In Notice 2015-10 (the “Notice”), the IRS announced that it and the Treasury will issue regulations to limit credits or refunds for withholding taxes under Chapter 3 (Sections 1441-1443) and Chapter 4 (Sections 1471-1472, aka FATCA) to the amount actually deposited by withholding agents. The hope is that this “deposit limitation” will lessen the Treasury’s financial risk of crediting or refunding more tax, based on Form 1042-S reporting, than it collects or can collect.
The Notice previews regulatory amendments to provide that a credit or refund for withheld tax is available only [...]Read more
Tax-exempt organizations under § 501(c)(3) of the Internal Revenue Code face strict rules about regulating lobbying activities. Breaking these rules can result in severe consequences such as loss of tax-exempt status and excise tax penalties. For those § 501(c)(3) organizations that wish to expand their operations to encompass lobbying activities, two primary options exist.
Create and Operate an Affiliated § 501(c)(4) organization
Unlike § 501(c)(3) organizations, § 501(c)(4) organizations may engage in unlimited lobbying activities with the caveat that the § 501(c)(4)’s primary [...]Read more
On April 8, 2015, the Supreme Court of Appeals of West Virginia heard oral arguments for Perdue v. Nationwide Life Insurance Company, et al. with regard to whether life insurance companies are statutorily obligated to search the Death Master File (DMF) for purposes of determining whether the dormancy period has been triggered on life insurance proceeds. In the latest in a series of skirmishes involving life insurance companies and state unclaimed property administrators, the state supreme court has to decide whether the West Virginia unclaimed property laws – which do not explicitly require [...]Read more
A simple spinoff is usually not a simple thing. LTR 201511001 is one of the few “significant issue” rulings issued by Chief Counsel (Corporate) since it stopped ruling generally on most nonrecognition transactions in Subchapter C. As spinoffs go, the transactions addressed in the ruling should be simple, yet it took a lot of tax engineering to get to “yes”.
In a provocative op-ed published in the March/April issue of the Journal of Multistate Taxation and Incentives, the Connecticut Commissioner of Revenue Services (Kevin Sullivan) argues that given Congress’s apparent unwillingness to pass the Marketplace Fairness Act, the states should consider taking matters into their own hands and simply act as if Quill is no longer good law.
The Commissioner appears to have been emboldened by Justice Kennedy’s concurrence in the U.S. Supreme Court’s recent decision in Direct Marketing Association v. Brohl, No. 13-1032, __ S. Ct. __ (Mar. 3, 2015), in [...]Read more
Cumulus Radio Corp. v. Olson, U.S. Dist. Ct., C.D. Ill., March 10, 2015
The existence of federal jurisdiction in this case turned on whether an individual who held an unvested profits interest in a limited liability company (“LLC”), and whom the LLC considered a partner for tax purposes, was a “member” of the LLC under Delaware law. The case illustrates some of the confusion commonly surrounding the nature of LLCs, LLC membership, and “profits interests.”
Defendant Alpha at first admitted being a Delaware “corporation,” which, if true, would have given the court diversity jurisdiction. [...]Read more
The District Court of Delaware signals Temple-Inland and other unclaimed property holders are likely to prevail on constitutional grounds against the Delaware Escheats Law. The decision may also have a meaningful impact on other holders that are domiciled in Delaware and are currently under audit or participating in a voluntary disclosure program with the state. However, the court also held that that the Texas Cases’ priority rules do not apply in disputes between private parties and states.
Read the full advisory. [...]Read more
The IRS can have a long memory when it comes to rulings and decisions against taxpayers. Even with the seemingly all-purpose economic substance doctrine in its utility belt, the IRS sometimes dusts off old precedents to attack transactions. Revenue Ruling 80-239, 1980-2 C.B. 103, and Basic, Inc. v. United States, 549 F.2d 740 (Ct. Cl. 1977) are two anti-taxpayer authorities that targeted perceived abuses that are now largely obsolete. Nevertheless, the IRS may still invoke these precedents for support in totally different situations. Taxpayers should be aware of how the IRS might use [...]Read more
Last week, in ConAgra Brands, Inc. v. Maryland Comptroller of the Treasury, No. 09-IN-00-0150 (Md. Tax Ct., Feb. 24, 2015), the Maryland Tax Court issued an opinion perpetuating the state’s erroneous Gore decision from 2014, essentially holding that a corporate subsidiary had nexus in Maryland because its corporate parent had nexus there. The Tax Court was constrained by the Maryland Supreme Court’s decision in Gore Enterprise Holdings, Inc. v. Comptroller, 437 Md. 492 (2014), so perhaps it is not surprising that the Tax Court issued an opinion that is a continuation of that very confused [...]Read more
In late January, the IRS issued a private letter ruling (P.L.R. 201504004) dealing with whether interests in a non-grantor trust and a partnership are considered to be in registered form, a precursor to qualification for payments thereon to the portfolio interest exemption. Although the ruling answers in the affirmative, it does not ultimately state whether the particular payments addressed in the ruling would be eligible for the portfolio interest exemption.
To qualify for the portfolio interest exemption, and avoid U.S. withholding tax on payments of U.S.-source interest to a foreign person, [...]Read more