News and miscellaneous legal topics – 2008
I re-started limited posts after stopping posting new items on June 10, 2007. 11/2/08
The IRS announced an expedited lien discharge / subordination process 12/17/08
for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235 for address information. IR-2008-141, Dec. 16, 2008
A new page on IRS.gov features video and audio presentations on a variety of topics for small businesses and self-employed taxpayers. 12/10/08
An online audio podcast for first-time Schedule C filers includes basic tips to help new business owners avoid potential problems.
IRS post-Appeals mediation and arbitration 12/8/08
The IRS on December 1, 2008 announced in IR-2008-135, Dec. 1, 2008 that beginning Dec. 1, 2008, for a two-year test period, Appeals will offer post-Appeals mediation and arbitration for Offer in Compromise (OIC) and Trust Fund Recovery Penalty (TFRP) cases for taxpayers whose appeals are considered at the Appeals office in Atlanta, Ga.; Chicago, Ill.; Cincinnati, Ohio; Houston, Texas; Indianapolis, Ind.; Louisville, Ky.; Phoenix, Ariz.; and San Francisco, Calif. Either the taxpayer or Appeals may request nonbinding mediation, and the taxpayer may decline Appeals’ request for mediation. Appeals will evaluate a taxpayer’s request for mediation based on the criteria detailed in Revenue Procedure 2002-44 and Announcement 2008-111. A request for binding arbitration must be made jointly by the taxpayer and Appeals. The mediation and arbitration procedures do not create any additional authority for settlement by Appeals. An OIC submitted during Collection Due Process (CDP) as an alternative to a Collection action is not eligible for these alternative dispute resolution strategies during the test period.
The Post-Appeals mediation process is available for both legal and factual issues. The mediator’s role is to facilitate settlement negotiations so the parties can reach their own agreement. The mediator does not have settlement authority over any issue.
The Arbitration procedure is available for factual issues only, is binding on both parties, and neither party may appeal the decision of the arbitrator or contest the decision in any judicial proceeding. The arbitrator’s role is to hear both sides of a disputed issue and then render a decision on the specific factual issue being arbitrated. The arbitrator does not have the authority to decide that the offer in compromise itself must be accepted or that a person is/is not liable for the TFRP under § 6672.
Complete procedures for initiating a request for post-Appeals mediation or arbitration are in Announcement 2008-111.
The Missouri Department of Revenue issued ("Private Letter Ruling") LR 5205 regarding drop shipments from suppliers both within Missouri or from outside Missouri to Missouri customers to an out-of-state vendor registered to collect Missouri vendor's use tax. A drop shipment is a sale in which the seller accepts an order from a customer, places the order with a third party supplier such as a manufacturer or wholesaler, and directs the third party supplier to deliver the item directly to the customer. Title passes from the supplier to the seller and then to the customer on delivery. Seller and then title to the item passes from the seller to the customer. R.S.Mo. § 144.054.2 provides an exemption for state sales and use taxes and local use taxes, but not local sales tax. Seller's customer can claim the exemption for state sales tax, but not for the local sales tax. Seller should register with the Department to collect and remit the local sales tax on its sales that are drop shipped. Seller should collect the local sales tax for sales that are drop shipped by Missouri suppliers at the rate in effect at a Missouri supplier. Seller should collect the local sales tax in effect at the customer's location for sales that are drop shipped by non-Missouri suppliers. 12/5/08
IR-2008-131, Rev. Proc 2008-72 IRS issues standard vehicle mileage rates effective 1/1/09 11/26/08
- Business – 55¢ per mile
- Charitable contribution – 14¢ per mile
- Medical and moving – 24¢ per mile
A national bank which solicited business and received significant gross receipts from interest and fees paid by Indiana customers had a substantial nexus with the state subjecting it to the Indiana financial institutions tax (FIT). The bank argued physical presence was required under the Commerce Clause, but, the Indiana Tax Court found that the U.S. Supreme Court has not extended the physical presence requirement beyond the realm of sales and use taxes. MBNA America Bank v. Indiana Department of State Revenue, Indiana Tax Court, No. 49T10-0506-TA-53, October 20, 2008.
Reduction in state franchise tax generally deductible under Code Sec. 164 10/30/08
The IRS Chief Counsel recently determined the reduction in state franchise tax attributable to the New York Qualified Empire Zone Enterprise (QEZE) Credit for real property taxes is generally deductible under Code Sec. 164, but receipt of a payment attributable to the refundable credit would be included in federal gross income and treated as a recover of property tax. CCA 200842002
Disregarded entity to pay employment taxes under its EIN 10/30/08
Previously, a disregarded entity could pay employment taxes under either its name and own EIN, or the disregarded entity owner's name and EIN. Now, disregarded entities paying wages on or after January 1, 2009 must have their own tax ID number. The new regulations only apply to employment taxes, and a disregarded entity continues to be disregarded for other Federal tax purposes. Reg. § 301.7701-2(c)(2)(iv). See 72 Fed. Reg. 45,891 (Aug. 16, 2007).
Owner of a disregarded single-member LLC fights personal liability for the entity's unpaid employment tax liabilities 10/30/08
The Ninth Circuit Court of Appeals declined to review arguments not raised before the District Court by the owner of a disregarded single-member LLC fighting personal liability for the entity's unpaid employment tax liabilities that the IRS's check-the-box regs are unreasonable and invalid. The court also found that the recent decision by the IRS to adopt new regulations regarding the taxation of sole member LLCs does not change the result here. Kandi, 06-35209, 2008-2 USTC ¶50,599 (9th Cir, September 25, 2008).