Tuesday, August 26, 2014

Applicable Federal Rates for September

 The Section 7520 rate for September 2014 is 2.2%, while the Applicable Federal Rates (AFRs) are as follows (Rev. Rul. 2014-22, 2014-37 IRB):
Annual Semiannual Quarterly Monthly
Short-term (≤ 3 years) 0.36% 0.36% 0.36% 0.36%
Mid-term (> 3 years but ≤ 9 years) 1.86% 1.85% 1.85% 1.84%
Long-term (> 9 years) 2.97% 2.95% 2.94% 2.93%

Sunday, August 24, 2014

IRS Income Data Unreliable Measure of Inequality, Report Says

The Tax Foundation’s Alan Cole in a recent report found that the IRS income data unreliable as a measure of inequality.
The conclusions of the report were:

IRS income data is collected in order to raise revenue as directed by

Congress, which means it is not necessarily well-suited for other purposes,

like measuring equality in our society.

The average taxpayer’s income changes dramatically throughout his

lifetime; the average tax return for an 18- to 25-year-old shows about

$15,000 in adjusted gross income where an average tax return for

someone between ages 55 and 64 shows above $80,000.
College students, particularly, comprise a very large number of low-income


Incomes go considerably farther in some places than in others. Much of the

narrative about rural states being poorer is mistaken.

Much capital income—especially capital income in tax-free middle-class

retirement accounts—goes uncounted in income data, heavily distorting

the measurement and making people appear poorer than they are.

Thomas Piketty’s income inequality data leaves out $19 trillion of pension

assets, which are yet to be attributed to any individual.


Second Circuit Reverses Grant of $3.8 Million Tax Refund

The Second Circuit reversed a district court opinion that upheld a bankruptcy court's decision granting a liquidating trustee a $3.8 million tax refund, holding that the bankruptcy court lacked jurisdiction over the refund claim because neither the debtor nor the bankruptcy trustee filed a refund claim before confirmation of the bankruptcy plan.

In US v. EDWARD P. BOND, LIQUIDATING TRUSTEE OF THELIQUIDATING TRUST U/A/W PT1COMMUNICATIONS, INC., a liquidating trust that had been assigned tax refund claims pursuant to a Chapter 11 reorganization plan was awarded a federal income tax refund by the United States Bankruptcy Court for the Eastern District of New York (Craig, C.J.). The United States District Court for the Eastern District of New York (Cogan, J.) affirmed the award, but held that the government could bring a separate action to offset the refund against taxes owed by the liquidating trust. The trustee of the liquidating trust appeals from the portion of the district court judgment upholding the government's right to setoff. Because the bankruptcy court lacked subject matter jurisdiction to decide the tax refund claim. The Second Circuit reversed.

The Second Circuit held that the bankruptcy court lacks jurisdiction over the Liquidating Trustee's refund claim and that the jurisdictional defense was not waived by the government's withdrawal of its appeal. Section 505(a) of the Bankruptcy Code ("Code") allows a tax refund suit in bankruptcy court only after a refund claim is filed with the IRS by "the trustee" in bankruptcy. (A debtor-in-possession has the status "of a trustee serving in a case under this Chapter," 11 U.S.C. § 1107; in this opinion, all references to a bankruptcy trustee include the debtor-in-possession.) Here, however, the refund claim was filed by the Liquidating Trustee, a representative of the estate who was appointed under the reorganization plan and whose status is distinct from that of a trustee in bankruptcy. Because Congress authorized a bankruptcy trustee (not a plan-appointed estate representative) to administratively exhaust a refund claim before bringing that claim in bankruptcy court, and the refund claim here was not filed with the IRS by a bankruptcy trustee, the bankruptcy court lacked jurisdiction to award the refund.

Friday, August 22, 2014

First Circuit Affirms Deduction of Fraud Penalty Settlement By Government Contractor

This article appeared in accountingtoday
Boston (August 20, 2014)
By Roger Russell

The First Circuit, in a case of first impression and a split with the Ninth Circuit, has held that in determining the tax treatment of an FCA (False Claims Act) civil settlement, a court may consider factors beyond the mere presence or absence of a tax characterization agreement between the government and the settling party.

The case, Fresenius Medical Care Holdings, Inc. v. United States, involved the tax treatment of roughly $127 million paid to the government in partial settlement of what the court characterized as “a kaleidoscopic array of claims.” Fresenius is a major operator of dialysis centers in the U.S. and around the world. Between 1993 and 1997, a series of civil actions were brought against Fresenius by whistleblowers, resulting in investigations into Fresenius’s dealings with various federally funded health-care programs, and a complex of criminal plea and civil settlement agreements by Fresenius with the government.

The district court concluded that where the parties had abstained from any tax characterization, the critical consideration in determining deductibility was the extent to which the disputed payment was compensatory as opposed to punitive. Generally, no business expense deduction is allowed for fines paid for the violation of any law, but compensatory damages may be deductible since they are not considered to fines.

The First Circuit found that at trial, the court’s jury instructions followed this conclusion and directed the jury’s focus to the economic realities of the situation. According to the First Circuit, “The jury split the baby and found that a large chunk of the money ($95 million) was deductible. “

The government relied on the Ninth Circuit’s Talley decision, arguing that the FCA settlement context is special and that economic reality is irrelevant, insisting that the only pertinent inquiry is one that seeks to determine whether a tax characterization agreement exists between the government and the settling party. The First Circuit disagreed.

“We cannot accept the government’s rationale,” the court stated. “A rule that requires a tax characterization agreement as a precondition to deductibility focuses too single-mindedly on the parties’ manifested intent in determining the tax treatment of a particular payment. Such an exclusive focus would give the government a whip hand of unprecedented ferocity: it could always defeat deductibility by the simple expedient of refusing to agree – no matter how arbitrarily -- to the tax characterization of a payment.”

Tuesday, August 12, 2014

Taxpayers cannot file a foreign bank account report electronically if they have a copy of popular software programs such as Adobe Acrobat installed on their computers because the programs conflict with the FBAR electronic filing portal, Tax Analysts has learned.

Taxpayers cannot file a foreign bank account report electronically if they have a copy of popular software programs such as Adobe Acrobat installed on their computers because the programs conflict with the FBAR electronic filing portal, Tax Analysts has learned.
The only way to resolve the problem is to uninstall the conflicting programs and install a copy of Adobe Reader, according to instructions from the Financial Crimes Enforcement Network's Bank Secrecy Act (BSA) e-filing help desk. The conflict was confirmed by a help desk employee. FinCEN mandated e-filing of FBARs as of July 1, 2013. According to a FinCEN FAQ, failure to comply with the electronic filing mandate could result in civil penalties, including a $500 fine for each negligent currency transaction. Exceptions to the mandate are allowed only in some limited circumstances, according to the agency.  Adobe Reader is a less functional version of Adobe Acrobat. Reader allows users only to view and fill out PDFs and does not allow for the creation or editing of PDFs. Those who want to continue to use Acrobat after filing an FBAR must reinstall the program. The FBAR e-filing portal also conflicts with Adobe Pro, Adobe Standard, and Adobe Air. Burgess J.W. Raby of Raby Law Office told Tax Analysts in an e-mail that Adobe Acrobat is "one of the, if not the, most ubiquitous computer programs for all users, and especially attorneys and accountants." He said he was surprised that the conflict exists and that it is not reported in FAQs posted on the BSA electronic filing website.  A FAQ on the BSA e-filing website specifies that Adobe Reader is required to submit forms, but not that users cannot have Adobe Acrobat or other conflicting software programs installed on their computers. The help desk employee said that if a user who has Acrobat installed on her computer tries to file an FBAR electronically, the form will not work correctly and the user will not be able to submit it.
FinCEN did not respond to a request for comment.

Tuesday, August 5, 2014

New Draft Form 1023-EZ.

Those of us who have submitted applications for approval of exempt organizations know how frustrating the long wait for approval can be.

The Treasury has produced a new, vastly simplified version of the Form 1023 "Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code," called Form 1023-EZ, "Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code." Proposed Form 1023-EZ arrives in the midst of a staggering backlog of exemption applications currently pending at the IRS. Practitioners report that it is now common for new organizations to wait two years or more before receiving a ruling on their exempt status. In the face of this backlog, the proposed Form 1023-EZ would radically change the process of applying for Code Sec. 501(c)(3) status to something resembling self-certification (with more emphasis supposedly placed on enforcement through audits).

Monday, August 4, 2014

New Jersey Updated Sales Tax Matrix

The New Jersey Division of Taxation has updated its taxability matrix and certificate of compliance. (Taxability Matrix, N.J. Division of Taxation, 08/01/2014; Certificate of Compliance, N.J. Division of Taxation, 07/01/2014.)

The matrix provides administrative definitions, inclusion or exclusion form sales tax, statutory /rule citation and comments.

the matrix also provides for "sales tax holidays."


From my work with the United Nations Committee of Experts on International Cooperation in Tax Matters I have compiled a list (nearly complete) of tax website for each country. I hope these may be of assistance to you.


Country Website


Albania                  http://eduart0.tripod.com/

Andorra           http://www.andorra-intern.com/index_en.htm

Argentina         http://www.afip.gov.ar/

Australia          http://www.treasury.gov.au/home.asp?ContentID=521&titl=Home


Bangladesh     http://www.nbr-bd.org/


Belgium           http://www.minfin.fgov.be/index.html



Brazil               http://www.fazenda.gov.br/


Canada http://www.cra-arc.gc.ca/menu-e.html

Chile                http://www.minhda.cl/portada.php

China               http://www.chinatax.gov.cn/n8136506/index.html

Columbia         http://www.dian.gov.co/

Costa Rica       http://www.ccpa.or.cr/

Croatia             http://www.mfin.hr/

Cyprus                   tp://www.mof.gov.cy/mof/mof.nsf/DMLindex_gr/DMLindex_gr?OpenDocument

Czech Republichttp://www.mfcr.cz/cps/rde/xchg/mfcr/hs.xsl/en.html

Denmark          http://www.skm.dk/

Egypt               http://www.incometax.gov.eg/


Estonia            http://www.fin.ee/

Finland            http://www.valtioneuvosto.fi/etusivu/en.jsp

France             http://www.finances.gouv.fr/

Germany              http://www.bundesfinanzministerium.de/DE/BMF__Startseite/node.html?__nnn=true

Greece             http://www.minfin.gr/portal/

Guam               https://www.guamtax.com/

Guatemala       http://www.minfin.gob.gt/

Hong Kong      http://www.ird.gov.hk/eng/welcolme.htm

Hungary           http://www.kim.gov.hu/index_hu.html

Iceland             http://www.rsk.is/

India                http://finmin.nic.in/


Ireland             http://www.revenue.ie/en/index.html

Isle of Man       http://www.gov.im/treasury/

Israel               http://www.financeisrael.mof.gov.il/FinanceIsrael/Pages/En/Home.aspx

Italy                 http://www.finanze.it/export/sites/default/finanze/index.htm

Jamaica           http://www.mof.gov.jm/

Japan               http://www.mof.go.jp/english/index.htm

Kenya              http://www.kra.go.ke/

Korea               http://english.mosf.go.kr/

Latvia              http://www.fm.gov.lv/?lat/

Lithuania         http://www.finmin.lt/web/finmin/home

Luxembourg    http://www.mf.public.lu/

Macedonia       http://www.finance.gov.mk/node/161

Malaysia          http://www.treasury.gov.my/index.php?lang=eng

Malta               http://www.ird.gov.mt/

Mexico             http://www.shcp.gob.mx/Paginas/default.aspx

Morocco          http://www.finances.gov.ma/portal/page?_pageid=53,1&_dad=portal&_schema=PORTAL

Netherlands     http://english.minfin.nl/

New Zealand    http://www.ird.govt.nz/

Nicaragua        http://www.dgi.gob.ni/

Norway            http://www.regjeringen.no/en/dep/fin.html?id=216

Pakistan          http://www.cbr.gov.pk/?AspxAutoDetectCookieSupport=1

Peru                 http://www.mef.gob.pe/

Philippines      http://www.bir.gov.ph/


Portugal           http://www.afp.pt/

Puerto Rico            http://www.hacienda.gobierno.pr/planillas_y_formularios/planilla_en_linea.html


Russia             http://www.minfin.ru/en/

Saudi Arabia    http://www.dzit.gov.sa/en/index.shtml

Singapore        http://www.iras.gov.sg/irashome/default.aspx

South Africa
Spain               http://www.aedaf.es/

Sri Lanka         http://www.inlandrevenue.gov.lk/

Sweden            http://www.skatteverket.se/international/inenglish.4.3a2a542410ab40a421c80006827.html
Switzerland     http://www.efd.admin.ch/index.html?lang=en

Thailand          http://www2.mof.go.th/

Trinidad and Tobago  

Tunisia            http://www.cld-conseilfiscal.com/cncf/

Turkey             http://www.maliye.gov.tr/

Ukraine            http://minfin.gov.ua/control/en/index

United Arab Emirates 
United Kingdom          http://www.hmrc.gov.uk/index.htm

United States               http://www.irs.gov/index.html

Venezuela                    http://www.fccpv.org/



International Tax Organization Websites


Asian Development Bank http://www.adb.org/


Caribbean Organisation of Tax Administrators http://www.caricom.org/


Center For tax Policy and Administration (OECD)



The Commonwealth Association of Tax Administrators http://www.catatax.org/


Committee of Experts on International Cooperation in Tax Matters http://www.un.org/esa/ffd/tax/


European Association of Tax Law Professors- http://www.eatlp.org/


Inter American Development Bank http://www.iadb.org/en/inter-american-development-bank,2837.html


The Institute of Internal Auditors http://www.theiia.org/


Intra-European Organisation of Tax Administrators http://www.iota-tax.org/eng/


International Bureau of Fiscal Documentation http://www.ibfd.org/


International Federation of Accountants http://www.ifac.org/


International Fiscal Association http://www.ifa.nl/Pages/default.aspx


Organisation For Economic Co-operation & Development (OECD)   http://www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html


Inter-American Center of Tax Administrators (CIAT)  http://www.ciat.org/index.php/en.html


International Tax Dialogue http://www.itdweb.org/pages/Info.aspx?lang=3&titleID=10095&bodyID=10096


ADB Institute http://www.adbi.org/


International Monetary Fund http://www.imf.org/external/index.htm


United Nations Conference on Trade and Development http://www.unctad.org/Templates/StartPage.asp?intItemID=2068