Tax News

CCH (cch.taxgroup.com) reports:

  The Alabama Department of Revenue has revised a chart that reflects the latest information concerning the counties and municipalities that have notified the department regarding their participation in the sales tax holiday being held from August 7 through August 9, 2009.

  The updated chart reflects the participation by Cherokee on an annual basis, while Guntersville and Red Bay are only participating in 2009. Also, Jefferson County and Needham are not participating in the tax holiday. Jefferson County had previously announced that it was participating in the tax holiday on a "limited" basis each year.

  The list of participating localities will be updated by the department as it receives information. The chart listing localities that have notified the department regarding their participation in the tax holiday can be found on the department's Web site at
http://www.ador.state.al.us/salestax/STholiday.htm.

Sales Tax Holiday Notice, Alabama Department of Revenue, July 9, 2009
 

CCH (cch.taxgroup.com) reports:

  The U.S. District Court for the Southern District of Florida has denied Swiss banking giant UBS AG's motion to compel the government to provide certain discovery materials in efforts to unearth the names of U.S. taxpayers hiding assets abroad in the firm's accounts. The bank had argued that some of the information requested by the IRS in a "John Doe" summons (TAXDAY, 2009/02/20, M.1) was already within the IRS's possession. As a result, it sought discovery, cross-examination and potential in camera inspection of documents to determine what information was within the IRS's possession. The bank had also argued that there were alternative means of obtaining the information sought by the IRS.

  Instead, the court, in a July 7 order denying the motion to compel disclosure, gave the government a green light to continue with enforcing its John Doe summons, seeking the identities of U.S. customers of UBS for which the firm did not have Forms W-9, Request for Taxpayer Identification of Certification, or accurately and timely filed Forms 1099 reporting to the IRS amounts paid. The court held that enforcement of this summons should not be denied strictly because the IRS was in possession of some of the records sought. The IRS had pointed to controlling law in the Eleventh Circuit ( Davis,
81-1 USTC ¶9193), where appeal of the decision on the motion would lie.

  The court also ruled that reliance on voluntary disclosure and other filings by U.S. taxpayers did not provide an alternative means for the government to obtain the same information. The government had argued that, simply because some U.S. taxpayers had voluntarily disclosed their identities and the existence of a UBS bank account to the IRS, not all of the documents sought by the government's summons were in the IRS's possession. The taxpayer's filing of a TD F 90-22.1, Report of Foreign Bank and Financial Accounts, or disclosure of a secret bank account did not require the taxpayer to produce any of the UBS source documents requested.

  CCH Comment. Also on July 7, the Swiss government filed an amicus curiae brief against the government's efforts to enforce the IRS summons, asserting that UBS would be unable to comply with the summons without violating Swiss law. It stated, "The government of Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons and expressly prohibiting UBS from attempting to comply."

  CCH Comment. In response, House Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., released a written statement, saying, "The statement from the Swiss government today does not look like a move toward greater openness to me. And, I don't find their willingness to provide information on tax evaders in the future particularly reassuring.... In my opinion, the current policy of protecting these tax evaders is simply unacceptable."

  By Torie Cole, CCH News Staff

UBS AG, DC Fla., 2009-2 USTC ¶50,478

Ways and Means Select Revenue Measures Subcommittee Press Release: Neal Critical of Swiss Bank Action

Other References:

 
Code Sec. 7602

  CCH Reference - 2009FED ¶42,827.562

  CCH Reference - 2009FED ¶42,827.570

  Tax Research Consultant

  CCH Reference - TRC IRS: 21,364

CCH (cch.taxgroup.com) reports:

  A trust's margin-purchased securities constituted debt-financed property that produced income subject to the unrelated business income tax (UBIT). Reg. §1-514(b)-1(a), which interprets the UBIT to tax both periodic income and capital gains, is consistent with the definition of debt-financed property in
Code Sec. 514(b)(1). Furthermore, Code Sec. 512(b)(4) treats all income derived from debt-financed property as taxable and deriving from an unrelated trade or business. Imposition of the UBIT is also not limited to situations in which an exempt organization's business activities provide it with an unfair competitive advantage over taxable entities. Finally, the "inherent purpose" and "substantially related" exceptions to the UBIT were inapplicable. Although the use of debt-financed property was substantially related to the organization's purpose, selling that property to fund the organization was subject to the UBIT. Moreover, the trust did not establish that it could not support the university by any investment strategy other than the use of margin-purchased securities.

The Henry E. and Nancy Horton Bartels Trust for the Benefit of Cornell University, FedCl, 2009-2 USTC ¶50,475

Other References:

 
Code Sec. 512

  CCH Reference - 2009FED ¶22,837.30

 
Code Sec. 514

  CCH Reference - 2009FED ¶22,859.30

  Tax Research Consultant

  CCH Reference - TRC EXEMPT: 15,050
CCH Reference - TRC EXEMPT: 18,100
CCH Reference - TRC EXEMPT: 18,102.05
CCH Reference - TRC EXEMPT: 18,104
 

CCH (cch.taxgroup.com) reports:

  The Senate Appropriations Committee on July 9 approved a proposed IRS budget of $12.15 billion for fiscal year (FY) 2010. The IRS budget is included in the proposed FY 2010 Treasury budget of $13.5 billion, which includes $152 million for the Treasury Inspector General for Tax Administration. The House Appropriations Committee approved the IRS's budget on July 7 (TAXDAY, 2009/07/09, C.1). Congress is expected to act on the budget before its August recess.

  The Senate Appropriations Subcommittee on Financial Services and General Government, chaired by Sen. Richard Durbin, D-Ill., approved the IRS and Treasury budgets on July 8. The proposed IRS budget exceeds the Service's FY 2009 budget by $550 million (5 percent) and increases the Obama administration's proposal by $26 million, the subcommittee reported in a July 8 news release. The House Appropriations bill provides $2.27 billion for taxpayer services; the Senate Appropriations Committee did not identify the funding for this category.

  The bill fully funds the administration's request of $7.1 billion for IRS enforcement, the subcommittee indicated. This represents a $387-million increase above the FY 2009 level. The budget provides $274 million for business systems modernization (BSM), approximately $20 million above the administration proposal, a spokesman for Durbin said. The IRS Oversight Board has highlighted BSM as an IRS weakness and recommended funding of $400 million (TAXDAY, 2009/07/08, I.3).

  The Senate bill also provides a 2.9-percent cost-of-living increase for federal employees. The administration has proposed a 2-percent increase. "The bill includes several provisions constraining the outsourcing of federal jobs to contractors," the subcommittee reported.

  By Brant Goldwyn, CCH News Staff

CCH (cch.taxgroup.com) reports:

  Senate Finance Committee Chairman Max Baucus, D-Mont., is scrambling to find ways to offset some $320 billion from the estimated $1-trillion price tag of health care overhaul legislation after both Republican and Democrats, including Senate Majority Leader Harry Reid, D-Nev., publicly and privately expressed their reservations over plans to tax employer-provided health benefits. Reid is further pressuring Baucus to hold firm on inclusion of a public health insurance option, despite Finance Committee Republicans' resistance to such a proposal.

  The brewing dissent left Baucus holding open the possibility of raising revenue outside of the health care system and backing down on an earlier pledge not to seek revenue in other areas. Back on the table is discussion of taxing sugared drinks, placing additional taxes on alcohol and tobacco, and levying a surtax on the wealthy, roughly aimed at those earning more than $250,000 a year. Most lawmakers, however, downplayed those options, saying the committee would continue to look for ways to cut costs through savings in other areas.

  "The most difficult issue is paying for it," said Sen. Charles E. Schumer, D-N.Y., adding that "there are lots of options out there to fill the hole." He does not believe the tax on health care benefits is completely without merit, but acknowledged that there will be resistance among Democrats if it cuts too deeply into middle-class pocketbooks. One option is to cap the tax at benefits valued over $25,000, which would raise $90 billion over 10 years. The question now facing lawmakers is what constitutes the middle class, and Schumer was not convinced that the proposed cap would pass that test. "If that still includes the middle class, there will be a lot of concern," he warned.

  Democratic leaders are apparently losing patience with the snail's pace of Baucus' negotiations with Republicans and continued setbacks. Reid wants to complete action on the bill before the month-long summer recess, which is slated to begin for the Senate on August 7. In an effort to move the process forward, he met on July 8 with four Republican heavyweights on the Finance Committee: ranking member Charles E. Grassley, R-Iowa, Olympia J. Snowe, R-Maine, Orrin G. Hatch, R-Utah, and Michael B. Enzi, R-Wyo. "We need to work with Republicans," said Reid the following day. "It's better that we do a bipartisan bill...we are committed to doing this."

  In an effort to deflect charges that he was strong-arming Baucus and cutting Republicans out of the picture, Reid added that he was not going to "draw lines," but was standing by his timetable of completing a health care reform bill by the start of the August recess. As to the difficulties the finance panel is reportedly having over raising revenue to pay for the bill, Reid asserted that lawmakers involved in assembling the bill had already worked out 85-to-90 percent of the needed revenue, mostly through new cost-cutting measures. "We will be able to pay for this in a bipartisan manner," he said.

  Reaching final agreement in a timely manner, however, still seems elusive. Following a meeting with a small group of bipartisan Finance Committee members, Baucus acknowledged that lawmakers are resistant to raising revenue through taxation. "It's difficult, but there is no discouragement," he said. "We are moving the ball forward. We are discussing a lot of revenue options."

  However, Baucus refused to offer a time frame for completion of his mark, saying only that meetings and discussions were ongoing. Other members were also unwilling to offer assurances that the job would be done anytime soon. "We are going through a laundry list and trying to see what is possible," said Snowe.

  By Jeff Carlson, CCH News Staff

Tax Analysts report: