Tax News

CCH (cch.taxgroup.com) reports:

Port modem management services purchased by an Internet service provider from a telecommunications company were telecommunications services subject to Pennsylvania sales tax rather than exempt enhanced services. The taxpayer contended that its primary objective in purchasing services from the telecommunications company was port modem management and that the services should not be classified as taxable basic telecommunications services merely because they were purchased and billed together with transmission services. However, the court determined that "management" was only one component of the services and the remaining services were used for taxable purposes.
The taxpayer also claimed that based on Pennsylvania Department of Revenue Policy Statement 60.20, the services constituted nontaxable enhanced telecommunications services because they were offered over a telecommunications network and some functions were performed by using a computer processing application. The court determined that it was appropriate to consult federal communications law to determine the taxability of the services because although Policy Statement 60.20 provides that exempt enhanced telecommunications services do not include services that use computer processing applications "solely for the management, control or operation of a telecommunication system or the management of a telecommunication service," the policy statement does not define that phrase. The computer processing applications performed by the telecommunications company fell within the Federal Communications Commission's categories of protocol processing that resemble exempt enhanced services but are considered taxable basic telecommunications services. The taxpayer claimed that federal communications law should not be used to interpret Policy Statement 60.20 and that in order to be consistent with the federal Internet Tax Freedom Act (ITFA), the Pennsylvania Department of Revenue could not impose a sales tax on a service that was not a taxable telecommunications service as defined in Policy Statement 60.20. However, the court determined that the ITFA did not apply because the version of the federal law that was in effect at the time of the purchases provided that the term "Internet access" did not include telecommunications services. Finally, Pennsylvania's tax on the services did not constitute a tax on electronic commerce in violation of the ITFA because the services were not transactions "conducted over the Internet or through Internet access."
America Online, Inc. v. Pennsylvania , Pennsylvania Commonwealth Court, No. 621 F.R. 2004, September 7, 2007, ¶203-704
Other References:
Explanations at ¶60-720

CCH (cch.taxgroup.com) reports:

A long-distance telephone carrier licensed to transmit 900 number and long distance telephone calls was liable for Maryland sales tax imposed on such 900-type telecommunications services. The taxpayer, a jointly responsible agent of the out-of-state vendors, was not merely a common carrier of the 900 service but was, instead, substantially involved in the multiple acts that created the service.

CCH (cch.taxgroup.com) reports:

The IRS was not required to issue a statutory notice of deficiency prior to making assessments after entering into closing agreements with limited partners to settle matters pertaining to a Notice of Final Partnership Administrative Adjustment (FPAA). The deficiencies assessed were attributable to the partners' at-risk amounts but those amounts, although they were affected items, did not qualify as affected items requiring a factual determination. In the closing agreements, the partners and the IRS stipulated to the partners' at-risk amounts, including the manner in which those amounts might increase. All of the adjustments made by the IRS could be made without additional information from the partners; the Service had only to refer to the terms of the closing agreements.
L.F. Bush, FedCl, 2007-2 USTC ¶50,635
Other References:
Code Sec. 6212
CCH Reference - 2007FED ¶37,544.20
Code Sec. 6231
CCH Reference - 2007FED ¶37,849.40
Tax Research Consultant
CCH Reference - TRC PART: 60,450
CCH Reference - TRC IRS: 27,154

CCH (cch.taxgroup.com) reports:

The IRS has released the applicable terminal charge and the Standard Industry Fare Level (SIFL) mileage rates for determining the value of noncommercial flights on employer-provided aircraft in effect for the second half of 2007 for purposes of the taxation of fringe benefits. The value of a flight is determined under the base aircraft valuation formula by multiplying the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple provided in Reg. §1.61-21(g)(7) and then adding the applicable terminal charge.
For flights taken during the period from July 2007, through December 31, 2007, the terminal charge is $37.91, and the SIFL rates are: $.2074 per mile for the first 500 miles, $.1581 per mile for 501 through 1,500 miles, and $.1520 per mile for over 1,500 miles.
Rev. Rul. 2007-55, 2007FED ¶46,633
Other References:
Code Sec. 61
CCH Reference - 2007FED ¶5907.04
CCH Reference - 2007FED ¶5907.042
CCH Reference - 2007FED ¶5907.50
Tax Research Consultant
CCH Reference - TRC COMPEN: 33,202.10

CCH (cch.taxgroup.com) reports:

Senate Finance Committee ranking member Charles E. Grassley, R-Iowa, along with two Finance Committee members, are urging the Treasury Department and IRS to go easy on taxpayers who have lost their homes due to foreclosure. "Working families who lose their homes are getting hit with huge tax bills," Grassley said in a statement. He noted that some of the homeowners are also receiving exceptionally high tax bills that are often inaccurate. "The IRS should offer the taxpayer every opportunity to negotiate the size of the bill and a fair payment plan," he added.
In a September 13 letter to Treasury Secretary Henry M. Paulson, Jr., Grassley and committee members Gordon Smith, R-Ore., and Pat Roberts, R-Kan., pressed Paulson to allow, for taxpayers who have lost homes through foreclosure, offers in compromise that will either eliminate or reduce the taxes they owe due to cancelled mortgage debt on a primary residence. "If the IRS issues simple procedures for taxpayers to file an offer in compromise --and undertakes a significant program of outreach to taxpayers, practitioners, and lenders --much good can be accomplished immediately," wrote the lawmakers. They also requested that the IRS address the problem of taxpayers receiving inaccurate Forms 1099 for the amount of debt forgiveness, saying, "We encourage you to have the IRS undertake preventive action in this area immediately."
President Bush on August 31 proposed changes to the Internal Revenue Code that would ensure cancelled mortgage debt on a primary residence is not counted as income and Congress is currently considering the proposal. The Finance Committee is expected to mark up the "Good Government" legislation the week beginning September 17 and Grassley noted that it could be an appropriate vehicle for any additional authority required by the IRS to immediately address the debt forgiveness issue before changes to the law are enacted.
By Jeff Carlson, CCH News Staff

Tax Analysts report: