News and miscellaneous legal topics – 2009
Out-of-state vendor nexus requiring the vendor to collect Missouri use tax 5/17/09
Letter Ruling No. LR5552, Missouri Department of Revenue, dated April 7, 2009, held that an out-of-state vendor ("Vendor") selling tangible personal property to customers and resellers in Missouri established nexus requiring the vendor to collect Missouri use tax, and to obtain signed resale certificates from its resellers and not collect use tax on such sales. The ruling cites 12 CSR 10-114.100(2)(B) defining "physical presence", including having agents, representatives, independent contractors, brokers or others that reside in, or regularly and systematically enter into, this state on behalf of the vendor.
Vendor operates a website selling products via mail-order, the Internet, telephone, or facsimile, and it delivers products to purchasers by mail or common carrier from out-of-state. Vendor does not send direct mailers to the public or advertise through television, radio, newspaper, or other media. Vendor's customers can purchase the products for their own use, or to sell to others ("resellers"). Resellers receive discounts and other incentives, and there are no sales quotas and there are no restrictions on sales, recruiting activities, or territories. Vendor employs five regional managers based out-of-state who held three one-day seminars to educate on products, but not on sales techniques, and they made approximately nine visits to top sellers in Missouri in 2007. Vendor holds two conventions each year in different cities in the United States, but held no conventions in Missouri in the past ten years. Customers may return products to Seller within 90 days of purchase for a full refund, replacement, or credit, but may not return products to resellers.
Information on the tax consequences of canceled debt is available in an audio podcast and as a written transcript 4/28/09
Nina E. Olson, National Taxpayer Advocate, 2/26/09 statement 4/28/09
before the Subcommittee On Oversight Committee On Ways And Means U.S. House Of Representatives Hearing on tax compliance challenges facing financially struggling taxpayers
The IRS has a comprehensive new insolvency worksheet 4/27/09
included in the newly revised edition of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals), to determine whether and to what extent taxpayers are insolvent, and thus whether and to what extent their canceled debts are excluded from gross income.
Web site for mortgage relief eligibility 4/25/09
FICO, fka the Fair Isaac Corporation, has a new free web service to help determine eligibility for mortgage relief under the Making Home Affordable program (MHA) by the US Treasury to help up to 7-9MM US homeowners stay in their homes, and free credit counseling http://www.mortgagereliefonline.com/
Where Do Our Federal Tax Dollars Go ? (Center on budget and Policy Priorities). 4/14/09
Where Do Our State Tax Dollars Go ? (Center on budget and Policy Priorities). 4/14/09
Request for innocent pose relief
A divided Tax Court invalidated Reg. §1.6015-5(b)(1), which required taxpayers seeking innocent spouse relief under I.R.C. § 6015(f) to request such relief within two years of the IRS's commencement of the collection action. Lantz v. Commissioner, 132 T.C. No. 8 (Apr. 7, 2009).
To be eligible for relief under section 6015(b) or (c), the statute explicitly provides that the requesting spouse must elect relief not later than the date that is 2 years after the date the Secretary has begun collection activities with respect to the individual making the election. Sec. 6015(b)(1)(E) and (c)(3)(B). However, there is no such limitation in section 6015(f). " 'It is generally presumed that Congress acts intentionally and purposely' when it 'includes particular language in one section of a statute but omits it in another' ".
The United States Department of Labor issued a FAQ for Employers. The DOL FAQ indicatesthe employer makes the initial subsidy eligibility determination based on the enrollment forms and the Request for Treatment as an Assistance Eligible Individual form provided with the new model notices. Employees make application for the subsidy and employers either approve or deny the request. Appeals of denial of the assistance will be made directly to the DOL (not to the employers) through a form and review process being developed by the DOL. The DOL has 15 days from receipt of an appeal to make a determination. Because of the short time period for response, employers should expect to have to give the basis for their rejection of the subsidy request to the DOL almost immediately.
for employers and plan sponsors to use in administering this new COBRA subsidy, available at the DOL web site http://www.dol.gov/ebsa/ COBRAmodelnotice.html. Each notice must be specifically tailored and customized to provide accurate information for the issuing employer or plan.
under the Children's Health Insurance Program Re-authorization Act of 2009 (CHIPRA), including certain notice and reporting requirements. It requires group health plans to allow individuals who were not covered by the plan to enroll when the become eligible for Medicaid/CHIP or when they become eligible for a premium subsidy from Medicaid/CHIP, regardless of whether such an event occurs during the plan's open enrollment period.
The IRS posted podcasts and text scripts on a variety of topics to its web site. 3/25/09
FDIC Consumer News Winter 2008/2009 3/14/09
Special Edition: Managing Your Money in Good Times and Bad. Spending Less; Good Ways to Get Started Cutting Back; Saving More; 7 Tips on Putting Your Dollars to Work … for You !; Make the Most of Your FDIC Guarantee; Protecting Against Fraud; When the Economy Cools Down, Financial Scams Heat Up; Borrowing Wisely; You Can Get a Good Loan: Ways to Make It Happen; Your Credit Score: It Pays to Aim High; When Payments Are a Problem; President Announces Aid for Millions of Distressed Mortgage Borrowers; When a Debt Collector Calls; Take Charge of Your Credit Cards; How to Learn More; Sources of Help and Information on Managing Your Money.
The IRS released the 2009 allowable living expense standards on March 1, 2009. 3/9/09
IRS decides not to renew private debt collection contracts. 3/7/09
The IRS determined that the work is best done by IRS employees who have more flexibility handling cases, which is particularly important with many taxpayers currently facing economic hardship. Shulman also noted that the IRS anticipates hiring over 1,000 new collection personnel in FY 2009. These new employees would give the IRS the flexibility to make assignments based on the areas of greatest need rather than filtering which cases can be worked using contractor resources. IR-2009-19, March 5, 2009.
The IRS posted information to its web site on the COBRA Health Insurance Continuation Premium Subsidy established by The American Recovery and Reinvestment Act of 2009, and FAQs for employers.
House hearings on IRS assistance 2/26/09
The House Ways and Means Oversight Subcommittee will hold a hearing on assistance available from the Internal Revenue Service (IRS) to taxpayers experiencing economic difficulties. The National Taxpayer Advocate, an independent official appointed to address taxpayer problems (established in Public Law 104-168), indicates that more action may be warranted to address the problems of struggling taxpayers. Person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms.
Just released is an October 1, 2008 Tax Exempt and Government Entities Division of the Internal Revenue Service Memorandum.
Recently, personnel in our examination and determination letter functions have identified a retirement plan design that appears to operate primarily to transact in employer stock, resulting in the avoidance of taxes otherwise applicable to distributions from tax-deferred accumulation accounts.
Although we do not believe that the form of all of these transactions may be challenged as non-compliant per se, issues such as those described within this memorandum should be developed on a case-by-case basis.
A version of a qualified plan is being marketed as a means for prospective business owners to access accumulated tax-deferred retirement funds, without paying applicable distribution taxes, in order to cover new business start-up costs. For purposes of this memorandum, these arrangements are known as Rollovers as Business Startups, or ROBS. While ROBS would otherwise serve legitimate tax and business planning needs, they are questionable in that they may serve solely to enable one individual's exchange of tax-deferred assets for currently available funds, by using a qualified plan and its investment in employer stock as a medium. This may avoid distribution taxes otherwise assessable on this exchange. Although a variety of business activity has been examined, an attribute common to this design is the assignment of newly created enterprise stock into a qualified plan as consideration for these transferred funds, the valuation of which may be Questionable.
Legislation toeliminate valuation discounts introduced 1/30/09
HR 436 was proposed on January 9, 2009. It would eliminate valuation discounts related to the transfer of entity interests (other than entities that are actively traded) to the extent the entity holds nonbusiness assets, treating it as a transfer of the appropriate portion of the entity’s underlying nonbusiness assets. Real estate is treated as a nonbusiness asset, unless used in the active conduct of a real estate trade or business in which the transferor materially participates and with respect to which the transferor meets the requirements of Code Sec. 469(c)(7)(B)(ii) (i.e., the taxpayer materially participates in more than 750 hours of services in real property trades or business during the taxable year). The proposed effective date is the date of enactment. Some (but not all) tax benefits of family limited partnership and defective trust may be curtailed and expedited consummation of these transactions may be beneficial.
State courts hold economic exploitation of state's economy without physical presence meets "nexus" requirement. 1/21/09
- The New York Supreme Court, New York County, dismissed an Amazon.com lawsuit challenging a New York statutory provision requiring out-of-state Internet retailers with no physical presence in New York to collect New York sales and use taxes.
- The Massachusetts Supreme Judicial Court upheld the imposition of the financial institution excise tax in Capital One Bank v. Commissioner of Revenue. The bank had no physical presence in Massachusetts, and conducted consumer lending activities and significant credit card business with hundreds of thousands of Massachusetts residents, generating millions of dollars in income for the banks. The banks addressed customer complaints with the assistance of the Massachusetts Attorney General's office and used the Massachusetts court system to recover payment for delinquent accounts.
- The Massachusetts Supreme Judicial Court upheld the imposition of the corporate excise tax in Geoffrey, Inc. v. Commissioner of Revenue. A Delaware intangible holding company received royalty income from affiliated entities for the licensing of its trademarks, which the entities used for Massachusetts retail business activities.
IRS Commissioner Doug Shulman announced 5 specific steps to offer leniency to taxpayers owing taxes: 1/8/09
- giving tax assistors greater authority to suspend collection actions in certain circumstances, such as a recent job loss, relying solely on Social Security benefits, or is facing steep, unexpected medical costs (tax debt is not extinguished, but collection activity will be deferred);
- taxpayers missing an installment agreement payment will not automatically have their agreement suspended (no guidance provided if more than 1 payment could be skipped);
- broadened eligibility for its "offer in compromise" program for some taxpayers who appear to have enough equity in their home to cover their tax debt. The IRS established a special unit to review specific cases;
- Taxpayers missing a payment under an existing offer-in-compromise agreement can work with IRS officials to avoid defaulting on that agreement; and
- The IRS will speed levy releases for taxpayers in financial hardship