Tax News

CCH (cch.taxgroup.com) reports:

  A U.S. district court dismissed for lack of standing consolidated putative class actions that claimed that several wireless phone companies and other entities involved with the sale of wireless telecommunication services had engaged in the unfair and deceptive practice of charging consumers California sales tax on the full retail value of wireless phones that were advertised as "free" or at substantial discounts, in violation of California's Unfair Competition Law and False Advertising Law. The court found that the plaintiffs that brought the claims did not suffer injury as the direct result of the phone companies' advertisements as the evidence presented indicated that :

  -- one of the plaintiffs based her claim on an in-store purchase that she said she entered into as a result of an Internet advertisement that specifically limited the offer to on-line sales and stated that sales tax charges were extra;

  -- one of the plaintiffs stated that he probably would have purchased the phones even if he had known that sales taxes would be charged on basis of the phones' full retail value; and

  -- one of the plaintiffs had a history of trading in her phone every two years when her contract expired, and therefore could not show that her purchase of the phone was the result of the phone companies' advertisement.

  
Laster v. T-Mobile USA, Inc. , United States District Court, Southern District of California, No. 05cv1167, December 14, 2009

CCH (cch.taxgroup.com) reports:

  The IRS has finalized regulations that provide guidance to corporations that are component members of a controlled group of corporations regarding the apportionment of tax benefit items and the amount and type of information that they are required to submit with their returns. The final regulations also provide guidance to consolidated groups filing life-nonlife federal income tax returns. The regulations are effective on the date of publication in the Federal Register.

Code Sec. 1502 Regulations

  Under the final Code Sec. 1502 regulations, if a consolidated group is treated collectively as being one component member of a controlled group or if each member of a consolidated group is treated as being a separate member of a controlled group, then Code Sec. 1561 applies to determine the portion of the consolidated accumulated earnings credit to be allocated to the group or each member. The final regulations under Code Sec. 1502 also set forth certain filing requirements for consolidated income tax returns for a life-nonlife consolidated group by the common parent. These regulations generally apply to consolidated federal income tax returns due (without extensions) on or after December 21, 2009. However, a consolidated group may apply the regulations to any consolidated federal income tax return filed on or after December 21, 2009.

Code Sec. 1561 Regulations

  The final regulations under Code Sec. 1561 provide: (1) general rules regarding certain tax benefits available to the component members of a controlled group of corporations, (2) special rules for allocating reductions of certain Code Sec. 1561(a) tax benefit items, and (3) filing requirements related to the allocation of
Code Sec. 1561(a) tax items. These regulations generally apply to any tax year beginning on or after December 21, 2009. However, taxpayers may apply the regulations to any federal income tax return filed on or after December 21, 2009. For tax years beginning before December 21, 2009, the former temporary regulations apply.

  The general rules in the final regulations provide that the amount of tax items set forth in Code Sec. 1561(a) that are available to any of the component members of a controlled group shall be determined as if the component members were a single corporation. Certain other tax items, such as the Code Sec. 11(b)(1) additional tax and the Code Sec. 55(d)(3) phaseout of the alternative minimum tax (AMT) exemption amount will be determined by combining the positive taxable income or positive alternative minimum taxable income (AMTI) of the component members of such group and then allocating the amount of such items among the members.

  The special rules in the final regulations provide detailed guidance on the calculation of the Code Sec. 11(b)(1) additional tax and the apportionment of the additional tax under the proportionate method or the FIFO method. Detailed guidance is also provided on the calculation of the reduction set forth in Code Sec. 55(d)(3) to the amount exempted from the AMT. Any reduction to the exemption amount shall be apportioned to the component members of a controlled group in the same manner that the amount of the exemption provided in
Code Sec. 55(d)(2) to the AMT was allocated under Code Sec. 1561(a). Additional rules for short tax years and examples are also provided.

  The filing requirements in the Code Sec. 1561 final regulations generally provide that, for each tax year that a corporation is a component member of the same controlled group of corporation on December 31st (its testing date), such corporation and all other component members of such group each must file Schedule O or any successor form with the federal income tax return for that component member's tax year that includes a particular testing date. Each such corporation must file the form with its return whether or not there is an apportionment plan in effect or any change is made to the group's apportionment of its Code Sec. 1561(a) tax benefit items from the previous year. An exception applies if any of the component members of a controlled group are also members of a consolidated group. Additional rules provide guidance where no apportionment plan is in effect and guidance on how component members of a controlled group adopt an apportionment plan or an amendment of an apportionment plan.

T.D. 9476, 2010FED ¶47,006

Other References:

 
Code Sec. 924

  CCH Reference - 2009FED ¶28,144

 
Code Sec. 1502

  CCH Reference - 2009FED ¶33,190

  CCH Reference - 2009FED ¶33,193

 
Code Sec. 1561

  CCH Reference - 2009FED ¶33,341

  CCH Reference - 2009FED ¶33,342

  CCH Reference - 2009FED ¶33,344

  CCH Reference - 2009FED ¶33,345

  Tax Research Consultant

  CCH Reference - TRC CCORP: 42,050

  CCH Reference - TRC CCORP: 42,052.05

  CCH Reference - TRC CCORP: 42,052.10

  CCH Reference - TRC CCORP: 42,054.05

  CCH Reference - TRC CCORP: 42,054.10

  CCH Reference - TRC CCORP: 42,058

  CCH Reference - TRC CCORP: 42,204

  CCH Reference - TRC CCORP: 42,206

  CCH Reference - TRC CCORP: 45,054.10

  CCH Reference - TRC CCORP: 45,502

  CCH Reference - TRC CONSOL: 7,106

CCH (cch.taxgroup.com) reports:

  Unemployed workers will be eligible for an additional two months of COBRA premium assistance for their health insurance coverage, under the Department of Defense Appropriations Act, 2010 (HR 3326; P.L. 111-118) signed by President Obama on December 19. The COBRA benefits were scheduled to expire after December 31, but House lawmakers voted 395-to-34 to extend the benefits as part of the defense spending measure on December 16. Senate lawmakers cleared the measure for the president's signature on December 19 by a vote of 88 to 10.

  Extended eligibility for the 65-percent COBRA premium subsidy was originally enacted as part of the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) (P.L. 111-5). Under the new law, employees must have faced involuntary termination between September 1, 2008, and February 28, 2010, in order to qualify for the COBRA benefits. House lawmakers had also attempted to extend the COBRA benefits for six months in the Jobs for Main Street Bill of 2010, which is part of the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2010 (HR 2847) on December 16, but Senate lawmakers declined to consider that bill while the chamber was in the midst of debate on health care reform legislation.

  CCH Comment. Information on the COBRA extension is available in the CCH Tax Briefing on the House-approved Tax Extenders Bill of 2009 (HR 4213). The CCH Tax Briefing update on the Tax Extenders Bill of 2009 can be found at
http://CCHGroup.com/Legislation/TaxExtendersActof2009.pdf.

  By Stephen K. Cooper, CCH News Staff

Commerce, Justice, Science, and Related Agencies Appropriations Bill, 2010, HR 2847
 

CCH (cch.taxgroup.com) reports:

  The Senate on December 22 approved, by a 60-to-39 margin, a motion to end debate on the Patient Protection and Affordable Care Bill (HR 3590), setting the stage for a final vote early on December 24. Leaders decided to move up the vote in order to recess earlier for the holidays.

  With the Senate progressing toward passage of their $871-billion health care reform package and breaking for the rest of the year, Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, issued a joint statement declaring their intent to address expiring tax provisions early in 2010. "Although the House and Senate were unable to come to agreement on a package to extend several expiring tax provisions before Congress adjourned, these measures must be addressed as soon as possible," stated the lawmakers. "In an effort to provide a seamless extension of these provisions with the fewest disruptions and administrative problems, we will take up legislation as quickly as possible in the New Year."

  In addition, the senior lawmakers sent a letter to Senate Majority Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., informing them of their plan to immediately pursue the extension of the popular tax credits. "We write to inform you that early in the next year, we intend to address the extension of various tax provisions expiring on or before December 31, 2009. We intend to extend the provisions without a gap in coverage, just as the House did on December 9th of this year."

  Baucus later told reporters that fixing the estate tax, which Congress also failed to address in 2009, was critical, and that he would like to see it taken up as part of tax reform legislation expected sometime in 2010. Democratic leaders in both chambers had initially planned to attach a short-term extension at 2009 levels to the Department of Defense appropriations bill, but they abandoned that plan when it became apparent that they did not have the necessary 60 votes in the Senate required for passage. President Obama signed the measure into law on December 19 (P.L. 111-118).

Obama to Remain in Town

  President Obama on December 22 said he would not leave Washington, D.C., until the Senate finished its work on HR 3590. Noting the sacrifices that are being made to get the measure done, the president offered to remain in town to provide "any encouragement and last-minute help, if necessary." The White House did not elaborate on what kind of eleventh hour help the president had in mind.

  White House Press Secretary Robert Gibbs, at a press briefing on December 22, hailed the Senate legislation, noting it would make fundamental changes in health care coverage by reforming the insurance system and offering access to care to 30 million people who are now uninsured. He stressed that the proposal is fiscally responsible and reduces the federal deficit.

  Gibbs depicted as "delusional" criticism that the White House pressured the Congressional Budget Office (CBO) into underestimating the cost of the legislation. According to CBO estimates, the health care reform bill would lower the deficit by $132 billion over the first 10 years and up to $1.3 trillion in the second decade.

  Speaking confidently about the prospects of the bill's passage, Gibbs several times told reporters that enactment of health care reform legislation is no longer a question of "if," but "when." When asked whether the president would like the bill to be signed into law before his State of the Union address in January, Gibbs said he did not know the date of the address, but then added that the president wants to sign the bill as soon as Congress sends it to him.

  By Jeff Carlson and Paula Cruickshank, CCH News Staff

SFC Press Release: Baucus-Grassley Statement Regarding Extending Expiring Tax Provisions

CBO Letter to Sen. Reid Regarding Financial Impact of Senate Amendment 2786

Correction to CBO Letter to Sen. Reid Regarding Financial Impact of Senate Amendment 2786

Floor Speech of Sen. Chuck Grassley: Tax Cuts v. Tax Increases