Tax News

CCH (cch.taxgroup.com) reports:

  The New Jersey Division of Taxation has issued a notice and new gross (personal) income tax withholding tables to reflect the new income tax rates for all taxpayers with gross income over $400,000. The new withholding rates take effect October 1, 2009; however the withholding rates have been adjusted to take into account that the new tax rates apply for the entire 2009 tax year. All employers are required to withhold at the rate of 12% (the rate at which the withholding rate is capped) from salaries, wages, and other remuneration paid in excess of $400,000 during the remainder of 2009. This new rate takes effect immediately and must be instituted by all employers no later than October 1, 2009. On January 1, 2010, the withholding rate will revert back to the prior rate.

  Two sets of revised withholding tables for the percentage method of withholding are provided. One table is for October 1, 2009, through December 31, 2009, and the second table is for January 1, 2010, and thereafter.

  Subscribers can view the notice and new withholding tables. The percentage method computation rates in Tables A through E are for weekly, biweekly, semimonthly, monthly, daily or miscellaneous, and annual pay periods. Taxpayers who have pay frequencies other than those provided should divide the amount of tax to be withheld under the Annual Pay Period column for each rate table (but not the withholding percentage rate) by the number of pay periods in the year.

Notice , New Jersey Division of Taxation, July 15, 2009
 

CCH (cch.taxgroup.com) reports:

  Proposed regulations have been issued regarding the election for claiming the reduced research credit under Code Sec. 280C(c)(3). The regulations are proposed to apply to tax years ending on or after the date of publication of the Treasury decision adopting these rules as final regulation in the Federal Register.

Procedure

  The proposed regulations would change the procedure for making the election for the reduced research credit under Code Sec. 280C(c)(3)(C). Instead of requiring the election to be made "on an original return," the proposed regulations specify that the election is made on Form 6765, "Credit for Increasing Research Activities," which should be attached to the return.

Controlled Groups

  The proposed regulations also address comments received by the IRS and Treasury Department regarding members of controlled groups. The proposal provides that each member of a controlled group may make the election under Code Sec. 280C(c)(3) after the group credit is computed and allocated under Reg. §§1.41-6(b)(1) and 1.41-6(c) and
Temporary Reg. §§1.41-6T(b)(1) and
1.41-6T(c)(2).

Comments & Hearing

  Written or electronic comments must be received by October 14, 2009. Outlines of topics to be discussed at the public hearing, scheduled for November 4, 2009, at 10:00 a.m. EST, must be received by October 16, 2009.

Proposed Regulations, NPRM REG-130200-08, 2009FED ¶49,423

Other References:

 
Code Sec. 280C

  CCH Reference - 2009FED ¶14,953C

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 54,150

CCH (cch.taxgroup.com) reports:

  The IRS has updated the list of transactions that it has determined to be "listed transactions" for purposes of Reg. §1.6011-4(b)(2) and Code Secs. 6111, 6112, 6662A, 6707, 6707A, and 6708. The notice updates the list of listed transactions in Notice 2004-67, 2004-2 CB 600, adding transactions identified as listed transactions in notices and other guidance released after September 24, 2004, and deleting those that the IRS has previously announced will no longer be considered listed transactions.

  The IRS has determined that transactions that are the same as or substantially similar to transactions described in the notice are tax-avoidance transactions and are, therefore, listed transactions. Consequently, taxpayers may need to disclose their participation in these transactions under Reg. §1.6011-4, and material advisors may need to disclose them under Reg. §301.6111-3.

  Taxpayers who fail to disclose may be subject to penalties under
Code Secs. 6662A and 6707A. Material advisors who fail to disclose may be subject to penalties under Code Sec. 6707. In addition, material advisors must maintain lists of advisees and other information with respect to these listed transactions pursuant to Reg. §301.6112-1. Failure to furnish a required list may subject a material advisor to penalties under Code Sec. 6708. Notice 2004-67, 2004-2 CB 600, is supplemented and superseded.

Notice 2009-59, 2009FED ¶46,429

Other References:

 
Code Sec. 6011

  CCH Reference - 2009FED ¶35,141.78

 
Code Sec. 6111

  CCH Reference - 2009FED ¶37,002.156

 
Code Sec. 6112

  CCH Reference - 2009FED ¶37,022.156

 
Code Sec. 6662A

  CCH Reference - 2009FED ¶39,654E.01

 
Code Sec. 6707

  CCH Reference - 2009FED ¶40,090.20

 
Code Sec. 6707A

  CCH Reference - 2009FED ¶40,093.10

 
Code Sec. 6708

  CCH Reference - 2009FED ¶40,100.10

  Tax Research Consultant

  CCH Reference - TRC FILEBUS: 3052.25

 

CCH (cch.taxgroup.com) reports:

  The IRS has provided a list of transactions that have been identified by the Service as "transactions of interest." The IRS will consider transactions similar to any of the transactions on the list to be transactions of interest for purposes of Code Secs. 6111, 6112, 6662A, 6707, 6707A and 6708, and Reg. §1.6011-4(b)(6).

  One transaction of interest (initially identified in
Notice 2007-72, 2007-2 CB 544) involves taxpayers who purchase a remainder interest or similar successor member interest directly or indirectly in real property and then transfer such interest to a tax-exempt organization, claiming a charitable contribution deduction significantly higher than the amount paid for the interest. The Treasury and IRS are concerned that taxpayers may be utilizing the contribution of such successor member interests to generate an excessive deduction.

  Another transaction of interest (Notice 2007-73, 2007-2 CB 545) involves certain transactions in which trust grantors attempt to avoid recognizing gain or claiming a tax loss greater than the actual economic loss by purportedly terminating ("toggling off") and then reestablishing ("toggling on") the grantor status of the trust. These terminations and reestablishments usually occur within a brief period of time.

  A third transaction (Notice 2008-99, I.R.B. 2008-47, 1194) involves the creation of a charitable remainder trust, contribution of appreciated assets to the trust by the taxpayer and subsequent sale of the assets by the trust and reinvestment of the proceeds of the sale in different assets such as money market funds or marketable securities. The taxpayer and the charity then sell or dispose of their respective interests in the trust to an unrelated third party for an amount equal to the value of the trust's assets. The trust then terminates, with its assets being distributed to the third party. The taxpayer typically takes the position that this set of transactions results in little or no taxable gain. The IRS believes the transaction improperly manipulates the uniform basis rules to avoid tax on gain from the sale of the appreciated assets in this transaction.

  The last transaction (Notice 2009-7, I.R.B. 2009-3, 312) involves a U.S. taxpayer who owns a controlled foreign corporation (CFC) that holds stock of a lower tier CFC through a domestic partnership that takes a position that subpart F income of a lower tier CFC does not result in income inclusion. The U.S. taxpayer takes the position that the subpart F income of a lower tier CFC was already included in the domestic partnership's income, which is not subject to U.S. tax and, thus, should not be included in the income of the U.S. taxpayer. Without the interposition of the domestic partnership, the subpart F income of the lower tier CFC would be taxable to the U.S. taxpayer. The IRS is concerned that taxpayers are taking the position that the structures described result in no income inclusion under Code Sec. 951. Therefore, the IRS has identified these structures and other substantially similar transactions as transactions of interest that are contrary to the purpose and intent of the provisions of subpart F.

  Generally, persons entering into these transactions on or after November 2, 2006, must disclose their participation in the transaction. Taxpayers who fail to disclose may be subject to civil penalties. Material advisors who make tax statements with respect to transactions of interest may have disclosure and list maintenance obligations.

Notice 2009-55, 2009FED ¶46,428

Other References:

 
Code Sec. 664

  CCH Reference - 2009FED ¶24,468.12

 
Code Sec. 951

  CCH Reference - 2009FED ¶28,474.021

 
Code Sec. 1001

  CCH Reference - 2009FED ¶29,225.1011

 
Code Sec. 1014

  CCH Reference - 2009FED ¶29,380.73

 
Code Sec. 1015

  CCH Reference - 2009FED ¶29,394.14

 
Code Sec. 6011

  CCH Reference - 2009FED ¶35,141.06

  CCH Reference - 2009FED ¶35,141.78

 
Code Sec. 6111

  CCH Reference - 2009FED ¶37,002.157

 
Code Sec. 6112

  CCH Reference - 2009FED ¶37,022.157

  Tax Research Consultant

  CCH Reference - TRC FILEBUS: 9,450.10
CCH Reference - TRC FILEBUS: 9,454.05
 

CCH (cch.taxgroup.com) reports:

  The Senate Health, Education, Labor and Pensions (HELP) Committee on July 15 passed a $615-billion health care reform bill, leaving the heavy lifting, on how to pay for it, up to the Senate Finance Committee. Talks between Finance Committee Chairman Max Baucus, D-Mont., and key members continue, but they have yet to forge agreement on the most acceptable way to raise revenue and fill an estimated $320-billion gap that remains after all reforms are in place and the final cost nears $1 trillion.

  Following early morning talks between Democratic members of the Finance Committee, Sen. Charles E. Schumer, D-N.Y., reasserted that most of the bill would be paid for through cutting costs and not through raising revenue. Schumer said members had spent much of the meeting discussing the need to bring insurance companies into the equation and have them commit to savings in the range of $75 billion to $100 billion, which would resemble similar agreements recently reached between the White House and hospitals and pharmaceutical companies.

  The HELP Committee's Affordable Health Choices Bill, approved 13-10 along strict partisan lines, provides a public insurance option and a pay-or-play mandate for most employers that would require them to provide health insurance for their employees or face a stiff penalty. The sweeping reform reportedly would cover 97 percent of the currently estimated 46-million uninsured and place greater emphasis on preventative care and wellness programs. The marathon markup stretched over 13 working days and saw Democrats approve over 160 Republican amendments.

  When the Senate Finance Committee produces a mark, lawmakers will still face another difficult hurdle, melding the HELP bill with the Finance Committee's final product. That task may prove more difficult than crafting a bipartisan Finance Committee bill, according to several lawmakers, and pressure is mounting. Senate Majority Leader Harry Reid, D-Nev., said he wants to take up a health care reform bill on the Senate floor by the week beginning July 27.

White House Response

  President Obama put Congress on notice that he wants the House and Senate to pass health care reform bills before the August recess. "We are going to be continually talking about this for the next two to three weeks until we've got a bill out of the Senate and we've got a bill out of the House," Obama asserted.

  Following passage of the Senate HELP Committee's health care bill, Obama praised the action taken so far by House and Senate Democrats and said both proposals "will offer stability and security to Americans who have coverage today, and affordable options for Americans who don't." House leaders unveiled their reform plan on July 14 (TAXDAY, 2009/07/15, C.1).

  The president, in remarks in the Rose Garden with members of the American Nurses Association, maintained that the status quo on health care is unsustainable and threatens the stability of families, businesses and government. He praised the House and Senate measures for including a health insurance exchange and a public health insurance option.

  In his statements about the House and Senate health care proposals, Obama has not commented on the tax provisions. White House Press Secretary Robert Gibbs, at a press briefing on July 15, noted that the president has refrained from commenting on any tax-cut proposals beyond his own because he wants to watch the legislative process as it unfolds. The president has proposed limiting certain deductions taken by upper income taxpayers but the proposal has not been well-received in Congress.

  By Jeff Carlson and Paula Cruickshank, CCH News Staff

HELP Committee Press Release: In Historic Vote, HELP Committee Approves the Affordable Health Choices Act

SFC Press Release: SFC Republican Tax Counsels Q&A on House Surtax

White House Press Release: Statement by the President on the Health Care Reform Legislation Passed Today by the Senate HELP Committee
 

Tax Analysts report: