Tax News

CCH (cch.taxgroup.com) reports:

  Overriding the veto of Governor Jim Douglas, the Vermont legislature has passed the Fiscal Year 2010 Appropriations Act that contains a tax amnesty program as well as various property, cigarette, and estate tax provisions. Separate stories discuss the changes to income tax (TAXDAY, 2009/06/03, S.32) and sales and use tax (TAXDAY, 2009/06/03, S.33).

CCH (cch.taxgroup.com) reports:

  New York City Mayor Michael R. Bloomberg and City Council Speaker Christine C. Quinn have announced an agreement on a revenue package containing a variety of sales tax, general corporation tax, and unincorporated business tax proposals. If approved by the state legislature and signed into law by the governor, the package would do following:

  -- increase the New York City portion of the sales tax rate from 4.0% to 4.5%;

  -- repeal the exemption for purchases of clothing items priced at $110 or more;

  -- apply the full New York City sales tax to electric and natural gas customers purchasing energy from non-utility companies;

  -- shift the general corporation tax from a three-factor apportionment formula to a single sales factor; and

  -- eliminate the unincorporated business tax for businesses with incomes under $100,000 and reduce the tax for businesses making up to $150,000.

  The press release concerning the agreement is available at
http://www.nyc.gov/html/om/html/2009a/pr247-09.html.

Press Release , New York City Mayor's Office, June 1, 2009
 

CCH (cch.taxgroup.com) reports:

  A corporation's communications excise tax refund claim for taxes paid on long distance service --service that the IRS conceded in
Notice 2006-50 was nontaxable --was untimely under Code Sec. 6511(a) because it was filed 10 years after the tax was paid. Therefore, the Court of Federal Claims correctly held under Code Sec. 7422 that it lacked jurisdiction over the refund claim.

  The appellate court explained that the jurisdiction of the Court of Federal Claims is defined by the Tucker Act (28 U.S.C. §1491(a)(1)), which allows it to decide certain monetary claims against the United States. But the Court of Federal Claims' Tucker Act jurisdiction is limited by the Tax Code, including Code Sec. 7422(a), which bars a suit when a refund claim has not been filed with the IRS. In turn, Code Sec. 6511(a) requires taxpayers to file refund claims "within 3 years from the time the return was filed or 2 years from the time the tax was paid . . . or if no return was filed by the taxpayer, within 2 years from the time the tax was paid." (Emphasis added.)

  The fact that the corporation was not required to file a return did not render Code Sec. 6511(a) inapplicable since someone must file a return for the federal communications excise tax --namely, the telephone carriers who collect and remit the tax. Thus, because Code Sec. 6511(a) is the type of tax for which returns are filed, its time limitations apply to all taxes and all taxpayers, regardless of who was obligated to file.

  Appeal from U.S. Court of Federal Claims case at
2008-1 USTC ¶70,278.

RadioShack Corporation, CA-FC, 2009-1 USTC ¶70,285

Other References:

 
Code Sec. 4251

  CCH Reference - ETR ¶18,135.04

  CCH Reference - ETR ¶18,135.68

 
Code Sec. 6511

  CCH Reference - ETR ¶50,435.01

  CCH Reference - ETR ¶50,435.08

 
Code Sec. 7422

  CCH Reference - ETR ¶57,475.01

  CCH Reference - ETR ¶50,475.10

  Tax Research Consultant

  CCH Reference - TRC IRS: 32,052.05
CCH Reference -
TRC LITIG: 9,056
CCH Reference - TRC EXCISE: 9,056
 

CCH (cch.taxgroup.com) reports:

CCH (cch.taxgroup.com) reports:

  IRS Commissioner Douglas Shulman in addressing the Organization for Economic Co-Operation and Development (OECD) before a luncheon on June 2 in Washington, DC, focused on the IRS's international tax initiative and the agency's latest efforts on cracking down on international tax abuses, an integral part of its overall plan. Shulman stated that the IRS would be attacking abuse on two fronts: reigning in aggressive tax planning by businesses and calling to task U.S. individuals with foreign assets who fail to pay their associated tax liabilities.

  According to Shulman, the latest IRS statistics indicate a 71-percent increase in foreign tax credits claimed by U.S. businesses between 2000 and 2007 and a 133-percent increase in foreign tax credits claimed by individuals. Shulman said these figures indicate that more of the country's business transactions are occurring across international borders and that all of the world's tax authorities are forced to deal with the resulting issues.

  To provide adequate tax administration in the international area, Shulman emphasized that the IRS would require certain "must haves." The top three on this list include:

  Personnel. Shulman noted that the IRS is often labeled with the moniker of "out manned and out gunned" in the international tax area due to the ability of large multi-national companies to pay more than the average taxpayer (as well as the average IRS agent) for sophisticated legal and tax services. Shulman emphasized the agency's need retain its existing international tax experts, as well as hire new personnel with international tax experience.

  Information Exchange. Shulman also underscored that the IRS needs to have resources to support its focus on enhancing information reporting in order to boost compliance in this area. Analyzing and utilizing data obtained from information reporting would not only aid the agency in its enforcement of international tax laws, but also in its provision of services.

  Qualified Intermediary Program. Shulman reported that the IRS will be putting more effort into improving its qualified intermediary program. He considers the tool in international enforcement essential to stopping abusive transactions.

Proposed Measures

  Shulman also reviewed President Obama's recently announced international tax initiative and proposals stated in the President's Fiscal year 2010 budget. He pointed out that the administration seeks to prevent U.S. multi-nationals from investing overseas, claiming tax deductions for related expenses and then deferring income tax on the resulting income. With the exception of research and experimentation expenses, the administration would prevent companies from claiming tax deductions associated with their foreign investments until they actually repatriated the associated offshore profits back into the U.S.

  The administration also proposes, Shulman explained, to change the "check-the-box" rules that enable U.S. multinational corporations to cause their foreign subsidiaries to be ignored for federal income tax purposes. This effort is aimed at ensuring fairness in the IRS's enforcement of the tax code, as well as allowing U.S. businesses to remain competitive in the global market.

  With respect to individuals, Shulman pointed out that the Obama administration has proposed changes to the Internal Revenue Code that would make it easier for qualified intermediaries of cross-border transactions to ensure that U.S. taxpayers are paying correct amounts of tax, in addition to creating a financial disincentive for U.S. taxpayers who wish to use a non-qualified intermediary.

  Under the administration's proposals, Shulman reported, U.S. financial institutions and qualified intermediaries would be required to determine the true owner of any account to discourage U.S. taxpayers from forming shell entities in which to hold offshore accounts. Additionally, the administration would require U.S. financial institutions and qualified intermediaries to withhold 20 to 30 percent on all U.S. payments to individuals or businesses who use non-qualified intermediaries. In order to obtain a refund for this amount, U.S. investors would be required to disclose their identities and prove that they are in compliance with applicable tax laws. The proposal would also require:

  --Increasing reporting requirements for qualified intermediaries;

  --Doubling certain penalties for failure to disclose a foreign financial account; and

  --Extending the current statute of limitations on international tax enforcement to six years after information is disclosed to the IRS.

  CCH Comment. Shulman, while appointed by President Bush and confirmed in March 2008, appears to be endorsing much of the Obama administration's international tax proposals. The IRS Commissioner is appointed by the president with the advice and consent of the Senate. The IRS Restructuring and Reform Act of 1998 (P.L. 105-206) amended Code Sec. 7803 to set a five-year term of office. The National Commission on the Restructuring of the IRS had stated, "Providing a five-year term is designed to bring greater continuity and independence to the position without diluting the Executive Branch accountability for management of the IRS."

  Shulman concluded his address by stating that "many corporations and their legal tax advisors are generally trying to comply with the myriad of international tax laws. While we're not going to always agree, about what the law is or how it applies in a particular case, we recognize that many businesses are trying to get it right. However, we all know that some businesses use the complexity of the tax code and the complexity of the international capital markets to push the envelope too far. That is where we have issues and that is where we will continue to focus."

  By Torie Cole, CCH News Staff

Prepared Remarks of Douglas H. Shulman Before the OECD
 

Tax Analysts report: