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October 8,  2008

Federal Headlines

Manufacturers Certify Advanced Lean-Burn Technology Vehicles for Alternative Vehicle Credit (IR-2008-113)

 

The IRS has acknowledged manufacturer certifications that certain advanced lean-burn vehicles qualify for the alternative motor vehicle credit. The qualifying vehicles and their credit amounts are:

 

--2009 Volkswagen Jetta 2.0L TDI Sedan manual or automatic --$1,300;

 

--2009 Volkswagen Jetta 2.0L TDI SportWagen manual or automatic --$1,300;

 

--Mercedes GL 320 BLUE TEC --$1,800;

 

--Mercedes R 320 Blue TEC --$1,550; and

 

--Mercedes ML 320 Blue TEC --$900.

 

The alternative motor vehicle credit was extended to advanced lean-burn technology vehicles beginning in 2006. A qualified vehicle must be acquired or leased by the taxpayer for personal use rather than resale, and its original use must begin with the taxpayer. Advanced lean-burn technology vehicles are passenger cars or light trucks with internal combustion engines that generally run on diesel fuels, but use more air than is necessary for complete combustion of the fuel. Qualified vehicles must also incorporate direct fuel injection technology and achieve at least 125 percent of the 2002 model-year city economy fuel rating. Credit amounts vary, based on the vehicle's city fuel economy rating and lifetime fuel savings. The credit for advanced lean burn technology vehicles begins to phase out when a manufacturer sells 60,000 qualified hybrid and advanced lean-burn technology vehicles.

IR-2008-113,

2008FED ¶46,607

Other References:

 

Code Sec. 30B

 

CCH Reference - 2008FED ¶4059E.025

 

Tax Research Consultant

 

CCH Reference - TRC INDIV: 57,706

Treasury Issues Relief for Insurance-Dedicated Money Market Funds (Notice 2008-92)

 

The Treasury Department and the Internal Revenue Service will not view participation in the Temporary Guarantee Program for Money Market Funds by insurance-dedicated money market funds as a violation of the diversification requirements of Code Sec. 817(h) with respect to any segregated asset account that invests in the fund. Further, they will not view the fund's participation as causing the holder of a variable contract supported by a segregated asset account that invests in the fund to be treated as an owner of the fund. This determination is intended to promote stability in the market for money market funds.

Notice 2008-92, 2008FED ¶46,608

Other References:

 

Code Sec. 817

 

CCH Reference - 2008FED ¶26,015.15

 

Tax Research Consultant

 

CCH Reference - TRC INDIV: 30,068

Presidential Contenders Clash over Tax and Spending Policies

 

Presidential hopefuls, Sen. John McCain, R-Ariz., and Sen. Barack Obama, D-Ill., challenged each other's tax and spending policies during the second in a series of three presidential candidates' debates on October 7. Both presidential contenders outlined their plans to restore the rapidly failing health of the U.S. economy.

 

McCain unveiled a new proposal designed to stabilize the housing market at its core. The rescue plan would authorize the Secretary of the Treasury to purchase bad mortgages so that a homeowner facing foreclosure could renegotiate the loan based on the diminished value of the home. Obama maintained that the core problem in the housing crisis is deregulation of the financial industry that has led to reckless risk-taking and loans made to those who could not afford them.

 

To rein in federal spending, McCain called for an across-the-board spending freeze on all nondefense programs. Obama said he disagrees with across-the-board spending cuts, saying it was like using a hatchet when a scalpel is more appropriate. "We need to prioritize spending and tax policy," Obama maintained.

 

McCain likened Obama's tax policy to pinning jello to the wall. He contended that 50 percent of small business revenue would be taxed under Obama's plan. Obama disagreed, noting his plan would not increase taxes on anyone earning less than $250,000 annually. He noted that only two percent of small businesses earn more than $250,000 and would be subject to a tax increase.

 

Both candidates were asked whether they would tackle entitlement reform during the first two years in office. Obama said his administration would take on Social Security quickly during his first term, but he is not sure if it would be done within the first two years in office.

 

McCain claimed that it is "not that hard to fix Social Security," noting that President Reagan and former House Speaker Tip O'Neil, D-Mass., worked together on a plan to reform the system in the 1980s.

 

McCain noted that Medicare would be tougher to fix. He recommended the establishment of a bipartisan commission on Medicare reform similar to the creation of a base-closing commission. He also said that Congress should be allowed only an up-or-down vote on the reform plan.

 

By Paula Cruickshank, CCH News Staff

State Headlines

Colorado --Sales and Use Tax: City Could Not Retroactively Apply Taxes

 

A medical company's refund of municipal use tax payments was affirmed by the Colorado Court of Appeals which held that the municipality could not retroactively impose an expanded use tax upon taxpayers. Colorado's taxpayer bill of rights (TABOR) provisions require voter approval of tax measures in advance. The municipality's use tax was initially approved by the voters in 1996, and only applied to construction and building materials. In 2003, the municipality passed an ordinance that attempted to expand the tax to apply to all tangible personal property. However, since the measure was never submitted for voter approval, the expanded use tax was not valid. Finally, in 2006, an expanded use tax was submitted and approved by the voters imposing a use tax on the privilege of storing, using, distributing, or consuming tangible personal property at retail in the municipality. The taxpayer had paid use tax on items other than construction and building materials during the period between 2003 and 2006, and requested a refund for all use taxes paid on items other than construction and building materials. The taxpayer was entitled to the refund, because the 2006 measure with voter approval created a new tax, and the tax could not be applied retroactively. The municipality was not authorized to impose a use tax on items other than construction and building materials until voter approval in 2006, so any use taxes paid by the taxpayer, other than on construction and building materials, was ordered to be refunded.

HCA-Healthone, LLC v. City of Lone Tree, Colorado Court of Appeals, No. 07CA1446, October 2, 2008, ¶200-837

 

Other References:

 

Explanations at ¶61-710

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