Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has provided guidance on the requirements to be satisfied by a sponsor of a defined benefit plan wishing to use substitute mortality tables in determining the plan's minimum funding requirements, as allowed under Code Sec. 430(h)(3)(C). This is an update of Rev. Proc. 2007-37, I.R.B. 2007-25, 1433, which was based upon proposed regulations. The update is necessary due to the need to reflect final regulations published in the Federal Register on July 31, 2008 (T.D. 9419,
TAXDAY, 2008/07/31, I.1).

  The following changes were made to reflect the provisions of the final regulations:

  --guidance regarding the required experience study reflect the final regulation's grant of authority to use a period of up to five years and clarify that the experience study period used to develop unadjusted base tables must coincide with the experience study period used to demonstrate credible mortality experience;

  --reflection of the extended October 1, 2008 deadline for submitting requests to use substitute mortality tables to be used for plan years beginning in 2009;

  --reflection of the revised definition of "Base Year" used in the final regulations;

  --a new subsection allowing plans within a permissive group to use different experience study periods if the plans have different plan years;

  --reflection of the increased length of the period used to demonstrate lack of credible mortality experience if an experience study period is longer than four years;

  --guidance for demonstrating lack of credible mortality experience when different experience study periods are used by a permissive group;

  --permission to use alternative means of demonstrating lack of credible mortality experience;

  --elimination of one set of sample annuity values with respect to nonannuitant mortality tables;

  --adjustments to the date of birth used for annuity values; and

  --the term "newly acquired" was changed to "newly affiliated" throughout the procedure to reflect the change in the final regulation's language.

  This procedure applies to all requests to use substitute mortality tables submitted on or after December 1, 2008. Requests submitted prior to December 1, 2008 may choose to follow this procedure or that prescribed in Rev. Proc. 2007-37.

Rev. Proc. 2008-62, 2008FED ¶46,592

Other References:

 
Code Sec. 430

  CCH Reference - 2008FED ¶20,161.032

  CCH Reference - 2008FED ¶20,161.60

  Tax Research Consultant

  CCH Reference - TRC RETIRE: 30,556

CCH (cch.taxgroup.com) reports:

  The IRS has provided the static mortality tables to be used under Code Sec. 430(h)(3)(A) for purposes of calculating the funding target and other items for valuation dates occurring during calendar years 2009 through 2013, and modified "unisex" mortality tables for use in determining minimum present value under Code Sec. 417(e)(3) for distributions with annuity starting dates that occur during stability periods beginning in calendar years 2009 through 2013.

  The mortality tables described in Code Sec. 430(h)(3)(A) are also used to determine current liability under Code Sec. 412(l)(7) of the Code for nondisabled participants. Furthermore, the same mortality assumptions that apply for purposes of Code Sec. 430(h)(3)(A) and Reg. §1.430(h)(3)-1(a)(2) are used to determine a multiemployer plan's current liability for purposes of applying the full-funding rules of Code Sec. 431(c)(6). For this purpose, a multiemployer plan is permitted to apply either the annually adjusted static mortality tables or the generational mortality tables.

Notice 2008-85, 2008FED ¶46,591

Other References:

 
Code Sec. 412

  CCH Reference - 2008FED ¶19,125.52

 
Code Sec. 417

  CCH Reference - 2008FED ¶17,730.41

 
Code Sec. 430

  CCH Reference - 2008FED ¶20,161.022

  CCH Reference - 2008FED ¶20,161.60

 
Code Sec. 431

  CCH Reference - 2008FED ¶20,181.033

  Tax Research Consultant

  CCH Reference - TRC RETIRE: 30,556

CCH (cch.taxgroup.com) reports:

  The IRS has published a list of the counties and parishes in the United States that have suffered exceptional, severe or extreme drought during the 12 months ending August 31, 2007, sufficient to extend the livestock replacement period. As authorized in Code Sec. 1033(e)(2)( and implemented in Notice 2006-82, I.R.B. 2006-39, 529, an extended replacement period is available for livestock sold on account of extreme weather conditions until the end of the first taxable year ending after the first drought-free year. For this purpose, the 12-month period that ended on August 31, 2007, was not a drought-free year for a region that includes any county on the IRS list.

Notice 2008-86, 2008FED ¶46,589

Other References:

 
Code Sec. 1033

  CCH Reference - 2008FED ¶29,650.127

  Tax Research Consultant

  CCH Reference - TRC SALES: 27,064.25
CCH Reference - TRC FARM: 3,206.10
 

CCH (cch.taxgroup.com) reports:

  House lawmakers had planned to leave Washington, D.C., on September 29, thereby ending stalled negotiations with the Senate and forcing Senate lawmakers to accept their package of tax extenders, energy incentives and alternative minimum tax (AMT) relief bills. However, the failure of the House to pass the Emergency Economic Stabilization Bill of 2008 (HR 3997), will require lawmakers to return to Washington as early as October 1. Since work must continue on a bailout plan for the economy, House and Senate lawmakers might also get another chance to work out their difference on the tax bills.

  House Ways and Means Committee member Jim McDermott, D-Wash., said the Senate has "played all kinds of games with us, so we though we could get out of here without having to have another round." McDermott said the failure of the bailout bill means that House lawmakers could be back in Congress for another couple of weeks, thereby leaving lots of time for a continued standoff between the House and Senate.

  Two energy incentive and extender tax bills were unveiled by House Ways and Means Chairman Charles B. Rangel, D-N.Y., late on September 28, but Democratic leadership decided not to bring them up for a vote when it became clear that the Senate would reject them. Rangel had hoped that the Energy Improvement and Extension Bill of 2008 (HR 7201) and the Temporary Tax Relief Bill of 2008 (HR 7202) would generate support in the Senate because they include modified energy tax incentives and added rural schools provisions.

  Senate Finance Committee Chairman Max Baucus, D-Mont., said the 60 votes necessary to pass House tax legislation are not available, after another attempt failed on September 29. GOP lawmakers do not believe the tax extenders, energy incentives or disaster relief bills should be offset by tax increases, Baucus said. He told reporters that House and Senate lawmakers have not communicated with one another and that the gulf between the two legislative bodies is resulting in a lack of movement on the legislation.

  "The larger issue is the House and Senate just don't talk to one another and work out an understanding," Baucus said. "They're in their little world and we're in our little world, instead of just sitting down like adults, both sides --House and Senate, and working out solutions."

  House Majority Leader Steny H. Hoyer, D-Md., and the group of fiscally conservative House Democrats known as the Blue Dogs, expressed anger that the Senate sent its version of the energy, AMT and extenders tax bill, HR 6049, to the House on September 29 just as lawmakers were preparing to vote on the economic bailout bill. Hoyer said that did not give the House enough time to consider the tax bill since the House planned to adjourn following the bailout vote. Hoyer said the House would reject the Senate strategy to legislate by blunt force. "It is not our intention to come back in a lame-duck session and pass extenders," he said.

  Baucus also said the Senate would not be satisfied with simply approving the House-passed Alternative Minimum Tax (AMT) Relief Bill of 2008 (HR 7005), a $64.6-billion measure that does not include a revenue offset. The measure passed the House on September 24 by a bipartisan vote of 393 to 30 (TAXDAY, 2008/09/25, C.1). He said the Senate views their own bill, HR 6049, as a total package that should not be broken into individual pieces.

  By Stephen K. Cooper, CCH News Staff

Energy Improvement and Extension Act of 2008, HR 7201

Temporary Tax Relief Act of 2008, HR 7202

Renewable Energy and Job Creation Tax Act of 2008, as Passed by the House on September 26, 2008, HR 7060

Congressional Release: Summary of HR 7201 Energy Improvement and Extension Act of 2008

Congressional Release: Summary of HR 7202 Temporary Tax Relief Act of 2008

Senate Finance Committee Release: SFC Chairman Max Baucus Remarks on Extenders
 

CCH (cch.taxgroup.com) reports:

  The House on September 29 voted 228 to 205 to reject the Emergency Economic Stabilization Bill of 2008 (EESA) (HR 3997). House Republicans voting against the measure totaled 133, with 95 Democrats joining them. Treasury Secretary Henry M. Paulson, Jr., will be consulting with President Bush, Federal Reserve Board Chairman Ben Bernanke and congressional leaders as to the next steps, according to a statement released by the Treasury.

  " In the meantime, we stand ready to work with fellow regulators and use all the tools at our disposal, as we have over the last several months, to protect our financial markets and our economy," said Treasury Assistant Secretary for Public Affairs and Director of Policy Planning Michele Davis.

  Prior to the vote, President Bush described the EESA as "a bold bill that will help keep the crisis in our financial system from spreading throughout our economy."

  The bill would have given the Treasury $250 billion immediately, and would have required the president to certify if an additional $100 billion is necessary. The remaining $350-billion disbursement would have been subject to congressional approval. The Treasury would have been required to report on the use of the funds and progress made in addressing the crisis.

  Meanwhile, the EESA also called on the Treasury to modify troubled loans wherever possible to help families keep their homes. It also directed other federal agencies to modify loans that they own or control.

  The legislation also would require companies that sold some of their bad assets to the government to provide warrants so that taxpayers could benefit from any future growth these companies might experience as a result of participation in this program. The legislation would require the president to submit legislation to cover any losses to taxpayers resulting from this program by charging a small, broad-based fee to all financial institutions.

  The EESA provided that, in exchange for participation in the program, companies would lose certain tax benefits and, in some cases, would have to limit executive pay.

  In a September 28 letter from Office of Management and Budget (OM Director Jim Nussle to House Minority Leader John A. Boehner, R-Ohio, Nussle stated that the impact on the taxpayer would be "substantially less" than $700 billion. "No one knows just how much these assets will sell for, but since 90 percent of mortgages are currently being paid on time and in full, we can expect a substantial payback on our investment." He added that, in some cases, if a mortgage asset is purchased at a deep discount from its face value, taxpayers may even see a positive return on their investment.

  House Financial Service member Emanuel Cleaver II, D-Mo., said that his constituents believe the bailout bill would allow the federal government to spend tax dollars to bail out millionaires, or executives with lucrative golden parachutes. Rep. John Tanner, D-Tenn., said lawmakers did a poor job of communicating the seriousness of the economic problems that the bailout bill would address. "Nobody knew for sure what we were avoiding, and nobody knew for sure what we were alleviating," he said.

  Rep. Joseph Crowley, D-N.Y., said the bailout bill failed because of a lack of GOP support. "Outside of war and peace, this is the most important vote people will take in their lives." But Rep. Eric Cantor, R-Va., the GOP Chief Deputy Whip, said more Republicans would have voted for the bill, but a partisan speech given by House Speaker Nancy Pelosi, D-Calif., made at least 11 members vote against the bill.

  House leaders will either find the necessary votes to bring the same bill up in the same format, or they will negotiate a better piece of legislation that is more acceptable to House Republicans, predicted Rep. Chris Van Hollen, D-Md.

  By Sarah Borchersen-Keto and Stephen K. Cooper, CCH News Staff

Amendment to the Senate Amendment to HR 3997, Emergency Economic Stabilization Act of 2008, HR 3997

Congressional Release: Section-by-Section Analysis of the Legislation, Emergency Economic Stabilization Act of 2008, HR 3997

Congressional Release: Summary of the Emergency Economic Stabilization Act of 2008, HR 3997

White House Statement: A Strong Bipartisan Proposal To Stabilize Our Financial System

Statement of Administration Policy on HR 3997, Emergency Economic Stabilization Act of 2008

Letter from Office of Management and Budget Director Jim Nussle to Rep. John Boehner

Treasury Department News Release, TDNR HP-1167

Treasury Department News Release, TDNR HP-1168
 

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  Legislation revises and clarifies the California corporation franchise and income tax intercompany dividend elimination provision and makes numerous other changes to corporation franchise and income tax and personal income tax provisions. These changes expand eligibility for filing nonresident group returns, subject partnerships to the nonresident realty withholding requirements, subject withholding agents who fail to remit withholding payments to the withholding penalty, increase the personal income estimated tax payment filing threshold, and extend the limitations period for filing a refund claim for taxes paid to another state. In addition, amendments authorize the Franchise Tax Board's (FT Taxpayers' Rights Advocate to abate penalties, interests, and additions to tax under specified conditions.

 

CCH (cch.taxgroup.com) reports:

  Legislation has been enacted that partially conforms California personal income tax law to federal amendments made by the Mortgage Forgiveness Debt Relief Act of 2007 (P.L. 110-142) allowing an exclusion from gross income for discharge of an individual's qualified principal residence indebtedness. However, the California exclusion is limited to indebtedness discharged in the 2007 and 2008 calendar years, while the federal exclusion applies to indebtedness discharged in 2007 through 2009. Also, the amount of the California exclusion is limited to $250,000 ($125,000 in the case of a married individual filing separately), and "qualified principal residence indebtedness" is defined for purposes of the California exclusion to mean an individual's qualified acquisition indebtedness of up to $800,000 ($400,000 in the case of a married individual filing separately) rather than the $2 million ($1 million in the case of a married individual filing separately) provided under federal law. Notwithstanding any other law to the contrary, no penalties or interest will be due with respect to the discharge of any qualified principal residence indebtedness during the 2007 taxable year, regardless of whether the taxpayer reports the discharge on his or her return for the 2007 taxable year.

Ch. 282 (S.B. 1055), Laws 2008, effective September 25, 2008, and applicable as noted above.
 

CCH (cch.taxgroup.com) reports:

  The IRS has provided guidance regarding the application of
Code Sec. 1058(a) to situations involving securities loan agreements where the borrower subsequently defaults under the agreement as a result of its bankruptcy (or that of an affiliate) and, as soon as it is commercially practicable (but in no event more than 30 days following the default), the lender uses collateral provided pursuant to the agreement to purchase identical securities. Pursuant to the guidance, the purchase of the identical securities will not result in the loss of tax-free treatment under Code Sec. 1058(a) for the lender, so long as the following conditions are met:

  (1) the securities loan agreement meets the requirements of Code Sec. 1058(b);

  (2) the agreement requires that the borrower transfer collateral as security for its obligations under the agreement;

  (3) the borrower defaults under the agreement as a direct or indirect result of its bankruptcy or that of an affiliate; and

  (4) as soon as it is commercially practicable (but in no event more than 30 days following the default), the lender applies collateral transferred under the agreement (or cash generated by the sale of the collateral) to the purchase of identical securities.

  The guidance is effective for tax years ending on or after January 1, 2008. No inference should be drawn as to whether similar consequences will result if a securities loan falls outside the scope of this guidance.

Rev. Proc. 2008-63, 2008FED ¶46,588

Other References:

 
Code Sec. 1058

  CCH Reference - 2008FED ¶30,003.01

  Tax Research Consultant

  CCH Reference - TRC SALES: 3,302.35

CCH (cch.taxgroup.com) reports:

  The IRS and Treasury Department will issue regulations providing that the date as of the close of which the U.S. government directly or indirectly owns a more-than-50-percent interest in a loss corporation will not be considered a testing date for purposes of determining whether the loss corporation is required to determine whether an ownership change has occurred under Code Sec. 382. In other words, the loss corporation will be required to determine whether there is a testing date (and, if so, whether there has been an ownership change) on any date as of the close of which the U.S. does not own a more-than-50-percent interest in the corporation. A "more-than-50-percent interest" is stock with more than 50 percent of the total value of all stock classes (excluding Code Sec. 1504(a)(4) preferred stock), or more than 50 percent of the combined voting power of all voting stock, or an option to acquire such stock. The regulations will address acquisitions not described in Notice 2008-76, I.R.B. 2008-39 (TAXDAY, 2008/09/09, I.1), and will apply for any tax year ending on or after September 26, 2008, unless and until the IRS issues additional guidance.

Notice 2008-84, 2008FED ¶46,587

Other References:

 
Code Sec. 382

  CCH Reference - 2008FED ¶17,115.40

  CCH Reference - 2008FED ¶17,115.45

  Tax Research Consultant

  CCH Reference - TRC NOL: 33,050

CCH (cch.taxgroup.com) reports:

  Although the IRS will continue not to issue advance rulings or determination letters on the income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan, as described in Code Sec. 409A, the Service may issue rulings on the application of certain other tax provisions to taxpayers who participate in those plans. Specifically, for rulings and determination letters issued after September 25, 2008, the IRS may address issues such as the estate and gift tax consequences of proposed inter vivos or testamentary transfers of rights under nonqualified deferred compensation plans that may be covered by Code Sec. 409A, and issues arising under the Federal Insurance Contributions Act (FICA) with respect to nonqualified deferred compensation.

  CCH Comment.
Code Sec. 409A contains requirements that apply to nonqualified deferred compensation plans. If the plan does not meet specified requirements, a participant must immediately include amounts deferred under the plan in income and pay additional taxes on such income. The IRS prohibition against issuing rulings encompassed matters tangential to issues regarding the establishment and operation of nonqualified deferred compensation programs under Code Sec. 409A. On April 7, 2007, final regulations were issued under Code Sec. 409A that apply on January 1, 2009, and define "nonqualified deferred compensation plan" and "deferral of compensation" for purposes of Code Sec. 409A. Transitional relief, as well as guidance on the correction of certain failures of nonqualified deferred compensation plans, is provided in Notice 2007-100, I.R.B. 2007-52, 1243, issued on December 3, 2007. In light of this additional guidance, the IRS has determined that the existing no-rule policy unnecessarily restricts its ability to issue private letter rulings.

  Pursuant to Section 3.01 of Rev. Proc. 2008-3, as modified and amplified by Rev. Proc. 2008-61, the IRS will continue not to issue rulings with respect to:

  --the income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan as defined in Reg. §1.409A-1(a);

  --whether a plan is a plan subject to a totalization agreement or similar plan;

  --whether a plan is a broad-based foreign retirement plan;

  --whether a plan is a bona fide vacation leave, sick leave, or compensatory time plan; and

  --whether a plan provides for the deferral of compensation under Reg. §1.409A-1(b).

 
Rev. Proc. 2008-3, I.R.B. 2008-1, 110, is modified and amplified.

Rev. Proc. 2008-61, 2008FED ¶46,586

Other References:

 
Code Sec. 409A

  CCH Reference - 2008FED ¶18,960.25

 
Statement of Procedural Rules Sec. 601.201

  CCH Reference - 2008FED ¶43,360.60

  Tax Research Consultant

  CCH Reference - TRC COMPEN: 15,050
CCH Reference - TRC IRS: 12,214.20
 

CCH (cch.taxgroup.com) reports:

  The IRS has designated the Indian tribal entities that appear on the annual lists published by the Bureau of Indian Affairs as Indian tribal governments for purposes of Code Sec. 7701(a)(40). The BIA published its list annually, with the most recent list appearing in the Federal Register on April 4, 2008. The list reflects the tribes eligible for programs and services provided to Indians by the federal government because of their status as Indians. Indians are treated as states for certain purposes under Code Sec. 7871(a).

Rev. Proc. 2008-55, 2008FED ¶46,582

Other References:

 
Code Sec. 103

  CCH Reference - 2008FED ¶6602.385

 
Code Sec. 7701

  CCH Reference - 2008FED ¶43,130.01

 
Code Sec. 7871

  CCH Reference - 2008FED ¶43,952.20

  CCH Reference - 2008FED ¶43,952.35

  Tax Research Consultant

  CCH Reference - TRC SALES: 51,056.15
CCH Reference -
TRC IRS: 12,216

CCH (cch.taxgroup.com) reports:

  The House passed HR 7083, the Charity Enhancement Bill of 2008, by voice vote on September 27 during an unusual weekend session. Introduced by House Ways and Means Committee Oversight Subcommittee Chairman John Lewis, D-Ga., the bill is intended "to fix unintended consequences of the Pension Protection Act of 2006 (PPA) P.L. 109-280), which failed to take into account unique and unforeseen situations in the charitable sector, such as the effect on scholarships and charitable giving," a Ways and Means press release announced after the vote. The bill is in response to a flood of written comments submitted to the Oversight Subcommittee by charitable institutions and foundations over the past year, complaining that certain PPA provisions have had the effect of hampering worthwhile charitable works.

  CCH Comment. While the Charity Enhancement Bill is a bi-partisan bill, its fate in the Senate before adjournment for the elections is uncertain based on the limited time available on the Senate calendar for pending bills other than the financial bailout legislation. The Charity Enhancement Bill is separate from the Pension Protection Technical Corrections Bill of 2008, HR 6382, passed by voice vote in the House on July 9, which primarily corrects non-charitable related PPA provisions. Its fate in the Senate is similarly dependent upon room on the Senate calendar before adjournment.

  The Charity Enhancement Bill of 2008 limits the extent to which certain PPA provisions should be applied, as well as rectifies other unintended restrictions on exempt organizations. HR 7083 would:

  --Remove from PPA's definition of "donor advised funds" those charitable funds created, funded and advised solely by one or more public charities or governmental entities;

  --Remove from PPA's restrictions on distributions from donor advised funds legitimate and carefully-monitored scholarship awards approved in advance by the charitable organization holding the donor advised fund;

  --Repeal the special written acknowledgment required for charitable contributions to donor advised funds stating that the sponsoring organization has exclusive legal control over the assets contributed;

  --Lift excess-benefit restrictions (and, thereby encourage voluntary boards) by allowing supporting organizations to pay substantial contributors reasonable compensation for services and reimburse reasonable and necessary expenses;

  --Except from holdings and payout requirements certain pre-1970 fully-funded Type III supporting organizations in which the original donors and family are no longer involved; and

  --Treat contributions by Indian tribal governments the same as contributions by states (i.e., as public support) in determining classification as a public charity or private foundation (and, thereby supporting their philanthropy).

  The Charity Enhancement Bill of 2008 also would tighten two provisions and raise $76 million in the process by:

  --Increasing e-filing (and, therefore, transparency) by exempt organizations by allowing the IRS to require e-filing of annual Form 990 information returns by organizations filing at least five returns with the IRS annually; and

  --Expanding the Code Sec. 6657 bad check penalty introduced by the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28) so that the penalty also applies in cases of bed electronic payments.

  By George Jones, CCH News Staff

SFC Release: Grassley Statement on House Charity Bill
 

CCH (cch.taxgroup.com) reports:

  Frustration at the lack of Senate movement on the House-passed tax extenders and energy bill (HR 7060) prompted House Ways and Means Chairman Charles B. Rangel, D-N.Y., on September 28 to separate the measure into two tax bills. Rangel and House Majority Leader Steny Hoyer, D-Md., told reporters that the two new tax bills were being introduced in hopes of persuading the Senate to negotiate with the House. Rangel introduced the Energy Improvement and Extension Act of 2008 (HR 7201) and the Temporary Tax Relief Act of 2008 (HR 7202). The House could take up the two new tax bills on September 29.

  The new legislation comes on the heels of HR 7060, the Renewable Energy and Job Creation Tax Act of 2008, which passed the House on September 26. However, Senate lawmakers immediately refused to accept the measure. Instead, they insisted that House lawmakers accept the bipartisan Senate-passed bill HR 6049.

  Rangel said HR 7201 and HR 7202 are mostly similar to the provisions included in HR 7060, except they add rural school provisions and make minor changes to the energy provisions. HR 7060 passed the House by a vote of 257 to 166.

  Hoyer and Rangel expressed their frustration at the unwillingness of the Senate to compromise on the tax legislation. They said House lawmakers do not want to accept the Senate positions, or bow to the necessity of getting 60 votes to pass legislation in the Senate. Hoyer said the House pay-as-you-go (PAYGO) rules are important to uphold, despite the possibility of ending the 110th Congress without ultimately passing the tax legislation. Hoyer also threatened that the House might decide to slow its consideration of Senate legislation in retaliation.

  By Stephen K. Cooper, CCH News Staff

Ways and Means Release: House Passes Critical Tax Relief for Families and Businesses

Blue Dog Leaders Support Fiscally Responsible Tax-Break Extenders, Call on Senate Republicans to Do the Same

SFC Release: Baucus Statement on House Vote on Tax Extenders Legislation
 

Tax Analysts report:

Tax Analysts report:

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  A Wisconsin corrugate manufacturer could not recover from the municipality in which it resided the amount of personal property taxes it erroneously paid on manufacturing equipment based on either an unidentified city employee's error in providing a tax form or the city mayor's assurances that he was working to correct the problem. Dismissal of the manufacturer's equitable estoppel claim against the municipality for over $200,000 was affirmed.

  Initially, it was decided not to determine whether the manufacturer could use equitable estoppel as a basis to a claim, rather than as a defense to a claim. Instead, it was assumed that the theory applied and the case would be decided based on whether the manufacturer's reliance was reasonable.

 

CCH (cch.taxgroup.com) reports:

  The sales of downloadable copyrighted photographs over the Internet by a Web site based business are not subject to Missouri sales and use tax if there is not a transfer of tangible personal property from the business to its customers. The business does not provide hard copies of the pictures that are downloaded by its customers. Although telecommunications services used for transmission of messages and conversations are taxable, telecommunications service does not include access to the Internet or interactive computer or electronic publishing services.

Letter Ruling No. LR5058 , Missouri Department of Revenue, August 29, 2008,
¶202-993

  Other References:

  Explanations at ¶60-445

CCH (cch.taxgroup.com) reports:

  The 2009 annual interest rate drops from 11% to 8% on underpayments and nonpayments of Colorado taxes. In addition, the interest rate decreases from 8% to 5% if payment of the tax, or an agreement to pay, is made within 30 days of notice of underpayment or nonpayment, or if an underpayment or nonpayment is cured voluntarily without notification from the Department of Revenue.

  Subscribers to CCH Tax Research NetWork can view the notice.

FYI General 11 , Colorado Department of Revenue, September 2008.
 

CCH (cch.taxgroup.com) reports:

  The IRS announced that it will issue guidance under the Industry Issue Resolution (IIR) program regarding technical terminations of a publicly traded partnership (PTP) that result in multiple short tax years within one calendar year. These terminations occur when more than 50 percent of a PTP's capital and profits interest are sold or exchanged within a 12-month period (Code Sec. 708(b)) and result in the PTP having to file a Form 1065, U.S. Partnership Return of Income, for each short tax year. Taxpayers that follow this released guidance will be able ton avoid audits triggered by problems arising from the PTP's filing requirements.

  Business associations and taxpayers may submit business tax issues that they believe could be resolved through the IIR program at any time. IIR project selection criteria and submission procedures are outlined in Rev. Proc. 2003-36, 2003-1 CB 859. The IRS reviews submissions at least semi-annually, with the last review conducted for submissions received by Aug. 31, 2008.

IR-2008-110,
2008FED ¶46,581

Other References:

 
Code Sec. 708

  CCH Reference - 2008FED ¶25,202.03

 
Code Sec. 7704

  CCH Reference - 2008FED ¶43,182.01

 
Code Sec. 7804

  CCH Reference - 2008FED ¶43,266.3097

  Tax Research Consultant

  CCH Reference - TRC IRS: 12,384
CCH Reference -
TRC PART: 51,100
CCH Reference -
TRC PART: 3,250
 

CCH (cch.taxgroup.com) reports:

  The IRS has updated the rules for determining the amount of an employee's ordinary and necessary business expenses for lodging, meals, and incidental expenses incurred while traveling away from home that are deemed substantiated under Reg. §1.274-5. The new procedure provides transition rules for the last three months of calendar year 2008 and updates the simplified "high-low" per diem rates and the high-cost/low-cost localities.

Transition Rules

  CONUS rates. Taxpayers may continue to use the current CONUS rates for the first nine months of calendar year 2008 instead of the updated GSA rates; however, they must consistently use one or the other for the period of October 1, 2008, to December 31, 2008.

  Meal and incidental expenses. Taxpayers who used the federal meal and incidental expense rates for the first nine months of calendar year 2008, may not use the transportation industry rates provided in this procedure until January 1, 2009. Conversely, taxpayers who used the transportation industry rates for the first nine months, cannot use the federal meal and incidental expense rates until January 1, 2009.

  Substantiation method. Payors who used the substantiation method for the first nine months of calendar year 2008, may not use the high-low method until January 1, 2009, and vice versa. However, payors using the high-low method may use the rates and high-cost localities contained in Rev. Proc. 2006-41, I.R.B. 2006-43, 777, rather than the updated rates and localities contained in this procedure.

Per Diem Rates

  The update applies to per diem allowances paid for travel on or after October 1, 2008. The simplified "high-low" per diem rates have increased to $256 for high-cost localities and increased to $158 for low-cost localities. For purposes of applying the high-low substantiation methods and the 50-percent limitation on meal expenses, the federal meal and incidental expense rate is treated as $58 for a high-cost locality and $45 for any other locality within CONUS.

Locality Update

  Jackson/Pinedale, Wyoming, has been added to the list of high-cost localities.

  The portion of the year for which the following are high-cost localities has been changed: Phoenix/Scottsdale, Arizona; San Diego, California; Silverthorne/Breckenridge, Colorado; Steamboat Springs, Colorado; Vail, Colorado; Palm Beach, Florida; Cambridge/St. Michaels, Maryland; Ocean City, Maryland; Martha's Vineyard, Massachusetts; Nantucket, Massachusetts; Jamestown/Middletown/Newport, Rhode Island.

  The following localities have been removed from the list of high-cost localities: Palm Springs, California; Yosemite National Park, California; Stuart, Florida; Incline Village/Crystal Bay/Reno/Sparks, Nevada; Conway, New Hampshire; Providence, Rhode Island; Loudon County, Virginia; Virginia Beach, Virginia; Lake Geneva, Wisconsin.

 
Rev. Proc. 2007-63, I.R.B. 2007-42, 809, is superseded.

Rev. Proc. 2008-59, 2008FED ¶46,580

Other References:

 
Code Sec. 162

  CCH Reference - 2008FED ¶180.01

  CCH Reference - 2008FED ¶1070.11

  CCH Reference - 2008FED ¶8856.17

 
Code Sec. 274

  CCH Reference - 2008FED ¶14,417.002

  CCH Reference - 2008FED ¶14,417.035

  CCH Reference - 2008FED ¶14,417.037

  CCH Reference - 2008FED ¶14,417.038

  CCH Reference - 2008FED ¶14,417.039

  CCH Reference - 2008FED ¶14,417.04

  CCH Reference - 2008FED ¶14,417.041

  CCH Reference - 2008FED ¶14,417.421

  CCH Reference - 2008FED ¶14,417.62

  Tax Research Consultant

  CCH Reference - TRC INDIV: 36,054.05
CCH Reference - TRC INDIV: 36,056.10
CCH Reference - TRC INDIV: 36,056.15
CCH Reference - TRC BUSEXP: 24,808
CCH Reference - TRC BUSEXP: 24,904
CCH Reference - TRC BUSEXP: 24,906.10
CCH Reference - TRC BUSEXP: 24,906.25
CCH Reference - TRC BUSEXP: 24,912.05
CCH Reference - TRC BUSEXP: 24,912.15
CCH Reference - TRC BUSEXP: 24,912.20
 

CCH (cch.taxgroup.com) reports:

  House Ways and Means Chairman Charles B. Rangel, D-N.Y., introduced yet another tax extenders bill on September 25, but it failed to generate support from Senate Republicans who are sticking to their insistence that House lawmakers should accept the bipartisan, Senate-passed bill
HR 6049. The House took up the Renewable Energy and Job Creation Tax Bill of 2008 (HR 7060), but a drafting error caused lawmakers to pull the bill from House consideration.

  The Bush administration issued a veto threat against the Rangel bill, saying that the measure should be discarded in favor of the Senate tax bill, which combines alternative minimum tax relief, energy tax incentives and tax provisions for businesses and families. "The House is trying to play games with extenders and tax relief," said Senate Finance Committee ranking member Charles E. Grassley, R-Iowa. He said HR 6049 includes provisions that House members want and that the bill would definitely become law because the president supports it.

  The Rangel bill, which will likely reach the House floor on September 26, was modified from earlier House extender tax bills in hopes of winning support from Senate Republicans. "The Senate said they wanted two years; this bill gives them two years, paid for by offsets they have already blessed," said Rangel, who urged the Senate to accept a compromise, rather than insisting on their version of the legislation.

  According to a summary of HR 7060 provided by Rangel's office, the legislation would invest $15 billion in renewable energy, energy efficiency and conservation improvements, and carbon capture and sequestration demonstration projects. Another $42 billion would be invested in extending a group of expiring tax provisions through 2009. Those provisions include the research and development credit, special rules for active financing income, the state and local sales tax deduction, the deduction for out-of-pocket expenses for teachers, and the deduction for qualified tuition expenses. The bill also includes $3 billion for the refundable child tax credit.

  In order to pay for the bill, Rangel used tax offsets that already won support in the Senate. His bill would prevent the understatement of foreign oil and gas extraction income in calculating foreign tax credits and freeze the Code Sec. 199 deduction for oil and gas companies at six percent. According to the summary, the measure would also prevent hedge fund managers who work for offshore corporations from deferring tax on their compensation.

  The bill would also delay a tax benefit for multinational corporations operating overseas that has yet to take effect. HR 7060 would also provide for broker reporting of customer's basis in securities, extend the FUTA surtax for one year and extend and increase funding for the Oil Spill Liability Trust Fund.

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

Ways and Means Release: Summary of Tax Provisions in HR 7060, the Renewable Energy and Job Creation Act of 2008

Statement of Administration Policy on HR 7060

JCT Technical Explanation of HR 7060, the Renewable Energy and Job Creation Tax Act of 2008, JCX-75-08

JCT Estimated Budget Effects of HR 7060, the Renewable Energy and Job Creation Tax Act of 2008, JCX-76-08

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  A Georgia superior court has issued an order compelling Expedia, Inc. to collect Columbus, Georgia, hotel occupancy taxes based on the prices its online consumers pay on Expedia.com rather than the wholesale prices it contracts for with hotels. Columbus filed the case in 2006 with respect to the collection of its 7% hotel occupancy tax. Though many cities and towns throughout the country have filed similar hotel occupancy tax cases against online travel companies, this order is the first substantive ruling.

 

CCH (cch.taxgroup.com) reports:

  A mechanical contractor that was expanding its business to serve the high-tech construction market was entitled to rental expense deductions for amounts paid to rent equipment from its controlling shareholders. The rental agreements entered into with the shareholders were hybrid arrangements that contained features of both long-term leases and short-term rental agreements.

  The taxpayer had a valid business reason for the arrangements. The taxpayer's management determined that incurring additional long-term debt or comparable commitments under a long-term lease was imprudent given the untested line of business. Additionally, short-term rentals were infeasible, given an increase in the construction business and a demand for construction equipment that exceeded its supply on the third-party rental market.

  The hybrid arrangements provided for exclusive control of the equipment, as well as actual usage features that precluded rental payments when the equipment was idle or in transit. The payments made under the hybrid arrangements were reasonable and not more than the taxpayer would have been required to pay as a result of an arm's-length bargain. Expert testimony confirmed that the hourly and monthly rates paid to the shareholders were generally consistent with or below rates in the short-term rental market in the area at the time the contracts were entered into.

  Further, amounts paid by the taxpayer and the shareholders to co-lease equipment under option to purchase agreements that were less than the amounts of the shareholders' subleases to the taxpayer did not indicate that the taxpayer paid above the fair market value. The taxpayer's financial condition supported the inference that the primary lessors of the equipment would not have entered into the leases without the shareholders as co-lessees and a rental amount over the rental value of the equipment was necessary to reflect guarantor risk.

  Because the taxpayer's financial condition prevented it from obtaining five-year leases for the equipment at issue, an arm's-length rate for the taxpayer's rent was not equal to the cost of these leases, but, rather, the cost was a rate above what would be paid for the five-year leasehold interest in order to compensate the shareholders for the risk that they might be unpaid as a result of the untested business.

  The taxpayer bore the burden of proof with respect to the original determination of deficiencies because it failed to meet the cooperation requirement. During pretrial proceedings, the taxpayer resisted producing necessary materials to substantiate the rental expense deductions, resulting in court-enforced discovery.

Yearout Mechanical & Engineering, Inc., TC Memo. 2008-217, Dec. 57,540(M)

Other References:

 
Code Sec. 162

  CCH Reference - 2008FED ¶8754.5587

 
Code Sec. 7491

  CCH Reference - 2008FED ¶42,520.10

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 3,152
CCH Reference -
TRC LITIG: 3,200
 

CCH (cch.taxgroup.com) reports:

  The House on September 24 approved a continuing appropriations resolution (an amendment to the Senate amendment to HR 2638) to fund the federal government at 2008 levels through March 6, 2009. Majorities in both parties, including 224 Democrats and 146 Republicans, voted 370-58 to approve the resolution, which was introduced by House Appropriations Committee Chairman David Obey, D-Wis. The government's fiscal year (FY) 2008 appropriations are set to expire on September 30, 2008.

  The resolution was part of a package that includes the FY 2009 appropriations for military construction and veterans affairs, defense and homeland security, as well as a disaster relief package. The resolution includes an additional $68 million to fund IRS taxpayer services needed to administer payments under the Economic Stimulus Act of 2008 (P.L. 110-185).

  The IRS budget for FY 2008 budget was $11.1 billion. The Service will receive a prorated amount for FY 2009. The Senate Appropriations Committee on July 10 approved an IRS budget of $11.5 billion for FY 2009; $163 million higher than the Bush administration's request (TAXDAY, 2008/07/11, C.3). The House Appropriations Committee on June 25 approved an IRS budget of $11.4 billion for FY 2009 (TAXDAY, 2008/06/30, C.1). Both bills would eliminate the IRS's use of private debt collectors.

  In other developments, the House and Senate approved the Fostering Connections to Success and Increasing Adoptions Act of 2008 (HR 6893), which would tighten the uniform definition of a child in Code Sec. 152 for claiming various tax benefits. The legislation would require that the child not have filed a joint return and that the child be younger than the taxpayer claiming the child. The bill also restricts claims for the child tax credit to the child's parents or to an individual whose income is higher than either parent's. The provisions would apply to tax years beginning in 2009 or later.

  By Brant Goldwyn, CCH News Staff

Fostering Connections to Success and Increasing Adoptions Act of 2008, Enrolled, HR 6893
 

CCH (cch.taxgroup.com) reports:

  President Bush warned that the U.S. is in the midst of a "serious financial crisis," with major sectors of the financial system at risk of shutting down unless action is taken on a $700-billion bailout proposal put forward in recent days by the administration. In a televised address to the nation, Bush said that the White House is working with Congress to address the root cause of the problem.

  Presidential candidates Sen. Barack Obama, D-Ill., and Sen. John McCain, R-Ariz., have been invited to the White House on Thursday to discuss the financial crisis, along with other congressional leaders, Bush said.

  "Our entire economy is in danger," Bush stressed. He noted that failure to act could result in bank failures, lost jobs, rising foreclosures and complete loss of retirement savings.

  Bush said that the proposal would remove the risk caused by troubled financial assets, while assuring that taxpayers are protected. In addition, the plan would put in place an oversight board to oversee implementation of the bailout, he said, adding that it would also prevent "failed executives" from receiving a windfall from taxpayer money.

  Meanwhile, "much, if not all," of the $700 billion will be paid back, Bush stated, noting that the government is the one institution with the patience and resources to buy assets at their current low prices and hold them until markets return to normal.

  By Sarah Borchersen-Keto, CCH News Staff

CCH (cch.taxgroup.com) reports:

  House lawmakers on September 24 approved the Alternative Minimum Tax (AMT) Relief Bill of 2008 (HR 7005) and the Disaster Tax Relief Bill of 2008 (HR 7006).

AMT Bill

 
HR 7005, a $64.6-billion measure authored by House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., does not include a revenue offset and passed the House by a bipartisan vote of 393 to 30. Ways and Means member Richard E. Neal, D-Mass., called HR 7005 a true, hold-harmless AMT patch but noted that the measure does not meet House pay-as-you-go (PAYGO) budget rules.

  The bill would provide AMT relief for nonrefundable personal credits and would increase the AMT exemption amount to $69,950 for joint filers and $46,200 for individuals. The legislation would also provide relief for AMT payors who have exercised incentive stock options and would make changes to the refundable AMT credit, according to a summary provided by Rangel. Rep.

  Thomas M. Reynolds, R-N.Y., said that, absent a long-term proposal, Congress has no choice but to pass HR 7005. Congress's inaction in 2008 has left many taxpayers hanging in the balance, he said.

  The Bush administration, in a written statement, praised the House for considering the AMT relief measure without including tax increases and urged Congress to send legislation to the president's desk as soon as possible in order to reduce the risk of a disruption in the 2009 tax filing season. Meanwhile, Senate Finance Committee Chairman Max Baucus, D-Mont., said the Senate-passed bill, HR 6049, includes an extension of expiring tax provisions, AMT relief and energy tax incentives.

  House lawmakers have not yet received that bill from the Senate and have signaled their displeasure with HR 6049 since the extenders provisions are not totally offset by corresponding tax increases or spending cuts. House passage of the Rangel AMT bill sets up a scenario where the AMT bill is cleared for the White House, while the extenders bill is delayed until 2009.

Disaster Bill

  The House also voted to pass the Disaster Tax Relief Act of 2008 (HR 7006) on September 24. Also introduced by Rangel, the measure passed by a 419 to 4 vote. He said the bill would provide a flexible package of economic recovery incentives to help families and businesses recover from the recent floods and hurricanes in the Midwest. The legislation would provide tax relief to taxpayers affected by federally declared disasters nationwide, between January 1, 2008, and December 31, 2011. According to a summary provided by Rangel, the measure would waive the income limitations on personal loss deductions, allow businesses to write off certain qualified disaster cleanup expenses and permit a five-year carryback for certain losses.

  The bill would also waive certain mortgage revenue bond requirements to allow bond proceeds to be used for rebuilding, provide additional low-income housing tax credits to communities with housing losses, add a new set of disaster private activity bonds for business reconstruction and waive certain limitations on charitable contributions for disaster relief, according to the summary.

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

Alternative Minimum Tax Relief Act of 2008, HR 7005

Disaster Tax Relief Act of 2008, HR 7006

Ways and Means Release: House Passes Bipartisan AMT Relief Bill

Ways and Means Release: House Passes Nationwide Disaster Relief Tax Package

SFC Release: Senate Passes Baucus-Grassley Clean Energy Incentives, Extensions of Expiring Tax Cuts, Disaster Tax Relief and Protection from AMT

SFC Release: Grassley Statement on Tax Extenders, Disaster Tax Relief

SFC Release: Baucus Statement on Senate Legislation for Jobs, Energy, Families

SAP on HR 7005-Alternative Minimum Tax Relief Act of 2008

JCT Technical Explanation of HR 7005, the Alternative Minimum Tax Relief Act of 2008,
JCX-71-08

JCT Estimated Revenue Effects of HR 7005, the Alternative Minimum Tax Relief Act of 2008,
JCX-72-08

JCT Technical Explanation of HR 7006, the Disaster Tax Relief Act of 2008, JCX-73-08

JCT Estimated Revenue Effects of HR 7006, the Disaster Tax Relief Act of 2008, JCX-74-08
 

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  The IRS has provided guidance regarding the treatment of taxpayers that accept certain settlements of potential legal claims relating to auction rate securities. The guidance applies to taxpayers who, before June 30, 2009, accept settlement offers from persons against whom the taxpayers may have legal claims due to the other persons' conduct related to auction rate securities. The settlement offers must include window periods that do not extend beyond December 31, 2012, and require that the taxpayer deliver an auction rate security that the taxpayer purchased prior to February 12, 2008. The procedure does not apply to taxpayers who (1) accept a settlement offer with respect to an auction rate security, (2) make an election to borrow the par amount of the auction rate security from the person making the offer either before or during the window period, and (3) take the position that they continue to own the auction rate security following the acceptance and election.

  The IRS stated that it will not challenge the following positions taken by taxpayers to whom the new guidance applies:

  --The taxpayer continues to own the auction rate security upon accepting the settlement offer.

  --The taxpayer does not realize any income as a result of accepting the settlement offer and does not reduce the basis of the auction rate security from its original purchase price.

  --The taxpayer's amount realized from the sale of the auction rate security during the window period to the person offering the settlement is the full amount of the cash proceeds received from that person.

Rev. Proc. 2008-58, 2008FED ¶46,579

Other References:

 
Code Sec. 385

  CCH Reference - 2008FED ¶17,351.12

  CCH Reference - 2008FED ¶17,351.15

  Tax Research Consultant

  CCH Reference - TRC CCORP: 3,300

CCH (cch.taxgroup.com) reports:

  The IRS has released proposed amendments to the new market tax credit regulations that provide rules on how an entity meets the requirements to be a qualified active low-income community business (QALIC when its activities involve certain targeted populations under Code Sec. 45D(e)(2). The new proposals generally follow earlier published rules in
Notice 2006-60 (I.R.B. 2006-29, 82), which can be relied upon until the proposed amendments are finalized.

Background

  The new markets tax credit is a credit for persons that have a qualified equity investment in a qualified community development entity (CDE) on the credit allowance date. Among the requirements for a qualified equity investment is that substantially all of the cash must be used by the CDE to make qualified low-income community investments. One type of qualified low-income community investment is an investment in a qualified active low-income community business.

 
Notice 2006-60 provides rules on how an entity meets the requirements to be a qualified active low-income community business when its activities involve targeted populations. The proposed amendments to the regulations follow the general definitions of targeted populations and low-income persons set forth in Notice 2006-60 and the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. § 4702(17), (20)). Targeted populations that will be treated as a low-income community are individuals, or an identifiable group of individuals, including an Indian tribe, who are low-income persons or who are individuals otherwise lacking adequate access to loans or equity investments.

QALICB Requirements for Low-Income Targeted Populations

  Individuals are considered low-income if the individual's family income, adjusted for family size, is not more than: (1) for metropolitan areas, 80 percent of the area median family income; or (2) for nonmetropolitan areas, the greater of 80 percent of the area median family income or 80 percent of the statewide nonmetropolitan area median family income. The proposed amendments to the regulations follow the general requirements for a qualified active low-income community business set forth in Notice 2006-60.

  In general, a qualified active low-income community business is a corporation, including a nonprofit corporation, or a partnership engaged in the active conduct of a qualified business if: (1) at least 50 percent of the entity's total gross income for any tax year is derived from sales, rentals, services or other transactions with individuals who are low-income persons; (2) at least 40 percent of the entity's employees are individuals who are low-income persons; or (3) at least 50 percent of the entity is owned by individuals who are low-income persons. Definitions of employee and owner for this purpose are also provided.

 
Notice 2006-60 and the proposed amendments provide a 120-percent income restriction. In general, under this restriction, an entity will not be treated as a qualified active low-income community business if the entity is located in a population census tract for which the median family income exceeds 120 percent of: (1) in the case of a tract not located within a metropolitan area, the statewide median family income; or (2) in the case of a tract located within a metropolitan area, the greater of statewide median family income or metropolitan area median family income. Other qualifications and restrictions also apply.

QALICB Requirements for GO Zone Targeted Populations

  Individuals are considered to lack adequate access to loans or equity investments if they are part of the GO Zone Targeted Population, meaning that the individual was displaced from his or her principal residence as a result of Hurricane Katrina and/or the individual lost his or her principal source of employment as a result of Hurricane Katrina. Notice 2006-60 and the proposed amendments provide special requirements for a qualified active low-income community business for the GO Zone Targeted Population.

  In general, an entity will not be treated as a qualified active low-income community business for the GO Zone Targeted Population unless: (1) at least 50 percent of the entity's total gross income for any tax year is derived from sales, rentals, services or other transactions with the GO Zone Targeted Population, low-income persons or some combination thereof; (2) at least 40 percent of the entity's employees consist of the GO Zone Targeted Population, low-income persons or some combination thereof; or (3) at least 50 percent of the entity is owned by the GO Zone Targeted Population, low-income persons or some combination thereof.

 
Notice 2006-60 and the proposed amendments provide a 200-percent income restriction qualified active low-income community businesses for GO Zone Targeted Populations. In general, under the 200-percent income restriction, an entity will not be treated as a qualified active low-income community business for GO Zone Targeted Populations if the entity is located in a population census tract for which the median family income exceeds 200 percent of: (1) in the case of a tract not located within a metropolitan area, the statewide median family income; or (2) in the case of a tract located within a metropolitan area, the greater of statewide median family income or metropolitan area median family income. Other qualifications and restrictions also apply.

Effective Date

  The rules in the regulations are proposed to apply to tax years ending on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. Until that time, taxpayers can rely on Notice 2006-60 for designations made after October 22, 2004.

Request for Comments and Public Hearing

  A public hearing is scheduled for January 22, 2009, beginning at 10:00 a.m. Written and electronic comments must be received by December 23, 2008.

  The IRS and the Treasury Department are particularly interested in receiving comments on the following issues: (1) the measure of income that should be used to determine an individual's income for purposes of the definition of low-income persons; (2) whether the gross income requirements should be modified to include the fair market value of goods and services provided to low-income persons at reduced fees; and (3) whether additional restrictions should be added to the employee requirements.

Proposed Regulations, NPRM REG-142339-05, 2008FED ¶49,835

Other References:

 
Code Sec. 45D

  CCH Reference - 2008FED ¶4488E

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 54,906.15

CCH (cch.taxgroup.com) reports:

  The Senate overwhelmingly voted to approve an alternative minimum tax (AMT) relief and extenders bill (HR 6049) on September 23, paving the way for House lawmakers to decide whether the partially offset tax measure will reach the president's desk before Congress adjourns later in September. The Senate bill, which also includes a package of clean energy tax incentives, passed by a vote of 93-to-2. Senate Budget Committee Chairman Kent Conrad, D-N.D., failed to win approval for revenue-raisers or spending cuts to offset the cost of HR 6049, noting that failing to meet the pay-as-you-go (PAYGO) budget rules will likely slow the bill in the House.

  Senate Majority Leader Harry Reid, D-N.D., questioned whether House Democrats could accept AMT relief that is not paid for, while rejecting the extenders because they were only partially offset. He said that, if Democratic leaders allow the Senate bill to come to the House floor, it would likely pass. The House has scheduled a vote on extenders tax legislation on September 24, but Democratic leaders and members of the House Ways and Means Committee said the Senate's partially paid-for package is unacceptable. Instead, Rep. Earl Pomeroy, D-N.D., said that the House might simply pass a smaller tax bill that only includes the provisions that can be paid for by the Senate-approved offsets.

  The Senate bill includes $18 billion in clean energy tax incentives, which are offset by a provision to delay the tax deduction for domestic manufacturing activities of major American oil and gas companies. The bill would also change rules for paying taxes on income earned overseas, according to a summary released by the Senate Finance Committee. The bill would also provide a one-year extension of the Federal Unemployment Tax Act surtax at the current level, and an increase in reporting requirements for brokers on stock sales. Meanwhile, the $64-billion cost of providing AMT relief would not be offset, under the Senate bill.

  The two-year extension of expiring tax provisions would be offset by requiring hedge fund managers to account for deferred compensation as it accrues, rather than avoiding appropriate and timely income taxes. The bill would provide tax relief for victims of natural disasters, expand the child tax credit and provide parity for mental health treatments. Other provisions included in the Senate bill would allow the deduction of state and local taxes, deduction for qualified tuition and teacher's expenses, and additional deductions for real property taxes. The bill would extend the research and development credit and the new markets tax credit.

  Late on September 23, House Ways and Means Chairman Charles B. Rangel, D-N.Y., introduced the Alternative Minimum Tax Relief Bill of 2008 (HR 7005) and the Disaster Tax Relief Bill of