Signup To Receive CCH Tax News Headlines Via Email

November 19,  2008

Federal Headlines

No Agreement on Senate Stimulus Package

 

A $100.3-billion economic recovery package unveiled late on November 17 by Senate Majority Leader Harry Reid, D-Nev., is running into stiff opposition from Republican leaders and may force Democrats to revisit the package at the start of the 111th Congress that convenes in January 2009. The measure includes $25 billion in direct loans to the auto industry and provisions for above-the-line tax deductions for interest payments on car loans and state sales/excise taxes for new cars purchased between November 12, 2008, and December 31, 2009. The measure was first introduced as separate legislation (Sen 3683) by Sen. Barbara Mikulski, D-Md., and immediately incorporated into the stimulus package.

 

"Families across the country facing rising prices and disappearing jobs cannot wait until January for help making ends meet, and they shouldn't have to," Reid said. "Congress can act now by passing a recovery package that creates more than 635,000 jobs, protects the auto industry that is the backbone of our manufacturing sector, and helps families cope with ever-increasing costs of living."

 

However, Senate Minority Leader Mitch McConnell, R-Ky., asserted that the $25 billion in direct loans to the auto industry from the Emergency Economic Stabilization Act (P.L. 110-343) is a short-term solution that would do little to aid the industry in the long run. Instead, McConnell threw his support behind a White House proposal that would allow immediate use of a $25-billion Energy Department loan program (included in P.L. 110-140) to assist auto makers in retooling for more fuel-efficient cars.

 

In addition to funds for the auto industry, the Senate bill folded in earlier House-passed bills --the Economic Recovery Bill of 2008 (HR 7110) and the Unemployment Compensation Extension Act of 2008 (HR 6867) (TAXDAY, 2008/11/11, C.1) --that include $37.8 billion in aid to states to reduce their share of Medicaid costs, another $13.5 billion for states to spend on infrastructure repair, over $22 billion in loan authority for small businesses, and funding for increased unemployment benefits, and energy savings programs.

 

White House Deputy Press Secretary Tony Fratto said the overall package would not stimulate the economy very much or very soon. The House may take up an economic stimulus bill, if it meets during the week of November 17, according to a schedule distributed by House Majority Leader Steny H. Hoyer, D-Md.

 

By Jeff Carlson and Paula Cruickshank, CCH News Staff

Economic Recovery Act of 2008, HR 7110

SDCC Release: Reid and Byrd Unveil Economic Recovery Package That Creates More Than 635,000 Jobs

 

 

Applicable Federal Rates for December 2008 Released (Rev. Rul. 2008-53)

 

Various prescribed rates for federal income tax purposes for December 2008 have been provided by the IRS. The annual short-term, mid-term, and long-term applicable federal interest rates (AFRs) are 1.36 percent, 2.85 percent and 4.45 percent, respectively. The semiannual short-term, mid-term, and long-term AFRs are 1.36 percent, 2.83 percent and 4.40 percent, respectively. Quarterly short-term, mid-term and long-term AFRs are 1.36 percent, 2.82 percent and 4.38 percent, respectively. Finally, the monthly short-term, mid-term and long-term rates are 1.36 percent, 2.81 percent and 4.36 percent, respectively.

 

The short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for December 2008 for purposes of Code Sec. 1288(b) are 2.20 percent, 3.82 percent and 5.40 percent, respectively, when annual compounding is used.

 

Additionally, the Code Sec. 382 adjusted federal long-term rate is 5.40 percent, and the long-term tax-exempt rate is also 5.40 percent. The Code Sec. 42(b)(2) appropriate percentage for the 70-percent present-value, low-income housing credit is 7.84 percent, and the appropriate percentage for the 30-percent present-value, low-income housing credit is 3.36 percent. The Code Sec. 7520 AFR for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest is 3.40 percent.

 

Finally, the applicable rate of interest for 2009 for purposes of Code Secs. 807 and 846 is 4.06 percent.

Rev. Rul. 2008-53, 2008FED ¶46,652

Rev. Rul. 2008-53, FINH ¶30,604

Other References:

 

Code Sec. 42

 

CCH Reference - 2008FED ¶173.02

 

CCH Reference - 2008FED ¶176.01

 

CCH Reference - 2008FED ¶4305.03

 

Code Sec. 382

 

CCH Reference - 2008FED ¶17,115.28

 

Code Sec. 642

 

CCH Reference - 2008FED ¶24,308.1885

 

Code Sec. 807

 

CCH Reference - 2008FED ¶25,821.15

 

Code Sec. 846

 

CCH Reference - 2008FED ¶26,331.10

 

Code Sec. 1274

 

CCH Reference - 2008FED ¶31,310.05

 

Code Sec. 7520

 

CCH Reference - 2008FED ¶42,785.40

CCH Reference -

FINH ¶22,630.05

 

Code Sec. 7872

 

CCH Reference - FINH ¶18,950.05

 

Tax Research Consultant

 

CCH Reference - TRC ACCTNG: 36,162.05

 

Two-Level Sentence Enhancement for Abuse of Position of Trust Proper (Callaway, CA-4)

 

A federal district court's two-level enhancement of an individual's sentence for filing false federal income tax returns was proper. The adjustment was warranted because the individual's abuse of his position of trust significantly contributed to the commission and concealment of his crime. Moreover, although the primary victim of his offenses was the United States, his former employer, for whom he provided accounting services, was also victimized by his conduct.

 

Unpublished opinion affirming, per curiam, an unreported DC N.C. decision.

P.F. Callaway, Jr., CA-4, 2008-2 USTC ¶50,638

Other References:

 

Code Sec. 7206

 

CCH Reference - 2008FED ¶41,333.216

 

CCH Reference - 2008FED ¶41,333.217

 

Tax Research Consultant

 

CCH Reference - TRC IRS: 66,462.05

 

State Headlines

Missouri --Corporate Income Tax: Hospital With Out-of-State Management Could Not Apportion Its Income

 

A hospital located in and transacting business in Missouri that contracted with an affiliated out-of-state company to perform management functions was not entitled to apportion its income for Missouri corporate income tax purposes, because it employed no labor or capital outside Missouri.

 

Apportionment is for corporations that do business in more than one state and must divide their income between those states for taxation purposes. A corporation that transacts business solely in Missouri must include all of its income as Missouri income, and is not entitled to apportion that income. All of the hospital's property and employees were located in Missouri, and all of its patients were treated within Missouri. The hospital had no independent contractors working exclusively for it outside of Missouri. Paying an affiliated out-of-state company to perform management services did not suffice as the employment of labor outside the state of Missouri within the meaning of Missouri Supreme Court precedents. If that position was accepted, other taxpayers could utilize the services of out-of-state management companies to shield a portion of their income from taxation in the sole state where they did business.

 

The hospital argued that out-of-state efforts contributed significantly to the production of the hospital's income. However, the business involved was that of operating a hospital. Local personnel, including a local management team, were employed to provide patient care and operate the hospital. The management team in Tennessee was actively involved only in the nonmedical decision-making and reporting functions at the hospital. Thus, the hospital did not show that it transacted business partly in another state or employed labor or capital outside the state.

 

Further, even though the hospital was not required to show that it was subject to tax in another state in order to apportion its income, the fact that it presented no evidence of payment of tax in another state was significant and provided support for the conclusion that the hospital did not employ labor or capital in another state. Apportionable interstate business activity must have some geographical nexus with Missouri and with some other state. The hospital's contractual management agreement with an affiliated out-of-state company was insufficient to establish that nexus with another state.

 

In addition, the decision that the hospital was not entitled to apportion its income was not an "unexpected decision," which could be applied only after the most recently ended tax period, because the decision was consistent with prior Missouri Supreme Court and Administrative Hearing Commission decisions.

Moberly Regional Center, a/k/a Moberly Hospital, Inc. v. Director of Revenue, Missouri Administrative Hearing Commission, No. 07-0283 RI, October 6, 2008, ¶203-019

 

Other References:

 

Explanations at ¶11-520

 

Explanations at ¶89-236
Copyright © 2008, CCH INCORPORATED. All rights reserved.