Tax Alerts

New ITIN rules for 2012 tax filings may impose new burdens
The new IRS procedures for the Individual Taxpayer Identification Number (ITIN) application process impact taxpayers applying for an ITIN to use in preparing 2012 tax returns. (5/16/2013)

Marketplace Fairness Act clears Senate, heads to House – middle market retailers watch and wait
On May 6, 2013, the Senate voted in favor of the Marketplace Fairness Act, which is intended to achieve sales tax collection and remittance parity between remote sellers and local retailers but may inadvertently increase disparity between large and middle market businesses. (5/9/2013)

IRS releases Colleges and Universities Compliance Project final report
The IRS launched the Colleges and Universities Compliance Project in 2008 with the distribution of detailed questionnaires to 400 randomly selected colleges and universities and subsequently selected certain questionnaire respondents for examination. Issued after more than 90 percent of these examinations were complete, the final project report provides additional analysis of the questionnaire responses and focuses on the examination results. (5/6/2013)

IRS issues updated directive to exam agents on tangible asset and repair regulations
The latest directive suspends exam activity for tax years beginning before Jan. 1, 2014, for positions relating to repair expenditures and correlative dispositions of tangible depreciable assets taken on original returns. (4/2/2013)

Taxation of income on state tax incentives – When is an incentive includible in income?
IRS holds loan proceeds includible in income when no longer subject to repayment to the state. (3/25/2013)

Be alert for foreign retirement trusts: Subject to stiff information
reporting penalties
U.S. persons who have an interest in, or make a contribution to, a foreign trust face stiff penalties if they fail to file IRS Forms 3520 or 3520-A. (3/22/2013)

IRS reverses course: OREO holding costs may be deducted under right circumstances
For banks holding foreclosed real estate, the IRS has issued a very favorable Chief Counsel Memorandum in which it reverses its previous position regarding the tax treatment of “other real estate owned” (OREO) property as inventory. (3/12/2013)

IRS extends deadline to April 29, 2013 for WOTC employers to submit Form 8850
On March 8, 2013, the IRS issued Notice 2013-14 to provide transitional relief to employers claiming the section 51 Work Opportunity Tax Credit (WOTC), many provisions of which were retroactively extended for two years (through Dec. 31, 2013). (3/11/2013)

McGladrey files comments on new 3.8 percent investment income tax
Beginning in 2013, the tax code imposes a new 3.8 percent tax on the net investment income of millions of Americans. McGladrey has filed comments with the IRS on the new law, suggesting several modifications to the regulations the IRS has proposed. (3/4/2013)

Accrued interest vs. PIK interest: Important distinctions exist for cash- and accrual-method taxpayers
Understanding whether a debt instrument includes qualified stated interest versus paid-in-kind interest is critical in determining the deductibility and taxability of accrued interest not yet paid in cash or property. (2/28/2013)

IRS issues capitalization guidance affecting taxpayers engaged in certain farming activities
The IRS recently released two pieces of guidance that will affect taxpayers with certain farming activities. (2/27/2013)

Ohio DOT requires PEGs to file combined or consolidated CAT returns at the fund level
The Ohio Department of Taxation interprets the combined and consolidated filing rules to require private equity groups to file commercial activities tax (CAT) returns on a consolidated or combined basis at the fund level, potentially resulting in substantial compliance burdens and limitations on the $1 million annual exclusion. (2/25/2013)

IRS directive favorable to pharmaceutical taxpayers claiming
research tax credits
A recent IRS directive instructs revenue agents not to challenge pharmaceutical taxpayers’ qualified research expenditures arising during either Stage 1 or Stage 2 of a drug’s development, which should substantially reduce the IRS examination burden for pharmaceutical companies. (2/25/2013)

Oklahoma Court of Appeals rules corporate income tax capital gains deduction unconstitutional
On Jan. 17, 2013, the Oklahoma Court of Appeals issued an unpublished decision, holding that the corporate income tax capital gains deduction was facially discriminatory and unconstitutional under the Commerce Clause of the U.S. Constitution. (2/22/2013)

President Obama’s State of the Union speech
The President remains committed to reducing the deficit in a balanced way as part of an overall plan for jobs, shared growth and tax and entitlement reform. (2/13/2013)

Instructions for taxpayers to retroactively claim 2012 fuel tax credits
The American Taxpayer Relief Act of 2012 retroactively extended several fuel tax credits that originally expired on Dec. 31, 2011. (2/13/2013)

Farmers and fishermen may qualify for estimated tax penalty relief
The IRS is providing estimated tax penalty relief to farmers and fishermen as a result of the last minute passage of the American Taxpayer Relief Act of 2012. (2/13/2013)

Tennessee DOR rules due process clause bars nexus for intangible holding company
The Tennessee Department of Revenue (DOR) ruled that an intangible holding company did not have nexus under the due process clause where its only contact with the state was through the licensing of patents to an affiliate that utilized the patents in manufacturing goods outside of Tennessee and subsequently sold those goods to customers in Tennessee. (2/13/2013)

Instructions for taxpayers to make EFTPS deposit payments for the medical device excise tax
The government's Electronic Federal and Tax Payment System was not updated to reflect the medical device excise tax (MDET) as a subcategory in time for the first payment due on Jan. 29, 2013. This article provides instructions on how to properly remit MDET payments in the meantime. (2/12/2013)

IRS announces $150 million of tax credits available for qualifying advanced energy projects
The IRS recently issued a notice to release the results of Phase 1 and to establish Phase 2 of the qualifying advanced energy property project program. The notice provides that an additional $150 million of tax credits are now available to qualifying taxpayers. (2/11/2013)

Cook County Illinois passes use tax ordinance providing rate incentive to purchase non-titled property within the county
On Nov. 9, 2012, Illinois’ Cook County passed a use tax ordinance that provides a 0.25 percent rate differential between sales tax due on non-titled personal property purchased within the county and use tax due on like property purchased outside of the county for use within the county. (2/11/2013)

Demutualization and stock basis
Recent decisions hold against “open transaction” but disagreements remain. (2/11/2013)

IRS extends filing and payment deadlines for hardest hit victims of Hurricane Sandy
On Feb. 1, 2013, the Internal Revenue Service announced additional relief for victims of Hurricane Sandy located in specified counties in New Jersey and New York. This additional relief extends the filing and payment deadlines that occurred starting in late October to April 1, 2013. (2/6/2013)

Do additions to the corporate reorganization “no-rule” policy represent a glimpse of things to come?
Since the updated IRS list of “no-rule” areas included three section 355 transactions on which the IRS had previously issued taxpayer-friendly rulings, taxpayers may no longer obtain a private letter ruling on these transactions and must take into consideration the impact of the updated policy on financial reporting for and any IRS examinations of these transactions. (2/4/2013)

Maryland Court of Appeals decision creates refund opportunity for resident owners of S corporations
On Jan. 28, 2013, the Maryland Court of Appeals affirmed the Maryland Circuit Court’s decision that a Maryland resident owner of an S corporation may claim a credit against both Maryland state and county personal income taxes for income taxes paid to other states. Under Maryland law, there is a three-year look-back period for taxpayers to file amended tax returns to request a refund. (2/1/2013)

For UNICAP “on-site” sales exception, retail purchaser must be physically present at sales facility
A recent IRS decision provides resellers with guidance regarding the types of transactions that constitute “on-site” sales for UNICAP purposes. (1/29/2013)

Supreme Court considers foreign tax credit issue
When does a tax imposed by a foreign jurisdiction have the “predominant characteristic” of a U.S. income tax? (1/28/2013)

Fiscal cliff deal extends and reinstates beneficial key cost recovery provisions
Several cost recovery opportunities now exist for real estate and construction companies. (1/25/2013)

IRS releases final FATCA regulations
On Jan. 17, 2013, the IRS released final regulations under the Foreign Account Tax Compliance Act that was enacted in 2010, providing significant relief to taxpayers. (1/25/2013)

IRS likely to issue additional guidance on the application of the consolidated tax return “next-day rule”
The IRS has signaled their intent to publish guidance limiting taxpayer flexibility in the application of the consolidated return “next-day rule,” which may be contrary to positions many taxpayers have taken in tax years where a member has joined or departed the group. (1/25/2013)

Consider changes in tax rules for tangible assets and repairs
Manufacturers may be capitalizing more costs than the rules require, take time now to plan for optimal compliance. (1/24/2013)

IRS guidance regarding the medical device excise tax – Part 3: Exemptions for export sales and sales for use in further manufacture
This third article in a three-part series addresses medical device tax exemptions for export sales and sales for use in further manufacture and also addresses registration and filing requirements. (1/22/2013)

IRS guidance regarding the medical device excise tax–Part 2: Notice 2012-77 provides interim rules
An IRS notice provides interim guidance regarding several issues not addressed in the final medical device tax regulations, including constructive sale price, donated taxable medical devices, the licensing of taxable medical devices, and the tax treatment of medical convenience kits.
(1/22/2012)

New rules regarding income tax rate and shelter Maquiladoras
Effective Jan. 1, 2013, Mexico’s new tax reform package includes two changes of relevance for U.S. companies doing business in Mexico. (1/21/2013)

Public charities receive a break under the new tax law
Public charities could see an influx of contributions for the month of January if their respective donor bases are aware of the changes enacted as part of the American Taxpayer Relief Act of 2012. (1/18/2013)

Fiscal cliff deal extends research tax credit through 2013
The American Taxpayer Relief Act of 2012 extends the section 41 research tax credit for two years, modifies the rules for acquisition and disposition-related computations, and clarifies allocations among controlled group members. (1/15/2013)

Changes in Mexico’s Federal Labor Law
Important changes in Mexico’s Federal Labor Law restrict, and in some cases eliminate, the benefits attained from having an employment services company. (1/15/2013)

The American Taxpayer Relief Act of 2012 – International provisions
Several international tax provisions that expired after 2011 were extended as part of the American Taxpayer Relief Act of 2012. (1/8/2013)

Fiscal cliff deal extends and reinstates beneficial key accounting methods provisions
The American Taxpayer Relief Act of 2012 contains several accounting methods opportunities for businesses. (1/8/2013)

The American Taxpayer Relief Act of 2012
During the waning hours of 2012 and early into Jan. 1, 2013, Congress and the White House worked to avert the so-called fiscal cliff that was due to strike on the first of the year. The result of these efforts is the American Taxpayer Relief Act of 2012. This new tax law does several things relating to the fiscal cliff including a deferral of sequestration, the set of mandatory, across-the-board spending cuts that were to take effect Jan. 1. (1/3/2013)

Temporary tangible asset regulations effective date officially delayed
On Dec. 14, 2012, the IRS and Treasury Department released technical amendments officially amending the effective date of the regulations governing the deduction and capitalization of expenditures related to tangible property. (1/2/2013)

Liability accrues in the year bonus paid if bonus payments revert
to employer
A recent IRS decision provides further guidance regarding the timing of an employer’s deduction for bonuses accrued in one year and paid in the next year. (12/28/2012)

Welcome 2013 and the new 0.9 percent Additional Medicare Tax on earned income
In December, proposed regulations under new section 3102(f) were issued. The proposed regulations provide guidance for employers and individuals relating to the implementation of the Additional Medicare Tax. (12/21/2012)

CHNA compliance deadline approaching for hospital organizations
Is your hospital organization prepared to comply? (12/18/2012)

Maryland enacts income tax credit for security clearance costs
and SCIF costs
On May 22, 2012, Maryland enacted a nonrefundable income tax credit available to individuals and corporations for qualified expenses incurred to obtain federal security clearances for employees who work in Maryland and costs to construct or renovate Sensitive Compartmented Information Facilities (SCIFs) located in the state. The credit is effective for all tax years beginning on or after Jan. 1, 2013. (12/18/12)

IRS guidance regarding the medical device excise tax – Part 1
Addressing the final medical device tax regulations. (12/18/12)

Casualty loss considerations in the wake of Hurricane Sandy
Since Sandy hit the Northeast on Oct. 29, 2012, significant portions of the East Coast have been slowly recovering from unprecedented damage to homes and businesses. As people and businesses start to rebuild, it is worth considering the tax implications of casualty losses. (12/17/12)

Health care organization kitting and bundling for own use deemed not subject to medical device excise tax
Recent regulations and notice provide good news for hospital and health care-related organizations. (12/14/12)

Certain retirement plans can make loans and hardship distributions to help Sandy victims
The IRS announced relaxed rules and streamlined procedures for loans and hardship distributions to Hurricane Sandy victims and members of their families. (12/6/12)

Sunset of payroll tax relief
Expected increase in the payroll tax rate would cause additional tax burden on employees. (12/5/12)

Should your business entity change from a pass-through
to a C corporation?
Business owners should start evaluating the impact potential tax law changes could have on their choice of business structure. (11/28/2012)

Final tangible asset regulations effective date delayed
The IRS and Treasury Department have announced a delay in the effective date of the final tangible asset regulations which may prove helpful for some taxpayers. (11/26/2012)

Adverse court ruling for taxpayer attempting to qualify ERP expenses for research tax credit
This decision highlights the importance of properly supporting their research tax credit claims with relevant documentation. (11/19/2012)

Mexican law to combat money laundering
On Oct. 17, Mexico passed an anti-money laundering law that restricts the use of cash in certain transactions.

IRS relief for victims of Hurricane Sandy
The IRS has announced special tax relief and assistance to taxpayers in designated areas.

IRS extends important FATCA compliance deadlines
Announcement 2012-42 extends certain important due diligence, withholding and reporting deadlines originally set forth in the proposed FATCA regulations.

New York MTA payroll tax protective refund claims update
The New York State Department of Taxation and Finance issued important information for taxpayers regarding the Metropolitan Commuter Transportation Mobility Tax, including guidance on how to file protective refund claims. (10/22/2012)

S corporations may have the opportunity to file refund claims for open Michigan SBT returns
A recent ruling by the Michigan Court of Appeals provides S corporation taxpayers the opportunity to file refund claims for open statute years under the former single business tax. (10/18/2012)

District of Columbia employer use tax returns due Oct. 20, 2012
Employers that file District of Columbia (D.C.) withholding tax returns but are not registered to remit D.C. sales tax must file an annual use tax return for the fiscal year ending Sept. 30, 2012. (10/8/2012)

Estate planning in a low interest rate environment
In the current low interest rate environment, self-cancelling installment notes represent a particularly attractive estate planning technique for use in sales between related parties.(9/20/2012)

Applying proposed section 987 regulations can generate
significant benefits
U.S. taxpayers conducting foreign operations through branch form (or through a disregarded entity) have an important choice to make that could have a significant financial statement impact. (9/18/2012)

New York court holds MTA payroll tax unconstitutional
The New York Supreme Court recently ruled that the metropolitan commuter transportation mobility tax violates the state constitution, and employers with employees working in the Metropolitan Commuter Transportation District should file protective refund applications for previously remitted MTA payroll taxes. (9/14/2012)

Illinois Small Business Job Creation Tax Credit extended
Illinois has extended its job creation program to run from July 1, 2012, to June 30, 2016, and expanded the program to include professional employer organizations. (9/4/2012)

Exxon Mobil wins global interest netting claim under a special statute of limitations rule
The Second Circuit affirms the Tax Court ruling, holding that interest netting is available as long as "one leg" of overlapping periods is open.(8/30/2012)

Unclaimed property developments in New Jersey and Delaware
The state of New Jersey recently enacted important unclaimed property legislation that will impact issuers of stored value cards in New Jersey. Delaware has authorized a new unclaimed property voluntary disclosure program to be administered by the secretary of state. (8/28/2012)

IRS addresses the deductibility of contributions to disregarded entities
Guidance provided to taxpayers. (8/23/2012)

North Carolina Department of Revenue changes interpretation of NEL statute
Under new interpretation, certain deductions that generate income not taxable will not reduce a corporation’s current-year North Carolina net economic loss. (8/22/2012)

Legislative update on the expiring tax provisions
Many of the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 are scheduled to expire at the end
of 2012. (8/20/2012)

Brazil's new transfer pricing reporting requirement
Brazilian taxpayers must now electronically report all cross-border transactions related to the provision of services and the transfer of intangibles, as well as certain other transactions. (8/17/2012)

Tax incentives extenders bill approved by Senate Finance Committee
The legislation is expected to move to the Senate floor in September. (8/17/2012)

Medical device manufacturers face new excise tax Jan. 1, 2013
Affected taxpayers have only months left to understand, comply with the new excise tax. (8/16/2012)

Termination of Argentina-Spain double taxation treaty
The Argentine government’s revocation of its tax treaty with Spain may significantly impact multinationals that relied on favorable provisions when structuring businesses in Latin America. (8/16/2012)

India – A transfer pricing overview
An overview of the Indian transfer pricing environment, key controversies regarding enforcement and suggestions on how companies can manage these challenges. (8/14/2012)

Expiration of tax cuts and other pending changes make tax planning for 2013 crucial
A summary of the various tax provisions set to expire on Jan. 1, 2013, along with other tax changes for 2013. (8/10/2012)

Fee disclosures in qualified plans
The U.S. Department of Labor (DOL) issues final regulations that require plan administrators to disclose significant detail regarding fees that participants in self-directed plans pay from their accounts. (8/10/2012)

The Gillette decision and the Multistate Tax Compact's three-factor formula
California court will revisit case to decide validity of the Multistate Tax Compact to allow taxpayers a choice of apportionment factors. (8/10/2012)

California legislative update and the impact of the Multistate Tax Compact three-factor election
California repeals adoption of the Multistate Tax Compact, thereby limiting apportionment choice for taxpayers. (8/9/2012)

New health care act presents financial issues for both employers
and employees
Substantial new mandates, penalties, or taxes may be imposed in 2014 on employers and employees under provisions of the Internal Revenue Code added by the new health care act. Virtually all employers and employees will need to evaluate the potential consequences and choices these new rules create. (8/7/2012)

Taxpayers must decide whether to make foreign tax credit election
with 2011 returns
Taxpayers that have engaged in so-called “splitter” transactions have an important choice to make with their 2011 tax returns that could dramatically affect their ability to claim credits for foreign taxes in 2011 and thereafter. (7/27/2012)

Misclassification of employees can be costly to many companies
Employers who misclassify independent contractors risk penalties from both the IRS and certain states. Some industries face a higher audit risk than others. (7/17/2012)

Manufacturer's rebate programs
When is the point at which a manufacturer's tax liability is fixed and determinable? (7/16/2012)

China initiates new VAT pilot program
China's new value added tax (VAT) pilot program may expand to replace the current business tax. This change could impact companies with transfer pricing agreements with Chinese subsidiaries. (7/16/2012)

2012 Offshore Voluntary Disclosure Program FAQs and guidance
issued by IRS
Recently, the IRS released frequently asked questions for its current offshore voluntary disclosure program, which was announced in January 2012. The FAQs caution that the terms of the OVDP could change at any time, and the IRS could limit eligibility for the program or even end the program abruptly. (7/16/2012)

Health care largely upheld: High court validates taxes
The Supreme Court decided, on June 28, that the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 are largely constitutional. The ruling validates a broad array of taxes that impact both individuals as well as employers. (6/28/2012)

A misconception relating to LLCs
The ability to treat LLC interests as stock for federal tax purposes can have important implications for LLC owners contemplating future transactions. (6/26/2012)

Illinois manufacturer’s purchase credit
For the 2011 year, MPC Forms ST-16, Annual Report of Manufacturer's Purchase Credit Earned, and ST-17, Annual Report of Manufacturer's Purchase Credit Used, must be filed by June 30, 2012. (5/30/2012)

Sweeping Kansas tax changes
On May 22, 2012, Kansas Governor Brownback signed House Bill 2117 into law. The new law provides sweeping and unprecedented changes to the tax law, especially for owners of limited liability companies (LLCs), S corporations and sole proprietorships. (5/25/2012)

Virginia enacts phase-in of single sales factor apportionment for manufacturers and retailers safe harbor rule
Virginia joins a national trend moving towards single sales factor apportionment or to a more heavily weighted sales factor. (5/24/2012)

IRS addresses frequently asked questions on tangible
asset regulations
At the May meeting of the ABA Section of Taxation, representatives from Treasury, the IRS Income Tax & Accounting Chief Counsel's Office, and the IRS Large Business & International Division addressed some of the frequently asked questions received since the release of the tangible asset regulations. (5/22/2012)

Capitalized interest included for purposes of bonus depreciation
safe harbor rule
Several private letter rulings address how the bonus depreciation rules apply to large construction projects. (5/21/2012)

IRS intends tougher, speedier audits of middle-market and flow-throughs
On March 26, 2012, Steven T. Miller, IRS Deputy Commissioner, Service and Enforcement, gave a presentation to the Tax Executives Institute (TEI). In his presentation, Mr. Miller shared some information that should make taxpayers in the middle market a little wary. (5/21/2012)

Maximizing the benefits of the S corporation in turbulent times
Considerations to ensure S corporations continue to provide tax benefits to shareholders.(5/21/2012)

State attempts to apply alternative apportionment formulas
Taxpayers need to be aware of state attempts to apply alternative methods of apportionment to tax more income. (5/18/2012)

Tax Court ruling highlights need for adequate supporting documentation in research tax credit claims
Considerations for businesses when claiming executive wages for purposes of the research tax credit. (5/18/2012)

Supreme Court rules against IRS on statute of limitations issue
The United States Supreme Court recently ruled that, under established judicial precedents, the IRS was precluded from reinterpreting the statute of limitations on tax assessments. United States v. Home Concrete & Supply, L.L.C., No. 11-139 (April 25, 2012). Although the result is certainly favorable to taxpayers, the Court’s opinion is narrowly focused and avoids larger issues of tax administration.

Proposed regulations issued on medical device excise tax
Treasury guidance on medical devices excise tax raises more questions. While congressional resistance makes the tax's future uncertain, manufacturers need to consider potential implementation costs in budgets and forecasts. (4/12/2012)

IRS issues method change rules for tangible asset regulations
Taxpayers should take the time now to determine the impact of complying with the tangible asset regulations and method changes that will need to be made to be in order to make appropriate estimated tax payments and financial accounting adjustments. (3/9/2012)

Repairs regulations finally issued on capitalization of tangible
asset costs
On Dec. 23, 2011, the IRS released the highly anticipated regulations regarding the deduction and capitalization of tangible asset costs in temporary and proposed form. Two companion revenue procedures will be issued in the coming weeks to provide transition rules for changes to comply with the temporary regulations. (12/24/2011)

Obama Administration 2012 Budget Proposals
Detailed analysis of some of the most significant 2012 budget proposals, their potential tax effects. (12/1/2011)

IRS Extends FBAR Filing Deadline for Years 2009 and Earlier to November 1, 2011
IRS Notice 2011-54 extends the deadline for filing FBARs to November 1, 2011, for persons with signature authority over, but no financial interest in, designated foreign accounts in calendar years 2009 or earlier. (6/24/2011)