Archive for Tax Provision/Tax Reporting

Over 50 Provisions Retroactively Extended On 12/19/14

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On December 31, 2013, 57 provisions in the federal tax law expired. Many had expired before and been renewed. While there was discussion in the congressional tax committees since at least April 2014, as well as votes, no consensus was reached until early December. The House passed the bill – H.R. 5771, the Tax Increase Prevention Act, on December 3 by 378-46. On December 16, the Senate passed it by a vote of 76-16. On December 19, President Obama signed the bill. The Joint Committee on Taxation estimates the cost of H.R. 5771 for one year as about $81 billion, but only $42 billion for ten years (because some of the items, such as bonus depreciation involved timing of deductions).

The extension means, for example, that if a business purchased new equipment in the first 50 weeks of 2014 not expecting to be able to claim 50% bonus depreciation on it (because Read more

The House Passes Tax-Extenders Bill

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On December 3, 2014, the House passed “The Tax Increase Prevention and Reconciliation Act of 2014” (TIPRA) by a vote of 378 to 46. This bill includes a temporary one-year extension of many favorable tax provisions and a laundry list of technical corrections, including extension of:

• The education deduction for teachers;

• Exclusion from taxable income of discharge of qualified principal residence indebtedness;

• Mortgage insurance premiums treated as a mortgage interest deduction; Read more

Church Exemption From Filing Form 990 Challenged

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Churches are exempt from having to file Form 990 with the IRS. This exemption has been in place since the early 1940’s when Form 990 was adopted, and non-profit organizations were required to file the form with the IRS. This was brought about by a concern that tax-exempt organizations were using their status to engage in unfair competition with for-profit businesses. Churches have held to be exempt, as to do so would violate the First Amendment to the Constitution.

The Freedom From Religion Foundation (FFRF) has filed suit in a federal district court in Wisconsin, alleging that it was required to file a “detailed application” (Form 1023) and pay a fee before obtaining tax exempt status, and has also been required to file “detailed, intrusive and expensive annual reports” (Form 990) in order to maintain that status. Read more

Why The Ministerial Housing Allowance Might Not Survive

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On September 7, as was discussed in “Appeals Court Upholds Clergy Housing Exemption,” the Seventh Circuit of appeals reversed a Federal District Court decision that ruled the minister’s housing allowance was unconstitutional. The suit had been brought by the Freedom From Religion Foundation. So the housing allowance survives, for now.

The Appeals Court ruling was actually based on the fact that the plaintiffs, Dan Barker and Laurie Anne Gaylor (co-presidents of FFRF) did not have standing to sue as they had not been denied the benefit of a housing allowance. In ruling that the plaintiffs did not have standing, the court did not actually address the issue of the constitutionality of the housing allowance. Read more

The Election, 114th Congress And Fate of Tax Reform

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What does the change in majority party in the Senate for the 114th Congress mean for tax reform, and perhaps for any tax legislation?

An op ed in the Wall Street Journal on November 5, 2014 by Congressman Boehner and Senator McConnell, states that the Republican controlled Congress will address many challenges including “The insanely complex tax code that is driving American jobs overseas.”

What might that mean? A few possibilities:

Nothing. Complexity is not a bi-partisan issue. There is no contrary argument to the statement that our federal tax law is too complex. So, why hasn’t the complexity been Read more

Appeals Court Upholds Clergy Housing Exemption

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The 7th U S Circuit Court of Appeals has dismissed a lawsuit by the Freedom From Religion Foundation (FFRF) that challenged the constitutionality of the clergy housing allowance. The suit was originally brought in the District Court for the Western District of Wisconsin where Judge Barbara Crabb ruled that the tax break for ministers was unconstitutional. Her basis for the ruling was that the law benefited religious people and no one else. The decision, which would potentially eliminate the most important tax break for ministers, was stayed pending appeal.

The law allows ministers of the gospel to exclude income tax on amounts designated by the church as housing allowance. Self-employment taxes are payable on these amounts. In addition, ministers may “double dip,” as they are allowed to deduct mortgage interest Read more

Minister’s Housing Allowance Subject of Court Battles

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The housing allowance is a significant tax benefit for a minister. It can result in thousands of dollars in tax savings annually. The law currently allows a minister to occupy a church-owned parsonage without paying income tax on the value of the accommodations. Alternatively, the church may designate an amount to be paid to the minister as housing allowance. This amount, when used for housing costs, is not subject to income tax. Both a parsonage and a housing allowance are subject to self-employment taxes.

Only One Home Subject to Housing Allowance

Several court cases have recently been brought, seeking to limit or abolish this tax benefit for ministers.

Read more

10 Provisions To Be Highlighted On, In Publication 1 – IRS Adopts “Taxpayer Bill of Rights”

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WASHINGTON ― The Internal Revenue Service today announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.

The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on

Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for Read more

Special Rules In The Canada-US Tax Treaty Apply To Cross-Border Death Tax Issues


Canada and the United States have very different regimes for imposing taxes on death. The United States imposes a Federal Estate Tax; however, Canada has not imposed any Estate Tax since 1971. Rather, Canada taxes accrued, but unrealized, capital gains on death, as part of its income tax system.

Most tax practitioners are not aware of the fact that there special rules found in Article XXIX-B of the Canada-United Tax Convention (“the Treaty”) that are aimed at providing relief in connection with certain cross-border death taxes issues.

Some of these are summarized below:

Read more

IRS Released Forms 8966 And 1042 Updated For FATCA Reporting Requirements

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On March 5, 2014 the Internal Revenue Service released new versions of three critical forms to help financial institutions and withholding agents meet the requirements of the Foreign Account Tax Compliance Act, including draft versions of Form 8966 and Form 1042-S, and a final version of Form 1042.

Form 8966, FATCA Report, is a new form that foreign financial institutions (FFIs) would use to report information on their U.S. account holders under the 2010 law. The statute requires FFIs to report accounts held by U.S. taxpayers to the IRS or face, in some cases, a 30% withholding tax on certain U.S. source payments that are made to them.

Form 1042-S now incorporates FATCA and includes ways to account for withholding under Read more

eBay To Pay $3 Billion Tax On Foreign-Held Cash

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eBay has made a huge decision to bring back as much as $9.7 Billion that had been designated as permanently invested overseas. As eBay made this decision, they had to pay tax on the difference between the United States and foreign tax rates. The tax to bring foreign held cash back to the United States: a staggering $3 billion. Moving the money back to the United States diminished eBay’s First Quarter.

At the end of 2013, eBay announced it has $12.8 billion in cash and investments with $9.7 billion held overseas. Because of this lucrative tax charge to eBay, they are reporting a $2.33 billion first-quarter loss. eBay made a major decision relocating capital to the United States in pursuit of financial growth and new acquisitions. Finance insiders predict Second Quarter revenues of $4 Billion. eBays sister company PayPal continues to draw new users which is Read more

House Ways And Means Committee Approves Permanent Extension of Research & Experimentation Tax Credit Amongst Other Expired Business Tax Provisions

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On April 29th, The House Ways and Means Committee approved six separate bills to permanently extend certain expired business tax provisions. These bills specifically address the research and experimentation tax credit (H.R. 4438); ‘look-through’ treatment for controlled foreign corporations (CFCs) (H.R. 4464); the subpart F exceptions for active financing income (H.R. 4429); increased section 179 ‘small business’ expensing limits (H.R. 4457); a reduced recognition period for S corporation built-in gains (H.R. 4453); and basis adjustments to stock of S corporations making charitable contributions of property (H.R. 4454).

These permanent ‘tax extender’ bills, approved by the Ways and Means Committee without revenue offsets, are estimated by Joint Committee on Taxation (JCT) staff to reduce federal Read more