1101, 2018

Tax Reform Takes Its Final Form

By |January 11th, 2018|Resource Library|0 Comments

Over the last several months Tax Reform has been one of the stories dominating the national headlines. Speculation on the impact and the final form of this legislation has been growing ever since the first version of the bill was introduce in the House of Representatives on November 2. Now, two months and five votes after the bill was first introduced, the completed legislation has been approved by Congress and signed by the President.

Although the ultimate impacts of this legislation won’t be known for several more years, tax professionals can now at the very least begin to familiarize themselves with the intricacies of the new law. Although the majority of the final provisions should be familiar to those of us who have been following the legislation through both the House and the Senate, several items from each have been dropped or amended by the Conference Committee.

Corporations and other businesses will […]

801, 2018

Coca-Cola Granted Summary Judgement on Foreign Tax Credits Issue

By |January 8th, 2018|Resource Library|0 Comments

On Dec. 14, 2015, Coca-Cola filed a petition in the U.S. Tax Court fighting a proposed $9.4 billion transfer pricing adjustment by the IRS. Among the many items being challenged by the Service are royalty payments made to Coca-Cola from a licensee in Mexico resulting in foreign tax credits (FTC). Now, two years to the day of Coca-Cola’s filing of their original petition, the Tax Court has granted Coca-Cola’s motion for Summary Judgement on the FTC issue. Although the overall case will continue, the Court ruled that Coca-Cola is entitled to the FTCs generated by the royalty payments made by the Mexico Licensee.

Background

In 2015, the IRS challenged Coca-Cola’s method of calculating its U.S. taxable income from several of its foreign affiliates for the 2007 through 2009 tax years. In addition to asserting that Coca-Cola undercharged seven foreign affiliates for intellectual property, the IRS also challenged income allocations from a Canadian […]

612, 2017

Tax Reform Inches Closer to Reality as Senate Votes Yes on Bill

By |December 6th, 2017|Resource Library|0 Comments

On Saturday, Dec. 2, the Senate version of the Tax Cuts and Jobs Act was passed by a 51 to 49 vote. The vote, taking place at 2 am, was another major step down the road of tax reform. The Senate plan, which moved from the Senate Finance Committee to the Senate Floor on the same day that the House of Representatives voted in favor of their version of the bill, proposes to make significant changes to the tax code. However, because the two versions of the bill differ they will need to be reconciled through a “conference” committee before being signed by the President.

Individual Income Tax Changes

Looking first to individual income tax, there are several key differences between the Senate and House plans. Where the House plan proposes to reduce the number of taxable brackets from seven to four, the Senate plan maintains seven brackets but reduces the taxable […]

412, 2017

IRS Releases New OVDP Documents As a Result of FOIA Request

By |December 4th, 2017|Resource Library|0 Comments

On Nov. 21, three new documents related to Offshore Voluntary Disclosure Programs (OVDP) were released by the IRS. The three documents, all chief council memorandums, were released in response to a Freedom of Information Act (FOIA) request made by Tax Analyst.

Traditionally, the OVDP is a program with streamlined procedures, as well as other options for taxpayers failing to report gross income from foreign financial assets or failing to file the necessary Foreign Bank Account Reporting (FBAR) documentation. The program was developed as a way to bring taxpayers into compliance while limiting exposure to some potential penalties. These memorandums provide a glimpse into some of the Service’s legal analysis for addressing taxpayer issues under the OVDP.

Two of the three memorandums address issues arising under the Miscellaneous Offshore Penalty (MOP). The MOP is a penalty on taxpayers residing in the U.S. who hold foreign financial assets that have given rise to tax […]

2811, 2017

The House of Representatives Takes a Major Step In the Direction of Tax Reform

By |November 28th, 2017|Resource Library|0 Comments

It might sound like an exaggeration, but Nov. 16, 2017, was a day to remember for tax professionals. The day began with the House of Representatives voting on their tax reform plan, and it ended with the Senate tax reform plan moving out from committee and to the Senate Floor. Although there is still potentially a long road ahead, this is a major step in the direction of significant tax reform.

Passing in the House by a vote of 227 to 205, the Tax Cuts and Jobs Act proposes sweeping changes to how both individuals and businesses would be taxed. Some of the more significant changes to individuals involve a reduction in the number of tax brackets and a lower maximum taxable rate on certain pass-through income. Currently individuals are subject to seven tax brackets, ranging from 10 percent of federal adjusted gross income (AGI) to 39.6 percent of federal AGI. […]

1011, 2017

IRS Notice 2016-66 Survives District Court Challenge

By |November 10th, 2017|Resource Library|0 Comments

A challenge to IRS Notice 2016-66 died last week. In CIC Services LLC et al. v. IRS et al.; No. 3:17-cv-00110, the Plaintiffs petitioned the Court for a declaratory judgement that Notice 2016-66 was invalid. On Friday November 3, Judge McDonough dismissed the Plaintiffs’ challenge by granting the Government’s motion to dismiss.

By way of background, Notice 2016-66 classifies many IRC § 831(b) captive insurance arrangements as “transactions of interest.” In general, the Notice requires captive insurance companies, their insureds, and owners of the insureds, to file Forms 8886 if the captive has made loans or other tax-free transfers of capital to a shareholder or if insured losses and claim expenses amount to less than 70 percent of premiums received by the captive over a 5-year period. Material advisors are also subject to their own disclosure requirements and must file Forms 8918.

On March 27, the Plaintiffs filed a petition seeking […]

1610, 2017

What Does Regulation Reform Mean for Taxpayers?

By |October 16th, 2017|Resource Library|0 Comments

On Oct. 2, 2017 the U.S. Department of the Treasury released the “Second Report to the President on Identifying and Reducing Tax Regulatory Burdens.” This report articulates the Treasury and Service’s position on eight proposed, temporary, and final regulations. Overall, two of the proposed regulations will be withdrawn entirely, while the remaining six temporary and final regulations will be revoked in part or substantially revised. But, what does this mean for taxpayers?

First and foremost, taxpayers engaging in the activities covered by these eight regulations will need to know what is exactly changing in each. These regulations span across a wide spectrum of activities, from estate taxes to outside attorneys assisting the Service in audits, and many things in between. It is important for taxpayers to be familiar with the regulations mentioned in this report so that they can be prepared for the upcoming changes.

It is also important to note […]

710, 2017

Are You Taking Advantage of Your State’s Tax Credits?

By |October 7th, 2017|Resource Library|0 Comments

All across the country businesses are engaging in activities that qualify them for state tax credits and incentives, but they may not even know it. Businesses should be mindful of the tax benefits related to their ongoing operations. There are incentives available to businesses that are growing, engaged in specific industries, located in targeted areas, and even expanding or relocating.

Take for example the Indiana Economic Development for a Growing Economy (EDGE) tax credit. Businesses that increase their employment and make investments in Indiana may be eligible to claim the credit if they meet the specific incentive criteria. Many states provide similar incentives for increasing employment.

Industry specific tax credits are meant to promote the growth of a particular industry in a state. A perfect example is a film tax credit. Although nearly two-thirds of the states provide such a credit, the two best known film tax credit programs can be found […]

2709, 2017

IRS grants relief following Irma and Harvey

By |September 27th, 2017|Resource Library|0 Comments

The people affected by Hurricanes Harvey and Irma are currently working through the long arduous process of rebuilding. Hundreds of thousands of individuals and businesses were touched in some way by these storms. Much like Hurricanes Katrina and Sandy before them, the devastation left in the wake of Harvey and Irma will be felt for years to come. Although the tax consequences of these disasters may be the furthest thing from the minds of those affected, the Internal Revenue Service provides businesses and individuals in federally declared disaster areas several avenues of relief.

Taxpayers suffering a loss of property are said to suffer a casualty loss. Casualty losses are governed by I.R.C. § 165, with losses of property in disaster areas specifically mentioned in I.R.C. § 165(i). This code section, along with several publications, set out the rules in which the IRS attempts to help taxpayers deal with their loss. […]

1209, 2017

Time has Arrived to Review Partnership Agreements

By |September 12th, 2017|Resource Library|0 Comments

Effective January 1, 2018, new rules apply for partnerships that modify the way the IRS conducts partnership examinations.

The change in law may require amendments to provisions in current partnership agreements to address the new tax procedures and preferences of the partners. Practitioners should review existing partnership agreements in light of these changes.

There are a number of decision points partners and practitioners should consider. For instance, the “Tax Matters Partner” under TEFRA has been eliminated and replaced by a new “Partnership Representative” whose rights and responsibilities differ significantly. The Partnership Representative does not have to be a partner and will bind the partnership, and its partners, in all dealings with the IRS. Additionally, the concept of “notice partner” has been eliminated, and a partner may no longer bring individual disputes or claims for partnership items. New and revised partnership agreements should be drafted carefully to provide the rights and responsibilities of […]

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