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In a case of first impression, the Ninth Circuit Court of Appeals decided that a federal district court erred in failing to reduce a corporation's interest award to the extent its wrongful levy judgment exceeded $10,000. The plain language of Code Sec. 6621 compelled the conclusion that Congress intended to treat wrongful levy judgments like overpayments of tax for purposes of calculating interest.
Code Sec. 7426(g) provides for interest on a wrongful levy judgment to be calculated as provided in Code Sec. 6621. Code Sec. 6621 provides that the interest rate on corporate tax overpayments equals the federal short-term rate plus 2 percent; when the corporate overpayment exceeds $10,000, the rate on the excess is reduced by 1-1/2 percent. The company asserted that the rate reduction did not apply to a wrongful levy judgment because a levy is not an overpayment of tax. However, Congress clearly expressed its intent to treat those whose property has been wrongfully levied similarly to those who have overpaid their taxes. Therefore, the district court should have applied the rate reduction to the portion of the company's wrongful levy award exceeding $10,000.
Reversing and remanding an unreported DC Wash. decision.
Steven N.S. Cheung, Inc., CA-9, 2008-2 USTC ¶50,616
Other References:
Code Sec. 6621
CCH Reference - 2008FED ¶39,455.51
Code Sec. 7426
CCH Reference - 2008FED ¶41,713.10
Tax Research Consultant
CCH Reference - TRC IRS: 51,156.30
CCH Reference - TRC PENALTY: 9,100
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The Business Advisory Council (BAC) of the Streamlined Sales Tax (SST) Governing Board has invoked the issue resolution process of the SST Agreement and requested that the Board reconsider its finding that New Jersey's fur tax does not put the state out of compliance with the Agreement. This is the first time that the Agreement's issue resolution process has been invoked and the procedures to be followed are still being worked out. The BAC has requested a hearing before the Board's Issue Resolution Committee, which will schedule a hearing not sooner than 60 days from receipt of the petition on November 3, 2008.
The Board has found New Jersey, a member state, out of compliance with the Agreement for its failure to adopt certain telecommunications provisions. A series of staggered sanctions were approved, the first of these (a loss of voting rights) comes into effect if New Jersey is not back in compliance by January 1, 2009. However, the Board, by a divided vote on September 4, 2008, upheld a separate finding by its Compliance Review and Interpretations Committee (CRIC) that New Jersey's retail gross receipts tax on fur clothing is not out of compliance with the Agreement. (TAXDAY, 2008/09/09, S.1)
The BAC contends that New Jersey's fur tax violates various provisions of the Agreement. New Jersey's general use tax is imposed at 7%, while its use tax on sales of fur clothing is imposed at 6%, which the BAC alleges violates the Agreement's prohibition on multiple use tax rates in a member state. The BAC also alleges that New Jersey's definition of "fur clothing" is substantially different from the uniform definition in the Agreement.
Legislation intended to resolve New Jersey's conformity issues involving its telecommunications provisions and taxation of fur clothing has passed the Assembly and is awaiting action in the Senate. (TAXDAY, 2008/09/29, S.12)
Subscribers to CCH Tax Research NetWork can view the BAC petition.
Petition for Reconsideration, Business Advisory Council, November 3, 2008.
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