Tax News

CCH (cch.taxgroup.com) reports:

  The definition of "gross receipts" under the Michigan business tax is modified so that more items are excluded. The amount deducted as a bad debt under federal income tax law that corresponds to items included in the modified gross receipts tax base may be subtracted from gross receipts according to phased-in percentage amounts. Among other things, other items that may be excluded from gross receipts include:

  -- proceeds from the sale less any gain to the extent the gain is included in federal taxable income if the property is (1) a capital asset under IRC §1221(a), (2) land used in a trade or business under IRC §1231(b), (3) a hedging transaction, or (4) an investment or trading assets managed as part of a treasury function;

  -- interest and dividends received from federal or Michigan bonds;

  -- dividends and royalties received or deemed received from a foreign operating entity, according to phase-in percentage amounts;

  -- certain specific taxes and fees, such as sales or use taxes collected from a consumer, excise taxes paid on tobacco, and motor fuel taxes, according to phased-in percentage amounts;

  -- amounts attributable to an ownership interest in a pass-through entity, regulated investment company, or a real estate investment trust; and

  -- for a regulated investment company, receipts derived from investment activity by that regulated investment company.

In addition, other technical changes were made to the gross receipts definition.

Act 433 (S.B. 1038), Laws 2009, effective January 9, 2009, applicable retroactively and effective for taxes levied on and after January 1, 2008
 

CCH (cch.taxgroup.com) reports:

  The Council On State Taxation (COST) has issued an evaluation of the laws governing state administration of unclaimed property. The evaluation is structured in a way that is similar to COST's well-known Scorecard on Tax Appeals & Procedural Requirements and, in the same way, it assigns a grade to each state based on COST's evaluation of several criteria.

  The criteria evaluated by COST include:

  -- whether business-to-business transactions are subject to escheat,

  -- whether a period of limitations for unclaimed reporting requirements exists that corresponds with state tax laws and normal business practices,

  -- whether an independent administrative appeals process is available for holders of unclaimed property,

  -- whether gift certificates are subject to escheat,

  -- whether the state treats both the payment of interest to property owners and the assessment of interest against holders equitably, and

  -- whether the state engages contingent-fee auditors in its administration of unclaimed property.

  The following states were ranked highly by COST: Kansas, Arizona, Wisconsin, Indiana, Maryland, Massachusetts, North Carolina, and Virginia. The following states were ranked at the bottom by COST: Delaware, Georgia, Mississippi, New York, Oregon, Pennsylvania, New Hampshire, Utah, and Wyoming.

  Subscribers to CCH Tax Research NetWork can view the COST report.

   
Scorecard on State Unclaimed Property Statutes, Council On State Taxation, January 2009
 

CCH (cch.taxgroup.com) reports:

  Stimulus provisions will get Congress's full --and undivided --attention on the tax side in 2009. In 2010, however, major tax reform is likely if momentum on preparatory work continues in 2009 and, in 2010, President-elect Obama leads the charge for major tax reform and gets buy-in from the congressional leadership who, in turn, muster bipartisan support from members. These predictions reflected a consensus of opinion of the over 20 panelists and speakers, most with extensive experience on Capitol Hill, attending "Current Perspective on Tax Reform," an all-day program held in Washington on January 13, sponsored by the D.C. Bar Tax Section.

  On stimulus tax legislation, former Hill staffers at the program stated their belief that the alternative minimum tax (AMT) patch that extends the 2008 higher exemption amounts into 2009 is one of the few nonstimulus provisions likely to find its way into legislation soon. Another is the retention of the estate tax for at least one more year, 2010, at 2009 levels. Ironically, prior to the current economic downturn, the AMT's growing incursion into the ranks of the middle-class and the estate tax issue were considered, along with the sunsetting of the Bush tax cuts in 2010, concerns over the international competitiveness of the corporate tax structure and the growing cost of health care entitlements, as the "perfect storm" to make 2009 the year for tax reform. Most panelists, including Jonathan Talisman, former Assistant Secretary for Tax Policy, and Marc Gerson, partner with Miller & Chevalier, however, agreed that the ingredients for this perfect storm remain and may be just as compelling in 2010.

Groundwork for Tax Reform

  Joint Committee on Taxation Chief of Staff Edward Kleinbard would not predict the contents of any eventual tax reform package but did indicate that preparations to make the eventual decisions on reform possible are being made in 2009. Among the most essential components for tax reform, in Kleinbard's opinion, is good distributional analysis, now taking place, to pinpoint who bears what percentage of the tax burden currently and how different proposals would change that matrix. He added that, for example, the current variation in the average effective tax rates for corporations (26 percent) from that for other business forms (20 percent), as well as that imposed on corporate equity investment capital (36 percent) in contrast to debt-financed investment (negative six percent), are the types of distributional statistics that may support reform.

  He also suggested that looking at the opinions of Lawrence (Larry) Summers, Obama's chief economic advisor, on distributional trends also might indicate where tax reform might be headed. Summers has voiced concern for at least several years over a growing disparity between the wealthiest and the poorest individuals within the U.S.

  In additional to readying the necessary statistical work for a tax reform package, preparations in 2009 for serious tax reform considerations next year are being made through debate being generated by House Ways and Means Committee Chairman Charles B. Rangel's, D-N.Y., "mother of all tax bills" (HR 3970) introduced in 2008 to cover individual and business reforms independently and with separate revenue offsets. Another development considered by panelists as great benefit to any tax reform bill in 2010 is an effort on the budget side to put into place a better procedure for forecasting the revenue impact of particular reform provisions, in contrast to the static, 10-year forecasts now in use.

Tax Reform Strategy

  Former Senate Finance Committee Chairman Bob Packwood, who served during the last major tax reform in 1986, shared his recipe for successful tax reform during an Obama administration. First and foremost, he observed that Congress, by its nature, is a body comfortable with incremental change. To move major tax reform, the proposal must be championed by the president as a priority of his administration. Without that support, most congressional members simply will not take the chance on voting for a controversial bill that would create many losers as well as winners and might not become law in the end.

  Next, congressional leadership must back major tax reform without qualification. In addition, lawmakers must feel that there is transparency and that their views will be fully vetted in committee. Finally, major tax reform in Congress cannot take place without some compromise on both sides, with each feeling that they are getting "a grand bargain." In 1986, this bargain took the form of rate cuts in return for more tax fairness. Packwood would not predict what "grand bargain" would work this time around.

Other Observations

  Other opinions on the direction of tax reform in 2010 (or beyond) voiced during the program included the following observations:

  --The rising cost of health care entitlements will create the need for another source of revenue. A value-added tax appears to be the most likely candidate at this point.

  --Imposing an energy tax on "bad" energy, such as with a carbon tax, would automatically provide an incentive to use "good" energy without the complications created by direct tax incentives.

  --Any tax reform will create winners and losers, absent a surplus. The politics of getting tax reform passed by Congress requires threading the needle carefully to know what votes are not needed and what provisions must stay in for passage.

  --Hearings on tax reform may begin in 2009.

  --The business community needs consistency and predictability for long-range investment planning. Postponing corporate tax reform postpones needed certainty.

  --While corporations do not vote, there is growing consensus that lowering the corporate tax rate to be competitive worldwide will increase jobs for domestic employees, who do vote.

  By George Jones, CCH News Staff

 

CCH (cch.taxgroup.com) reports:

  The IRS will provide a daily on-line series of Tax Tips for the 2009 filing season. The series will provide useful information easily understandable by the average taxpayer, with a new tip added every day until the April 15, 2009, filing deadline. Taxpayers will have access to Tax Tips through the IRS website, which will also provide daily e-mails upon request and audio files for podcast. Topics for the series will include: choosing a tax preparer, how to obtain free tax help, e-filing, filing extensions, retaining tax records, and the first-time homebuyer tax credit.

IR-2009-4, 2009FED ¶46,243

Other References:

 
Code Sec. 7804

  CCH Reference - 2009FED ¶43,266.308

  Tax Research Consultant

  CCH Reference - TRC INDIV: 100

Tax Analysts report: