Tax News

CCH (cch.taxgroup.com) reports:

  An amended version of Gov. Steve Beshear's special session economic development package containing income tax credits, sales and use tax incentives, and a pari-mutuel tax exemption for certain horse racing events passed by a wide margin in the Kentucky Senate. The original provisions proposed by the governor (TAXDAY, 2009/06/12, S.17), along with amendments made by the House of Representatives (TAXDAY, 2009/06/19, S.5), were retained in the Senate version, but the following provisions were added or changed:

  -- companies eligible to claim the new economic development credit against the corporation income tax, limited liability entity tax (LLET), and personal income tax, which would replace the Kentucky Rural Economic Development Act (KREDA), the Kentucky Economic Opportunity Zone Act (KEOZ), the Kentucky Jobs Development Act (KJDA), and the Kentucky Industrial Development Act (KIDA) credit programs, would be required to pay at least 90% of all new employees at the target minimum wage levels and advance disbursement of the credits would be subject to General Assembly approval;

  -- companies eligible to claim the alternative and renewable energy facilities credit against corporation and personal income tax, limited liability entity tax (LLET), sales and use tax, and severance tax liability would be allowed to use tar sands as an energy feedstock;

  -- personal income taxpayers would be allowed to claim a one-time, nonrefundable credit for the purchase of a new home;

  -- a 10% surcharge would be imposed on purchases of Kentucky lottery tickets to be remitted in the same manner as sales and use taxes; and

  -- an excise tax would be imposed on horse racing tracks equal to 1.5% of the taxable handle attributable to each live race conducted at the track.

  Subscribers can view the bill as passed by the Senate.

 
H.B. 3, as passed by the Kentucky Senate on June 19, 2009

CCH (cch.taxgroup.com) reports:

  In a sharply worded letter, a group of state legislators stated unequivocally their opposition to the Uniform Law Commission (ULC) proceeding with its current review of the Uniform Division of Income for Tax Purposes Act (UDITPA). The letter was sent to the ULC's leadership by the National Conference of State Legislatures (NCSL) Executive Committee Task Force on State and Local Taxation of Communications and Electronic Commerce.

  In 2008, the ULC appointed a drafting committee to revise the 50-year-old UDITPA. After certain legislators and taxpayers expressed their strong opposition to the revision effort, the ULC downgraded the panel to a study committee. However, the opposition to the committee's efforts did not abate. Following a May 14 committee conference call, the committee chair asked the ULC leadership to have until January 2010 to "explore with elected executive and legislative leaders of the states the need to revise UDITPA." (TAXDAY, 2009/05/29, S.1) The NCSL Task Force letter was a response to this request.

  The letter says the Task Force found the failure to allow legislators to participate in the May 14 conference call "incredibly offensive" and "met with incredulity" the suggestion that the committee was unclear as to legislators' stance on the revision effort. On May 30, 2009, the Task Force voted unanimously to oppose the continuation of the study committee and the effort to revise UDITPA. The letter concludes with a caution that the ULC not "squander [its] trusted trademark on an ill-conceived, ill-advised and unwarranted project."

  Subscribers can view the NCSL's letter.

 
Letter, NCSL Task Force on Communications & Electronic Commerce, June 19, 2009
 

CCH (cch.taxgroup.com) reports:

  A corporation was required to produce certain documents that it received from its tax advisors and that had been withheld as privileged or non-responsive to an IRS summons. The documents did not discuss federal tax issues; rather, they contained information generally gathered to facilitate the filing of a tax return. Such accounting advice was not covered by the tax practitioner privilege. Several memoranda and notes were not privileged because they did not reflect confidential communication between a client and tax practitioner for the purpose of providing federal income tax advice.

  The government also met its burden of showing that the withheld and redacted documents relating to the corporation's transactions surrounding its merger with a Canadian company fell within the tax shelter exception to the tax practitioner privilege and were, therefore, required to be fully disclosed. The communications between the corporation and its tax advisors were made in connection with the promotion of the corporation's participation in a tax shelter as defined in Code Sec. 6662(d)(2)(C)(ii).

  Affirming a DC Ill. decision, 2008-2 USTC ¶50,482.

Valero Energy Corporation, CA-7, 2009-1 USTC ¶50,445

Other References:

 
Code Sec. 7525

  CCH Reference - 2009FED ¶42,816F.25

  Tax Research Consultant

  CCH Reference - TRC IRS: 21,404

CCH (cch.taxgroup.com) reports:

  An individual's sentence for willful tax evasion and failure to collect and pay over payroll taxes was incorrectly calculated because the amount of tax loss used in sentencing improperly included the same amount twice. The individual, as a responsible party of a corporation, did not withhold tax from his own wages, and as an individual did not pay tax on those wages. These funds, however, were only subject to being taxed once, Similarly, the restitution order should have included the amount only once.

  Further, the individual's offense level under the sentencing guidelines was erroneously enhanced for abusing his position of public or private trust. Although the IRS was the victim of the individual's charged conduct, the individual was not in a position of trust in relation to the IRS because his only duty was to collect and pay over the payroll taxes. However, the court properly imposed a sophisticated means enhancement because the individual sought to hide his ownership interest in a financial advisory firm and established various business entities to disguise the distribution of profits. The individual's sentence was also properly enhanced for perjury because his trial testimony was false, material and intended to affect the outcome of the trial.

  Vacating and remanding an unreported DC Ohio decision.

M.W. May, CA-6, 2009-1 USTC ¶50,444

Other References:

 
Code Sec. 7201

 
Code Sec. 7202

  CCH Reference - 2009FED ¶41,318.22

  CCH Reference - 2009FED ¶41,318.221

  CCH Reference - 2009FED ¶41,318.222

  CCH Reference - 2009FED ¶41,318.224

  Tax Research Consultant

  CCH Reference - TRC IRS: 66,462
CCH Reference - TRC IRS: 66,462.10
CCH Reference - TRC IRS: 66,462.20

CCH (cch.taxgroup.com) reports:

  The IRS has released guidance encouraging taxpayers to safeguard themselves during the 2009 hurricane season. The Service suggests that taxpayers keep an extra set of records, preferably electronic records, in a location separate from their storage of original documents. The IRS also recommends that taxpayers take pictures or videos of items in their homes in order to more easily document items lost in a disaster. Finally, the IRS encourages employers to update emergency plans as needed and to ask payroll service providers if they have fiduciary bonds in place in the event of default by the provider.

  If a disaster occurs, the IRS has specialists available who are trained to handle disaster-related issues at (866) 562-5227. The IRS can also provide copies or transcripts of tax returns at no cost to taxpayers located in federal disaster areas.

IR-2009-61,
2009FED ¶46,408

Other References:

 
Code Sec. 165

  CCH Reference - 2009FED ¶10,005.42

 
Code Sec. 6001

  CCH Reference - 2009FED ¶35,111.30

 
Code Sec. 7508A

  CCH Reference - 2009FED ¶42,687C.101

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 30,104.10
CCH Reference - TRC FILEBUS: 15,110
CCH Reference -
TRC IRS: 9,300
 

Tax Analysts report: