Tax News

CCH (cch.taxgroup.com) reports:

  The New York Assembly has passed A.B. 8615, A.B. 8866, and A.B. 8867, which contain a variety of New York City sales tax, corporation tax, and unincorporated business tax provisions that are part of a revenue package previously announced by the mayor and the city council speaker. (TAXDAY, 2009/06/03, S.23)

  If enacted, A.B. 8866 would do the 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; and

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

  Under A.B. 8615, a credit reducing the unincorporated business tax would apply if the annual tax amount is less than $5,400. The credit would completely offset unincorporated business tax amounts of $3,400 or less.

  Among other changes, A.B. 8867 would phase in a single sales factor and generally require related corporations with substantial intercorporate transactions to file a combined report, regardless of the transfer price for such intercorporate transactions.

  The text of the bills is available at
http://assembly.state.ny.us/leg/?bn=a8615 for A.B. 8615,
http://assembly.state.ny.us/leg/?bn=a8866 for A.B. 8866, and
http://assembly.state.ny.us/leg/?bn=a8867 for A.B. 8867.

A.B. 8615, A.B. 8866, and A.B. 8867, as passed by the New York Assembly on June 16, 2009; Press Release , New York City Mayor's Office, June 15, 2009

CCH (cch.taxgroup.com) reports:

  Gov. Charlie Crist has signed legislation that, as previously reported (TAXDAY, 2009/05/01, S.4), decouples the Florida corporate income tax from the extension through 2009 by the American Recovery and Reinvestment Act of 2009 (Recovery Act) (P.L. 111-5) of the 50% bonus depreciation and IRC §179 limitations enacted by the Economic Stimulus Act of 2008 (P.L. 110-185). The legislation also decouples the Florida corporate income tax from a Recovery Act provision that allows taxpayers to defer income from the discharge of indebtedness in connection with the reacquisition after December 31, 2008, and before January 1, 2011, of a corporate or business debt instrument. The legislation is operative retroactively to January 1, 2009.

  In addition, the legislation updates Florida's conformity date to January 1, 2009 (formerly, January 1, 2008).

S.B. 2504, Laws 2009, effective June 16, 2009, operative as noted

CCH (cch.taxgroup.com) reports:

  A corporation seeking a research credit for expenses incurred to develop a new computer business system was allowed to apply the rules in 2001 proposed regulations that provided an exception to the disallowance of the credit for the development of internal use software. Subsequently adopted 2003 final regulations, which the taxpayer could choose to apply to the tax years at issue, were silent regarding the test. The taxpayer, however, was not required to apply the discovery test in the 2001 regulations and could choose to apply the dramatically different discovery test in the 2003 final regulations.

  The IRS impermissibly attempted to amend the 2003 regulations with subsequently issued Announcement 2004-9, 2004-1 CB 441, that stated that the internal use software test in the 2001 regulations must be applied with the discovery test in the 2001 regulations. The announcement was not due substantial deference and could not override the 2003 regulations because it was inconsistent with the Treasury and IRS statement that the discovery test in the 2001 regulations did not accurately reflect the intent of Congress.

  Further, the 2003 regulations allowed the taxpayer to apply the rules to the tax years at issue and the two tests did not have to be applied together. Finally, the 2001 regulations were issued pursuant to the Treasury's delegated authority and had never been amended.

FedEx Corporation, DC Tenn., 2009-1 USTC ¶50,435

Other References:

 
Code Sec. 41

  CCH Reference - 2009FED ¶4362.03

  CCH Reference - 2009FED ¶4362.15

  CCH Reference - 2009FED ¶4362.25

 
Code Sec. 7805

  CCH Reference - 2009FED ¶43,282.1076

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 54,158.05
CCH Reference - TRC BUSEXP: 54,158.30
CCH Reference -
TRC IRS: 12,050
 

CCH (cch.taxgroup.com) reports:

  Medical residents who were full-time employees of two medical education programs were not eligible for the student exception to FICA taxes.
Reg. §31.3121(b)(10)-2(d)(3)(iii) limits the exception to students who work only part-time by providing that the services of a full-time employee, defined as an employee who works for 40 or more hours a week, are not incident to, and for the purpose of, pursuing a course of study. Legislative history indicates that FICA exceptions were directed toward part-time workers; therefore, the full-time employee limitation in the amended regulation does not conflict with the plain language of the statute, is consistent with the origin and purpose of the student exception and is not invalid. The medical residents did not fall within the student exception because they worked more than 40 hours per week; therefore, they were full-time employees and their compensation for health care and patient services was subject to FICA taxes.

  Reversing DC Minn. decisions, 2007-2 USTC ¶50,577 and 2008-1 USTC ¶50,262.

Mayo Foundation for Medical Education and Research, CA-8, 2009-1 USTC ¶50,432

Other References:

 
Code Sec. 3401

  CCH Reference - 2009FED ¶33,533.23

  CCH Reference - 2009FED ¶33,538.5056

  CCH Reference - 2009FED ¶33,538.558

  Tax Research Consultant

  CCH Reference - TRC COMPEN: 3,122

CCH (cch.taxgroup.com) reports:

  Senate Finance Committee Chairman Max Baucus, D-Mont., told reporters on June 17 that he would not have his health care reform mark ready by the end of the week of June 15 as initially promised and raised doubts that he would hold a markup prior to the July 4 recess. Finance Committee Democrats have been scrambling to find ways to bring down the cost, estimated by the Congressional Budget Office (CBO) at nearly $1.6 trillion, to under $1 trillion.

  The Obama administration does not regard the Finance Committee's delay in drafting the bill as a setback, according to White House Press Secretary Robert Gibbs. The White House still believes that health care reform legislation can be done in 2009, Gibbs said at a press briefing on June 17. Noting that Baucus is working toward a bill that has bipartisan support and contains "cost-saving measures that are paid for," Gibbs said these are the same as the administration's goals. However, the administration, to date, has not called for additional taxes to finance a final health care package beyond its own proposal to reduce certain deductions for high-income taxpayers.

  Baucus initially downplayed the CBO figures, saying they are based on a plan that is two weeks old and has undergone significant changes since then. He emphasized that he plans to look for more savings through medical spending reductions and other offsets, rather than raising revenue outside of health-care-related matters. However, mounting pressure from Republican opponents to reduce the cost and to find ways to make sure that more people are covered under reform has left Baucus with the difficult task of once again trying to forge an agreement that will gain the approval of his party and appease the loudest GOP critics of the plan.

  As Baucus retreated from his initial deadline, Sen. Christopher J. Dodd, D-Conn., filling in for the ailing Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Edward M. Kennedy, D-Mass., began marking up that committee's partially completed bill. That measure has also proved controversial as the CBO estimates pegged the price so far at over $1 billion, or approximately $6,250 per newly insured, and noted that it would only provide coverage for an additional 16-million individuals out of an estimated 46-million uninsured. Moreover, the mark remains incomplete, with scant language addressing how to pay for the health care makeover. The markup is expected to take two weeks.

  Meanwhile, a health care reform proposal offered on June 17 by Bipartisan Policy Center (BPC) advisors and former Senators Howard Baker, Thomas Daschle, and Robert Dole, received high praise from Baucus and Senate Finance Committee ranking member Charles E. Grassley, R-Iowa. "The proposal not only helps identify areas of clear agreement, it addresses critical reforms, such as tackling cost concerns and ensuring quality coverage while holding insurance companies' feet to the fire, "said Baucus. "It should encourage current members of Congress that former leaders of both political parties were able to find a compromise on even the most controversial health care issues and demonstrate that bipartisan reform may be achievable, "said Grassley.

  Gibbs said the BPC's report reinforces the president's main health care reform principles: "lowering costs for families, businesses and governments; guaranteeing choice of doctors and plans; ensuring quality and affordable health care for all Americans, and adhering to fiscal discipline that does not add to the deficit." The report is available on the BPC website at http://www.bipartisanpolicy.org.

  By Jeff Carlson and Paula Cruickshank, CCH News Staff

Tax Analysts report: