Tax News

CCH (cch.taxgroup.com) reports:

  Texas has enacted a group of tax incentives aimed at projects to capture and sequester carbon dioxide that would otherwise be emitted into the atmosphere, including a franchise tax credit, a sales and use tax exemption, an extended severance tax rate reduction, and new qualifications for property tax incentives under the Texas Economic Development Act.

CCH (cch.taxgroup.com) reports:

  The Minnesota Department of Revenue has issued an update regarding the July 1 sales and use tax rate increase that provides transitional provisions for various transactions. As previously reported, the general sales and use tax rate increases from 6.5% to 6.875% on July 1, 2009. (TAXDAY, 2009/04/10, S.16) Beginning July 1, the new tax rate of 6.875% applies to all taxable sales, including leases of motor vehicles. However, the new 6.875% rate does not apply to sales or purchases of motor vehicles that are subject to the state excise tax on motor vehicles. (TAXDAY, 2009/05/19, S.8)

  If an invoice or billing includes charges for taxable items or services for dates prior to July 1 and dates on or after July 1, the entire billing is taxed at the 6.875% rate unless the charges are separately stated for sales before July and for sales beginning July 1. When the charges are separately stated, charges for taxable items and services sold before July 1 are taxed at the 6.5% rate and charges for taxable items or services sold on or after July 1 are taxed at the 6.875% rate.

CCH (cch.taxgroup.com) reports:

  California Controller John Chiang has announced that unless the governor and legislature adopt immediate budget and cash solutions, beginning July 2, 2009, the controller's office will be forced to issue registered warrants, also known as IOUs, for personal income and corporation franchise and income tax refunds and all other payment categories not protected by the state constitution, federal law, and court decisions.

  The warrants will carry an interest rate set by the Pooled Money Investment Board. The controller has requested an emergency meeting of the Board on July 2 to set the rate. Any rate adoption will become effective immediately. The warrants will have a maturity date of October 1, 2009.

Press Release , California State Controller's Office, June 24, 2009

CCH (cch.taxgroup.com) reports:

  The IRS failed to take necessary actions to notify taxpayers and their representatives of Notices of Federal Tax Liens (NFTL) filed by the Service, the Treasury Inspector General for Tax Administration (TIGTA) concluded in a report released on June 25. In a separate report, TIGTA determined that the IRS is not properly monitoring Acceptance Agents who obtain individual taxpayer identification numbers (ITIN) for alien individuals.

Notices of Federal Tax Liens

  The IRS attaches an NFTL on taxpayer assets when it has a claim for unpaid taxes. The IRS filed over 700,000 lien notices for the year beginning July 1, 2007, and ending June 30, 2008. After filing a notice, the IRS must, within five business days, notify taxpayers of the lien in writing at their last-known address. In addition, if the taxpayer has an authorized representative on file with the IRS, the Service must notify the representative of the lien within five business days after notice is sent to the taxpayer.

  TIGTA is required to audit the lien program every year. In a sample of 125 cases, TIGTA found that the IRS notified taxpayers within five days in every case. In the previous year, IRS could not demonstrate timely mailing in 3 percent of sampled cases.

  Taxpayers had an authorized representative in 27 of the 125 cases, but the IRS failed to notify the representatives in eight (30 percent) of the 27 cases. While this error rate declined from 76 percent in 2006, TIGTA projected that taxpayer representatives may not have been notified in over 45,000 cases. At TIGTA's recommendation, the IRS is improving its processes for updating its records of taxpayer representatives and for notifying representatives of NFTLs.

  If the lien notice mailed to the taxpayer is returned to the IRS as undelivered mail, employees must research the IRS computer system within five days to check the accuracy of the taxpayer's address. In a sample of 283 undelivered lien notices, the IRS failed to perform timely research in 83 percent of the cases, compared to 33 percent in the previous year. TIGTA indicated that it found similar problems in the previous year and that the IRS had agreed to address the problem but, instead, the IRS's performance declined. The Service agreed to TIGTA's new recommendation to check addresses using the Automated Lien System.

  TIGTA identified 26 cases where the addresses on the lien notice and in the IRS system did not match. In 17 of the cases, the address was updated before notice was sent to the taxpayer, and a new lien notice should have been sent to the updated address. This created potential violations of taxpayers' rights because the IRS did not satisfy the statutory requirement to send the lien notice to the taxpayer's last-known address. TIGTA also determined that the IRS failed to enter appropriate codes in its records to reflect the status of the notices and to determine appropriate actions.

Acceptance Agents

  In the second report, TIGTA examined the use of IRS-approved Acceptance Agents to obtain ITINs for aliens. TIGTA noted that inadequate screening and monitoring increased the risk to taxpayers and the government of potential losses associated with unscrupulous agents. The auditor found that the IRS failed to properly monitor agents. Copies of green cards were lacking for 10 of 12 agents sampled, and required criminal background checks were not performed for 70 of 74 agents. Finally, the IRS failed to visit agents to check on their performance. The IRS agreed to correct these problems.

TIGTA Press Release: TIGTA Releases Audit Report on Acceptance Agent Program

TIGTA Report: Inadequate Management Information Has Adversely Affected the Acceptance Agent Program (Reference Number: 2009-40-087)

TIGTA Press Release: TIGTA Releases Audit Entitled, "Additional Actions Are Needed to Protect Taxpayers' Rights During the Lien Due Process"

TIGTA Report: Additional Actions Are Needed to Protect Taxpayers' Rights During the Lien Due Process (Reference Number: 2009-30-089)
 

CCH (cch.taxgroup.com) reports:

  Transportation industry experts and government officials told lawmakers on the House Ways and Means Subcommittees of Oversight and Select Revenue Measures on June 25 that the nation's transportation needs are dire and that the Highway Trust Fund is severely underfunded. Since Americans have curbed their driving during the recession, the trust fund is not collecting enough in fuel taxes to fund the current highway program, said Transportation Department (DOT) Undersecretary for Policy Roy Kienitz.

  DOT estimates that the trust fund will run out of money in August 2009. "We estimate that an additional $5-7 billion will be needed in the Highway Account to manage the cash flow and pay all of our bills on time through the end of the current fiscal year," Kienitz said. "And we estimate that another $8-10 billion will be needed to cover the anticipated cash shortfall in fiscal year 2010."

  DOT Secretary Ray LaHood has proposed that lawmakers pass an 18-month highway reauthorization bill that lasts through March 2011, and that the Highway Trust Fund immediately be replenished with $20 billion in cash. However, 43 Democratic members of the House Transportation and Infrastructure Committee sent a letter to President Obama on June 24 arguing against the 18-month extension. Lawmakers prefer a massive surface transportation authorization bill that is now under consideration by the Transportation panel. Ways and Means members are considering whether to increase the current gasoline tax of 18.4 cents per gallon to add money to the trust fund.

  Rep. Charles Boustany Jr., R-La., said simply transferring money from the Treasury general fund to the Highway Trust Fund is not an acceptable long-term solution to the nation's transportation infrastructure needs. Moreover, Congress is likely to be on its August recess when the trust fund runs dry, so lawmakers really only have until the end of July to find a funding solution that the president will sign.

  By Stephen K. Cooper, CCH News Staff

Ways and Means Press Release: Chairmen Neal and Lewis on Highway and Transit Investment Needs
 

CCH (cch.taxgroup.com) reports:

  House lawmakers are expected to consider the American Clean Energy and Security Bill of 2009 (HR 2454) on June 26, just before leaving town for the week-long Independence Day recess. The measure includes a provision to modify the earned income tax credit by increasing the phaseout rate from $5,280 to $13,590, effective after December 31, 2011. The bill also includes a provision to allow the Treasury to transfer money from the general fund to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund to offset any changes in benefit costs and tax revenues caused by the energy measure.

  President Obama, in a Rose Garden statement, said the House energy bill would spur the development of low-carbon energy sources, such as wind, solar, geothermal, clean coal and nuclear power. He said the legislation would create incentives that will "spark a clean energy transformation" of the U.S. economy. Obama maintained that the energy bill will create millions of new jobs and urged lawmakers to support the measure.

  House Speaker Nancy Pelosi, D-Calif., in remarks to reporters, said the energy bill would reduce America's dependence on foreign oil, reduce pollution and create jobs. Former Vice President Gore had been scheduled to come to Capitol Hill to meet with undecided Democrats, but a last-minute agreement between House Agriculture Chairman Collin C. Peterson, D-Minn., and House Energy and Commerce Chairman Henry Waxman, D-Calif., reportedly persuaded more members to support the legislation.

  GOP lawmakers are not expected to support the measure, which they characterized as a national energy tax that will exacerbate the economic recession. House Republican Study Committee Chairman Tom Price, R-Ga., cited a study by the National Black Chamber of Commerce that predicts that, by the year 2030, the Waxman-Markey legislation will lower U.S. gross domestic product by roughly $350 billion; result in 2.5 million fewer jobs; and take an average of $390 per year out of American worker's pockets.

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

Tax-Related Portions of the American Clean Energy and Security Bill, as Reported by the House Rules Committee, HR 2454
 

Tax Analysts report: