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October 16,  2008

Federal Headlines

Organization's Volunteer President Liable for Trust Fund Taxes (Jefferson, CA-7)

 

The president of the board of directors of a tax-exempt day-care center was not entitled to a refund of federal employment and withholding taxes he paid from his personal funds. Although his position was voluntary and uncompensated, and although he was not involved in the day-to-day operations of the day care center, the individual had enough involvement in its financial affairs to qualify him as a "responsible person" within the meaning of Code Sec. 6672. Furthermore, his actions were willful because he ignored signs that the center's taxes were not being paid. While he asserted that he was not aware of the organization's ongoing failure to remit payroll taxes, he had access to the reports made available at the organization's office, and he was aware that at one time taxes had not been paid and penalties had been assessed. Additionally, although he had instructed a director to timely remit withheld taxes to the IRS, he did not ensure that the payments were actually made.

 

The individual was not exempt from the penalty under Code Sec. 6672(e) because, although he served on the board as an unpaid, volunteer member, he did not serve solely in an honorary capacity. Instead, he exercised enough control over the organization's financial affairs to make him a responsible person. He secured loans for the organization, directed payment of its taxes, reviewed and approved the organization's financial statements, and acted as a co-signatory on the organization's bank accounts. He also co-signed checks on behalf of the organization and approved the hiring of an accounting firm to review the organization's finances.

 

Finally, the individual failed to show any prejudice arising from the IRS's failure to promulgate documents that it was legally obligated to provide before collecting taxes and penalties. There was no evidence to show that the individual would have paid the tax had he been in possession of such materials. Consequently, the IRS could not be estopped from recovering the penalty against the individual.

 

Affirming a DC Ill. decision, 2007-1 USTC ¶50,304

C.E. Jefferson, CA-7, 2008-2 USTC ¶50,587

Other References:

 

Code Sec. 6672

 

CCH Reference - 2008FED ¶39,780.705

 

CCH Reference - 2008FED ¶39,780.729

 

CCH Reference - 2008FED ¶39,780.78

 

Tax Research Consultant

 

CCH Reference - TRC PAYROLL: 6,256

CCH Reference - TRC PAYROLL: 6,308

 

Obama and McCain Spar over Economic Plans in Final Presidential Debate

 

In their final debate of the campaign season, presidential candidates Sens. Barack Obama, D-Ill., and John McCain, R-Ariz., strongly criticized each other's economic policies and maintained their respective plans would benefit middle-income taxpayers and small businesses the most.

 

McCain said Obama's $62 billion plan would result in higher taxes on "Joe the Plumber" and increase taxes on 50 percent of small business revenue. Obama countered that only two percent of small businesses, with total income above $250,000 annually, would pay higher taxes and that no middle-income taxpayers earning less than $250,000 would pay additional taxes under his plan.

 

The presidential contenders sparred again over their respective health care plans, with each candidate maintaining his proposal would provide the best benefits to individuals and families.

 

Obama's health care proposals would preserve the current income tax exclusion for employer-provided health benefits and provide targeted health care tax credits, primarily to help lower-income individuals and small businesses, to offset the cost of providing health benefits.

 

McCain's health care plan would provide a refundable tax credit of $5,000 for families and $2,500 for single individuals to offset the cost of insurance. His proposal would treat employer-provided health benefits as taxable compensation to the employee for federal income tax purposes.

 

Both candidates were asked about the $455 billion federal budget deficit estimate for fiscal year (FY) 2008 and how much their respective economic plans would add to future deficits. The Treasury Department's budget report on October 14 (TAXDAY, 2008/10/15, T.3) revealed the record high deficit for FY 2008, which ended on September 30; a dramatic increase from the $162 billion shortfall in FY 2007.

 

Obama said his $60 billion proposal is a "net spending cut" and that the $750 billion financial rescue package, if "structured properly," would return the money back to taxpayers over time. He also noted that he is a strong proponent of the pay-as-you-go rules (PAYGO) that require all new tax cuts to be paid for by spending cuts or tax increases in other areas.

 

McCain did not comment specifically on the impact of his economic plan on the federal deficit. He maintained that he would be able to balance the federal budget in four years but did not explain how that could be accomplished. "Americans are hurting and angry. I can help them by cutting spending," McCain asserted.

 

For the record, "Joe the Plumber" is Joe Wurzelbacher, an Ohio man who spoke briefly with Obama during a campaign appearance in Toledo on October 13, according to several media reports. Wurzelbacher reportedly told Obama that his tax plan would keep him from purchasing a plumbing business.

 

By Paula Cruickshank, CCH News Staff

State Headlines

Maryland --Corporate Income Tax: Information Reporting Deadline Extended

 

The Maryland Joint Committee on Administrative, Executive and Legislative Review (AELR) has agreed to extend the due date for the state's new corporate income tax information reporting requirements to November 29, 2008. The decision to extend the filings, which would have been due October 15, 2008, was reached during a meeting held October 14, 2008, to approve proposed emergency regulations. It was also agreed that the Comptroller would have the power to abate or decrease the penalty provisions provided for in the proposed emergency regulations.

 

The reports for tax year 2006 are now due no later than November 29, 2008. The reports for tax year 2007 are due on or before the later of seven months after the due date of the original return (October 15, 2008, for calendar year taxpayers) or November 29, 2008. The proposed emergency regulations will be amended to reflect these changes and will be posted on the Comptroller's Web site once they have been approved.

Phone conversation, Maryland Department of Legislative Services, October 15, 2008.

Massachusetts --Corporate and Personal Income, Property Taxes: Treatment of Wireless Cellular Telecommunications Carriers Discussed

 

A Technical Information Release explains the current Massachusetts corporate excise, income tax, and property tax treatment of wireless telecommunications carriers. The release is in response to the decision of the Supreme Judicial Court in Bell Atlantic Mobile of Massachusetts Corporation, Ltd. v. Commissioner of Revenue (TAXDAY, 2008/04/30, S.15). The Supreme Judicial Court affirmed the rulings of the Appellate Tax Board, holding that a provider of wireless cellular telecommunications service is not considered a telephone company and is not subject to central valuation of its taxable telephone personal property by the Commissioner of Revenue. The Commissioner will no longer issue certified centralized valuations. For valuations of property for fiscal years 2009 and after, all valuations will be made by the local board of assessors in the locality where the property is located. In addition, the Commissioner will treat a wireless cellular telecommunications carrier that is a corporation as subject to the business corporation excise tax. In the case of a wireless cellular telecommunications carrier that is not a corporation, but, rather, is treated as a partnership or a disregarded entity, the direct or indirect members of such entity will be subject to tax in accordance with their appropriate taxpayer classification. The Commissioner will assess additional taxes as may be owed. Taxpayers must file returns and amended returns in a manner consistent with such treatment.

Technical Information Release 08-20, Massachusetts Department of Revenue, October 10, 2008, ¶401-198

 

Other References:

 

Explanations at ¶10-330

 

Explanations at ¶15-210

 

Explanations at ¶20-330

Michigan --Corporate, Personal Income Taxes: Extensions Granted for Hurricane Victims

 

Michigan will follow the federal tax filing extension for taxpayers adversely affected by hurricanes Ike and Gustav for Michigan business and personal income tax purposes. Under the federal tax relief, certain filing and payment deadlines have been extended to January 5, 2009.

 

For personal income tax purposes, the third quarter installment of estimated tax and the extended annual income tax return may be filed on or before January 5, 2009. Penalty and interest charges for late filing will be waived. For Michigan business tax purposes, fiscal or calendar year payments due during the federal extension period (i.e., September 7 through December 30, 2008) will be considered timely if they are made by January 5, 2009. Taxpayers should write "Hurricane Gustav" or "Hurricane Ike" in red at the top of the form.

 

There is no automatic extension for sales and use taxes, personal income withholding taxes, and excise taxes. However, late filing or payment charges may be waived on a case-by-case basis.

Press Release, Michigan Department of Treasury, October 13, 2008.

 
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