Tax Law Blog | IRS Tax Attorneys

A federal judge is due for an update on negotiations aimed at settling the government’s tax evasion lawsuit against Swiss bank UBS.

A hearing is scheduled Wednesday morning in Miami federal court so the judge can find out more about the chances of a deal from lawyers for the bank, the Swiss government and the U.S. Justice Department.

Without an agreement, a full-scale hearing is set to begin Monday on a U.S. effort to obtain the names of some 52,000 wealthy account holders believed to be hiding assets and dodging U.S. taxes. The Swiss and UBS insist they can’t turn over all the names without violating Switzerland’s bank secrecy laws, a position the U.S. rejects.

Switzerland’s foreign minister is to discuss the case later this week with Secretary of State Hillary Clinton.

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A new New York state law that makes it easier for residents to eliminate taxing districts won’t help those who want to get rid of a special Town of Union tax that supports two village libraries.

Union attorney Kurt Schrader said Your Home Public Library in Johnson City and George F. Johnson Memorial Library in Endicott are not part of a special library taxing district, which the new law targets.

Instead, the libraries get their funding through a provision in the education law that allows residents to enact a tax through a referendum - which they did in 2004. The referendum passed 8,720 to 6,587.

The distinction is important, because New York State Attorney General Andrew Cuomo’s new law, which passed the state Legislature and was signed by the governor, addresses special districts.

Cuomo said the law was intended to reduce overlapping layers of government which “saddle residents with the nation’s highest local taxes.”

Last year, Union Town Board members moved to place a referendum on the ballot to eliminate library funding completely, but two state courts ruled against the move. Instead, voters last November went on to approve a referendum increasing the tax to $1.54 million from $1.37 million.

Last year, Schrader said Union’s elected officials had the right to ask voters if they wanted to eliminate the special tax, which has been a point of controversy since it was added to property tax bills following the 2004 referendum.

Libraries have fought to keep the funding derived from the special tax because, prior to the referendum, they were at the mercy of government officials who decided how much funding they would receive.

Johnson Memorial Library Director Edward Dunscombe said the new Cuomo law makes it unlikely that the libraries would form a district in the future for fear someone would then use the new law to try to eliminate the district.

In some ways, he said, a library district might be beneficial. For example, a library district has an elected board, unlike the present setup where the mayor appoints the board; and a taxing district is funded with an annual vote, instead of gathering petitions and getting a referendum placed on the ballot to increase funding.

Union Supervisor John Bernardo said even if Cuomo’s law allowed him to abolish the library tax he doesn’t know if he would pursue it.

“We fought the last referendum item (the libraries) put on the ballot. Voters decided they were OK with increasing the amount of extra tax,” said Bernardo.

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A new law that fully exempts veterans who suffered severe disabilities during military service will not shake up local tax rolls.

Final certified home values issued Friday by the Lubbock Central Appraisal District reported only slight changes in the estimated total values of property the district published in May, before the proposal became law.

Governments, including school boards, the city of Lubbock and Lubbock County, will use the figures to calculate how much money their tax rates will raise for budgets over the next year.

But Texas threw local governments a curve in June after a new law took effect exempting disabled veterans from some or all of their property taxes.
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With its state parks and summer schools on the chopping block, budget-busted California could see a $1.4 billion windfall if it legalizes and taxes the sale of marijuana, the state tax board found in an analysis that was published last week.

But a close look at that $1.4 billion figure raises a timely and important question:

What in blazes were they smoking?

To reach that amount, the board apparently relied on a source that relied on a source that misquoted a book that misquoted a study, all involving a hazy mix of out-of-date numbers, high margins of error and complete guesswork that could be a mere $700 million off the mark.

California’s Board of Equalization published its much ballyhooed analysis last week of a bill that would tax pot like alcohol and also levy an extra $50 fee on every ounce (which already costs about $400), a green godsend the bill’s sponsor says the state can’t afford to pass on.

“It defies reason to propose closing parks and eliminating vital services for the poor while this potential revenue is available,” State Assemblyman Tom Ammiano said in a statement.

According to the tax commission’s report, Californians consume 16 million ounces of pot every year — 1 million pounds exactly — a suspiciously round number the report said was derived from a “literature review” of “law enforcement and academic studies.”

That number would go up even more, it said, if prices dropped by half as the drug became legal.

But FOXNews.com took a close look at the board’s analysis and found a $700 million kink in its accounting.

The board appears to have based its 16-million-ounce guess on a problematic “study” conducted by the founder of a pot-growing university in Oakland and by the director of California’s branch of NORML, the National Organization for the Reform of Marijuana Laws.

But the fact is, no one — not even law enforcement agencies — really knows how much weed gets smoked in California, because self-reported users can and do lie on government surveys.

Drug Enforcement Administration agents in California said they “don’t really track users,” the Drug Czar’s office said it doesn’t follow the amount of pot consumed, and the California Highway Patrol said they “do not have those types of statistics.”

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The company-issued cell phone you tote around could is actually a tax liability under a 2-decades-old tax provision Congress and the IRS would like to see scrapped.

You probably don’t consider that electronic umbilical cord between you and your boss as a fringe benefit, but federal tax law does.

Part of the tax code enacted in 1989 puts company-issued cell phones in the category of “listed property,” meaning you have to keep detailed records to prove you use the phone less than 50 percent of the time for personal use or pay income tax on personal use as a benefit.

Most everyone hasn’t had to worry about the provision because the IRS hasn’t made an issue of it.

U.S. Sen. Mel Martinez, R-Fla., has joined a congressional effort to make sure the IRS doesn’t make employees and employers scramble to keep track of personal and business use of the iPhones and BlackBerrys that have become so entwined with our lives or pay taxes on personal use.

“When cell phones first came out, they were viewed as a luxury,” said Ken Lundberg, a spokesman for Martinez.

But that has changed in 20 years, and bills in the U.S. House and Senate seek to bring the tax code in step with the times.

The Senate bill has 59 co-sponsors, and the House bill has 75. Both call for removing cell phones as listed property on the tax books.

The legislation may get no argument from the IRS.

In June, the agency asked for public comments on how to simplify rules on employer-issued cell phones, a posting on the IRS Web site says, calling the law “burdensome, poorly understood by taxpayers and difficult for the IRS to administer consistently.”

The statement by IRS Commissioner Doug Shulman asks for congressional action to be sure there are no tax consequences for companies or employees for personal use of company cell phones and calls the law “obsolete”.

An IRS spokesman, Michael Dobzinsik, said the agency has an obligation to apply all provisions of the tax law, but did not know how much compliance there has been or the manpower devoted to its enforcement.

“Obviously, resources are an issue,” he said.

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A people’s veto effort to overturn Maine’s newly enacted tax code changes is struggling financially. Reports show it’s just raised $50.

The Republican-led effort targets changes in sales and income tax policy. Opponents are trying to collect more than 55,000 signatures to put the repeal question before voters in November.

Maine Public Radio reports GOP leaders say that unlike other people’s veto campaigns with paid circulators, theirs is a true grass roots initiative.

Tax law supporters say they’re not surprised the repeal effort is struggling.

The law at the center of the people’s veto campaign extends the state’s sales tax to a number of currently untaxed services and raises the food and lodging tax. It also lowers the state’s top income tax rate from 8.5 to 6.5 percent for most Mainers.
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A new law in New Hampshire may thwart attempts by other states to impose their sales taxes on their residents purchasing tires and other products in the Granite State, which has no sales tax.

N.H. Gov. John Lynch signed into law July 9 a bill that quickly traveled through the state legislature in response to a legal battle in neighboring Massachusetts between Town Fair Tire Centers Inc. and the Massachusetts Department of Revenue (DOR). The DOR claims Town Fair’s stores in New Hampshire should be collecting the Massachusetts 5-percent sales tax—known as a use tax—from customers identified as Massachusetts residents.

The new law prevents retailers from providing private consumer information to another state seeking to impose a use tax. The bill also puts the burden of proof on Massachusetts or other states on whether a good or service purchased in New Hampshire is to be used, stored or consumed in another state.

Town Fair has 74 locations in New England, including 25 stores in Massachusetts and seven in New Hampshire. Massachusetts had conducted an audit of the dealership’s records and discovered numerous purchases by Massachusetts residents at the New Hampshire stores between 2001 and 2003.

Town Fair is fighting the state’s assessment against the dealership for $229,311 in uncollected use tax, penalties and interest. The case has been argued before the Massachusetts Supreme Judicial Court and is awaiting a decision.

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Federal estate-tax laws are on a collision course with chaos in 2010, thanks to an old piece of legislation that’s on schedule to come to full fruition less than six months from now.

Many estate-planning experts don’t believe Congress and the White House will let matters transpire as mandated by the Economic Growth and Tax Relief Reconciliation Act of 2001, which remains on the books.

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Louisiana Gov. Bobby Jindal approved $4.9 million in tax breaks for ports, sportsmen and other groups for this year, though that figure will balloon to an estimated $30.3 million in 2010 when additional tax breaks take effect.

In all, Jindal on Thursday signed nine tax-break bills, most of which don’t take effect until July 1, 2010: tax help for the movie, video game and music recording industries, companies doing research and development, and other businesses.

From this year to 2014, companies will have access to $190.5 million in new tax reduction programs, according to projections by the Legislative Fiscal Office.

“By signing these bills, we’re ensuring that we not only have the ability to remain economically competitive, but that we can continue to move our state forward by making Louisiana the greatest place in the world to find a great paying job and raise a family,” Jindal is quoted as saying in a news release.

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Retailers are making a push on Beacon Hill to nix tax regulations they say penalize big retail chains that are based in Massachusetts.

Right now, retailers that are anchored in the state are taxed based on their Massachusetts-apportioned income, which takes into account sales, property, and payroll. But the Bay State-based corporations back a bill pushed by Democratic Rep. Pam Richardson of Framingham that would require only their sales factor to be used in calculating their taxable income for the state.

Richardson told the Legislature’s revenue committee on Wednesday that the state’s present tax structure discourages retailers and wholesalers from expanding headquarters offices and distribution centers in the state, and encourages them to locate employees and property outside of the state.

In some cases under the current system, the portion of taxable income inflates to twice as much as their sales in Massachusetts.

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