Source: http://bhbmlaw.com/bhbm-tax-law-alert-07302014/
Timestamp: 2017-12-15 23:44:05
Document Index: 122587412

Matched Legal Cases: ['§ 330', '§10', '§ 10', '§ 10', '§ 10', '§ 10', '§ 10', '§ 10']

BHBM Tax Law Alert 07/30/2014 - Baldwin Haspel Burke & Mayer
On July 1, 2014, the IRS issued new Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code, with the hope of providing a new streamlined process for smaller charitable organizations to apply for tax-exempt status. The new form aims to alleviate an IRS backlog of pending applications for tax-exempt status. The IRS has reduced the Form 1023-EZ to three (3) pages from the traditional twenty-six (26) page Form 1023. The Form 1023-EZ is more of a registration for tax-exempt status rather than a comprehensive description of all of the organization’s activities.
Based on IRS data, approximately seventy percent (70%) of charitable organization applicants will qualify to use the new Form 1023-EZ. The IRS also released Rev. Proc. 2014-40, which sets forth the procedures for using the new Form 1023-EZ. Applicants must have gross receipts of $50,000 or less during the past three (3) years (or projected gross receipts of $50,000 or less in any of the next three (3) years) and total assets less than $250,000. Rev. Proc. 2014-40 contains other criteria for using Form 1023-EZ.
The new Form 1023-EZ is completed electronically and must be submitted online at www.pay.gov. The form is subject to a $400 user fee due upon submission.
The IRS issued final regulations that change various provisions of Circular 230, which provides rules on practice before the IRS. The most significant changes include elimination of the complex rules governing “covered opinions” and reconfiguration of written tax advice requirements into one standard.
31 U.S.C. § 330 authorizes the Treasury Department (“Treasury”) to regulate the practice of persons’ representatives before the Treasury. With this authority, the Treasury publishes regulations governing practice before the IRS in 31 C.F.R. §10, which is reprinted as Treasury Department Circular No. 230 (“Circular 230”). In 2012, the IRS proposed regulations that would amend Circular 230, which are discussed in more detail below.
Former Circular 230 rules required practitioners to make certain disclosures when providing covered opinions. As a result, many practitioners included Circular 230 disclosures at the end of every email or other writing to remove the correspondence from the covered opinion rules.
Departing from a rule-based approach, the final regulations adopt the method provided in the proposed regulations, which replaces the covered opinion rules (§ 10.35) with one standard for all written tax advice. The IRS expects that this change will minimize or may even eliminate the use of Circular 230 disclaimers in email and other writings.
Final regulation § 10.37 states affirmatively those principles to which all practitioners must adhere when providing written advice on a Federal tax matter. It requires, among other things, that a practitioner (1) base all written advice on reasonable factual and legal assumptions, (2) consider all relevant facts that he or she knows or reasonably should know, (3) use reasonable efforts to identify and establish facts relevant to the written advice, and (4) exercise reasonable reliance.
A practitioner must possess the necessary competence to practice before the IRS. Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the issue for which the practitioner is engaged. As seen in the final regulations, the competence standard asserts that competency may be gained in a myriad of ways, including but not limited to, consulting with experts and studying relevant law.
Under the revised Circular 230, any practitioner who has principal authority and responsibility for overseeing a firm’s practice must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees to comply with Circular 230 provisions. Failure to comply with this mandate or to ensure that procedures are followed properly will result in disciplinary action.
Changes/Additions Made to Proposed Regulations
Other changes made by the final regulations to the proposed regulations include:
The designation that a “Federal tax matter,” which was undefined under the proposed regulations, is any matter concerning the application or interpretation of (1) a revenue provision as defined in IRC Section 6110(i)(1)(B), (2) any provision of law impacting a person’s obligations under the interval revenue laws and regulations, and (3) any other law or regulation administered by the IRS (Reg. § 10.37(d));
The determination that government submissions on matters of general policy and continuing education presentations given for the sole purpose of educating practitioners on Federal tax matters are not considered written advice on a Federal tax matter (Reg. § 10.37(a)(1));
The clarification that the IRS will apply a reasonable practitioner standard, rather than a heightened standard of review, to determine whether a practitioner has satisfied the written advice requirements when he or she knows or has reason to know that the advice will be used in promoting, marketing, or recommending an investment plan or arrangement which is designed to avoid or evade taxes (Reg. § 10.37(c)(2));
The requirement that practitioners relate applicable law and authorities to facts (Reg. § 10.37(a)(2)(v)).
These final regulations became effective on June 12, 2014. For more information, see a full-copy of the revised Circular 230 here.
Retroactive Ban on Corporate Inversions May Kill Pending Deals
Taking a firm position on corporate inversions on July 24 while speaking at the Los Angeles Trade-Technical College, President Obama called for “economic patriotism” and urged a ban on corporate inversions used to shield tax exposure.
A corporate inversion occurs when a domestic corporation reincorporates in another country through an acquisition or merger with a foreign company. Domestic companies often choose this strategy to prevent double taxation if they conduct substantial amounts of foreign business or generate a significant amount of revenue abroad. Generally, the U.S. Internal Revenue Code prohibits this practice through anti-inversion rules; however, companies have found a loophole. Under current U.S. tax laws, a company that results from the merger of a domestic and foreign corporation is considered “foreign” if more than twenty percent (20%) of its stock is owned by the shareholders of the foreign constituent corporation.
Approximately forty-one (41) U.S. companies have exploited this loophole and changed their addresses to low-tax jurisdictions. Additionally, at least eight (8) more inversions are pending.
At the moment, President Obama has endorsed the Stop Corporate Inversions Act of 2014, a bill proposed by Rep. Sander Levin (D-Mich.). Under this bill, which would retroactively take effect as of May 2014, a foreign corporation would be treated as a U.S. company if (1) the shareholders of the U.S. corporation own fifty percent (50%) or more of the merged company following acquisition, or (2) if the foreign corporation is managed and controlled primarily within the U.S. and has substantial domestic business activities.
If Congress fails to pass anti-inversion legislation within the year, legislation may still be passed next year and could apply retroactively to deals that close after January 1, 2015. Because of this, inversion transactions involve some risk of which companies are wary. To reduce this risk, some buyers have negotiated a “walkaway” right in the event that tax laws constrict. For example, in a recent inversion transaction, Medtronic, Inc. added an out clause to its purchase agreement whereby it could terminate its deal if U.S. tax laws changed in such a way that the combined company would be considered a U.S. company for U.S. tax purposes.
For more information, please see the question and answer document here as well as Notice 2013-54.
On Friday, August 1 and Saturday, August 2, most retail purchases will be exempt from the four percent (4%) Louisiana state sales tax. The exemption applies to the first $2,500 of each eligible item of tangible personal property that a customer purchases if:
The customer buys and accepts delivery of property;
The customer places an order for immediate delivery, even if delivery must be delayed, provided that the customer has not requested delayed delivery.
The exemption does not apply to the following purchases:
Purchase of vehicles subject to license and title;
Purchase of meals prepared for consumption on premises or to-go; and
Purchase of taxable services such as hotel occupancy, laundry services, printing services, telecommunication services, the furnishing of cold storage space, leases or rentals of tangible personal property, repairs to tangible personal property, and admission to athletic, amusement, or recreational facilities or events.
Please note that this exemption applies only to Louisiana state sales tax. Local sales taxes will still apply unless the local taxing authority offers its own exemption. For more information, visit the Louisiana Department of Revenue’s website here.
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