Tax practice

Gov. Phil Bredesen has told Nashville business leaders that he will not seek a state income tax if re-elected in 2006. Bredesen made the same promise before his first term, but had refused to extend the pledge as he campaigns for a second term.

The Internal Revenue Service has ordered 52 Cross Match digital fingerprinting systems from Cross Match Technologies, to use in conducting fingerprint-based background checks on employees and contractors.

With the President's Advisory Panel on Federal Tax Reform due to report Nov. 1, we asked industry leaders, many who made Accounting Today's recently released 2005 Top 100 Most Influential People list, to tell us what sort of tax system they would create.

Bolstered by higher sales and lower costs, consulting giant Accenture posted a 25 percent hike in fourth-quarter profits, to $229.1 million, versus the year-ago period.

Meeting for the first time since July, the President's Advisory Panel on Federal Tax Reform began focusing discussions on what recommendations will be included in its report, due on Nov. 1.

KPMG ANNOUNCES NEW TAX SERVICES HEADS: Moving on from its recent legal troubles, KPMG named vice chairs for its tax services and tax services operations.Shaun T. Kelly, 46, and Frederick S. "Rick" Smith, 49, will take over the respective tax leadership roles effective at the end of the fiscal year on Sept. 30. Tax services vice chair James Brasher will assume other significant duties within KPMG's organization, while operations vice chair John Chopack will retire in early 2006, as previously planned.

As the U.S. mobilizes on a number of fronts to assist in the recovery from Hurricane Katrina, the Internal Revenue Service has mobilized as well. The IRS has already released several information releases in response to Hurricane Katrina.There have already been disasters this year involving droughts, floods, tornadoes and other hurricanes. The IRS had released relief guidance earlier this year involving Hurricane Dennis and a tornado in Wyoming. It is seldom, however, that a disaster of the scope and national impact of Hurricane Katrina comes along.

Calling the proposal for a "return-free" filing system "flawed" and "dangerous to taxpayers," 14 groups have written the President's Advisory Panel on Tax Reform to urge that it be taken off the table in any final report.While the timetable for a final report has been delayed by Hurricane Katrina relief efforts, with the final two scheduled meetings postponed, the return-free concept is one of the proposals under consideration by the panel.

The Internal Revenue Service has accused former U.S. ambassador to Ireland Richard Egan of setting up a $62 million illegal tax shelter as soon as he moved to Dublin, a charge Egan denies.

A new study estimates that almost 30 percent of children potentially eligible for the child tax credit live in households with incomes too low to qualify for the entire $1,000 credit.

City council member and former Washington mayor Marion Barry is being investigated by the Internal Revenue Service and the U.S. Attorney's Office in Washington for failing to pay taxes, according to published reports.

Complying with the current federal tax code costs American taxpayers at least $100 billion annually, and lost economic efficiency associated with the tax system may top half a trillion dollars, auditors for the Government Accountability Office told Congress.

After a delay brought on by Hurricane Katrina, the President's Advisory Panel on Federal Tax Reform announced two October meetings and a deadline of Nov. 1 to issue its comprehensive report.

Taxpayers affected by Hurricanes Katrina and Rita now have until Feb. 28, 2006 to file tax returns and pay any taxes due, according to the Internal Revenue Service. Taxpayers affected by the hurricanes may be eligible for tax relief regardless of where they live.

Louisiana Gov. Kathleen Blanco asked lawmakers for help in rebuilding the state devastated by Hurricanes Katrina and Rita.

The Internal Revenue Service announced relief for taxpayers affected by Hurricane Rita, including many of the deadline reprieves and fee waivers enacted in the immediate aftermath of Hurricane Katrina.

After years of procedural delays, the trial between investment company Berkshire Hathway Inc. and the Internal Revenue Service has begun over the legality of tax deductions taken by the company in the late 1980s.

The Nelson A. Rockefeller Institute of Government issued a report detailing a 13.3 percent average increase in state tax revenues across the country.

TREASURY, IRS ANNOUNCE PROPOSED COST-SHARING REGS: The U.S. Treasury Department and the Internal Revenue Service announced proposed regulations that provide further guidance to Section 482, which determines taxable income in connection with cost-sharing arrangements affecting intellectual property.The changes could mean a big difference to the bottom lines of companies in the pharmaceutical and software industries, whose main asset is their intellectual property.

Although the Energy Tax Act allocates considerably more dollars to efficient energy production, the homeowner energy conservation credits, along with the alternative motor vehicle credits (examined in our last column, Sept. 5-25, 2005, page 10), have made most of the headlines.While long-term predictions vary on whether the $500 lifetime (i.e., 2006 and 2007) residential energy property credit, the $2,000 credits for solar electricity and hot water, and the fuel-cell credit will be used by most homeowners or only a few, interest in them is high. In the age of Home Depot and ongoing relationships with home contractors, however, there is no doubt that, in time, enough situations will arise to test every issue and explore every fine point.