Tax News

CCH (cch.taxgroup.com) reports:

  Legislation to bring Florida into conformity with the Streamlined Sales and Use Tax (SST) Agreement has been prefiled in the Florida House of Representatives. If enacted, the legislation would be effective July 1, 2009.

  CCH Tax Research NetWork subscribers can view the legislation as prefiled.

H.B. 329, as prefiled in the Florida House of Representatives on January 13, 2009

 

CCH (cch.taxgroup.com) reports:

  In response to the continued liquidity crisis making it difficult for taxpayers to fund their operations, the IRS has extended the temporarily relaxed standards set forth in Notice 2008-91, I.R.B. 2008-43, 1001 (TAXDAY, 2008/10/07, I.1) and Notice 88-108, 1988-2 CB 445, for the exclusion of certain obligations from the definition of U.S. property on which U.S. shareholders of a controlled foreign corporation (CFC) are taxed. The IRS has also extended the application of Rev. Proc. 2008-26, I.R.B. 2008-21, 1014 (TAXDAY, 2008/05/13, I.1) to any day during calendar year 2009, for which it is relevant whether securities are readily marketable under Code Sec. 956(c)(2)(J).

 
Notice 88-108 excludes from the definition of the term "obligation" (Code Sec. 956(c)(1)(C)) an obligation that would constitute an investment in U.S. property if it is held at the end of a CFC's tax year, so long as the obligation is collected within 30 days from the time it is incurred. This exclusion does not apply, however, if the CFC holds for 60 or more calendar days during such tax year obligations that, without regard to the 30-day rule, would constitute an investment in U.S. property if it is held at the end of the CFC's tax year.

  Under Notice 2008-91, a CFC may choose to exclude from the definition of the term "obligation" an obligation held by the CFC that would constitute an investment in United States property provided the obligation is collected within 60 days from the time it is incurred. This exclusion does not apply if the CFC holds for 180 or more calendar days during such tax year obligation that, without regard to the 60-day rule, would constitute an investment in U.S. property.

  The new rules provide that, in addition to the period set forth in Notice 2008-91, the regulations described in that notice will apply to the third consecutive tax year of a foreign corporation, if any, including any short tax year that ends after October 3, 2008, and before December 31, 2009.

Notice 2009-10, 2009FED ¶46,246

Other References:

 
Code Sec. 956

  CCH Reference - 2009FED ¶28,576.023

  CCH Reference - 2009FED ¶28,576.35

  Tax Research Consultant

  CCH Reference - TRC INTLOUT: 9,256.15

CCH (cch.taxgroup.com) reports:

  The Treasury and IRS have finalized proposed regulations (NPRM REG-142680-06) relating to the postponement of certain tax-related deadlines for taxpayers affected by military or terroristic actions or federally declared disasters. The regulations reflect the Victims of Terrorism Tax Relief Act of 2001 (P.L. 107-134), as well as the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (TEAMTRA) (P.L.110-343). The rules apply for disasters declared after January 15, 2009.

  The Victims of Terrorism Tax Relief Act of 2001 extended the time period during which the Secretary could postpone certain tax-related acts and allowed the Secretary to suspend the accrual of interest, penalties and additional amounts or additions to tax during the postponement period. The regulations reflect that the Secretary may postpone certain tax-related acts up to one year. The regulations also reflect that the Secretary may suspend the accrual of interest, penalties, additional amounts or additions to tax during the postponement period.

  The regulations describe how postponements are implemented and additionally that:

  --further relief may be granted in revenue rulings, procedures, notices, announcements, new releases or other guidance;

  --specific tax-related acts due on different days within the postponement period may be postponed until the last day of the period;

  --if an affected taxpayer's tax-related due date falls within the postponement period, it will be eligible for relief from interest and penalties, etc.;

  --the postponement period runs concurrently with extensions to file and pay under other Code Secs.; and

  --the relief provided under Code Sec. 7508A, is specific to the type of extension received, for extended due dates that are not original dues dates within the postponement period.

  Consistent with changes made by TEAMTRA, the regulations use the term "federally declared disaster," instead of the term "Presidentially declared disaster." The term "affected taxpayer" is expanded to include any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a deadline are in the covered disaster area. Affected taxpayers may also include individuals visiting a covered disaster area who are killed or injured as a result of the disaster.

  Finally, the regulations add Example 9 to illustrate that a taxpayer's obligation to make installment agreement payments is suspended during the postponement period, but interest and penalties continue to accrue since the payments relate to preexisting liabilities.

T.D. 9443, 2009FED ¶47,012

T.D. 9443, FINH ¶43,124

Other References:

 
Code Sec. 7508A

  CCH Reference - 2009FED ¶42,687B

  CCH Reference - FINH ¶22,555

  Tax Research Consultant

  CCH Reference - TRC FILEIND: 18,052.20

  CCH Reference - TRC FILEBUS: 15,100

  CCH Reference - TRC FILEBUS: 15,110

  CCH Reference - TRC FILEBUS: 15,204.25

CCH (cch.taxgroup.com) reports:

  Preliminary negotiations over a $775 billion, tax-laden stimulus package are near completion and the tax-writing panels in both chambers plan to mark up portions within their authority during the week beginning January 19. Members reiterated that they are on track to have a bill completed and ready for President-elect Obama's signature by February 13.

  Lawmakers have jettisoned a proposed $3,000 tax credit for employers to hire and retain workers during the current economic downturn, arguing that the $50 billion the provision would cost could be put to better use. Negotiators say they remain undecided on how to utilize the funds but have more than enough options to choose from."Every member has five ideas" for what they would like to see replace the credit, Senate Finance Committee Chairman Max Baucus, D-Mont., recently told reporters.

  Senate Finance Committee member Charles E. Schumer, D-N.Y., told reporters on January 14 that adding a one-year patch for the alternative minimum tax (AMT) to the stimulus package is still under consideration. "Some people have proposed it be in the bill because, as you know, it's something that has to be done. And it's been difficult to pass in the past," he said. Baucus acknowledged the same a day earlier, telling reporters that the AMT patch is "still on the table."

  According to Schumer, the energy incentives portion of the measure has been expanded, reportedly up to $25 billion from the $10 billion initially proposed. Education tax credits will also get a boost, with a doubling and possibly quadrupling of the current $1,000 college tuition tax credit. Still posing problems is a provision that would allow companies to write off losses (NOLs) beyond the two years currently on the books. Aside from its questionable stimulative benefits, lawmakers are uneasy with the idea that banks receiving federal funds under Troubled Assets Relief Program (TARP) may also benefit from the tax deduction. Some have said that a smaller expansion beyond the proposed five years may still be possible because, despite their reluctance to include the provision, the deduction remains a popular means to provide tax relief for small businesses.

  House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., told reporters on January 14 that the economic stimulus package now under consideration by lawmakers and the incoming Obama administration would likely include a one-year AMT patch. Rangel said that both Senate and House lawmakers are interested in including an AMT provision, and he predicted that Congress would never let the AMT affect unintended taxpayers. He said his committee would have jurisdiction over $300 billion in tax cuts as part of the stimulus bill, but he would approach Obama for a larger amount if the committee believes it is necessary.

  The Ways and Means Committee is likely to mark up the economic stimulus bill during the week of January 19, according to House Majority Leader Steny H. Hoyer, D-Md. Hoyer told reporters that the tax components of the legislation will be targeted to middle-class working Americans, who will spend cash and boost the economy. Although he was not specific, Hoyer said the bill would also include energy tax credits.

  Meanwhile, members of the House Republican Study Committee released their own plan for economic stimulus on January 14, calling for lowering corporate tax rates, expanding child tax credits, lowering and indexing capital gains tax rates for inflation and allowing greater business expensing. The provisions are included in the Economic Recovery and Middle-Class Tax Relief Bill, sponsored by Rep. Scott Garrett, R-N.J., and Rep. Jim Jordan, R-Ohio.

Obama Administration View

  Separately, Office of Management and Budget Director Nominee, Peter Orszag, said Congress must take dramatic action to stimulate the U.S. economy. Orszag, at a nomination hearing before the Senate Committee on Homeland Security and Government Affairs on January 14, stressed the importance of maintaining a balanced mix of spending and tax-cut proposals in the economic recovery package.

  The key impediment to economic growth is the $1 trillion gross domestic product (GDP) gap between U.S. goods and services produced and the demand for them, Orszag noted. Public infrastructure projects are the fastest way to add to aggregate demand followed by assistance to states to maintain necessary social services, he said.

  "The economy lost more than 2.5 million jobs in 2008 and without policy interventions to bolster aggregate demand, it could lose another 3-to-4 million jobs over the coming year," Orszag warned. The former head of the Congressional Budget Office said the most pressing challenge in the short run is to jump-start the U.S. economy "out of the worst crisis since the Great Depression." A key challenge in the long run is putting the budget on a more sustainable course, but that will not be possible without controlling health care costs, he said.

Ways and Means Meeting

  After an organizational meeting of the Ways and Means committee, Rangel and ranking member Dave Camp, R-Mich., agreed to continue the cordial working relationship started by Rangel and former ranking member Jim McCrery, R-La., who retired. In reference to the committee's agenda, Rangel said he hopes to work with Camp and other GOP lawmakers on legislation to lower corporate tax rates and close outdated tax loopholes.

  Oversight Subcommittee Chairman John Lewis, D-Ga., said once his subcommittee meets in February, it will likely begin work on the issue of using private debt collectors to collect unpaid taxes. Lewis said his subcommittee would actively provide oversight of charitable organizations and nonprofits.

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