Tax News

CCH (cch.taxgroup.com) reports:

Legislation is enacted that dramatically revises the appeals process for resolving disputes of taxes administered by the North Carolina Department of Revenue (DOR), including corporation franchise and income taxes, personal income taxes, and sales and use taxes. The legislation, generally effective January 1, 2008, changes how taxpayers pursue tax refunds; revamps the procedures to protest refund denials, proposed assessments, vendor license revocations, and imposition of penalties; and revises and consolidates a variety of tax collection provisions. In addition, corporation franchise and income tax filing deadlines are changed, the failure to pay penalty is modified, and corporate officer liability for unpaid corporate sales and use, employer withholding, and motor fuel excise taxes is expanded.
Under the revised administrative provisions, the Tax Review Board will be abolished and taxpayers will be afforded an opportunity for an independent appeal before the North Carolina Office of Administrative Hearings prior to paying any proposed tax assessment or penalties. As a result of the abolition of the Tax Review Board, the manner in which taxpayers apply for use of an alternative apportionment method for corporate income tax purposes is revised, as is the procedure by which the DOR adopts regulations.

CCH (cch.taxgroup.com) reports:

In its September 2007 issue of Tax News , the California Franchise Tax Board (FT states that it will hold protective claims for refund of California corporation franchise and income taxes and personal income taxes paid on municipal bond interest pending action in Kentucky Department of Revenue v. Davis , U.S. Supreme Court, Dkt. 06-666, petition for certiorari granted May 21, 2007. Also, the FTB says that it is closely scrutinizing the use of IRC §754 by partnerships to construct bogus optional basis (BO transactions; announces that it is now easier for electronic return originators (EROs) to electronically file individual and business tax returns; provides a detailed discussion of its personal income tax audit program; reports on a recent interested parties meeting on withholding tax at the source; and encourages tax professionals to attend the upcoming California Tax Policy Conference in November.

CCH (cch.taxgroup.com) reports:

Taxpayers, who were successful in a collection case, were not entitled to discovery of unredacted IRS memoranda for purposes of subsequent litigation brought to recover costs and impose sanctions against the IRS. The memoranda, which included the IRS's initial trial counsel's request for advice from the IRS's national office and the national office's response, were protected from disclosure under the work product privilege. The timing of the memoranda indicated that they were prepared as part of the IRS's counsels' efforts to prepare legal theories and plan strategy for the case, which ultimately resulted in a settlement ( T. J. Ratke , Dec. 55,600(M)).
The Tax Court rejected the argument that the both memoranda were prepared for the case in chief and were not work product for purposes of the litigation determining costs and sanctions. Documents prepared for the same litigation qualify as work product. A decision on the litigation for which the memoranda were prepared could not be entered until the disposition of the costs and sanctions issue. Further, there was no case law indicating that a lawsuit should be segmented for purposes of deciding whether a document is work product.
The Tax Court further determined, after an in-camera review, that there was neither a substantial need to discover any of the fact-based work product nor compelling need to discover any of the opinion work product. Because the statement of facts were identical in both the unredacted and redacted versions of the memoranda, the taxpayers were in possession of fact-based work product. Moreover, the redacted portions would not impact the outcome of the costs and sanctions litigation. Therefore, there was no compelling need to discover the memoranda. The taxpayers' desire for the memoranda was outweighed by the protection afforded under the work product doctrine. Finally, the IRS did not waive the work product doctrine privilege with respect to the memoranda because there was no testimonial use of the memoranda.
Related decision at TC Memo. 2004-86, Dec. 55,600(M), 87 TCM 1169.
T.J. Ratke, 129 TC No. 6, Dec. 57,087
Other References:
Tax Court Rule 70
CCH Reference - 2007FED ¶42,320.89
Tax Research Consultant
CCH Reference - TRC LITIG: 6,304
 

CCH (cch.taxgroup.com) reports:

The IRS has highlighted two recent changes to the credit for the portion of employer Social Security taxes paid with respect to employee cash tips. Although the Fair Minimum Wage Act of 2007 (P.L. 110-28) increased the minimum wage, the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28) provides that employers operating food and beverage establishments should continue to compute the amount of the Code Sec. 45B tip credit based on the federal minimum wage as in effect on January 1, 2007, i.e., $5.15 per hour. Additionally, effective for tax years beginning after December 31, 2006, the credit can offset the alternative minimum tax (AMT). This offset was previously applicable only against the regular tax.
IR-2007-155, 2007FED ¶46,620
Other References:
Code Sec. 45B
CCH Reference - 2007FED ¶4460.01
CCH Reference - 2007FED ¶4460.021
Tax Research Consultant
CCH Reference - TRC BUSEXP: 54,400
 

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