Tax News

CCH (cch.taxgroup.com) reports:

  The capital investment credit allowed against the Florida corporate income tax or insurance gross premiums tax and the renewable energy technologies credit allowed against the corporate income tax are amended to provide for transferability of the credits. The renewable energy production credit allowed against the corporate income tax is amended to clarify the treatment of the credit by pass-through entities. Also, where applicable, references in the credits to the Department of Environmental Protection have been changed to refer to the Florida Energy and Climate Commission.

CCH (cch.taxgroup.com) reports:

  The California State Board of Equalization (SBE) has announced that taxpayers affected by the wildfires in Mendocino County may be eligible for emergency tax relief in regard to taxes administered by the SBE. For all taxpayers and fee payers who cannot meet tax filing and payment deadlines due to the fires, the SBE may grant a one-month extension. The SBE also may extend deadlines for filings that were delayed by disruption of the normal activities of the U.S. Postal Service or private mail and freight companies. Relief is also available from interest and penalties for those unable to file their returns or pay taxes and fees due in a timely manner. Persons requesting relief must include with their returns a statement signed under penalty of perjury stating the cause for the late filing.

  CCH Tax Research NetWork subscribers can view the release in its entirety.

News Release No. 48-08-Y, California State Board of Equalization, June 27, 2008.

CCH (cch.taxgroup.com) reports:

  For purposes of determining a life insurance company's taxable income, where the company did business in several states with different minimum reserve requirements, the amount of the company's statutory reserves, within the meaning of Code Sec. 807(d)(6), was the highest aggregate reserve amount set forth on an annual statement pursuant to the minimum reserve requirements of any state in which the company did business. This was the case where the company held and reported to each state the highest aggregate minimum amount of reserves required for its insurance contracts under the laws of all states in which the company transacted business. The same result occurred in a second situation where the company reported to each state the minimum amount of reserves required for its insurance contracts under the laws of that particular state. In that situation, however, the company actually held the highest aggregate minimum amount of reserves required for its insurance contracts under the laws of any state in which the company did business.

Rev. Rul. 2008-37, 2008FED ¶46,492

Other References:

 
Code Sec. 807

  CCH Reference - 2008FED ¶25,821.25

  Tax Research Consultant

  CCH Reference - TRC NOL: 6,154

CCH (cch.taxgroup.com) reports:

  The IRS has provided filing relief to the victims of the recent storms and flooding in Illinois. The IRS has extended tax return filing and payment deadlines for victims of the severe storms and floods in the Illinois counties of Adams, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Lake, Lawrence, Mercer and Winnebago. Taxpayers residing or having a business in these presidentially declared disaster areas have until August 25, 2008, to file returns, pay taxes and perform other time-sensitive acts. The extended deadline applies to items due between June 2, 2008, and August 25, 2008, and includes the filing of Form 5500 series returns, Annual Return/Report of Employee Benefit Plan.

  In addition, the IRS will also waive penalties for failure to deposit employment and excise taxes due on or after June 1 and on or before June 16, as long as the deposits are made by June 16. Taxpayers whose books, records or tax professionals' offices are located in the designated disaster areas may also be entitled to this relief.

  Neither of the extended due dates applies to information returns in the W-2, 1098, or 1099 series, or to Forms 1042-S or 8027. However, the IRS may waive penalties for failure to timely file information returns under existing procedures for reasonable cause. In addition, affected taxpayers may claim disaster-related casualty losses from the destruction of property on either their 2007 or 2008 federal income tax return.

  Affected taxpayers should write "Illinois/Severe Storms and Flooding" across the top of their returns to expedite the processing of any refund the taxpayer may be due.

Illinois Disaster Notice, 2008FED ¶46,493

Other References:

 
Code Sec. 6081

  CCH Reference - 2008FED ¶36,789.213

 
Code Sec. 7508A

  CCH Reference - 2008FED ¶42,687C.22

  Tax Research Consultant

  CCH Reference - TRC FILEBUS: 15,110

  CCH Reference - TRC FILEBUS: 15,204.25

CCH (cch.taxgroup.com) reports:

  The House Appropriations Committee on June 25 approved without any changes an IRS fiscal year (FY) 2009 budget of $11.4 billion, the same budget approved by the House Appropriations Subcommittee on Financial Services and General Government (TAXDAY, 2008/06/19, C.2). The budget includes $5.1 billion for enforcement, $2.2 billion for taxpayer service, and $223 million for business systems modernization. The appropriation is $304 million above the agency's FY 2008 budget and $37 million higher than the Bush administration request for FY 2009.

  The 2009 budget would "make it easier for honest Americans to file their taxes while it beefs up IRS enforcement to catch tax cheats," the committee said in a news release.

  The bill would eliminate funding for the IRS's use of private debt collectors. "The IRS can perform the same function at less cost and with better safeguards for taxpayers," the committee said. Subcommittee Chairman Jose Serrano, D-N.Y., commented that "under this very misguided and wasteful program, the IRS allows private contractors to collect unpaid taxes and to keep up to 24 percent of the tax revenue they bring in. This programs should be terminated."

  The overall IRS budget includes a $47 million increase for taxpayer service and return preparation, including IRS walk-in sites. Taxpayers receiving help at walk-in sites fell from 665,000 in 2003 to 406,000 in 2006, the committee noted. The budget also includes $192 million for the Taxpayer Advocate Service (TAS), a $15 million increase from FY 2008. From 2004 to 2006, taxpayers experienced long delays as the TAS's case load rose 43 percent while its staff declined by 7 percent, the committee pointed out.

  The bill also raises federal civilian pay by 3.9 percent for a cost-of-living adjustment and imposes a one-year moratorium on federal job outsourcing activities.

  By Brant Goldwyn, CCH News Staff

Tax Analysts report:

Tax Analysts report:

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

Imposition of the Seattle telephone utility tax on a cable television provider with respect to its cable Internet service was barred by the state Internet tax moratorium in effect for the period at issue, the Washington Supreme Court has held.

CCH (cch.taxgroup.com) reports:

The Rhode Island budget bill (1) increases the gross premiums tax on insurance companies, (2) places limits on the motion picture production investment credit against the corporate and personal income taxes, the gross premiums tax, and the bank excise tax as well as on the innovation and growth credit against the corporate and personal income taxes and the franchise tax, and (3) repeals the foreign tax credit against the personal income tax. A separate story discusses changes to the utilities and motor fuel taxes. (TAXDAY, 2008/06/27, S.17)

CCH (cch.taxgroup.com) reports:

The Treasury has released temporary and proposed regulations governing how a "small business refiner" elects to take, and determines the amount of, a Code Sec. 179B deduction for costs of producing diesel fuel. The deduction, 75 percent of certain qualifying costs, is allowable for a tax year even if the relevant property is not placed in service until a later year. In addition to other implementing rules, the temporary regulations state which environmental protection agency rules are used when determining the deduction and provide a reduction in the allowable deduction if certain production thresholds are exceeded.
Under the temporary regulations, the election to utilize Code Sec. 179B(a) is made separately for each year and a taxpayer may elect the deduction for one year and not for another year. The election is made on the taxpayer's original Federal income tax return for the year and requires attaching an informational statement. The election is made at the entity level if taken by a partnership or an S corporation. And, the common parent of a consolidated group makes the election on behalf of eligible group members.
If an election under Code Sec. 179B(e) is made by a cooperative, the deduction amount allocated is equal to the owner's ratable share of the total deduction based on ownership interests in the electing cooperative small business refiner. Each cooperative owner must be notified of the election and their allocated amount of the deduction. If ownership interests vary during the year, the allocation must be done with a consistently applied method that accounts for such variances. If such an allocation is made to cooperative owners, the electing cooperative must reduce its Code Sec. 179B deduction in calculating its income under Code Sec. 1382 for the deduction amount allocated to its owners.
The due date for making the election is the due date (including extensions) of the taxpayer's Federal income tax return for the taxable year. The temporary regulations generally apply to tax years ending on or after June 26, 2008. However, the regulations may be applied to tax years ending after December 31, 2002, and before June 26, 2008 by using the rules provided in Notice 2006-47.
Written or electronic comments on the proposed regulations must be received by September 25, 2008. A public hearing is scheduled for October 28, 2008, at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, D.C. Outlines of topics to be discussed must be received by September 22, 2008.
T.D. 9404, 2008FED ¶47,040
Proposed Regulations, NPRM REG-143453-05, 2008FED ¶49,811
Other References:
Code Sec. 179B
CCH Reference - 2008FED ¶12,136.20
Tax Research Consultant
CCH Reference - TRC BUSEXP: 18,900
CCH Reference - TRC BUSEXP: 18,908

CCH (cch.taxgroup.com) reports:

The Senate on June 26 approved by unanimous consent the Federal Aviation Administration Extension Bill of 2008 (HR 6327), which would lengthen a four-month extension of federal aviation excise taxes and fees until the end of September 2008. The last extension of the aviation excises taxes occurred on February 28, when President Bush signed the Airport and Airway Extension Act of 2008 (P.L. 110-190). The House earlier approved the measure on June 24 (TAXDAY, 2008/06/25, C.2).
Rising jet fuel prices have driven airlines to raise ticket prices, leading to a higher amount of aviation taxes collected to fund the Airport and Airway Trust Fund. However, HR 6327 keeps the same tax rates in effect as current law, and the extra revenue has been directed to address problems with airport congestion and airport runway improvements.
House Democrats were able to win Republican support for the measure by deleting a provision that would have transferred $8 billion to the highway trust fund. Senate Finance Committee Chairman Max Baucus, D-Mont., strongly condemned the Senate's failure to reach agreement on his trust fund legislation."Replenishing the highway trust fund now would prevent the loss of an estimated 380,000 jobs, create new ones, and do so without increasing the federal budget deficit," stated Baucus.
By Jeff Carlson, CCH News Staff.

CCH (cch.taxgroup.com) reports:

Senate Majority Leader Harry Reid, D-Nev., said late on June 25 that the Senate would temporarily suspend debate on housing legislation (HR 3221) and wait until after Congress returns from its July 4 recess because leaders on both sides of the aisle could not agree on how to proceed with amendments. The measure contains a $14 billion tax title proposed by Senate Finance Committee Chairman Max Baucus, D-Mont.
"...[R]ealistically, with this objection to the housing bill, it appears very clear to me that [it is] going to take more time and we will not be able to do that by the day after tomorrow, but we will complete it, "said Reid. "We have a short work period in July, and it is guaranteed we will complete the work on the housing bill the first week we get back," he said.
The latest glitch came when Sen. John Ensign, R-Nev., insisted on adding what Democrats considered a nongermane amendment that would add a package of renewable energy tax extenders to the bill.
White House Agenda
President Bush urged Congress to act on housing legislation once it returns from recess the week of July 7. "The Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes," Bush said in a Rose Garden statement on June 26. The White House has issued veto threats on both the House and Senate housing packages, but Press Secretary Dana Perino on June 25 expressed guarded optimism that both chambers would be able to reach an agreement acceptable to the president.
By Jeff Carlson and Paula Cruickshank, CCH News Staff.

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

In calculating its alternative minimum taxable income, a corporation that owned a number of gold mines was required to make an adjusted current earnings (ACE) adjustment under Code Sec. 56(g)(4)(C)(i) for depletion with respect to mines placed in service on or before December 31, 1989. The ACE adjustment under Code Sec. 56(g)(4)(C)(i) is a general provision that applies to all property, regardless of when placed in service, and offsets the permanent benefit of percentage depletion method and other deductions not allowed when computing earnings and profits. The ACE adjustment under Code Sec. 56(g)(4)(F)(i), which applies only for mines placed in service after December 31, 1989, and requires an adjustment for the difference between the taxpayer's depletion deduction and the amount of the depletion that would be allowed under the cost method, did not preclude the general ACE adjustment. There was no ambiguity or conflict between the provisions because the general ACE adjustment applied only where the depletion deduction exceeded the adjusted basis of the property. Thus, the ACE adjustment under Code Sec. 56(g)(4)(F)(i) could be required when the general ACE adjustment would not apply. There was no evidence that Congress intended to protect mines placed in service on or before December 31, 1989, from the general ACE adjustment by, for example, including a similar limitation in the statute. The Tax Court rejected a number of arguments involving the rules of statutory construction and the legislative history and statutory scheme of Code Sec. 56.
Unamortized Code Sec. 56(a)(2) mining development costs were not included in the adjusted basis of the depletable property when calculating either the general ACE adjustment under Code Sec. 56(g)(4)(C)(i) or Code Sec. 57 tax preference items. In both cases, adjustments are required for the same amount, that being the excess of the depletion deduction allowed under the percentage depletion method over the adjusted basis of the property. Property for purposes of determining the depletion deduction included actual minerals. Unamortized Code Sec. 56(a)(2) costs are added to the mineral enterprise, but excluded from the adjusted basis of the mineral deposits for purposes of determining depletion deductions and the ACE adjustment. Similarly, for purposes of tax preference items, property was defined by reference to the cost depletion rules as interests in mineral deposits, excluding unamortized Code Sec. 56(a)(2) costs. However, based on the IRS's concession that the unamortized Code Sec. 56(a)(2) costs could be included in the adjusted basis of the mine property for purposes of calculating the tax preference items, the taxpayer was not required to make adjustments to its tax preference item. The ACE adjustment was computed to exclude items taken into account as tax preferences.
Santa Fe Pacific Gold Company, 130 TC No. 17, Dec. 57,477
Other References:
Code Sec. 56
CCH Reference - 2008FED ¶5210.22
Code Sec. 57
CCH Reference - 2008FED ¶5307.12
Tax Research Consultant
CCH Reference - TRC STAGES: 9,120.05

CCH (cch.taxgroup.com) reports:

The IRS has issued revised interim guidance on the credit for electricity produced from certain renewable resources. The new guidance revises and supersedes Notice 2006-88 to reflect recent legislative changes and omits the guidance in that notice relating to the simultaneous sale and purchase of electricity. It can be relied upon until final regulations are issued. The IRS will continue its policy of not issuing private letter rulings regarding Code Sec. 45 as it pertains to open-loop biomass or regarding Subchapter K rules for partnerships claiming the credit.
A renewable electricity production credit is allowed for electricity produced by a taxpayer from qualified energy resources at a qualified facility, including open-loop biomass produced at an open loop biomass facility placed in service by a statutorily defined deadline. Section 201 of the Tax Relief and Health Care Act of 2006 (2006 Extenders Act) (P.L. 109-432) extended that deadline to December 31, 2008. Section 7(b)(1) of the Tax Technical Corrections Act of 2007 (2007 Technical Corrections Act) (P.L. 110-172) eliminated the requirement that open-loop biomass be segregated from other waste materials.
Accordingly, the new notice makes various changes to the rules regarding claiming the credit for producing energy from open-loop biomass. The placed-in-service deadline has changed to reflect the change made in the 2006 Extenders Act. Moreover, the guidance in the old notice pertaining to simultaneous sale and purchase of electricity from an unrelated person has been eliminated.
Finally, a new section has been added clarifying the rules limiting the credit to electricity, refined coal or Indian coal produced and sold to an unrelated person. Electricity or coal will be treated as sold to an unrelated person if the ultimate purchaser of the electricity or coal is not related to the person that produces the electricity or coal. The sale requirement will be treated as satisfied if the producer sells the electricity or coal to a related person for resale to a person not related to the producer within the meaning of Code Sec. 45(e)(4). Notice 2006-88 is superseded.
Notice 2008-60, 2008FED ¶46,486
Other References:
Code Sec. 45
CCH Reference - 2008FED ¶4415.27
CCH Reference - 2008FED ¶4415.30
Tax Research Consultant
CCH Reference - TRC BUSEXP: 54,550

CCH (cch.taxgroup.com) reports:

The IRS has announced that it will view a rolling-average method of valuing inventories for financial accounting purposes as clearly reflecting income for federal income tax purposes provided a taxpayer meets one of the two newly created safe harbors. The IRS has also provided procedures by which a taxpayer may obtain automatic consent to change to a rolling-average method.
Safe Harbors
A taxpayer's use of the rolling-average method for financial accounting purposes will be deemed to clearly reflect income provided:
(1) the taxpayer recomputes the rolling average cost of an inventory item according to one of the following:
(a) each time the taxpayer purchases or produces an additional unit or units of that item; or
(b) on a regular basis but no less frequently than once per month; and
(2) the taxpayer satisfies one of the following conditions:
(a) the variance percentage (as determined under sec. 4.02 of the new procedure) does not exceed one percent; or
(b) the taxpayer's entire inventory turns at least four times per year (as determined under sec. 4.03 of the new procedure).
Variance Percentage
The variance percentage is determined by:
(1) subtracting the cost of the ending inventory, computed using the taxpayer's rolling-average method, from the cost of the ending inventory using either the FIFO or the specific identification method to determine the variance; and then
(2) dividing the variance by the aggregate rolling-average cost of the inventory.
  Inventory Turns
The number of times that the taxpayer's entire inventory turns during a tax year is equal to the cost of goods sold divided by average inventory, which is the average of beginning and ending inventory. However, a taxpayer using a LIFO cost-flow assumption for tax purposes must calculate inventory turns using rolling-average cost and a FIFO cost-flow assumption.
A taxpayer's use of a rolling-average method of accounting on a federal income tax return filed before June 25, 2008, in accordance with this procedure will not be raised by the IRS as an audit issue. In addition, for tax returns filed before June 25, 2008, where the taxpayer's use of a rolling-average method is an issue under consideration, the IRS will not pursue it further.
This procedure is effective for tax years ending on or after December 31, 2007.
Rev. Rul. 71-234, 1971-1 CB 148, and Rev. Rul. 77-480, 177-2 CB 186, are modified to permit taxpayers to use a rolling-average method of accounting for inventories as provided under the new procedure. Rev. Proc. 2002-9, 2002-1 CB 327, is modified and amplified to include in the Appendix the automatic change provided in the new procedure.
Rev. Proc. 2008-43, 2008FED ¶46,485
Other References:
Code Sec. 471
CCH Reference - 2008FED ¶22,208.50
Code Sec. 472
CCH Reference - 2008FED ¶22,240.25
CCH Reference - 2008FED ¶22,240.33
Tax Research Consultant
CCH Reference - TRC ACCTNG: 15,154.20
CCH Reference - TRC ACCTNG: 18,110.05

CCH (cch.taxgroup.com) reports:

The Treasury Department and IRS have issued a notice providing employers and employees with a new set of formal questions and answers on Health Savings Accounts (HSAs). An HSA is a tax-exempt trust or custodial account established under Code Sec. 223 exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, is covered under a high-deductible health plan (HDHP).
The new guidance includes over 40 frequently asked questions and answers, grouped into the following categories: eligible individual, HDHPs, HSA contributions, HSA distributions, prohibited transactions, and establishing an HSA.
Who is an eligible individual. Guidance topics regarding eligibility mostly center around the effect of other insurance or benefits. Some of these issues examined include the payment of HDHP premiums by a Health Reimbursement Account, disqualifying benefits paid or reimbursed before the HDHP minimum deductible is satisfied, Medicare benefits, Department of Veterans Affairs benefits, access to employer-provided free or low-cost health care, and family HDHP coverage for dependents with disqualifying coverage.
High-Deductible Health Plans (HDHPs). The HDHP issues relate mostly to permitted deductibles and required coverage. The guidance examines the transition from family HDHP coverage to self-only HDHP coverage, and it discusses plans with higher deductibles for specific benefits, plans that restrict benefits to hospitalization or in-patient care, and expenses that apply toward meeting the deductible.
Contributions to HSAs. The guidance discusses a wide variety of contribution issues including limits for individuals with family coverage and dependents with nonpermitted coverage, as well as limits for married couples with different types of HDHP coverage. It also examines rollovers, catch-up contributions for spouses, excess contributions due to errors, employer contributions to an HSA of the employee's spouse.
Distributions from HSAs. Guidance topics for HSA distributions include debit cards, third-party authorization, payment of Medicare Part D premiums, Medicare premiums for a spouse, continuation coverage premiums, premiums for a dependent receiving unemployment benefits, and expenses for a child claimed as a dependent by another.
Prohibited transactions. Prohibited transaction issues include borrowing from an HSA, loans from a trustee to an HSA, pledging HSA assets as security for a loan, and the consequences for entering into a prohibited transaction.
Establishing an HSA. Topics related to establishing an HSA include determining when an HSA is established, and the establishment date for rollovers and for successive HSAs.
Notices 2004-2, 2004-1 CB 269, 2004-50, 2004-2 CB 196, and 2007-22, 2007-10 I.R.B. 670, are amplified.
Treasury Department News Release, TDNR HP-1056, 2008FED ¶46,487
Notice 2008-59, 2008FED ¶46,488
Other References:
Code Sec. 105
CCH Reference - 2008FED ¶6702.73
Code Sec. 106
CCH Reference - 2008FED ¶6803.0255
CCH Reference - 2008FED ¶6803.32
Code Sec. 223
CCH Reference - 2008FED ¶12,785.025
CCH Reference - 2008FED ¶12,785.029
CCH Reference - 2008FED ¶12,785.033
CCH Reference - 2008FED ¶12,785.037
CCH Reference - 2008FED ¶12,785.041
CCH Reference - 2008FED ¶12,785.075
CCH Reference - 2008FED ¶12,785.25
Code Sec. 4980B
CCH Reference - 2008FED ¶34,601.20
Tax Research Consultant
CCH Reference - TRC INDIV: 42,450
CCH Reference - TRC COMPEN: 45,064

CCH (cch.taxgroup.com) reports:

Taxpayers would receive one year of relief from the alternative minimum tax (AMT), under a bill passed by House lawmakers on June 25. By a vote of 233 to 198, the House approved the Alternative Minimum Tax Relief Bill of 2008 (HR 6275), which was introduced on June 17 by House Ways and Means Chairman Charles B. Rangel, D-N.Y (TAXDAY, 2008/06/18, C.1).
The $61.5-billion cost of the bill, which is offset by provisions that raise taxes on oil companies, hedge fund managers and others, continued to draw opposition from GOP lawmakers. "This vote is nothing more than a cynical and craven political exercise that will only further delay the inevitable: a one-year patch without revenue raisers," said Rep. Phil English, R-Pa., ranking member of the House Select Revenue Measures Subcommittee.
According to a summary of the legislation, the two biggest revenue raisers in the AMT bill would tax the so-called "carried interest" earned by investment fund managers as ordinary income, rather than as capital gains. This would raise $30.9 billion over 10 years. The bill would also deny Code Sec. 199 benefits to major integrated oil and natural gas companies. This provision would raise $13.5 billion over 10 years.
Rangel told lawmakers that the federal government should pay for what it buys, rather than increasing the nation's budget deficit. "We shouldn't go to China and Japan and ask them once again to bail us out," Rangel said. "Instead, we should take a look at the tax code and see what loopholes we can close to repair the AMT --at least for this year --without passing this burden on to our children and grandchildren."
GOP lawmakers noted that the Senate, as well as the White House, reject the idea of raising taxes to offset the cost of AMT relief. They predicted that a tax-free AMT relief bill will be passed by Congress and signed into law by President Bush in 2008.
The White House issued a veto threat against the AMT relief bill because it contains tax offsets to pay for it. "The administration does not believe that the appropriate way to protect the 26 million Americans from higher 2008 AMT liability --including 22 million that would be newly exposed to the AMT --is to impose a tax increase on other taxpayers," according to a written policy statement. The administration statement warned that a delay in enacting the measure would likely disrupt the 2009 tax filing season.
By Stephen K. Cooper and Paula Cruickshank, CCH News Staff
Ways and Means Release: House Passes Bipartisan AMT Relief Bill

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

Louisiana Governor Bobby Jindal signed legislation that provides a reduction of personal income tax rates in certain brackets to the same amounts as provided for prior to the enactment of the Stelly Plan (Act 51 of 2002). This change is applicable to all tax years beginning on and after January 1, 2009, and the withholding tables for personal income tax will not be amended by the Department of Revenue until after July 1, 2009.
Specifically, the individual rates of tax are as follows:
-- a rate of 2% on the first $12,500 of net income that is in excess of applicable credits;
-- a rate of 4% on the next $37,500, up to $50,000, of net income; and
-- a rate of 6% on anything over $50,000.
This legislation was reported on previously (TAXDAY, 2008/06/12, S.13).
Act 396 (S.B. 87), Laws 2008, effective June 23, 2008 and applicable as noted
CCH Reference - TRC SALES: 51,552.20
 

CCH (cch.taxgroup.com) reports:

The IRS has issued guidance for issuers of tax-exempt bonds on how to make claims for recovery of overpayments with respect to arbitrage rebates under Code Sec. 148(f)(2), penalties in lieu of rebates under Code Sec. 148(f)(4), and yield-reduction payments under Reg. §1.148-5(c). In order to receive recovery of an overpayment, the issuer must file a refund claim by completing Form 8038-R, Request for Recovery of Overpayments Under Arbitrage Rebate Provisions, and filing the form and any attachments with the IRS, Ogden Submission Processing Center, Ogden, Utah, 84201.
In general, the form must be filed no later than the date that is: (1) two years after the final computation date for the applicable bond issue, for an issue of bonds whose final computation date is after June 24, 2008, or (2) two years from July 1, 2008, for an issue of bonds whose final computation date is on or before June 24, 2008.
The IRS also outlined the procedures that it will employ in processing refund claims for overpayment amounts. Any necessary refinements or revisions of these procedures will be published in the Internal Revenue Manual. If the IRS rejects a claim and issues a Refund Claim Denial letter, the issuer may appeal the Refund Claim Denial to the IRS Office of Appeals, pursuant to section 3.01 of Rev. Proc. 2006-40, I.R.B. 2006-42, 694. This newly issued guidance obsoletes Rev. Proc. 92-83, 1992-2 CB 487.
Rev. Proc. 2008-37, 2008FED ¶46,482
Other References:
Code Sec. 148
CCH Reference - 2008FED ¶7889.50
Tax Research Consultant

CCH (cch.taxgroup.com) reports:

The Senate on June 24 agreed 83-to-9 to limit debate on a housing stimulus bill (HR 3221). At press time, Senate leaders were still deciding on the timing for substituting their bill, which includes a $14-billion tax title offered by Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, for the House version and limitations on further amendments. The amendment is part of a compromise housing policy bill reached between Senate Banking Committee Chairman Christopher Dodd, D-Conn., and ranking member Richard C. Shelby, R-Ala.
Grassley and a number of cosponsors have filed a tax relief amendment designed to help people and communities in Midwestern states recover from the recent spate of floods and tornados in that region. The Midwestern Disaster Tax Relief bill contains provisions that would let disaster victims withdraw money from retirement plans without tax penalties, suspend limits on tax incentives for charitable contributions, create tax-exempt bond authority to help rebuild infrastructure, remove limitations on deducting casualty losses due to natural disaster, and allow additional depreciation and increased amounts for expensing property to help businesses. Lawmakers are also seeking to offer an amendment that would prevent municipalities from raising property taxes because the legislation provides a new $1,000 property tax deduction for homeowners who do not itemize. The Senate plans to complete final action on the housing measure before beginning a one-week Fourth of July recess on June 27.
By Jeff Carlson, CCH News Staff
SFC Release: Senators Seek Tax Relief for Flood and Tornado Victims in the Midwest
 

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

Guidance is provided for Florida corporate income tax purposes regarding recently enacted legislation that requires, effective January 1, 2008, additions to adjusted federal income for amounts in excess of $25,000 deducted under IRC §179 as well as amounts deducted as bonus depreciation under IRC §168. (TAXDAY, 2008/06/19, S.6)
In regard to the 2007 tax year, an amended return may be required for some fiscal year taxpayers. In regard to tax years beginning before January 1, 2008, and assets placed in service after December 31, 2007, an addition to adjusted federal income is required for amounts deducted as bonus depreciation under IRC §168. This addition must be included on Form F-1120, Florida Corporate Income/Franchise and Emergency Excise Tax Return, Schedule I, Line "Other Additions." Taxpayers are also reminded that the same legislation changed the due dates for declarations and payments of estimated corporate income tax effective January 1, 2009. Declarations and payments of estimated tax are required to be made on or before the last day of the fourth, sixth, and ninth months and the last day of the tax year.

Tax Information Publication No. 08C01-02, Florida Department of Revenue, June 17, 2008.

CCH (cch.taxgroup.com) reports:

The California Franchise Tax Board has issued a notice explaining the state personal income tax treatment and tax return filing obligations of same-sex married couples in light of the California Supreme Court's decision in In re Marriage Cases, 43 Cal.4th 575 (2008), in which the court struck down specified sections of California's Family Code, thereby allowing same-sex marriages to proceed in California.
As a result of the court's decision, for purposes of the California Revenue and Tax Code the term "spouse" includes every individual who is legally married under California law, including same-sex married individuals. Consequently, such individuals who are married by the last day of the taxable year are required to file either a joint return or married, filing separately returns.
Because same-sex married couples are still required to file their federal tax returns using the single filing status, they may be required to recompute those deductions claimed on the state tax return that are computed using a taxpayer's federal adjusted gross income (AGI) amount. Examples of such deductions include a taxpayer's itemized deductions or the deduction for contributions to an individual retirement account (IRA). Same-sex married individuals must recompute their federal AGI for purposes of computing and claiming these deductions on their state tax returns utilizing the same filing status as that used on their state return. Frequently, this will mean adding each individual's AGI from the federal return to compute the couple's combined AGI.
Taxpayers should also be aware that the filing of a joint return may impact a same-sex married couple's qualification for the estimated tax safe harbor provision that enables taxpayers to avoid estimated tax underpayment penalties if their estimated tax payments equal the amount of their tax liability for the prior year. Taxpayers who will file a joint return for the current taxable year but who filed as single, head of household, or married, filing separately during the prior taxable year must compute their prior year's tax liability for purposes of determining their estimated tax safe harbor threshold by adding the tax paid by each individual spouse during the prior taxable year.
FTB Notice 2008-5 , California Franchise Tax Board, June 20, 2008, ¶404-691
Other References:
Explanations at ¶15-125
Explanations at ¶15-305

CCH (cch.taxgroup.com) reports:

An IRS Appeals officer did not abuse her discretion when she issued a notice of determination without considering a married couple's offer-in-compromise (OIC) based only on doubt as to liability. Because the taxpayers received a notice of deficiency and had an opportunity to challenge the underlying tax liability, but failed to do so, they were barred from challenging the amount of the liability at the Collection Due Process (CDP) hearing. Therefore, the settlement officer properly refused to consider the taxpayers' OIC it was a prohibited challenge to the underlying tax liability.
E.S. Yesse, TC Memo 2008-157, Dec. 57,473(M)
Other References:
Code Sec. 6360
CCH Reference - 2008FED ¶38,184.12
Tax Research Consultant
CCH Reference - TRC IRS: 51,056

CCH (cch.taxgroup.com) reports:

In recognition of increasing gasoline prices, the IRS has announced an increase in the optional standard mileage rates for the second half of 2008. The standard mileage rate for business miles driven from July 1, 2008, through December 31, 2008, will be 58.5 cents per mile, an increase of eight cents over the rate for the first half of the year. The standard mileage rate for medical and moving expenses has been increased to 27 cents per mile from 19 cents per mile. The standard mileage rate for charitable purposes, however, remains unchanged at 14 cents per mile. Rev. Proc. 2007-70, I.R.B. 2007-50, 1162, is modified.
IR-2008-82, 2008FED ¶46,480
Announcement 2008-63, 2008FED ¶46,481
Other References:
Code Sec. 61
CCH Reference - 2008FED ¶1090.11
CCH Reference - 2008FED ¶1201.24
CCH Reference - 2008FED ¶5907.0325
Code Sec. 62
CCH Reference - 2008FED ¶6006.0324
Code Sec. 162
CCH Reference - 2008FED ¶8590.021
CCH Reference - 2008FED ¶8590.55
Code Sec. 170
CCH Reference - 2008FED ¶11,620.029
CCH Reference - 2008FED ¶11,620.6744
Code Sec. 213
CCH Reference - 2008FED ¶12,543.82
Code Sec. 217
CCH Reference - 2008FED ¶12,623.021
CCH Reference - 2008FED ¶12,623.11
Code Sec. 274
CCH Reference - 2008FED ¶14,417.043
CCH Reference - 2008FED ¶14,417.045
CCH Reference - 2008FED ¶14,417.046
CCH Reference - 2008FED ¶14,417.047
CCH Reference - 2008FED ¶14,417.048
CCH Reference - 2008FED ¶14,417.05
CCH Reference - 2008FED ¶14,417.051
CCH Reference - 2008FED ¶14,417.052
CCH Reference - 2008FED ¶14,417.053
CCH Reference - 2008FED ¶14,417.50
Code Sec. 1016
CCH Reference - 2008FED ¶29,412.385
Tax Research Consultant
CCH Reference - TRC BUSEXP: 24,506

CCH (cch.taxgroup.com) reports:

The IRS has issued temporary and proposed regulations governing the determination of basis of U.S. property acquired by a controlled foreign corporation (CFC) in certain nonrecognition transactions that are intended to repatriate earnings and profits of the CFC without a corresponding income inclusion by the U.S. shareholders of the CFC under Code Sec. 951(a)(1)(. The regulations apply when a CFC acquires the stock or obligations of a domestic corporation in an exchange with the domestic corporation, the stock or obligations constitute U.S. property under Code Sec. 956(c), and the CFC's basis in the stock or obligations is determined under Code Sec. 362(a).
If the temporary regulations apply, then, solely for purposes of determining the income inclusion required by the U.S. shareholders, the CFC's basis in the stock or obligations is not less than the fair market value of the property transferred by the CFC in exchange for the stock or obligations of the domestic corporation. Consequently, the income inclusion cannot be avoided by claiming a basis in the stock or obligations less than the amount of earnings and profits effectively repatriated. The basis rule and consequent income inclusion required by the temporary regulations cannot be avoided by a subsequent transfer of the stock or obligations of the domestic corporation by the CFC to a related person in another nonrecognition transaction.
In one typical transaction covered by the regulations, a domestic corporation that is the common parent of an affiliated group which files a consolidated return owns 100 percent of the stock of two domestic corporations (A and that are part of the consolidated group. A owns 100 percent of the stock of a CFC. B issues $100x of its stock to the CFC in exchange for $10x of CFC stock and $90x cash. The parent takes the position that (1) Code Sec. 351
applies to the exchange between and B and the CFC; (2) B recognizes no gain by reason of receipt of the $10x stock and $90x cash and the CFC recognizes no gain upon issuance of the stock to B under Code Sec. 1032(a); and (3) the CFC's basis in B's stock is zero under Code Sec. 362(a), and A and B do not have an income inclusion under Code Sec. 951(a)(1)( as a result of the CFC holding B's stock. Under the temporary regulations, however, the CFC will be treated as having acquired B's stock with a basis of no less than $90x, thereby triggering an income inclusion.
The regulations apply to United States property acquired in exchanges occurring on or after June 24, 2008. The IRS may, however, challenge earlier transactions that would otherwise be subject to the temporary regulations under other applicable provisions or judicial doctrines.
The text of the temporary regulations also serves as the text of the proposed regulations. Written or electronic comments and requests for a public hearing must be received by September 22, 2008.
T.D. 9402, 2008FED ¶47,039
Proposed Regulations, NPRM REG-102122-08, 2008FED ¶49,810
Other References:
Code Sec. 956
CCH Reference - 2008FED ¶28,571
CCH Reference - 2008FED ¶28,572
Tax Research Consultant
CCH Reference - TRC INTL: 9,250

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

The Wisconsin Department of Revenue has issued a notice on how to determine whether interest and rent expenses paid, accrued, or incurred to a related party (related entity) that was added back to income can be deducted for purposes of personal income and corporation franchise and income taxes. The addback requirement and deduction were enacted as part of the recent budget adjustment bill, which was reported previously. (TAXDAY, 2008/05/19, S.23)
This law change, which is effective for taxable years after 2007, applies to corporations, tax-option (S) corporations, partnerships, LLCs, individuals, fiduciaries, and insurance companies. Taxpayers who wish to deduct related party interest or rent expenses must complete and submit, along with their Wisconsin income or franchise tax return, Schedule RT, which will be available on the Department Web site around July 31, 2008.
The Department has provided an article separate from the notice that provides
-- a description of transactions affected by this law change,
-- requirements that must be met in order to deduct related party interest and rent expenses, and
-- details and examples of what is considered a "related entity."
Subscribers to CCH Tax Research NetWork can view the text of the Department notice and article.

News for Tax Practitioners ; Addback of Related Party Interest and Rent Expenses , Wisconsin Department of Revenue, June 19, 2008.
 

CCH (cch.taxgroup.com) reports:

Purchases of construction materials made by a non-Native American contractor and then delivered to a site on tribal land were subject to California sales tax. The tribe's attempt to circumvent the state sales tax by marketing an exemption to non-Native Americans did not outweigh the state's interest in raising general funds for its treasury.

CCH (cch.taxgroup.com) reports:

The House and Senate voted to override a second presidential veto of an agriculture reauthorization bill (HR 6124), which includes a $1.7 billion package of tax incentives for agriculture, conservation and renewable energy projects. The Senate also rejected another attempt to take-up a $120 billion package of tax extenders along with a temporary patch for the AMT that Democrats had intended to offer as a substitute amendment to a House energy package. The House Ways and Means Committee, meanwhile, voted to approve legislation offered by Chairman Charles B. Rangel, D-N.Y., that would fully offset the cost of a one-year patch to the alternative minimum tax (AMT). In IRS news, long-awaited proposed preparer penalty regulations under Code Sec. 6694 have been released giving tax professionals a clearer picture of what the Service expects from practitioners under the new more-likely-than-not penalty regime. The Service also issued a flurry of relief notices to help individuals and taxpayers recovering from flooding in the Midwest and other areas.
Congress
The House Ways and Means Committee on June 18 voted 26 to 16 to approve legislation offered by Chairman Charles B. Rangel, D-N.Y., that would fully offset the cost of a one-year patch to the alternative minimum tax (AMT) (TAXDAY, 2008/06/19, C.1). Lawmakers approved the Alternative Minimum Tax Relief Bill of 2008 (HR 6275), which would pay for AMT relief by raising $61.5 billion in taxes on hedge fund managers, integrated U.S. oil companies, credit card transactions and foreign firms subject to U.S. tax treaties. Republican lawmakers predicted that history will repeat itself and that the Democratic-controlled Congress will eventually pass an AMT relief bill without revenue offsets, just as it did in 2007 (TAXDAY, 2007/12/20, C.1). Speaking on behalf of the administration, Treasury Assistant Secretary for Tax Policy Eric Solomon said AMT repeal should be done as part of an overall reform of the tax code. He did acknowledge that not offsetting the AMT patch with spending cuts or higher taxes would increase the federal budget deficit.
The Senate on June 17 rejected another attempt to take-up a $120 billion package of tax extenders along with a temporary patch for the AMT that Democrats had intended to offer as a substitute amendment to a House energy package, the Renewable Energy and Jobs Creation Bill of 2008 (HR 6049) (TAXDAY, 2008/06/18, C.1). The procedural motion failed to garner the necessary 60-vote majority and fell by a 52-44 margin. Democratic leaders have vowed to continue their efforts to move the measure.
Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, on June 18 offered a $14 billion tax title as part of a substitute amendment to a housing stimulus bill (HR 3648) (TAXDAY, 2008/06/19, C.3). The amendment was part of a compromise housing policy bill reached between Senate Banking Committee Chairman Christopher Dodd, D-Conn. and ranking member Richard Shelby, R-Ala. The tax provisions would create an additional standard deduction for property taxes for homeowners who do not itemize their federal taxes, an $8,000 refundable, repayable tax credit for first time home buyers, and increased funding for mortgage revenue bonds. Also included is a provision to increase the amount of Federal low-income housing tax credits (LIHTC).
Both the House and Senate on June 18 voted to override a second presidential veto of an agriculture reauthorization bill (HR 6124), which includes a $1.7 billion package of tax incentives for agriculture, conservation and renewable energy projects (TAXDAY, 2008/06/19, W.1). The House voted 317-109 and the Senate followed with an 80-14 vote to override President Bush's veto. Congress initially overrode President Bush's veto of the Food and Energy Security Act of 2008 (P.L. 110-234), but the enrolling clerk made an error that omitted the trade title from that bill. As a result, Congress had to take up and approve a corrected version of the measure (HR 6124). Among the tax provisions, which are fully offset, the farm bill would make changes to agricultural tax-exempt bonds, self-employment taxes, depreciation for race horses and tax-free exchanges of water rights. The most expensive provision is the establishment of a cellulosic biofuels credit at an estimated cost of $403 million, followed by the creation of a tax deduction for the protection of endangered species. In addition, the measure changes the method used for calculating the self-employment tax for Social Security by increasing the thresholds of gross earnings that would qualify for both the farm and nonfarm optional methods.
The White House issued a veto threat against a Senate housing package (TAXDAY, 2008/06/19, C.3). On the housing assistance tax provisions, the administration strongly opposes the proposal to expand the types of tax-exempt bonds guaranteed by the Federal Home Loan Banks (FHLBs) and a recapture provision in the proposed refundable tax credit for first-time homebuyers.
The FHLBs should focus its attention on the housing market and not become involved in insuring non-housing obligations, according to an administration policy statement. The administration contends that the homebuyer tax credit would go largely to those who could afford to purchase homes regardless of the tax break, making it an "inefficient use of resources," It also maintains the recapture provision would create concerns for tax administration and be burdensome to taxpayers.
IRS
Preparer Penalty Regulations. Proposed return preparer penalty regulations were released by the IRS on June 16 (NPRM REG-129243-07; TAXDAY, 2008/06/17, I.1). The proposed regulations, more than 200 pages long, describe how practitioners should apply the new more-likely-than-not standard in Code Sec. 6694(a)
as well as, among other things, how to make important disclosures to clients and the IRS. A hearing on the proposed regulations is scheduled for August 18, 2008, at the IRS National Office in Washington, D.C.
Disaster Relief. Taxpayers recovering from flooding in the Midwest and natural disasters in other parts of the country have additional time to file and pay taxes (IR-2008-78; TAXDAY, 2008/06/17, I.4). In hard-hit Iowa, the IRS is postponing certain deadlines until July 28. Similar relief has been granted to disaster victims in nine other states. In related news, the IRS announced on June 19 that it would temporary waive the low-income housing credit limits in Indiana and Iowa to help provide shelter to storm victims (IR-2008-81; TAXDAY, 2008/06/20, I.3).
IRS Collections. National Taxpayer Advocate Nina Olson told Congress on June 19 that the IRS will lose $565 million in collection revenue in 2008 because it transferred employees from collection activity to answer telephone inquiries about the economic stimulus payments (TAXDAY, 2008/06/20, C.1). Employees in IRS Accounts Management and Automated Collection System (ACS) functions were pulled from their regular duties to help taxpayers calling with questions about the payments.
Claudia Hill, EA, Cupertino, Calif., told CCH that the decline in service on both the Accounts Management and the ACS telephone lines creates real-world problems for taxpayers. Hill highlighted Olson's warning that an individual who cannot reach the IRS to negotiate an installment agreement might find his or her paycheck levied. "My concern is that the Service Center programs with automated time tracking such as Automated Under Reporter (CP-2000; service Center exam, automated substitute for return) have enough backlog problems that create ill-timed statutory notices of deficiency (SND) without this added yoke"" Hill, who is editor-in-chief of CCH's Journal of Tax Practice and Procedure , cautioned.
Economic Stimulus Payments. Testifying at the same Congressional hearing as Olson, IRS Commissioner Shulman told lawmakers that 5 million retirees and disabled veterans qualify for an economic stimulus payment but have not yet filed a 2007 return to claim their payment. While Shulman was testifying, the IRS announced a special publicity campaign targeted to these 5 million retirees and disabled veterans (IR-2008-80; TAXDAY, 2008/06/20, I.1).
Charitable Remainder Trusts . Final regulations regarding the excise tax on unrelated business taxable income (UBTI) earned by charitable remainder trusts were released on June 19 (T.D. 9043, TAXDAY, 2008/06/20, I.4). The IRS explained that the excise tax is treated as paid from corpus, and the trust income that is UBTI is income of the trust for purposes of determining the character of distributions made to beneficiaries.
Retirement Plans. Proposed regulations issued on June 17 provide guidance for retirement plans that determine benefits on the basis of two or more formulas (NPRM REG-100464-08; TAXDAY, 2008/06/18, I.2). The proposed regulations would generally extend the relief provided in Rev. Rul. 2008-7, I.R.B. 2008-7, 419; TAXDAY, 2008/02/04, I.4.
Estates and Trusts. The IRS issued proposed regulations on June 17 addressing ordering rules for charitable payments by estates and trusts (NPRM REG-101258-08; TAXDAY, 2008/06/18, I.1). The proposed regulations clarify the existing regulations under Reg. §1.642(c)-3(b), which provides guidance concerning adjustments and other special rules for computing the charitable contributions deduction, and Reg. §1.643(a)-5(b), which contains rules for computing the amount of tax-exempt income included in distributable net income.
Supplemental Wages. New guidance describes federal income tax withholding on supplemental wages (Rev. Rul. 2008-29, I.R.B. 2008-24, 1149; TAXDAY, 2008/06/16, I.1). The guidance explores nine common situations involving the payment of supplemental wages and reflects important changes made by the American Jobs Creation Act of 2004 (P.L. 108-357).
"This is the first guidance that provides common examples," William Hays Weissman, shareholder, Littler Mendelson, P.C., San Francisco, told CCH. Weissman noted that the first two examples in Rev. Rul. 2008-29, commissions paid at fixed intervals with no regular wages paid to the employee and commissions paid at fixed intervals in addition to regular wages paid at different intervals, are very common situations.
Mileage rates. The chair of H&R Block, Inc., Richard Breeden, has added his voice to the growing chorus urging the IRS to immediately increase the 2008 standard mileage rates in light of skyrocketing gasoline prices. Breeden reminded Treasury Secretary Henry M. Paulson that the government took similar action after Hurricane Katrina caused a temporary spike in gasoline prices (TAXDAY, 2008/06/16, M.1).
Previously, Sen. Norm Coleman, R-Minn., asked Shulman to increase rates mid-year (TAXDAY, 2008/06/16, M.1). A spokesperson for Coleman told CCH on June 20 that the IRS has not yet replied to the senator's request.
By Jeff Carlson, Stephen K. Cooper, Paula Cruickshank and George L. Yaksick, Jr. CCH News Staff.

CCH (cch.taxgroup.com) reports:

Forgiven student loan debt was not discharge of indebtedness income to a former student who had completed a period of service following graduation under a repayment assistance program that qualified under Code Sec. 108(f). A Loan Repayment Assistance Program (LRAP) operated by the individual's school refinanced existing loans with new loans that included provisions for forgiving part or all of the graduates' loans if they work for minimum periods of time in qualifying public-service positions. The refinanced loan still qualified as a student loan under Code Sec. 108(f)(2) because it refinanced the same sums originally borrowed as education loans, and the terms of the refinanced loan --requiring a minimum period of employment in a qualifying public service position --met the requirements of Code Sec. 108(f)(1) to qualify for the exception to the Code Sec. 61(a)(12) provision including income from the discharge of indebtedness in the graduate's gross income.
Rev. Rul. 2008-34, 2008FED ¶46,479
Other References:
Code Sec. 108
CCH Reference - 2008FED ¶7010.83
Tax Research Consultant
CCH Reference - TRC INDIV: 60,054.10
CCH Reference - TRC SALES: 12,152.10
 

Tax Analysts report:

Tax Analysts report:

Tax Analysts report: