Tax News

CCH (cch.taxgroup.com) reports:

The sale of agricultural machinery capable of simultaneously harvesting grain and crops as well as biomass to a person engaged in a business enterprise is exempt from Michigan use tax. Machinery used to harvest biomass is also exempt. “Biomass” is crop residue used to produce energy or crops grown specifically for the production of energy.

Subscribers to CCH Tax Research NetWork can view the legislation.

Act 314 (H.B. 5877), Laws 2008, effective December 18, 2008
 
 

CCH (cch.taxgroup.com) reports:

  The IRS has published tables showing the amount of an individual's income that is exempt from a notice of levy used to collect delinquent tax in 2009. This information is the same as that found in Publication 1494, Table for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income (Forms 668-W(c), 688-W(c)(DO) & 688-W(ICS)).

Notice 2008-114, 2009FED ¶46,207

Other References:

 
Code Sec. 6334

  CCH Reference - 2008FED ¶38,225.101

  Tax Research Consultant

  CCH Reference - TRC IRS: 51,060.05
CCH Reference - TRC IRS: 51,060.052

 

CCH (cch.taxgroup.com) reports:

  The IRS has issued proposed regulations under Code Sec. 6707 concerning the failure of material advisors to timely file a return or filing a return with false or incomplete information regarding reportable transactions under
Code Sec. 6111. The regulations are proposed to apply to a return the due date of which is after the date a final version of the regulations is published in the Federal Register.

Disclosure Requirement

  Under Code Sec. 6111, each material advisor is required to timely file an information return with respect to a reportable transaction (including a listed transaction). A material advisor is any person who provides any material aid, assistance, or advice with respect to the reportable transaction, as well as any individual who receives (directly or indirectly) a certain threshold of gross income from the transaction. The threshold is $50,000 in the case of a reportable transaction with substantially all tax benefits provided to a natural person ($10,000 in the case of a listed transaction). The threshold is increased to $250,000 in any other case ($25,000 in the case of a listed transaction).

  Form 8918, Material Advisor Disclosure Statement, is used by the material advisor to make the disclosure. Generally, the return must be filed by the last day of the month that follows the end of the calendar quarter in which the person became a material advisor. To be considered complete, the information disclosed must meet the requirements of Reg. §301.6111-3. A penalty is imposed under Code Sec. 6707 on any material advisor who fails to timely file the return or files a false of incomplete return under Code Sec. 6111. The penalty with respect to any reportable transaction other than a listed transaction is $50,000. For a listed transaction, the penalty is the greater of $200,000 or 50 percent of the gross income derived by the material advisor with respect to the transaction before the return is filed. In the case of a failure or action with respect to a listed transaction that is intentional, the penalty is the greater of $200,000 or 75 percent of the gross income derived by the material advisor with respect to the transaction before the return is filed.

Liability for Penalty

  Under the newly issued proposed regulations, the penalty may be assessed against each material advisor required to file Form 8918. Thus, if more than one material advisor is responsible for filing a return with respect to the same reportable transaction, a separate penalty may be assessed under Code Sec. 6707 against each material advisor who fails to file the return timely or files the return with false or incomplete information. In addition, if a group of material advisors enter into an agreement designating one material advisor to file the required return on behalf of all parties to the agreement, then the penalty may still be imposed on each party to the agreement if the designated material advisor fails to timely file the return or files the return with false or incomplete information.

Intentional Failures

  In the case of listed transactions, material advisors are considered to have acted intentionally, subjecting them to an increased penalty, if they knew of the obligation to file a return under Code Sec. 6111, and knowingly did not timely file a return with the IRS or filed a return knowing that it was false or incomplete. Thus, in the case of a material advisor under designation agreement, a nondesignated material advisor of the agreement will not be considered to have intentionally failed to meet the requirements of
Code Sec. 6111 unless the nondesignated material advisor knew or should have known that the designated material advisor would fail to timely file a true and complete return.

  Moreover, to encourage material advisors to correct material defects, the proposed regulations provide that any failure to file a timely return or filing a return with false or incomplete information will be considered unintentional if the material advisor remedies the failure by filing a true and complete return with the IRS prior to the earlier of the date that: (1) any taxpayer files Form 8886 identifying the material advisor with respect to the reportable transaction in question; or (2) the IRS contacts the material advisor concerning the reportable transaction.

False or Incomplete Information

  A return is considered to contain false information if any information on the return is untrue or incorrect when Form 8918 is filed. Information will not be considered false if it contains untrue or incorrect information by mistake or accident after the exercise of reasonable care by the material advisor or the information is immaterial. Incomplete information on a return means that the return does not provide the information required under Reg. §301.6111-3. A return will not be considered incomplete when the required information not provided is immaterial or was not provided due to mistake or accident after the exercise of reasonable care.

  In addition, material advisors who complete Form 8918 to the best of their ability and knowledge after the exercise of reasonable efforts to obtain the information will not be considered to have filed an incomplete return. However, in the case of a listed transaction, a Form 8918 will be considered intentionally incomplete and subject to an increased penalty if information required to be provided under Reg. §301.6111-3 is omitted and the form contains a statement that the omitted information will be provided upon request.

Rescission of Penalty

  Finally, the proposed regulations restate the procedures described in Rev. Proc. 2007-21, I.R.B. 2007-9, 613, for a material advisor to request a rescission of all or a portion of a penalty assessed under Code Sec. 6707 including: the deadline by which a person must request rescission; the information the person must provide in the rescission request; the factors that weigh in favor of and against granting rescission; where the person must submit the rescission request; and the rules governing requests for additional information from the person requesting rescission.

  The regulations note that the factors that weigh in favor of or against rescission do not represent an exclusive list, and no single factor will be determinative. Rather, all factors will be considered whether included in the list or not. However, the IRS will not take into consideration doubt as to liability for, or collectibility of, the penalty. In addition, the extent to which the penalty assessed is disproportionately larger than the tax benefit received will not be considered. The gross income threshold to be considered a material advisor ensures that any penalty imposed will not be disproportionate to the benefit received.

Comments

  Written or electronic comments and requests for a public hearing regarding the proposed regulations must be received by March 23, 2009.

Proposed Regulations, NPRM REG-160872-04, 2009FED ¶49,409

Other References:

 
Code Sec. 6707

  CCH Reference - 2008FED ¶40,086E

  Tax Research Consultant

  CCH Reference - TRC PENALTY: 3,252
CCH Reference - TRC PENALTY: 3,254
 

CCH (cch.taxgroup.com) reports:

  Under proposed regulations issued by the IRS, for purposes of determining whether a conduit financing arrangement exists, the term "person" includes a business entity that is disregarded as an entity separate from its single-member owner. In general, the IRS is allowed to disregard the participation of one or more intermediate entities in a financing arrangement where an entity is acting as a conduit entity and recharacterize the financing arrangement as a transaction directly between the remaining parties to the financing arrangement for purposes of imposing tax under Code Secs. 871, 881, 1441 and 1442.

  Questions have arisen regarding the proper treatment of a disregarded entity, an entity that is not classified as a corporation, that has a single owner and that has elected to be disregarded as an entity separate from its owner, The proposed regulations would make it clear that transactions into which a disregarded entity enters will be taken into account for purposes of determining whether a financing arrangement exists.

Proposed Regulations, NPRM REG-113462-08, 2009FED ¶49,408

Other References:

 
Code Sec. 881

  CCH Reference - 2008FED ¶27,485C

  Tax Research Consultant

  CCH Reference - TRC SALES: 3,166
CCH Reference - TRC EXPAT: 15,112
CCH Reference -
TRC INTL: 3,120

 

CCH (cch.taxgroup.com) reports:

  The Treasury Department and the IRS will not suspend 2008 required minimum distributions (RMDs) from IRAs, Code Sec. 401(k) plans and similar arrangements, according to a December 17 letter from a senior Treasury official to Congress obtained by CCH. "Individuals who are subject to RMDs for 2008 should take their distribution under existing rules," Kevin I. Fromer, Treasury assistant secretary for legislative affairs, told House Education and Labor Committee Chairman George Miller, D-Calif.

  CCH Comment. At least certain members of Congress did not press for suspension of 2008 RMDs in the Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-343) under the assumption that the Treasury and IRS would take care of 2008 RMDs administratively. The Act suspends RMDs for 2009 only. Now, the Treasury and IRS, after considering the matter, have decided that they must pass on giving any 2008 relief. Whether Congress can provide relief retroactively in the stimulus bill slated for January remains questionable. Likely, this will remain a developing story that will not end with the Treasury letter. CCH asked the Treasury to elaborate on the letter but did not receive a response by press time.

Distributions

  Individuals must receive the entire balance of their IRA or similar arrangement or start receiving periodic distributions from it by April 1 of the year following the year in which they reach age 70-1/2. Individuals who turned 70-1/2 in 2008 have until April 1, 2009 to take their 2008 distribution. However, individuals who reached age 70-1/2 before 2008 must take their distributions by December 31, 2008. Individuals who fail to take a RMD risk a 50-percent excise tax.

  "2008 RMDs are based on plan balances from December 31, 2007, and the stock market has seen major declines in October and November of 2008," B. Janell Grenier, Law Office of B. Janell Grenier, West Chester, Pa., told CCH. "This may require seniors (if they have not already done so) to liquidate their assets in order to make the RMDs and take losses whereas holding on to those assets might bring recovery."

Administrative Relief

  After Congress suspended RMDs for 2009, many practitioners and taxpayers expected the Treasury and the IRS to provide some type of relief for 2008 RMDs. Administrative relief would not necessarily have to be suspension of RMDs for 2008, Edgar Adkins, partner, Grant Thornton, LLP, Washington, D.C., told CCH. "The Treasury and the IRS could have allowed taxpayers to use a date closer to today (rather than December 31, 2007) on which to calculate their distributions." This would result in a smaller RMD for many individuals.

Not for 2008

  Now, it appears that no relief of any kind for 2008 RMDs is forthcoming from the Treasury and the IRS. "Because Congress has provided broad and direct relief [for 2009]...the Treasury and the IRS have determined that any further change to the RMD rules should not be undertaken," Fromer wrote. He explained that any steps the Treasury could take would be substantially more limited than the relief enacted by Congress and could not be made available uniformly to all individuals subject to RMDs. "Such changes would be complicated and confusing for individuals and plan sponsors."

  "We are disappointed that the Treasury declined to act to help those seniors forced to take withdrawals from their depleted retirement accounts," Aaron Albright, a spokesperson for the House Education and Labor Committee, told CCH. "Congress acted to provide relief for seniors in 2009 with the understanding that the Treasury was actively working on a solution for this tax year."

Looking Ahead

  "Some people have asked whether the fact that RMDs are not required for 2009 will mean that people will have to make two RMDs for 2010," Grenier told CCH. "While regulations will likely be issued by IRS, it appears that the general consensus is that the RMD will be skipped for 2009 and that only one RMD will be required for 2010. However, because no RMD will be taken for 2009, the year-end balance will likely be higher (unless the individual has incurred losses), meaning that later RMD amounts will be greater in amount."

  By George G. Jones and George L. Yaksick, Jr., CCH News Staff

Treasury RMD Letter
 

Tax Analysts report: