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President Bush on December 26 signed a one-year extension of the alternative minimum tax (AMT) patch, effective January 1, 2007. Absent enactment of the temporary fix, the administration predicted that an estimated 25 million taxpayers would pay on average an additional $2,000 in taxes for the 2007 tax year.
The Tax Increase Prevention Act of 2007 (HR 3996) increases the AMT exemption amount for 2007 to $44,350 for single taxpayers and heads of households, $66,250 for married couples filing jointly, and $33,125 for married couples filing separately. The new law allows taxpayers to use most nonrefundable personal tax credits to offset AMT liability. These include the dependent care, HOPE and lifetime learning education credits and the District of Columbia first-time homebuyer's credit.
By Paula Cruickshank, CCH News Staff
President Bush on December 26 signed an omnibus fiscal year (FY) 2008 appropriations bill, the Consolidated Appropriations Act, 2008 (HR 2764), funding federal government operations through the end of the fiscal year on September 30, 2008. The president, in a written statement, said the appropriations package funds the federal government with the spending levels he requested in his fiscal year 2008 budget but he was critical of the number of spending projects that were slipped into the final measure.
The president noted that Congress included nearly 9,800 earmarks totaling $10 billion in the appropriations package. "These projects are not funded through a merit-based process and provide a vehicle for wasteful federal spending," the president said. Bush recently directed Office of Management and Budget (OMB) Director Jim Nussle to look into ways the executive branch could take action to eliminate specific earmarks from appropriations bills.
The new law includes FY 2008 funding for the Treasury and the IRS. Funding for the Treasury Department totals $12 billion, of which $10.9 billion is allocated for the IRS. The IRS funding for FY 2008 exceeds its previous year budget by $300 million. The IRS budget includes: $4.8 billion for enforcement activities, $2.2 billion for taxpayer services, $3.7 billion for operations support of enforcement, taxpayer service, and other functions and $267 million for business systems modernization
By Paula Cruickshank, CCH News Staff
Married taxpayers were required to include qualified dividends in the calculation of their alternative minimum tax (AMT). The taxpayers reported their qualified dividends but computed the tax on them separately and did not include them in their taxable income; thereby excluding them for purposes of the AMT. However, although qualified dividends receive special treatment under which the amount of AMT is capped by reference to the capital gains rates in the regular tax regime, they may not be disregarded in the calculation of AMT. Moreover, even if Form 1040 is ambiguous with respect to qualified dividends, the form is not an authoritative source of law and does not affect the taxpayers' obligations under the IRC.
T. Weiss, 129 TC No. 18, Dec. 57,206
Other References:
Code Sec. 55
CCH Reference - 2008FED ¶5101.14
Tax Research Consultant
CCH Reference - TRC FILEIND: 30,400
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Alaska Governor Sarah Palin signed legislation revising the petroleum profits tax (PPT) on December 19. As previously reported, the Legislature passed the bill, entitled Alaska's Clear and Equitable Share (ACES), on November 16, the final day of the special session called by the governor to address oil taxation. (TAXDAY, 2007/11/20, S.1) The general effective date of the legislation is December 20, 2007, but many provisions apply retroactively.
The base tax rate is increased from 22.5% to 25% of the annual production tax value of taxable oil and gas. When a producer's average monthly production tax value per BTU equivalent barrel of taxable oil and gas is between $30 and $92.50, an additional tax of 0.4% is imposed on the difference between the average monthly production tax value and $30. Formerly, the additional tax was 0.25%. When a producer's average monthly production tax value exceeds $92.50, the additional tax is 0.1% of the difference between the monthly production tax value and $92.50. The new tax rates are effective July 1, 2007.
Credits allowed for qualified exploration expenditures are increased from 20% to 30%. In addition, the law is amended to provide that exploration credits may not be taken for costs associated with repairs and replacements, fraud, negligence, or violations of law, including the federal Clean Water Act. These provisions are effective July 1, 2008.
Another amendment provides that a producer or explorer may elect to take a credit of 25% (formerly, 20%) of a carried-forward annual loss. "Carried-forward annual loss" is the amount of the producer's or explorer's adjusted lease expenditures that were not deductible in the calendar year in which they were incurred because their deduction would have caused a production tax value less than zero. A statutory amendment provides that only the amount of adjusted lease expenditures remaining after the specified accounting procedure may be used to establish a carried-forward annual loss. These provisions are effective July 1, 2007.
A new provision allows a credit of 5% of an eligible expenditure for seismic exploration performed before July 1, 2003, provided the claim is filed before January 1, 2016. This provision takes effect July 1, 2008.
Effective April 1, 2006, the law is amended to provide that deductible lease expenditures do not include costs arising from violations of law or failure to comply with an obligation under a lease, permit, or license issued by the state or federal government. Lease expenditures also do not include costs incurred for repair, replacement, or deferred maintenance of a facility, pipeline, or other equipment, other than a well, that is related to a failure or event that results in disruption of oil and gas production. Similarly, lease expenditures do not include repair costs related to an unpermitted release of a hazardous substance or gas.
Effective July 1, 2007, lease expenditures generally do not include costs associated with construction, acquisition, or operation of a refinery or crude oil topping plant, nor do they include costs of lobbying and public relations.
Reporting requirements applicable to producers are amended to require additional information, and a new penalty of up to $1,000 per day may be imposed for each day a person fails to file a report at the time required. These provisions are effective December 20, 2007.
The Department of Revenue has issued an advisory bulletin regarding Sec. 71 of the legislation, which requires taxpayers to pay any additional production taxes arising from the retroactive application of certain provisions before April 1, 2008. The Department states that it believes the intended due date for those additional production taxes is March 31, 2008, and interest will not be owed if the taxes are paid by that date.
Subscribers to CCH Tax Research NetWork can view the legislation.
H.B. 2001, Laws 2007, Second Special Session, effective as noted; Advisory Bulletin, Alaska Department of Revenue, December 20, 2007.
A defunct company and its president were barred by comity and the Tax Injunction Act from maintaining all but one of their federal 42 U.S.C. §1983 claims based on allegations that Illinois county officials placed obstacles in the company's path to make it difficult to collect property tax refunds for its clients. The remaining claim involving an allegedly retaliatory criminal investigation of the company and the president also failed due to the prosecutor's absolute immunity.
Tax Injunction Act, Comity
The officials were charged in both their individual and official capacities with claims of Equal Protection and Due Process Clause violations, RICO violations, conspiracy, tortious interference, and conversion. All of those claims stemmed either from the officials' treatment of the president and the company in the real estate tax refund process or in retaliation for a related state court action.
However, the claims were essentially a complaint about the loss of tax refunds, delayed refunds, and the officials' ultimate refusal to issue taxpayer refund checks, and the complaint repeatedly alleged lost profits as the primary injury suffered. To the extent that the business was harmed by the failure to receive refunds, the relief sought would operate to reduce the flow of state tax revenue. To the extent the business was harmed by delaying refunds or even sending checks directly to taxpayers, the relief sought would tie up rightful tax revenue by freezing some money in the county's coffers and arresting state tax collection, putting the county system of administering refunds at the mercy of the federal courts. The relief sought went to the heart of the county's ability to control its tax revenue by managing its real estate tax refunds and would have had a negative impact on the county's ability to rely on its own tax revenue.
Immunity
Neither the company nor the president could maintain a §1983 action against county officials, including the state's attorney, for allegedly initiating a criminal investigation of the company's recovery of Illinois county real estate tax refunds on behalf of clients in retaliation for the president's initiation of a state court action alleging a conspiracy through which the county retained millions of dollars in tax overpayments. The company did not have standing to sue under §1983 for retaliation against protected First Amendment activity because the president, not the company, had initiated the state court action. The individual's claim failed because only the state's attorney could initiate a criminal investigation, he had absolute immunity for that core function, and there were no allegations that the officials were suborning perjury or otherwise obstructing justice.
Levy v. Pappas, U.S. Court of Appeals for the Seventh Circuit, No. 06-3182, December 21, 2007, ¶401-838
Other References:
Explanations at ¶89-224
Explanations at ¶89-236
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