Tax News

CCH (cch.taxgroup.com) reports:

  Massachusetts Governor Deval Patrick has signed legislation authorizing a sales tax holiday on August 16 and 17, 2008. On those days, sales tax does not apply to nonbusiness retail sales of tangible personal property costing $2,500 or less per item. The tax holiday does not apply to sales of telecommunications, tobacco products, gas, steam, electricity, motor vehicles, motorboats, or meals.

H.B. 4995, Laws 2008, effective July 30, 2008.
 

CCH (cch.taxgroup.com) reports:

  The IRS abused its discretion in denying a request for equitable innocent spouse relief under Code Sec. 6015(f). The taxpayer satisfied the relevant safe harbor conditions set out in Rev. Proc. 2000-15, 2000-1 CB 448. Her husband had died so she was no longer married. At the time the returns were filed, she had no knowledge or reason to know that the tax would not be paid by her husband. Finally, she would suffer economic hardship if relief were not granted because the payment of the underlying liabilities would prevent her from paying basic living expenses.

K.S. Alioto,
Dec. 57,506(M)

Other References:

 
Code Sec. 6015

  CCH Reference - 2008FED ¶35,192.25

  Tax Research Consultant

  CCH Reference - TRC INDIV: 18,058.15

CCH (cch.taxgroup.com) reports:

  The Pension Protection Act of 2006 (PPA) (P.L. 109-280) continues to have a tremendous effect on many retirement plan practitioners. While understanding of the statute has finally begun to sink in, the IRS and Treasury are now struggling with administering its requirements, especially for defined benefit plans with complex actuarial calculations. Most recently, the agencies listened to practitioners debate a perceived "revolving door" of regulation at a July 31 hearing on multiemployer defined benefit plan regulations (NPRM REG-110136-07, I.R.B. 2008-17, 838; TAXDAY, 2008/03/21, I.1). Practitioners clearly signaled their disagreement with a proposed rule regarding underfunded multiemployer defined benefit plans.

Critical Status

  According to testimony from Barry S. Slevin, on behalf of the United Food and Commercial Workers International Union, multiemployer defined benefit plans with less than 65 percent of the resources required to pay their expected future distributions are referred to as "critical status" plans. These critical status plans must adopt a "rehabilitation plan" that actuaries project will make up the difference between their liabilities and ability to pay within the course of 10 years. After adoption of a rehabilitation plan, Code Sec. 432(e)(4)( notes that the plan may emerge out of critical status within a year if the gap between its ability to pay and distribution liabilities has finally been projected by an actuarial certification to be met within 10 years, Slevin reported. The controversy is, however, that while both actuaries and attorneys alike argue that this period may be extended, the proposed regulations state otherwise.

  Slevin pointed out that, under Code Sec. 432(e)(4)(, multiemployer defined benefit plans are allowed to take into account extensions of the period over which their ability to pay their liabilities is projected, up to a maximum of five years. However, the proposed regulations require plans to ignore these extensions when applying the emergence out of critical status test. The result of not being allowed to use a 15-year projection period, some practitioners state, is that the plan is continuously stuck with a critical status classification.

Disagreement

  Edward Groden, testifying on behalf of the New England Teamsters & Trucking Industry Pension Fund, reported that this provision is an unlawful addition to the statutory rehabilitation plan requirement and is a hardship for employers and plan participants. He criticized the requirement as too difficult to implement and extraneous to the language of Code Sec. 432.

  Connie Leyva, testifying on behalf of the Southern California United Food & Commercial Workers Unions and Food Employers Joint Pension Trust Fund, agreed, asking the Treasury and the IRS to allow multiemployer defined benefit plans to use the extensions in determining whether the plan is in critical status. Leyva explained that, before the effective date of the regulations, her plan had proactively determined it was in critical status and adopted its own rehabilitation plan. If the unions would have to recalculate the status of their plan using a 10-year period, it is likely the plan would fall within the critical status classification again, forcing more reduction in benefits and increased plan participant contributions.

  Stephen Rosenblatt, testifying on behalf of the Sheet Metal Workers' National Pension Fund, also agreed. Rosenblatt pointed out that disallowing extensions of the period for actuarial projections could force plans to make more dramatic benefits cuts. Despite existing exceptions, he emphasized, these reductions could even lead to a violation of the Code Sec. 411(d)(6) anti-cutback rule for a participant's accrued benefits.

Call for Guidance

  Samuel Stanley, on behalf of the American Academy of Actuaries, called for IRS resolution of this disagreement. "With regard to the so-called "revolving door" issue, we think that this needs to be clarified," Stanley declared. "As practicing actuaries, we really need to have crystal clear rules as to how the emergence from critical status works.... We could tell that the issue is that plans enter critical status and then, under the regulations, there are extra requirements that involve consideration of the inclusion of amortization extensions. There's clearly a conflict there and the actuarial profession needs...guidance on that."

  By Torie Cole, CCH News Staff

Tax Analysts report: