Tax Law

    • 22 Jan 2013

    January 31 IRA Deadline Nears for 2012 Qualified Charitable Contributions

    The Pension Protection Act of 2006 added IRC Section 408(d)(8) , providing that owners of an IRA who were 70 ½ or older may donate an otherwise taxable distribution from an IRA to an eligible charitable organization. Each year, the IRA owner could exclude from gross income up to $100,000 of these qualified charitable donations. This provision was set to expire at the end of 2011. However, the American Taxpayer...
    • 7 Jan 2013

    States Target Inter-Company Cash Management Structure

    A common aspect of consolidated groups of companies is a centralized cash management function. While such a structure is a common item in corporate America, states are increasingly challenging any perceived tax benefits of such structures. Two states, Indiana and North Carolina, have taken recent actions to utilized discretionary authority with respect to alternative apportionment to force taxpayers with such structures...
    • 28 Dec 2012

    Guidance Needed on 1-Year Holdout Rule Elective Deferrals

    When an employee is rehired by a company, the granting or vesting of benefits under certain retirement plans may be delayed until the employee has been re-employed for a period of at least one year. The applicability of this "Holdout Rule" is becoming more common as the economy makes a recovery and former employees are targeted for rehiring. Under the Holdout Rule, if an employee's term of service is...
    • 17 Dec 2012

    Deadline to Amend Plans for Funding-Based Benefit Limitations Extended

    The IRS has extended the deadline originally provided in Notice 2011-96 to amend a defined benefit plan to satisfy the requirements of IRC Section 436 and has provided relief from the requirements of IRC Section 411(d)(6) . In general, Notice 2012-70 extends the deadline to adopt an interim amendment for IRC Section 436 to the latest of: the last day of the first plan year that begins on or after January 1, 2013;...
    • 20 Nov 2012

    Utilizing the New Market Tax Credit

    The Internal Revenue Code contains various tax incentives for taxpayers willing to invest in low-income communities. IRC Section 45D provides once such incentive for taxpayers who make qualified equity investments in a selected community development entity ("CDE"). The new market credit entitles the taxpayer who holds a qualified equity investment (an investment in a qualified CDE) to a 5-percent credit for...
    • 16 Nov 2012

    IRC § 409A and Changes in Control: Must Option Cash-Outs Be “All-or-Nothing”?

    IRC Section 409A was enacted post-Enron to stem the abuse of corporate executives who accelerated payments under their deferred compensation plans before the company went bankrupt. IRC Section 409A sets strict guidelines for private companies issuing stock options and other forms of non-qualified deferred compensation. Noncompliance results in immediate taxation of benefits and steep penalties. IRC Section 409A also addresses...
    • 15 Nov 2012

    Tennessee DOR’s Nettlesome Guidance on Related Party Intangible Expenses

    It has been some time since a state tax department has promulgated any guidance on the issue of related party interest and intangible expenses. With fiscal cliffs and other budget problems, states have turned their focus to other means of cracking down on perceived corporate tax abuse. The Tennessee Department of Revenue ("Department") has recently promulgated new guidance addressing the treatment of related...
    • 22 Oct 2012

    Family Limited Partnership Still Useful in Estate Planning

    Over the years family limited partnerships (FLPs) have experienced their fair share of scrutiny by the IRS and the courts. However, as evidenced by the Fifth Circuit's opinion in Keller v. United States , 2012 US App LEXIS 20119 , FLPs can be a very useful tool for protecting assets and reducing the amount of federal estate tax. In Keller , the Court upheld a $115 million estate tax refund upon determining that bonds...
    • 3 Oct 2012

    D.C. Struggles to Implement Combined Reporting Continue

    On September 19, 2012, the District of Columbia Council approved an emergency bill amending the District's combined reporting provisions applicable for the 2011 tax year. Should the bill be approved by the Mayor, the emergency legislation will be in effect for no more than 90 days, after which temporary legislation is expected to become effective until the Council enacts permanent legislation to address the issues...
    • 2 Oct 2012

    MAP-21 Act Enacted to Stabilize Pension Funding

    On July 6, 2012, President Obama signed The Moving Ahead for Progress in the 21 st Century Act ("MAP-21"), P.L. 112-141 , into law. One of the most significant aspects of the act involves changes to the funding requirements for single employer defined benefit plans. These changes are expected to reduce minimum funding obligations for employers, and this development is shaking up the pension planning community...
    • 18 Sep 2012

    TE/GE Fast-track Settlement Program Becomes Permanent

    In December 2008, the IRS announced a pilot program for entities with issues under examination by the Tax Exempt and Governmental Entities Division (TE/GE), providing such entities an opportunity to use Fast Track Settlement (FTS) to expedite case resolution. Announcement 2008-105 . FTS allows entities to work together with TE/GE and the Office of Appeals to resolve outstanding issues while the case is still in TE/GE...
    • 18 Sep 2012

    U.K., U.S. Agree on Compliance, Information Reporting, Withholding Provisions (FATCA)

    According to Treasury Department News Release TDNR TG-1711 (September 14, 2012), the United Kingdom and the United States have entered into an agreement to implement the information reporting and withholding tax provisions known as the Foreign Account Tax Compliance Act (FATCA) (enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010 (P.L. 111-147) . The agreement defines numerous terms, enumerates...
    • 6 Sep 2012

    Illinois Inconsistently Applies Amnesty Double Interest Penalty

    The Illinois Appellate Court recently found that a taxpayer who failed to pay a tax liability under the state's 2003 amnesty was subject to a 200% interest penalty, even though the taxpayer did not know it owed the tax until after a federal audit. [ Marriott Int'l, Inc. v. Hamer, 2012 Ill. App. LEXIS 684 (Ill. App. Ct. 1st Dist. 2012) .] A different division of the same appellate court reached the opposite...
    • 9 Dec 2011

    IRS Adds Flexibility to Trusts

    As estate planning practitioners are well aware, IRC Section 2042 includes in the gross estate: insurance proceeds on the life of the decedent receivable by the executor; and insurance proceeds on the life of fhe decedent received by others, where the decedent possessed any incident of ownership over the policy Because life insurance trusts and other types of trusts whose assets include life insurance are...
    • 9 Dec 2011

    Do CA and NY Get the ALEC–Laffer Message? Is the Message Believeable?

    In the first full week in December, "wealthy" New Yorkers and Californians found themselves to be a step closer to seeing their income tax liabilities (state, not federal) rise. This trend appears to be counterintuitive to anyone that respects the merits of theory advanced by the American Legislative Exchange Council. The 2011 ALEC-Laffer survey ranks California 47 th and 46 th in its state economic outlook...
    • 6 Dec 2011

    IRC § 162(m)(6): A Game Changer in the Healthcare Insurance Arena

    Update on "Obamacare" and the Individual Health Insurance Mandates Judicial challenges to the Patient Protection and Affordable Health Care Act of 2010, P.L. 111-148 have been plentiful pretty much since its enactment and I discussed this briefly in a commentary earlier this year. See "Group Health Plan Reporting Requirements: Delays, Rumors, Cadillacs Under Attack," Lexis Tax Staff Commentary ...
    • 5 Dec 2011

    Tennessee DOR Clarifies Conformity With IRC § 108

    The Tennessee Department of Revenue ("the Department") recently published Letter Ruling #11-44 ("the Ruling"), which addressed many issues related to potential income or gain that may arise from the discharge of indebtedness ("COD"), as well as the ancillary effects on other tax attributes, such as net operating losses. Generally, the Internal Revenue Code ("IRC") includes in...
    • 25 Nov 2011

    IRS Issues Final "Hot Stock" Regulations

    The IRS recently issued final regulations regarding the distribution of stock of a controlled corporation acquired in a transaction under IRC Section 355(a)(3)(B) . TD 9548, 76 FR 65110 . The final regulations adopt the substantive rules of the temporary regulations without change. TD 9435, 73 FR 75946 . The temporary regulations were set to expire on December 15, 2011. Under certain circumstances, a corporation may...
    • 19 Nov 2011

    IRS Issues Proposed Rules Clarifying Alternate Valuation Rules

    The executor can elect to value property in the decedent's estate at the alternate valuation date in an effort to reduce the estate's tax liability. IRC § 2032 . The alternate valuation election is provided solely to mitigate the hardship on an estate due to declining market values. A voluntary postmortem act of a surviving spouse, trustee or executor that results in a reduction of value is not to be considered...
    • 4 Nov 2011

    Transportation Bill Defeat: Congressional Business as Usual

    Following a familiar pattern, and to the surprise of no one, the Long-Term Surface Transportation Extension Act of 2011 (S. 1786) was defeated this week by six votes. Only Joe Manchin (D-WV) and Olympia Snowe (R-ME) broke from party ranks in this instance, yet another display of partisan posturing and finger-pointing. Because this result (nothing getting done) is the "new normal," the common man's interest...
    • 4 Nov 2011

    Does the Wireless Tax Fairness Act Pass the "Fairness" Test?

    Would the Wireless Tax Fairness Act equalize tax burdens or would it instead enrich special industries? Over the past few years, the use of wireless telecommunications has erupted, with a virtual panoply of services available to consumers from a number of providers. With the advent of any new method of delivering goods or services, however, there comes both opportunity and challenges when reviewing the state and local...
    • 1 Nov 2011

    Taxation of Employer-Provided Cell Phones: Who Benefits?

    When I was practicing law in the 1990s, the large private law firm I worked for decided to follow the lead of the technology-based Silicon Valley firms and issue what was likely the first generation of Blackberry smartphones to associates and partners. It seemed like such a perk initially: A firm-provided cell phone with Internet functionality! The firm would pay the service and contract fees! We could check work e-mail...
    • 31 Oct 2011

    State Tax Court: Conditions Apply to Forced Combined Reporting

    In an unpublished opinion, the Indiana Tax Court held that the Department of State Revenue (the "Department") is required to exhaust all statutory methods for determining an equitable allocation or apportionment of a taxpayer's income before forcing combination.1 Background AE Outfitters Retail Co. ("Retailer") sells retail apparel through several stores located in the United States, including...
    • 24 Oct 2011

    Investment Promotion Act Would Extend Domestic Tax Treatment to Puerto Rico Corporations

    Congress is considering a bill that would allow certain corporations incorporated in Puerto Rico to elect to be treated as a domestic corporation for U.S. income tax purposes. H.R. 3020, the Puerto Rico Investment Promotion Act of 2011 , was introduced by Resident Commissioner Pedro R. Pierluisi, a Democrat and the sole representative for Puerto Rico in Congress. (see http://pierluisi.house.gov/english/home.html ). ...
    • 17 Oct 2011

    Filing an IRC Section 254 Protective Claim for Refund

    Generally, a deduction cannot be taken for a claim against the estate while it remains a potential or unmatured claim. Claims that later mature can be deducted on a timely claim for a refund. A protective claim for a refund may be filed pursuant to Treasury Regulation Section 20.2053-1(d)(5) to preserve the estate's right to claim a refund for claims that mature after the statute of limitations period for filing a...