Tax News

CCH (cch.taxgroup.com) reports:

As in past years, several states are offering sales and use tax holidays for a few days in August, during which back-to-school items such as clothing, footwear, school supplies, and computers may be purchased tax free. Local sales taxes may continue to be imposed in some places, however.

CCH (cch.taxgroup.com) reports:

The Treasury and IRS have issued proposed pension excise tax regulations that provide guidance on employer comparable contributions to Health Savings Accounts (HSAs) under Code Sec. 4980G. Pension excise tax regulations are also proposed covering the return requirements for excise tax payments for failure to meet the continuing coverage requirements under Code Sec. 4980B and Code Sec. 4980D, as well as the comparable coverage requirements for Archer MSAs under Code Sec. 4980E
and for HSAs.
Special Rule for Non-Highly Compensated Employees
The proposed regulations allow an employer to contribute to the HSAs of non-highly compensated employees in an amount that is larger than the employer's contribution to the HSAs of the highly compensated employees with comparable coverage during a period. Contributions to highly compensated employees may not exceed employer contributions to the HSAs of non-highly compensated employees with comparable coverage during a period.
The comparability rules will still apply with respect to contributions to HSAs for those eligible individuals who are in the same category of employees with the same category of high deductible health plan coverage (HDHP).
The proposed regulations define a highly compensated employee as either (1) a five-percent owner during the tax year or the preceding year or (2) an employee who for the preceding year has compensation from the employer in excess of $105,000 (indexed for inflation for 2008) and, if elected by the employer, was in the group consisting of the top 20 percent of employees when ranked on compensation.
Maximum HSA Contribution Allowed for Employees Who Become Eligible Mid-Year
Eligible individuals may make or have made the maximum annual HSA contribution based on their HDHP coverage during the last month of the tax year. Under the proposed regulations, a employer can contribute up to this maximum contribution on behalf of all employees who are eligible individuals during the last month of the tax year, including employees who become eligible after January 1 of the calendar year and eligible individuals who are hired after that date ("midyear eligible individuals").
Special Comparability Rules for Qualified HSA Distributions
A qualified HSA distribution is a direct distribution of an amount from a health flexible spending arrangement (health FSA) or from a health reimbursement arrangement (HRA) to an HSA. Under the proposed regulations, if an employer offers this type of distribution to any employee covered under any HDHP, the employer must offer qualified HSA distributions to all employees who are eligible individuals covered under any HDHP. Employers who offer qualified HSA distributions only to employees who are eligible individuals covered under the employer's HDHP are not required to offer qualified HSA distributions to employees who are eligible individuals, but who are not covered under the employer's HDHP.
Return Requirements for Excise Tax Payments
Under the proposed regulations, persons liable for the excise taxes under Code Sec. 4980B, Code Sec. 4980D, Code Sec. 4980E or Code Sec. 49980G must file Form 8298, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code. The tax must be paid at the time prescribed for filing the return, without extensions. With respect to the excise tax under Code Sec. 4980B and Code Sec. 4980D for failure to continue coverage, the return is due on or before the due date or filing the person's federal income tax return for employers and third parties. For multi-employer or specified multiple health plans, the return is due on or before the last day of the seventh month after the end of the plan year. The excise tax return for non-comparable contributions under Code Sec. 4890E or Code Sec. 4980G is due on or before the 15th day of the fourth month following the calendar year in which the non-compabrable contribution was made.
Public Hearing
A public hearing has been scheduled for the proposed regulations on October 30, 2008, at 10:00 a.m.
Proposed Regulations, NPRM REG-120476-07, 2008FED ¶49,821
Other References:
Code Sec. 4980B
CCH Reference - 2008FED ¶34,600E
CCH Reference - 2008FED ¶34,600I
Code Sec. 4980D
CCH Reference - 2008FED ¶34,610D
Code Sec. 4980E
CCH Reference - 2008FED ¶34,615D
Code Sec. 4980G
CCH Reference - 2008FED ¶34,619R
CCH Reference - 2008FED ¶34,619V
CCH Reference - 2008FED ¶34,619X
CCH Reference - 2008FED ¶34,619YC
CCH Reference - 2008FED ¶34,619YE
Tax Research Consultant
CCH Reference - TRC COMPEN: 45,064.40
CCH Reference - TRC COMPEN: 45,206
CCH Reference - TRC COMPEN: 45,212
CCH Reference - TRC COMPEN: 45,214

CCH (cch.taxgroup.com) reports:

The IRS has published proposed amendments to regulations governing Code Sec. 6039, as amended by the Tax Relief and Health Care Act of 2006 (P.L. 109-432). Under amended Code Sec. 6039, corporate employers must provide an information return to the IRS and the employee when a transfer of stock is made in connection with the exercise of an option through an employee stock purchase plan (Code Sec. 423(c)) or through an incentive stock option program (Code Sec. 422(b)).
The main objective of the proposal is to insure that corporate employers provide employees with sufficient information to calculate their tax obligations when shares acquired through options are sold. To accomplish this, the amendments update the existing regulations governing the information statement provided to employees and add provisions detailing the return that must be filed with the IRS. Under the proposals, two new forms will be published in 2008:
Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), will be used for both the information return and the employee statement for stock options described in Code Sec. 422(b).
Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c), will be used for all reporting requirements for transfers of stock acquired by exercising a Code Sec. 423(c) option.
Corporations are not required to comply with the information return requirements of amended Code Sec. 6039 for stock transfers that occur during the 2007 and 2008 calendar years (Notice 2008-8, 2008-3 IRB, 276). However, corporations must furnish information statements to employees for such stock transfers and may rely on either Reg. § 1.6039-1 of the 2004 final regulations or Proposed Reg. § 1.6039-2 when providing the employee statements.
Proposed Regulations, NPRM REG-103146-08, 2008FED ¶49,820
Other References:
Code Sec. 6039
CCH Reference - 2008FED ¶35,601C
CCH Reference - 2008FED ¶35,601G
Tax Research Consultant
CCH Reference - TRC COMPEN: 21,352
CCH Reference - TRC COMPEN: 24,400

CCH (cch.taxgroup.com) reports:

House Democratic leaders said they are considering reworking the Senate-passed housing bill (HR 3221) to include provisions that address the financial problems facing Fannie Mae and Freddie Mac. House Majority Leader Steny Hoyer, D-Md., said that Senate Banking Committee Chairman Christopher Dodd, D-Conn., and House Financial Services Committee Chairman Barney Frank, D-Mass., are working with the administration to produce legislation that would be added to the housing bill. Hoyer said the measure could come before the House during the week of July 21.
The Senate completed work on July 11 on HR 3221, passing the housing bill by a margin of 63 to 5 (TAXDAY, 2008/07/14, C.1). The measure, which includes nearly $14.5 billion in tax relief, was expected to generate a swift conference agreement between the House and Senate lawmakers. However, continued weakness in the nation's housing market combined with concern over the financial stability of the two government sponsored housing enterprises have prompted lawmakers and the administration to consider broadening the scope of the housing bill. The Bush administration has spoken in favor of stronger oversight of Fannie Mae and Freddie Mac.
By Stephen K. Cooper, CCH News Staff.

Tax Analysts report: