Tax News

CCH (cch.taxgroup.com) reports:

  New York Governor David A Paterson has called on the Legislature to continue working on a property tax cap during a special economic session that will begin on August 19, 2008. The cap would provide relief to homeowners.

Press Release , Office of Governor David A Paterson, July 29, 2008
 

CCH (cch.taxgroup.com) reports:

  A retailer that participated in a private label credit card program with its customers that resulted in uncollectible accounts was not entitled to a bad debt refund of Indiana sales tax. As part of the program, the retailer conveyed information on the daily charges and sales tax to specified finance companies. These companies then remitted payment to the retailer for the charges and taxes and deducted certain service fees. The retailer wrote off these service fees as business expenses on its federal income tax return. In Indiana, a merchant may receive a sales tax refund if it writes off receivables as uncollectible bad debt "for federal tax purposes." However, the retailer was not eligible for the refund because it did not write off the uncollectible credit card accounts under the appropriate section of the Internal Revenue Code.

Home Depot U.S.A., Inc. v. Indiana Department of State Revenue , Indiana Tax Court, No. 49T10-0703-TA-11, July 28, 2008, ¶401-319

  Other References:

  Explanations at ¶61-120

CCH (cch.taxgroup.com) reports:

  President Bush on July 30 signed broad-sweeping housing legislation designed to reduce the growing number of housing foreclosures, assure mortgage finance giants Fannie Mae and Freddie Mac continued access to capital and liquidity and provide tax incentives primarily for homeownership and affordable housing. The Housing and Economic Recovery Act of 2008 (P.L. 110-289) contains a $15.1-billion tax package that is fully offset by a variety of revenue-raisers.

  The tax title, the Housing Assistance Tax Act of 2008, includes a refundable first-time-homebuyer tax credit and an additional standard deduction for real property taxes. The new law also simplifies and increases the low-income housing tax credit, provides a temporary increase in mortgage revenue bonds and treats certain federally guaranteed municipal bonds as tax-exempt bonds.

  The largest revenue offsets in the package require information reporting on merchant payment card transactions and a delay of the worldwide allocation rules. The housing law also sets new limits on the home sale exclusion and accelerates certain corporate estimated tax payments for corporations with at least $1 billion in assets.

  The president on July 23 announced he would sign the bill, reversing an earlier veto threat over a $4 billion community block grant provision (TAXDAY, 2008/07/24, C.1). White House Press Secretary Dana Perino emphasized that the White House still considers the block grants to be a bailout for lenders but recognizes that a prolonged veto battle was not in the best interest of the housing and credit markets.

  "We look forward to put in place new authorities to improve confidence and stability in markets and to provide better oversight for Fannie Mae and Freddie Mac. The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes," White House Deputy Press Secretary Tony Fratto said.

  House Majority Leader Steny H. Hoyer, D-Md., said the new housing law is the most comprehensive action taken yet to stem the surge of foreclosures facing the nation. He predicted the law will help minimize losses to homeowners and those impacted by the slumping housing market. "Beyond an assistance and stabilization measure, this legislation is a stimulus to boost the economy, which has been badly bruised by the housing crisis and related credit crunch," Hoyer stated.

  The measure has also won support from state housing authorities that are charged with administering benefits under the new law. According to the National Council of State Housing Agencies (NCSHA), a nonprofit organization based in Washington, D.C., the measure will provide new tools to stem home foreclosures, stabilize foreclosure-rocked neighborhoods and finance affordable home mortgages and rental homes.

  The NCSHA is particularly encouraged by the increase in tax-exempt housing bonds and low-income housing tax credits, permanent alternative minimum tax relief for housing bonds and credits, and temporary mortgage revenue bond refinancing authority. "The really tough work lies ahead," noted NCSHA Executive Director Barbara Thompson. She said state housing agencies must now "quickly deploy these new resources in ways that have the greatest impact on some of the toughest housing challenges our country has ever faced."

  By Stephen K. Cooper and Paula Cruickshank, CCH News Staff

Housing and Economic Recovery Act of 2008, Enrolled, P.L. 110-289

Ways and Means Release: Critical Housing Bill Signed Into Law
 

CCH (cch.taxgroup.com) reports:

  In a case of first impression, the Tax Court properly denied an innocent spouse's request for a refund of community property used to pay tax liabilities attributable to her husband's income because Code Sec. 6015(g) does not preempt state (California) community property law. While the determination whether a spouse qualifies for innocent spouse status is to be made under Code Sec. 6015(a)without regard to community property laws, Code Sec. 6015(g), the refund provision of the innocent spouse relief statute, has no similar language. Legislative history also suggests that Code Sec. 6015(a) was drafted to account for the expanded means of allocating items between spouses to determine eligibility for innocent spouse relief; it was not meant to preempt community property laws with respect to refunds.

  Affirming the Tax Court, 126 TC 47, Dec. 56,412.

L.E. Ordlock, CA-9, 2008-2 USTC ¶50,457

Other References:

 
Code Sec. 6015

  CCH Reference - 2008FED ¶35,192.75

 
Code Sec. 6321

  CCH Reference - 2008FED ¶38,136.54

  Tax Research Consultant

  CCH Reference - TRC IRS: 33,102.05

CCH (cch.taxgroup.com) reports:

  Amendments to Regs. §26.2642-6 and 26.2654-1, relating to the severance of a trust for generation-skipping transfer (GST) tax purposes, have been adopted. The final regulations under Code Sec. 2642 permit the trusts resulting from a qualified severance to be funded on a non-pro rata basis. However, if the funding is done on a non-pro rata basis, each asset received by a resulting trust must be valued by multiplying the fair market value of the asset held in the original trust as of the date of the severance by the fraction or percentage of that asset received by that resulting trust. Accordingly, the assets are valued without taking into account any discount or premium arising from the severance.

  The final regulations also permit a qualified severance of a trust with an inclusion ratio between zero and one into more than two resulting trusts, provided that certain requirements are satisfied. Trusts resulting from a severance that does not meet the requirements of a qualified severance will be treated as separate trusts for purposes of the GST tax, provided that the resulting trusts are recognized as separate trusts under applicable state law. However, each such resulting trust will have the same inclusion ratio as that of the original trust. In the case of a mandatory severance, the final regulations under Code Sec. 2654 provide that each resulting trust will be treated as a separate trust for GST tax purposes if the resulting trust is recognized as a separate trust under applicable state law. Each trust resulting from such a mandatory severance will have the same inclusion ratio as that of the original trust. The final regulations are effective July 31, 2008.

T.D. 9421, FINH ¶43,122

  [Document will be available on August 1, 2008. --CCH.]

Other References:

 
Code Sec. 2642

  CCH Reference - FINH ¶12,860

 
Code Sec. 2654

  CCH Reference - FINH ¶13,115

  Tax Research Consultant

  CCH Reference - TRC ESTGIFT: 57,054.05
CCH Reference - TRC ESTGIFT: 57,054.20
 

CCH (cch.taxgroup.com) reports:

  The IRS has issued final regulations providing guidance regarding the mortality tables to be used in determining present value or making any computation for purposes of applying certain pension funding requirements. The regulations provide generally applicable mortality tables, and rules for adopting substitute tables. The regulations governing the generally applicable mortality tables for single employer defined benefit pension plans, and the regulations providing for the use of those mortality tables for multiemployer defined benefit pension plans, apply to plan years beginning on or after January 1, 2008. The regulations regarding the approval and use of substitute mortality tables for single employer defined benefit pension plans apply to plan years beginning on or after January 1, 2009.

Background

  The Pension Protection Act of 2006 (PPA) (P.L. 109-280), revised the minimum funding requirements for defined benefit pension plans for plan years beginning on or after January 1, 2008. The PPA added Code Sec. 430, which specifies the minimum funding requirements that apply to defined benefit plans that are not multiemployer plans, and Code Sec. 431, which specifies minimum funding requirements for multiemployer plans. Code Sec. 430(h)(3) requires the IRS to provide mortality tables by regulation for these, and it provides rules for a plan's use of substitute mortality tables.

Generally Applicable Mortality Tables

  The final regulations set forth the IRS's methodology in establishing mortality tables to be used for participants and beneficiaries to determine present value or make any computation regarding the minimum funding standards for single-employer defined benefit plans under the changes made by the PPA. These mortality tables also apply for purposes of determining the current liability of a multiemployer plan and for determining the current liability of a plan for which the application of the PPA changes is delayed. Under the final regulations, mortality tables for disabled individuals is to be provided in separate guidance published by the IRS (Notice 2008-29, I.R.B. 2008-12, 637, is the latest pronouncement).

  The mortality tables are based on the RP-2000 Mortality Tables Report. The tables are gender-distinct since women live longer. The regulations use separate annuitant and nonannuitant tables because early retirees tend to be less healthy and do not live as long. The regulations reflect the effect of expected improvements in mortality.

Substitute Tables

  The final regulations provide for the use of substitute mortality tables upon written request of the plan sponsor and approval by the IRS. Substitute mortality tables must reflect the actual mortality experience of the pension plan for which the tables are to be used, and that mortality experience must be credible. Separate mortality tables must be established for each gender, and a substitute mortality table is allowed to be established for a gender only if the plan has credible mortality experience with respect to that gender.

  Credible mortality experience for a gender must be based on at least 1,000 deaths within that gender in the period covered by the experience study. One change in the final regulations from the proposed regulations is an increase in the maximum permissible time for an experience study from four years to five to help plans that have trouble coming up with 1,000 deaths. The IRS indicates that it may increase the maximum period in the future by published guidance.

T.D. 9419, 2008FED ¶47,055

Other References:

 
Code Sec. 430

  CCH Reference - 2008FED ¶20,154

  CCH Reference - 2008FED ¶20,155

 
Code Sec. 431

  CCH Reference - 2008FED ¶20,174

  Tax Research Consultant

  CCH Reference - TRC RETIRE: 30,556

CCH (cch.taxgroup.com) reports:

  The Senate on July 30 failed to approve a motion to proceed to the Jobs, Energy, Families, and Disaster Relief Bill of 2008 (Sen 3335), sending the package of tax extenders to defeat for a second day in a row and most likely leaving until September the next opportunity to revisit the bill. The legislation in its current form would provide $18 billion in tax breaks for alternative and renewable energy, in addition to business tax incentives, protection from the alternative minimum tax, and extension of the college tuition tax deduction and state and local sales tax deduction.

  The Senate failed to end debate on the motion to call up the bill by a 51-43 margin, nine short of the 60 votes needed; however, Senate Majority Leader Harry Reid, D-Nev., said he would keep open the motion to proceed to the bill. Most Senate Republicans support the tax breaks but oppose the use of revenue-raisers to pay for them. GOP leaders have suggested they would consider offsetting some of the new tax breaks and other provisions included in the legislation in exchange for making many of them permanent.

  Further complicating passage is a standoff between leaders of both parties over provisions in energy legislation that would curb the practice of oil speculation (Sen 3268). Reid had linked approval of the extenders legislation to acceding to Republican demands to offer amendments to Sen 3268 allowing offshore drilling, oil shale development and increased use of nuclear energy. Reid said that Senate Republicans knew full-well that blocking the extenders bill would put an end to any agreement to deal with other energy amendments but "they did it anyway."

  Senate Finance Committee Chairman Max Baucus, D-Mont., who authored the bill, said the Senate missed a "huge opportunity" and members will have to face the wrath of angry constituents during the August recess. "We're going to hear from folks who can't afford a heavy hit on their taxes from the alternative minimum tax or from the expiration of other family tax cuts that are running out right now," said Baucus. "I hope senators will answer the call in September, and work together for jobs, energy, and American families."

  By Jeff Carlson, CCH News Staff

Tax Analysts report: