Tax News

CCH (cch.taxgroup.com) reports:

  Illinois corporate and personal income tax legislation amends the Film Production Services Tax Credit Act of 2008. Specifically, the legislation repeals a section that provides that the law will sunset on January 1, 2009. Additionally, the bill amends the definition of "credit" to provide that, for an accredited production commencing on or after January 1, 2009, the amount of the credit is (i) 30% (instead of 20% for the previous years) of the Illinois production spending for the taxable year, plus (ii) 15% of the Illinois labor expenditures generated by the employment of residents from geographic areas of high poverty or high unemployment. The bill also places conditions on any rulemaking authority so that any rule must be adopted in accordance with standard procedure.

P.A. 95-1006 (S.B. 1981), Laws 2008, effective December 15, 2008
 

CCH (cch.taxgroup.com) reports:

  A married couple could not deduct as charitable contributions tuition and fees they paid to Orthodox Jewish day schools. The Tax Court correctly concluded that the couple failed to show that any part of the amount paid was subject to a dual payment analysis, because the couple did not have a charitable intent in paying their children's tuition and because they received a substantial benefit --education for their children --in exchange for the payments. Amendments to Code Secs. 170(f)(8) and
6115 in 1993 did not change the established rule that tuition paid to religious schools for religious education is not deductible as a charitable contribution. The exception to the charitable substantiation and disclosure requirements found in those provisions only applies where an organization is established exclusively for religious purposes.

  Moreover, the couple never intended to make a gift of the tuition payments. Instead, they paid tuition because the schools inculcated their children with their religion's lifestyle, heritage and values. They also failed to present evidence that their tuition payments exceeded the cost of a comparable secular education offered by other private schools. Therefore, the payments were a quid pro quo transaction even if part of the benefit received was religious in nature.

  Further, the Tax Court did not abuse its discretion in denying discovery regarding a closing agreement executed between the IRS and the Church of Scientology that purportedly allowed deductions for certain qualified religious services. The couple was not similarly situated to those who benefited from the Scientology closing agreement because tuition payments to schools that provide secular and religious education as part of one curriculum are quite different from payments to organizations that provide exclusively religious services. Moreover, even if similarly situated, an unlawful policy set forth in a closing agreement could not be extended to all religious organizations.

  Affirming the Tax Court, 125 TC 281, Dec. 56,225. Related case CA-9, 2002-1 USTC ¶50,210.

M. Sklar, CA-9, 2009-1 USTC ¶50,106

Other References:

 
Code Sec. 170

  CCH Reference - 2008FED ¶11,620.518

 
Code Sec. 6115

  CCH Reference - 2008FED ¶37,068.20

 
Code Sec. 6662

  CCH Reference - 2008FED ¶39,652.38

  CCH Reference - 2008FED ¶39,652.49

  Tax Research Consultant

  CCH Reference - TRC INDIV: 51,054
CCH Reference - TRC EXEMPT: 12,306
 

CCH (cch.taxgroup.com) reports:

  An Appeals officer did not abuse his discretion in cancelling an offer-in-compromise (OIC) agreement, reinstating a taxpayer's original tax bill and sustaining a levy, based on the taxpayer's breach of the OIC. As a condition for the OIC, the taxpayer agreed to file his tax returns and pay tax due for five years. However, the taxpayer failed to timely file returns for two years and pay tax for one of those years. Because the returns were never received by the IRS and there was no record of either a postmark, or certified or registered-mail receipt, the taxpayer could not rely on the presumption of delivery. Even assuming the Appeals officer had found the returns were timely filed, the IRS's evidence of nonreceipt was overwhelming. By not timely filing the returns and paying tax, the taxpayer was not in compliance with the express terms of the OIC. As a contract, the OIC was governed by general principles of federal common law.

  Clarifying its decision in J.M. Robinette , 123 TC 85, Dec. 55,698, the Tax Court stated that a national legal standard for construing OIC agreements was supported by three factors: federal government agency as litigant, contracts entered into under federal law and the need for nationwide uniformity in administration. Under general principles of the federal common law of contracts the taxpayer's obligation to file and pay taxes was an express condition of the contract that required strict compliance. The IRS used plain language to explain the terms and conditions of the OIC and the risk of forfeiture did not weigh against finding that the obligation to file and pay was an express condition of the OIC. Even without relying on principles of contract law, other federal courts have upheld the IRS's right to cancel an OIC when the taxpayer is in default because of the express language in the agreement. Finally, the IRS provided the taxpayer with several opportunities to become compliant and the only consideration for forgiveness of 95 percent of his tax debt was to timely file and pay his taxes for five years. Thus, the Appeal's officer's decision not to excuse the breach and reinstate the OIC was not an abuse of discretion.

D.W. Trout, 131 TC No. 16, Dec. 57,615

Other References:

 
Code Sec. 6330

  CCH Reference - 2008FED ¶38,184.62

 
Code Sec. 7122

  CCH Reference - 2008FED ¶41,130.20

 
Code Sec. 7502

  CCH Reference - 2008FED ¶45,625.10

  Tax Research Consultant

  CCH Reference - TRC IRS: 30,058

  CCH Reference - TRC IRS: 42,152

  CCH Reference - TRC IRS: 51,056.25

CCH (cch.taxgroup.com) reports:

  Citing "difficult times for the U.S. economy," IRS Commissioner Douglas H. Shulman has announced his commitment of IRS resources to an expedited process under which distressed homeowners can have federal tax liens subordinated or discharged. Although procedures already have been in place for lien subordination (in case of a refinancing) and discharge (in case of a sale) well before the current economic turmoil, the Commissioner's message to the media at IRS headquarters in Washington on December 16 covered three apparent changes:

  --An effort will be made to make more homeowners aware of this relief and facilitate applications;

  --The IRS will be shifting funds, personnel and other resources into expediting the process, thereby shortening the time it takes to obtain lien discharges and subordinations; and

  --By inference, the IRS will likely be more inclined to grant relief due to the current nationwide economic threat caused by foreclosures.

  "We don't want the IRS to be a barrier to people saving or selling their homes," Shulman stated, aware that a federal tax lien often blocks refinancing of mortgages or the sale of a home. To that end, Shulman promised that the IRS will work to speed requests for discharge or subordination of a tax lien so that liens would be lifted faster than the approximately 30 days it now takes after an application has been received.

  The IRS will consider the subordination of a tax lien to a secondary position when the mortgage lender is offering refinancing or a workout. The Service will also consider issuing a certificate of discharge of the lien to enable the short sale or other sale of a residence where proceeds would not cover both the mortgage and the lien.

  Procedures already in place cover the application process. The application process for a certificate of lien subordination may be found in IRS Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien. Directions for applying for a tax lien discharge are contained in IRS Publication 783, Instructions on how to apply for Certificate of Discharge of Property from Federal Tax Lien. IR-2008-141, which accompanied Shulman's announcement, stressed that "taxpayers' representatives" also may apply for the subordination or discharge and that in the case of a subordination, the taxpayer's lender may assist in the application.

  Shulman concluded, but without elaboration, that the IRS's expedited lien process represents the first in a number of steps that the IRS will be taking over the next several months to assist taxpayers. He particularly stressed that the agency wants to make certain that taxpayers with a long history of compliance don't become noncompliant because of "these extraordinary times." He added that the IRS's mission of service to these taxpayers will be considered as much as its mission of enforcement.

  By George Jones, CCH News Staff

IR-2008-141,
2009FED ¶46,204

Other References:

 
Code Sec. 6323

  CCH Reference - 2008FED ¶38,160.825

 
Code Sec. 7425

  CCH Reference - 2008FED ¶41,708.26

  Tax Research Consultant

  CCH Reference - TRC IRS: 48,166
CCH Reference -
TRC IRS: 51,308
 

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