Tax News

CCH (cch.taxgroup.com) reports:

  The Ohio Department of Taxation has issued a new information release explaining that there is no voluntary disclosure program for the commercial activity tax (CAT) because, due to the relative newness of the tax, all issues of noncompliance are within the statute of limitations for assessment. However, under current department policy, penalties will be waived for taxpayers that come forward to register, file, and pay the CAT, provided that the taxpayer was not previously contacted by the department through any audit or compliance, and that the taxpayer is not under investigation by the department's enforcement division.

  Interest is still due on delinquent accounts, and taxpayers liable for the CAT are encouraged to immediately register, file all outstanding returns, and pay any liability and interest due. Specific information regarding registration and filing is found within the release which can be viewed on the department's Web site, at
http://tax.ohio.gov/divisions/communications/information_releases/cat_2008_01.stm.

CAT Information Release 2008-01, Ohio Department of Taxation, July 25, 2008.
 

CCH (cch.taxgroup.com) reports:

  The Maryland Comptroller's Office has announced that new reporting requirements are being imposed on certain multistate corporations and manufacturers, to provide the new Maryland Business Tax Reform Commission with the necessary information to review and evaluate the state's current business tax structure and make specific recommendations for changes for corporate income tax purposes. The new reporting requirements apply to all taxable years beginning after December 31, 2005, and reports are to be filed on or before dates specified by the Comptroller.

  Manufacturing corporations that have more than 25 employees and apportion their income under the single sales factor are required to file an information report (500MC) with the Comptroller's office. The 500MC forms for 2006 and 2007 are now available on the business forms page of the Comptroller's Web site. Additionally, except as provided in regulations that the Comptroller adopts, the reports required for a taxable year beginning before January 1, 2007, must be submitted as part of the corporation's tax return for the next taxable year beginning after December 31, 2006. The information report must be submitted in an electronic format specified by the Comptroller. The Comptroller's office will post regulations shortly on due dates, format, and other issues for multistate corporations subject to the new reporting requirements. The press release is available on the Comptroller's Web site at
http://business.marylandtaxes.com/taxinfo/requirements.asp.

Press Release, Maryland Office of the Comptroller, July 25, 2008.
 

CCH (cch.taxgroup.com) reports:

  The House and Senate approved housing legislation after the White House lifted a veto threat. White House Press Secretary Dana Perino stressed that the president would not have supported the measure if there were more time left for negotiations before the start of the congressional recess in early August. The IRS, meanwhile, issued regulations dealing with the averaging of farm and fishing income when computing income tax liability and reminded qualifying retirees and veterans that it is not too late to file for an economic stimulus payment.

Congress

  The Senate on July 25 approved a final procedural motion on housing legislation (HR 3221) by a vote of 80 to 13, paving the way for a final vote and approval of the legislation on July 26 (TAXDAY, 2008/07/28, C.1). On July 26 the Senate approved by a 72 to 13 vote the massive housing bill, the Housing and Economic Recovery Act of 2008), that contains a package of $15.1 billion in housing tax provisions.

  The bill moved forward, passing the House on July 23 (TAXDAY, 2008/07/24, C.1), after President Bush dropped his veto threat, even though the $4 billion community block grant provision remained in the bill. Senior administration officials had recommended a veto because they regarded the provision as a bailout to lenders. However, Perino noted that the legislation needed to be enacted without further delay to increase confidence and stability in the housing and financial markets.

  Perino down played the significance of a Congressional Budget Office estimate that the bill would cost $25 billion if it included a provision giving the Treasury Department temporary authority to assure Fannie Mae and Freddie Mac continued access to capital and liquidity. The administration does not expect this authority will be needed, but taxpayer protections are in place if the plan were ever implemented, Perino maintained.

  Senate Finance Committee. Senate Finance Committee (SFC) Chairman Max Baucus, D-Mont. on July 24 held a hearing on the findings of a Government Accountability Office (GAO) investigation of Ugland House, a building in the Cayman Islands that is the registered office of over 15,000 companies (TAXDAY, 2008/07/25, C.1). Baucus said the problem might require financial firms to file information reports to the IRS when they facilitate transfers of client funds offshore, as a method of enabling the IRS to better track tax evaders by matching that report with filed returns. On July 22, the SFC held a hearing on Indian tax issues where witnesses called on the federal government to enhance Indian tax policy already in place; specifically tax-exempt bonds, accelerated depreciation and the Indian Employment Tax Credit.

  SFC ranking member Charles E. Grassley, R-Iowa, and several Midwestern senators on July 23 introduced a comprehensive plan to provide $3.96 billion in federal tax relief to flood, tornado and severe storm victims in the Midwest. The Midwestern Disaster Tax Relief Bill of 2008 (Sen 3322) is modeled after tax legislation that Congress passed to help victims of Hurricanes Katrina, Rita and Wilma in 2005 and the tornado in Kiowa County, Kansas in 2007. A companion bill was also introduced in the House.

White House

  Amid the current turmoil in the housing and financial sectors, the Office of Management and Budget (OM on July 28 will release the administration's latest economic forecast. The OMB report will show any changes in federal deficit projections, the annual rates of economic growth, unemployment and inflation, among other economic indicators since its February estimate.

IRS

  Farm and Fishing Income Averaging. The IRS and Treasury issued final, proposed and temporary regulations under Code Sec. 1301 dealing with the averaging of farm and fishing income when computing income tax liability (T.D. 9417,
NPRM REG-161695-04; TAXDAY, 2008/07/22, I.1). The regulations reflect changes to the law made by the American Jobs Creation Act of 2004 (P.L. 108-357) and provide guidance to individuals engaged in a farming or fishing businesses who elect to reduce their liability by treating all or a portion of the current tax year's farm or fishing income as if one-third of it had been earned in each of the prior three tax years. The temporary regulations generally apply to tax years beginning after July 22, 2008. However, taxpayers may use the temporary regulations in taxable years beginning after December 31, 2003, if consistently applied.

  Bonus Depreciation for Kansas Disaster Area. The IRS has issued procedures for claiming the 50 percent Kansas additional first-year depreciation provided by the Food, Conservation, and Energy Act of 2008 (P.L. 110-246) for qualified recovery assistance property (RA property) placed in service by the taxpayer on or after May 5, 2007 (Notice 2008-67; TAXDAY, 2008/07/24, I.4). The guidance also explains how a taxpayer may elect not to deduct the additional first-year depreciation for Kansas RA property.

  Stimulus Payment Information. The IRS reminded qualifying retirees and veterans that it is not too late to obtain an economic stimulus payment by filing a 2007 tax return (IR-2008-91; TAXDAY, 2008/07/22, I.4). The IRS will send a second set of information packets to 5.2 million people who may be eligible to receive a stimulus payment, but who have not yet filed. The packages will contain instructions, an example Form 1040A return showing the few lines that need to be completed and a blank Form 1040A. The packages will be mailed over a three-week period starting July 21.

  Offshore Tax Evasion. Frank Ng, the IRS commissioner of Large and Mid-Size Businesses, testified July 24 at the Senate Finance Committee hearing on tax evasion in the Cayman Islands (TAXDAY, 2008/07/25, C.1). Ng reported that over 9,000 Cayman Island entities are associated with U.S. firms, and over 900 are wholly owned U.S. companies. In 2005, the IRS received 5,500 tax returns from Cayman Island corporations reporting gross receipts of $162 billion. The IRS is attempting to deter offshore tax evasion by improving the qualified intermediary program, international cooperation, criminal investigations of U.S. taxpayers for offshore tax evasion, and the use of John Doe summonses. The Cayman Islands have cooperated with U.S. investigations, but the IRS has been hampered by its inability to identify specific individuals and activities for information requests. Ng asked Congress to strengthen penalties for foreign trust reporting, increase the three-year statute of limitations, and continue to support tax treaty information exchange agreements.

  By Jeff Carlson, Paula Cruickshank, Brant Goldwyn and George Jones, CCH News Staff.

CCH (cch.taxgroup.com) reports:

  Senate Finance Committee Chairman Max Baucus, D-Mont., on July 24 introduced the Jobs, Energy, Families and Disaster Relief Bill of 2008 (Sen 3335), a revised $123 billion tax extender bill, in hopes of wooing recalcitrant Republicans when the Senate attempts once again to move the legislation late in the week beginning July 28. Baucus dropped some controversial provisions and added a few sweeteners to boost chances of reaching the 60-vote majority necessary to move the legislation.

  Baucus added a $3.9 billion provision to create parity in mental health benefits, a cause long championed by two Republican senators who had previously voted against earlier versions of the extenders package. Another new provision, aimed at wooing Republicans from Midwestern states hard hit by early summer storms, would provide $ 4 billion in tax incentives to help those states recover and rebuild. In addition, Baucus dropped a controversial provision opposed by a majority of Republicans that would have provided a $1.5 billion tax break for trial lawyers.

  A new revenue-raising provision that creates mandatory basis reporting by brokers for transactions involving publicly traded securities such as stock, debt, commodities, derivatives and other items as specified by the Treasury, was also included. All of the provisions in the measure are offset, with the exception of a one-year patch for the alternative minimum tax (AMT). "Senators who support good-paying jobs, new energy solutions and America's working families must vote to pass this legislation before Congress heads home," said Baucus.

  Sen 3335 builds on the Energy Independence and Tax Relief Bill of 2008 (Sen 3125) that Baucus unveiled in June. He noted that the Senate bill text can replace the text of House tax legislation to comply with procedural rules. In addition to the original legislation, which provides another year of relief from the AMT, the measure replenishes the Highway Trust Fund to enable infrastructure repair and provides some new incentives for alternative energy and business and individual tax relief. The bill also extends tax incentives that expired at the end of 2007 or are set to expire at the end of 2008, such as the research and development tax credit, college tuition deduction and the state and local sales tax deduction.

  Senate Republican leaders qualified the revised legislation as inching nearer to something they might endorse, but stopped short of saying they were in agreement, primarily because of offsets for the renewal of tax breaks already in place. House budget hawks still insist that all tax breaks must be paid for, leaving another major hurdle before extenders legislation can be signed into law in 2008.

  By Jeff Carlson, CCH News Staff

Jobs, Energy, Families and Disaster Relief Act of 2008, Sen 3335 [Document will be available on July 29. --CCH.]

SFC Release: Baucus Updates Tax Relief Bill for Jobs, Energy, Families

SFC Staff Summary of the Jobs, Energy, Families and Disaster Relief Act of 2008

SFC Estimated Budget Effects of the Jobs, Energy, Families, and Disaster Relief Act of 2008 [Document will be available on July 29. --CCH.]
 

CCH (cch.taxgroup.com) reports:

  The Senate, on July 26, passed the Foreclosure Prevention Act of 2008 (HR 3221) by a vote of 72 to 13. The comprehensive housing legislation contains a $15.1 billion tax package, the Housing Assistance Tax Act of 2008, that is fully offset. President Bush indicated that he will sign the measure into law.

  The major revenue offset for the tax package, which is fully paid for, would require credit card information return reporting by merchants that would raise $9.082 billion. It would delay the implementation of worldwide allocation of interest rules and raise $7.322 billion. Part of that revenue would cover some of the cost of the $3.9 billion Community Development Block Grant program The bill would also raises $1.394 billion by modifying the exclusion of gains on the sale of a principal residence.

  The tax incentives include a refundable first-time home buyer credit estimated to cost $4.853 billion over 10 years, an additional standard deduction for real property taxes that would cost $1.537 billion, and a plan to simplify and increase the low income housing tax credit program and the tax exempt bond program at a cost of $1.946 billion. The measure also provides a temporary increase in mortgage revenue bonds ($1.475 billion), alternative minimum tax relief for housing programs ($2.093 billion), and treats certain federally guaranteed municipal bonds as tax exempt bonds ($126 million).

  In addition, the legislation would protect Social Security numbers in real estate transactions ($20 million), encourage the rehabilitation of government-leased buildings ($96 million), and reform rules for real estate investment trusts ($359 million). The package also includes a plan to expand the Gulf Opportunity Zone tax incentives ($1.333 billion) and allow taxpayers to accelerate the recognition of historic alternative minimum tax and research and development credits ($966 million).

  "This is an enormous win for millions of American families facing foreclosure and for our housing sector at the core of this economic downturn, "said Senate Finance Committee Chairman Max Baucus, D-Mont., following the vote. "It took ingenuity and great cooperation, and today I'm pleased to say that we passed a bill that will bring property tax relief to tens of millions of homeowners, help refinance subprime loans, and reduce the number of vacant homes on the market, "said Baucus.

  By Jeff Carlson, CCH News Staff

SFC Release: Summary of HR 3221, Housing Assistance Tax Act of 2008

Tax Analysts report: