Tax News

CCH (cch.taxgroup.com) reports:

  The Vermont Legislature has passed legislation that, if enacted, would phase-in the personal income tax rate reductions enacted by H.B. 441, Laws 2009 (TAXDAY 2009/06/03, S.32), phase-in and modify the personal income tax capital gains deduction amendments made by H.B. 441, and enact a new research and development credit against personal and corporate income taxes as well as new sales tax holidays.

CCH (cch.taxgroup.com) reports:

  Both the Maine Senate and House of Representatives have passed a bill that would replace the current personal income tax brackets, personal exemptions, and itemized deductions with a 6.5% flat tax on all taxable income. In addition, the bill would:

  -- create a new "household credit" for low- and middle-income individuals (the credit amount would be adjusted annually for inflation);

  -- add a tax credit for charitable contributions exceeding $250,000;

  -- establish a tax credit for persons who are 65 years of age or older;

  -- eliminate the low-income tax credit;

  -- abolish the alternative minimum tax on individuals;

  -- repeal the 15% tax on lump-sum retirement plan distributions and early distributions from qualified retirement plans;

  -- replace withholding exemptions with a requirement that the household credit be taken into account when determining personal income tax withholding rates; and

  -- require the State Tax Assessor to report to the Joint Standing Committee on Taxation by November 1, 2011, regarding the impact of the changes in the tax laws contained in the bill.

  The proposed changes would apply to tax years beginning on or after January 1, 2010. At press time, Gov. John Baldacci has not indicated whether or not he will sign the bill.

  Provisions in H.P. 750 pertaining to sales and use taxes and property taxes are reported separately. (TAXDAY, 2009/06/08, S.14)

  Subscribers can view the original bill and amendments to the original bill that affect personal income tax provisions.

L.D. 1088 (H.P. 750), as passed by the Maine House of Representatives on June 4, 2009, and passed by the Maine Senate on June 5, 2009
 

CCH (cch.taxgroup.com) reports:

  CCH Tax and Accounting is hosting a live two-hour audio seminar, Multistate Income Taxation: From Allocation and Apportionment to Credits and Incentives, on Tuesday, June 9, 2009, at 1 p.m. Eastern; noon Central; 10 a.m. Pacific. This two-hour CCH Audio Seminar is the second of a three-part series on multistate income taxation presented by noted state tax experts, educators and authors, John C. Healy, M.S.T., CPA, and Bruce Nelson, M.A., CPA. This seminar will identify the concepts and conflicts in disputes over business and nonbusiness income and the connection between those concepts and apportionment and allocation.

  Program topics include the following:

  -- Latest developments in business and nonbusiness income

  -- When does a taxpayer have the right to apportion income?

  -- Sourcing issues

  -- Detailed analysis of the payroll, property, and sales factors

  -- Tax credits and business incentives

  The learning objectives include:

  -- understand the distinctions between business and nonbusiness income

  -- gain awareness of sourcing issues

  -- develop an approach to analyze issues involving payroll, property or sales factors

  Registration can be completed online at
http://www.krm.com/cch or by calling 1-800-775-7654. Participants can receive two hours of CPE credit for an additional $25 per person. Firms registering for this audio seminar will also receive a free issue of CCH's Journal of State Taxation.

CCH (cch.taxgroup.com) reports:

  The IRS has issued guidance concerning the election procedures taxpayers are required to follow in making an irrevocable election to claim the Code Sec. 48 investment tax credit in lieu of the production tax credit under Code Sec. 45 with respect to renewable energy facilities. The guidance further describes the coordination of investment tax and production credits with Treasury Department grants for specified energy property under the American Recovery and Reinvestment Tax Act of 2009 (P.L. 111-5), known as "Section 1603 Grants".

  To make the election to treat a qualified facility as a qualified investment credit facility eligible for the investment tax credit, the taxpayer must claim the energy credit with respect to qualified property that is an integral part of the facility on Form 3468, Investment Credit. A separate election is required for each facility that the taxpayer treats as a qualified investment credit facility.

  A statement, signed under penalty of perjury by the taxpayer or someone authorized to bind the taxpayer, must be attached to Form 3468; the statement must include the taxpayer's name, address, taxpayer identification number and telephone number, together with detailed technical descriptions of the facility (including generating capacity) and of the energy property placed in service during the year as an integral part of the facility, including a statement that the property is an integral part of such facility. The attached statement must also state the date the energy property is placed in service, provide an accounting of the taxpayer's basis in such property, an include a depreciation schedule showing the remaining basis in the property after the energy credit is claimed. The taxpayer must also represent that no Section 1603 Grant will be sought for such property The taxpayer must also retain adequate books and records concerning the credit, including the required statement and all supporting documentation.

  Section 1603 Grants are federal grants of up to 30 percent of the cost of qualified facilities (other than small irrigation power facilities and Indian coal production facilities) that are placed into service or on which construction is begun during 2009 or 2010. However, if a Section 1603 Grant is obtained for any tax year with respect to the property then no credit may be determined under Code Secs. 45 or48 with respect to such property for such tax year.

Notice 2009-52, 2009FED ¶46,397

Other References:

 
Code Sec. 45

  CCH Reference - 2009FED ¶4415.30

 
Code Sec. 48

  CCH Reference - 2009FED ¶4671.01

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 54,550

CCH (cch.taxgroup.com) reports:

  The IRS is temporarily suspending the requirement to file foreign bank account reports (FBARs) (Forms TD F 90.22-1, Report of Foreign Bank and Financial Accounts) due on June 30, 2009, for persons who are not citizens, residents, or domestic entities. Form TD F 90.22-1, which was revised in October 2008, changed the definition of "United States person" and resulted in some confusion that may require additional guidance. Therefore, for FBARs due on June 30, 2009, taxpayers should use the prior (July 2000) definition in determining who must file an FBAR. Under that former definition, a "United States person" is (1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust. Taxpayers required to file an FBAR due on June 30, 2009, should still file the current version of Form TD F 90.22-1. The substitution of the prior definition of "United States person" applies only with respect to FBARs due on June 30, 2009.

  Comments regarding the revised FBAR form and instructions should be submitted by August 31, 2009.

IR-2009-58,
2009FED ¶46,395

Announcement 2009-51, 2009FED ¶46,396

Other References:

 
Code Sec. 6011

  CCH Reference - 2009FED ¶35,141.48

  Tax Research Consultant

  CCH Reference - TRC FILEBUS: 9,104

CCH (cch.taxgroup.com) reports:

  The IRS is requesting public comments on several proposals to simplify the procedures under which employers substantiate an employee's business use of employer-provided cell phones or similar telecommunications equipment. Suggestions for alternative approaches to simplify these substantiation procedures are also being requested. Any resulting changes to the substantiation procedures will not become effective until guidance is published.

  In the event that an employer acquires, and pays the costs of, a cell phone that is provided to an employee, the employee receives a fringe benefit. To the extent that the employee uses the employer-provided cell phone for business purposes, the fair market value (FMV) of such usage qualifies as a working condition fringe benefit excludable from the employee's gross income and deductible by the employer. However, the exclusion/deduction is not available unless the substantiation requirements of
Code Sec. 274(d) are met. In the event that the employee's use of the cell phone is for personal purposes, the FMV of such usage is includible in the employee's gross income. The employer's cost to provide the cell phone is not determinative of the FMV of the benefit received by the employee.

  The IRS and the Treasury Department are considering three alternative methods to simplify the substantiation requirements applicable to employee usage of employer-provided cell phones. It is contemplated that any employer using a simplified cell phone substantiation method will be required to implement a written policy that (1) requires employees to carry and use the employer-provided cell phone in connection with the employer's trade or business, and (2) prohibits personal use of an employer-provided cell phone other than for minimal personal use, similar to the rules currently applicable to employer-provided automobiles in Temporary Reg. §1.274-6T. It is also anticipated that the employer will be required to reasonably believe that the cell phone is not used for other-than-minimal personal use.

  The three alternative substantiation methods being considered by the IRS and Treasury Department are:

  (1) Minimal personal use method. There are actually two proposed "minimal personal use" methods being considered that would allow an employer to treat all of an employee's usage of an employer-provided cell phone as business usage. Under the first proposal, such treatment would be permitted if employees establish that they maintain and use non-employer-provided cell phones for personal purposes during work hours. The second alternative proposal would define a specified amount or type of "minimal" personal use that would be disregarded in determining the amount of personal use of an employer-provided cell phone.

  (2) Safe harbor substantiation method. Under this method, an employer would treat a certain percentage of each employee's use of an employer-provided cell phone (75 percent, as proposed) as business usage. The remaining percentage would be treated as personal use.

  (3) Statistical sampling method. This method would allow an employes to use a statistical sampling methodology similar to that provided in Rev. Proc. 2004-29, 2004-1 CB 918, to measure an employee's personal use of an employer-provided cell phone. The remaining portion of the employee's usage would be deemed to be for business purposes.

  The IRS is also soliciting comments as to whether a simplified valuation method would be helpful and appropriate to determine the FMV of an employee's personal use of an employer-provided cell phone. As noted above, in the event that the employee's use of an employer-provided cell phone is for personal purposes or is not properly substantiated under Code Sec. 274(d), the FMV of such usage would be includible in the employee's gross income as a taxable fringe benefit. The employer's cost to provide the cell phone is not determinative of the FMV of the benefit received by the employee.

  Public comments on the proposed substantiation and valuation methods discussed above, as well as suggestions for alternative simplified methods, must be submitted to the IRS on or before September 4, 2009. The notice includes a list of specific issues that the IRS is particularly interested in receiving comments regarding.

Notice 2009-46, 2009FED ¶46,394

Other References:

 
Code Sec. 274

  CCH Reference - 2009FED ¶14,417.027

  CCH Reference - 2009FED ¶14,417.26

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 24,856

Tax Analysts report: