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Tag Archive for Texas

Tax Court Denies Award In Recent Whistleblower Tax Case

Tax Court Denies Award In Recent Whistleblower Tax Case

Kennedy v. Comm’r, T.C. Memo. 2021-3 | January 12, 2021 | Copeland, E. | Dkt. No. 5687-17W

Short Summary:  Petitioner appealed, pursuant to § 7623(b)(4), three determinations of the Whistleblower Office (WBO) of the Internal Revenue Service (IRS) that declined to make awards to him.  Petitioner filed a single whistleblower claim, but the WBO split it into three distinct claims. Petitioner’s whistleblower claim alleged that three taxpayers and related subsidiaries owed $150,103,245 in unpaid excise taxes, penalties, and interest. The IRS processed the claims, and it took no action against two of the taxpayers, and no change resulted from the examination of the third taxpayer.  Petitioner challenged the WBO’s determinations. The Tax Court held that the WBO did not abuse its discretion in declining any awards to Petitioner.

Key Issue:  Whether the WBO abused its discretion in declining to award the Petitioner any amount under his whistleblower claims when it took no action against two taxpayers and issued no changes after the examination of the third taxpayer.

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Salt Alert: Nevada Amnesty Program

Salt Alert: Nevada Amnesty Program

The Nevada Legislature has enacted a one-time tax amnesty program for qualified businesses or individuals doing business in Nevada.

Benefits Of Amnesty

The program allows for penalty and interest to be waived on outstanding taxes that were due and payable on or before June 30, 2020, which includes monthly tax returns due on May 31, 2020 or before, and quarterly tax returns due April 30, 2020 or before.

Amnesty Period

The amnesty period is February 1, 2021 – May 1, 2021.

Taxes Covered Under Amnesty Program

The following tax types are eligible for amnesty:

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Mere Change? – “F” Reorganization Qualifies In Spite Of Change In Plan

Mere Change? - “F” Reorganization Qualifies In Spite Of Change In Plan

Former British Prime Minister Winston Churchill once said, “Plans are of little importance, but planning is essential.” Perhaps that quote is a tad strong to apply generally to corporate reorganizations under Section 368 of the Internal Revenue Code. Plans, after all, are very important—if not essential—in the context of corporate reorganizations. However, based on a recent Private Letter Ruling, the Internal Revenue Service (“IRS”) noted that the “plan of reorganization” requirement for an “F” reorganization was not undermined by a subsequent change to the plan midstream. Effectively, in this instance, a change to the plan was “of little importance.”

Corporate Reorganizations, Generally

Generally, corporate reorganizations are defined under Section 368(a)(1)(A)-(G) and may take many different forms.[1]An “A” reorganization, for example, is defined as a plain statutory merger or consolidation. An “E” reorganization is defined as a recapitalization. These corporate reorganizations must generally meet certain requirements to potentially qualify for tax-free treatment:

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The Tax Court in Brief: Tax Court Opinions And Decisions

The Tax Court in Brief: Tax Court Opinions And Decisions

The Week of January 11 – January 15, 2021

Kenneedy v. Comm’r, T.C. Memo. 2021-3 | January 12, 2021 | Copeland, E. | Dkt. No. 5687-17W

Short Summary:  Petitioner appealed, pursuant to § 7623(b)(4), three determinations of the Whistleblower Office (WBO) of the Internal Revenue Service (IRS) that declined to make awards to him.  Petitioner filed a single whistleblower claim, but the WBO split it into three distinct claims. Petitioner’s whistleblower claim alleged that three taxpayers and related subsidiaries owed $150,103,245 in unpaid excise taxes, penalties, and interest. The IRS processed the claims, and it took no action against two of the taxpayers, and no change resulted from the examination of the third taxpayer.  Petitioner challenged the WBO’s determinations. The Tax Court held that the WBO did not abuse its discretion in declining any awards to Petitioner.

Key Issue:  Whether the WBO abused its discretion in declining to award the Petitioner any amount under his whistleblower claims when it took no action against two taxpayers and issued no changes after the examination of the third taxpayer.

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State And Local Tax Audit Process

State And Local Tax Audit Process

This article is the third part of a three-part series regarding the State and Local Tax consequences of doing business in multiple states.  This article will discuss a State Tax Audit. Part 1 discussed Nexus and Part 2 discussed Voluntary Disclosure.

Questions we get from companies regarding its multistate activities are:  “How will states find me?”  “How will states enforce these new economic standards for sales and use taxes and income, franchise or gross receipts taxes?”   The answer is “do you really want to find out!”  The cost of states finding you and then assessing tax, interest, and penalties versus being proactive and compliant with state tax laws, as discussed in Part 1 of this series, can be a lot of money, as tax, interest, and penalties multiply very quickly.

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Tax Treaties: United States And Greece

Tax Treaties: United States And Greece

Quick Summary. Greece (Ελλάδα, Hellada or Hellas)sits on the Mediterranean Sea in Southeastern Europe.   Officially the Hellenic Republic (Ελληνική Δημοκρατία, Elliniki Dimokratia), Greece’s government is a parliamentary republic.  Its structure is set forth in the Constitution of Greece, its fundamental charter, which was adopted by the Fifth Revisional Assembly in 1975 and last amended by the Greek Parliament in 2008.

In 2019, Greece implemented several amendments to its Income Tax Code, including a corporate income tax rate reduction, reduced dividend withholding tax rates, and a participation exemption for certain capital gains.  The amendments also reduced bracketed rates for individuals and certain exemptions for non-residents from income, inheritance, and gift taxes.
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Tax Treaties: United States And Netherlands

Tax Treaties: United States And Netherlands

Quick Summary:  The Netherlands is comprised of 12 provinces with a capital at Amsterdam.  Following the dissolution of The Netherlands Antilles in 2010, the Caribbean Netherlands officially became part of The Netherlands. The Netherlands is a member of the North Atlantic Treaty Organization (NATO) and the European Union (EU).

Its corporate tax system provides for a full participation exemption on certain participations and several preferential tax regimes, including with respect to certain income derived from intellectual property.  The Netherlands introduced a special tax regime to encourage research and development, known as an innovation box, providing corporate income tax credits for certain profits derived from preferential innovations.

The Netherlands has a general anti-abuse rule (GAAR) under its longstanding fraus legis doctrine.  In 2019, the European Union Anti-Tax Avoidance Directive (EU ATAD 1) entered into effect in The Netherlands.  As part of its implementation, The Netherlands adopted a controlled foreign corporation (CFC) regime, as well as earnings stripping rules.  Effective in 2020, the Netherlands also adopted EU directive ‘ATAD II’, providing for hybrid mismatch rules. Read more

Skating On Thin Ice: IRS Does Not Recognize Organization’s 501(c)(3) Status

IRS Does Not Recognize Organization’s 501(c)(3) Status

Various 501(c)(3) organizations may pursue charitable activities or operate to pursue altruistic purposes. However, what if such activities or purposes do not fall within the Internal Revenue Code’s requirements for charitable organizations? Besides jeopardizing the ability of donor taxpayers to deduct contributions, the organizations may find that they are taxable and have certain filing requirements other than annual Form 990 filings. In a recent Private Letter Ruling, the Internal Revenue Service highlighted that “charitable” organizations, such as hockey organizations, that ultimately take care of their own members may not be so charitable for tax purposes.

501(c)(3) Organizations, Generally

Generally, charitable organizations must meet certain requirements to be exempt for federal tax purposes.[1] First, the organization must operate for limited purposes (e.g., religious, charitable, scientific, testing for public safety, literary, or educational purposes). Second, individuals must not privately benefit from the net earnings of the organization. Finally, the organization must not engage in substantial propaganda or lobbying activities, and the organization must not participate in (or intervene in) any political campaign for or against a political candidate.[2]

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Bare Bitcoins: No Fourth Amendment Privacy In Virtual Currency Records

Bare Bitcoins — No Fourth Amendment Privacy In Virtual Currency Records

Virtual currency has been around for a number of years now, and yet many still believe virtual currency transactions provide a level of anonymity and privacy not afforded by other types of monetary transactions. That simply isn’t true. With the right tools and understanding, it is possible to uncover the identities of virtual currency users. Moreover, virtual currency has led to the evolution of financial regulations, tax regulations, and legal regulations. In July, the Fifth Circuit dealt with whether Bitcoin users had certain Fourth Amendment protections from unreasonable searches and seizures. In short, they do not.

Bitcoin Transactions, Generally

Virtual currencies may take many forms, but the “Bitcoin” is perhaps the most well-known. Furthermore, Bitcoin transactions function in a very specific way. Bitcoin users maintain an “address,” which is a string of alphanumeric characters, much like a bank account number. A company or organization may form multiple addresses and combine them into a separate, centralized address, known as a “cluster.”

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Starting A Business In Texas: Choice Of Entity

Starting A Business In Texas: Choice Of Entity

Business owners in the State of Texas face a lot of tough decisions.  Perhaps the most significant of these decisions is the choice of entity the business will utilize while conducting its operations.  Similar to many other states, the State of Texas offers its business owners and entrepreneurs several options.  This Insight provides a summary of the tax and non-tax implications of each potential entity.

Sole Proprietorship

It may surprise you to learn that starting a business in Texas sometimes does not require any formal organization paperwork at all.  For example, a business owner or entrepreneur may begin conducting business in Texas under his or her own name.[i]

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Tax Treaties: United States And Italy

Tax Treaties: United States And Italy

Quick Summary.  Located on Southern Europe and bordering the Mediterranean Sea, Italy is a parliamentary republic with 20 administrative regions and a capital at Rome.

In 2020, Italy introduced a new digital service tax.  In addition, other recent measures include replacement of its hyper and super tax depreciation regimes with a tax credit regime, a corporate equity deduction, and certain step-up provisions for business assets.

Italian corporations are subject to a corporate income tax (imposta sul reddito sulle società) and a regional production tax (mposta regionale sulle attività produttive).  Individuals are subject to income tax (mposta sui redditi delle personne fisiche).

Italy is a member of the European Economic Community (EEC) and North Atlantic Treaty Organization (NATO), the United Nations (UN), World Trade Organization (WTO), and Organisation for Economic Co-operation and Development (OECD).

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A Second Class Of Stock May Not Jeopardize Your S Election

A Second Class of Stock May Not Jeopardize Your S Election

On Christmas Eve, while Santa was packing up his sleigh, the Internal Revenue Service (“IRS”) released a Private Letter Ruling related to S election status. As noted in a previous Insight Blog, corporations may jeopardize their S election by failing to timely submit Form 2553, failing to obtain spousal consent, or, in this case, creating a second class of stock. Here, however, despite the creation of a second class of stock, the IRS determined that the termination of the taxpayer’s S election was inadvertent and, therefore, still valid.

S Election Terminations, Generally

Generally, a small business corporation may terminate its S election in a number of manners.[1] For example, a majority of the corporation’s shareholders may elect to voluntarily revoke the election.[2] Further, a corporation may cease to be a small business corporation (e.g., having more than 100 shareholders) or the corporation’s passive investment income may exceed 25 percent of gross receipts for three consecutive taxable years and the corporation has accumulated earnings and profits.[3]

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