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November 11,  2008

Federal Headlines

IRS Announces 2009 VITA Grant Recipients (IR-2008-127)

 

The IRS announced its award of nearly $8 million in matching grants to support its Volunteer Income Tax Assistance grant program (VITA). Under the program, the IRS awarded matching grants to 111 organizations that plan to offer free return-preparation sites in 2009. Taxpayers will find sites located throughout the 50 states and the District of Columbia. Richard E. Byrd, Jr., IRS Commissioner, Wage and Investment Operating Division, said, "This is the first time we've been able to provide matching grants to support the VITA program. These grants can be used to expand free services to some of the millions of taxpayers served each year by these VITA sites and their volunteer tax preparers." Included among the recipients of the matching grants are United Way organizations in various states, legal aid societies, community colleges and universities, credit unions, and the AARP Foundation in Washington, D.C.

 

Funds provided by VITA will serve to:

 

--Enable VITA programs to extend services to underserved populations and hardest to reach areas, both urban and nonurban;

 

--Increase the capacity to file returns electronically;

 

--Heighten quality control;

 

--Enhance training of volunteers; and

 

--Significantly improve the accuracy of returns prepared by the VITA sites.

 

Over 370 organizations submitted applications requesting more than $30 million in matching funds, creating an overwhelming response to the inaugural VITA grant program. The VITA partners comprise organizations that provide free federal tax return preparation and electronic filings for those taxpayers with moderate to low income. Members of the VITA program have experienced significant support since its inception in 1969. Alongside Tax Counseling for the Elderly, a sister program of VITA dedicated to volunteer return preparation for elderly taxpayers, over three million economic stimulus payment requests and tax returns were prepared and filed in 2008 at nearly 12,000 locations across the nation. During the 2009 filing season, individuals and families with an adjusted gross income of $42,000 will be eligible to receive assistance from VITA partners.

IR-2008-127

 

VEBA's Expenditure of Investment Income on Member Benefits Did Not Prevent Its Inclusion in Calculation of Excess in Qualified Asset Account (CNG Transmission Management VEBA, FedCl)

 

A tax-exempt voluntary employees' beneficiary association (VEBA) was required to include its total investment income for the year when determining if it had an excess in its qualified asset account. It could not avoid the limitation on exempt function income in Code Sec. 512(a)(3)(E)(i) merely by allocating investment income toward the payment of welfare benefits during the course of the tax year. In addition, it failed to present any evidence of its excess over the account limit for purposes of determining whether it was entitled to a tax refund pursuant to Code Sec. 512(a)(3).

 

Although Code Sec. 512(a)(3)(E)(i) is ambiguous with regard to the treatment of investment income in relation to the amount of member benefits paid during the tax year, Reg. §1.512(a)-5T was a reasonable interpretation of the statute and dispelled any ambiguity. The formula provided in the regulation for determining a VEBA's unrelated business taxable income (UBTI) does not provide for reducing a VEBA's investment income based on its expenditures for welfare benefits during the year.

 

The VEBA's passive investment income could be excluded from UBTI only if it did not result in an excess over the account limit. Thus, the IRS correctly interpreted the formula in Reg. §1.512(a)-5T to provide that the UBTI of the VEBA was the lesser of the investment income of the VEBA or the excess of total investment income over the account limit as determined under Code Sec. 419. The organization was not entitled to a refund of taxes paid on its UBTI because it did not show that its excess investment income over the qualified asset account limit was less than the amount reported reported on its return as UBTI for the year.

CNG Transmission Management VEBA, FedCl, 2008-2 USTC ¶50,626

Other References:

 

Code Sec. 419

 

CCH Reference - 2008FED ¶19,301.75

 

Code Sec. 512

 

CCH Reference - 2008FED ¶22,837.30

 

CCH Reference - 2008FED ¶22,837.84

 

Tax Research Consultant

 

CCH Reference - TRC COMPEN: 54,352.15

CCH Reference - TRC EXEMPT: 15,208

 

State Headlines

Massachusetts --Multiple Taxes: Governor Sends Tax Amnesty Plan Amendment to Lawmakers

 

Massachusetts Governor Deval L. Patrick has sent lawmakers an amendment to Sec. 9 of H.B. 5132, which would create a two-month tax amnesty program for fiscal year 2009. In a letter to House and Senate Representatives, the governor said that, as drafted, the provision does not provide the Commissioner of the Department of Revenue with the authority to determine the scope of the amnesty program, particularly in terms of tax types and tax periods to which the amnesty would apply. Governor Deval wrote, "I am concerned that allowing a penalty waiver to extend to cases in which the taxpayer has already agreed to pay tax and penalty amounts or to cases where the taxpayer is otherwise very likely to pay the amounts would reduce the Commonwealth's revenue, rather than increase it." Under the amendment, the commissioner would determine when the two-month amnesty period would occur. However, such period could not be later than June 30, 2009. Furthermore, all required payments would have to be made on or before that date in order for the amnesty to apply.

Letter to Senate and House Representatives, Governor Deval L. Patrick, November 7, 2008, Telephone Conversation, Office of Governor Deval L. Patrick, November 10, 2008.

 

Wisconsin --Personal Income Tax: 2008 Filing Thresholds Released

 

For purposes of being required to file a Wisconsin personal income tax return for 2008, the following thresholds apply. For a single filer under age 65, a return must be filed if gross income is $9,660 or more (previously, $9,490 or more). For a single filer 65 or older, the threshold is $9,910 (previously, $9,740).

 

For joint filers the threshold remains at $18,000 (unless both spouses are 65 or older, in which case the threshold is increased to $18,040). For married taxpayers filing separately, the threshold remains at $9,000, applicable to each spouse individually.

 

For head of household filers under age 65, the threshold is $12,270 (previously, $12,050). For head of household filers age 65 or older, the threshold is $12,520 (previously, $12,300).

 

For part-year residents and nonresidents, the threshold remains at $2,000 (for married taxpayers, a return must be filed if combined gross income is $2,000 or more).

 

For 2008, dependents having gross income of more than $900 (previously, $850), including at least $301 of unearned income, must file a return. Further, dependents must file a 2008 return if their gross income exceeds the following amounts: for single filers, $8,960 (previously, $8,790); for heads of household, $11,570 (previously, $11,350); for joint filers, $16,140 (previously, $15,830); and for married taxpayers filing separately, $7,660 (previously, $7,520).

 

In addition, the standard deduction amounts have increased for tax year 2008, as follows: for single filers, $8,960 (previously, $8,790); for heads of household, $11,570 (previously, $11,350); for joint filers, $16,140 (previously, $15,830); and for married taxpayers filing separately, $7,660 (previously, $7,520). For all filing statuses, the standard deduction amount phases out as a taxpayer's income increases.

 

Subscribers to CCH Tax Research NetWork can view the text of the Department's instructions for 2008 Form 1A.

2008 Form 1A Instructions, Wisconsin Department of Revenue, November 2008.

 
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