Tax research

One quarter of all individual tax returns so far this filing season are being processed by the Internal Revenue Service's modernized account information computer system. The Customer Account Data Engine, or CADE, has processed 15.1 million individual tax returns through March 7, more than 25 percent of all those processed so far this year by the IRS. The number of tax returns processed this year by CADE has already topped the 11.2 million returns the system handled for all of last year. CADE, which is at the core of the effort to replace many of the agency's aging systems, dramatically speeds up internal IRS processing, permitting taxpayer accounts to update on a daily basis, rather than the older system's weekly basis. The IRS is rolling out CADE in a series of "releases," each improving on and adding to the system capabilities. The current release, launched in January, permits CADE to process certain 1040, 1040A and 1040EZ forms, as well as Schedules C, E and F for Form 1040 and a number of other IRS schedules, such as the Earned Income Tax Credit.

The American Institute of CPAs sent a letter to the Senate Finance Committee prior to its March 12 hearing on estate tax reform urging lawmakers to make permanent changes to the estate tax prior to the current law expiring in 2010.In a letter, the institute reiterated a prioritized series of reforms -- a list that the AICPA had previously sent to Congress in 2005 and again in 2006.

Sen. Max Baucus, D-Mont., chairman of the Committee on Finance, and Sen. Chuck Grassley, R-Iowa, ranking member, have written to several religious ministries to urge cooperation with an earlier information request from Grassley. The ministry inquiry that Grassley launched last November is meant to gauge the effectiveness of certain tax-exempt policies. "This ought to clear up any misunderstanding about our interest and the committee's role," Grassley said. "We have an obligation to oversee how the tax laws are working for both tax-exempt organizations and taxpayers. Just like with reviews of other tax-exempt organizations in recent years, I look forward to the cooperation of these ministries in the weeks and months ahead." Grassley wrote to six ministries in November, asking a series of questions on the nonprofit organizations' expenses, treatment of donations and business practices. The questions were based on presentations of material from watchdog groups and whistleblowers and on investigative reports in local media outlets. One of the six ministries, Joyce Meyer Ministries of Fenton, Mo., has cooperated substantially with his request and provided the requested information. Benny Hinn Ministries of Grapevine, Texas, has indicated a willingness to cooperate and provided answers to five of the 28 questions so far. Representatives for Randy and Paula White of Without Walls International Church/Paula White Ministries, Tampa, Fla., have verbally indicated to Finance Committee staff that they would cooperate. The remaining ministries have not cooperated, citing privacy protections or questioning the committee's standing to request the information. Baucus and Grassley wrote to them on March 11 to describe the committee's jurisdiction and role in determining the effectiveness of tax policy developed by the committee, distinct from the Internal Revenue Service's role, which is to enforce existing law. The three ministries are: Kenneth and Gloria Copeland of Kenneth Copeland Ministries, Newark, Texas; Creflo and Taffi Dollar of World Changers Church International/Creflo Dollar Ministries, College Park, Ga.; and Eddie L. Long of New Birth Missionary Baptist Church/Eddie L. Long Ministries, Lithonia, Ga.

Next year's budget proposals offered by Senate Democrats contain a material increase in spending that is contrary to sound fiscal policy, according to Senator Chuck Grassley, R-Iowa, ranking member of the Committee on Finance. In his opening statement on the Senate floor debate of the Fiscal Year 2009 Budget, Grassley noted that the proposals would raise discretionary spending by 9 percent over last year's spending. "How many Americans got a 9 percent raise? How many American families raised their discretionary household spending by 9 percent? You would think proponents of fiscal responsibility would be looking at spending cuts, not 9 percent increases," he said. The consequences are not merely imposed on high-income taxpayers, according to Grassley. "Low-income folks, including millions of seniors, pay no tax on their dividend or capital gain income," he said. "If this budget stands, even with the Baucus amendment, millions of these low-income taxpayers, especially seniors, will pay a 10 percent rate on capital gains and could pay as high as a 15 percent rate on dividends."

The Internal Revenue Service needs to improve oversight of its process for interpreting tax laws through its published guidance program, according to a new audit publicly released today by the Treasury Inspector General for Tax Administration. The audit, "The Public Guidance Program Needs Additional Controls to Minimize Risks and Increase Public Awareness," examined the process by which the IRS Office of Chief Counsel develops tax guidance, including a pilot guidance program to request and evaluate public submissions before considering changes to existing regulations. The chairman and ranking member of the Senate Finance Committee requested the review after news articles questioned whether the pilot program was putting special interest before the public's interests when developing tax guidance. "We believe the pilot program does not present an increased risk of influence by special interest groups in the selection of guidance projects," TIGTA Inspector General J. Russell George said. "The pilot program did not directly create tax guidance or circumvent existing internal controls." "Although Counsel considers ideas from a wide variety of sources when selecting guidance projects for its annual business plan, it does not track all open projects on the business plan, which could lead to an increased risk of untimely actions, less management oversight, and less public awareness," George added. The audit makes seven recommendations to IRS, including expanding written procedures for developing and monitoring the guidance business plan, issuing more frequent updates to and establishing a reasonable expectation in the Priority Guidance Plan, and improving recordkeeping.

Big Four firm KPMG LLP is offering two Webcasts this week, with one on the potential affect of proposed Treasury Department regulations on contract manufacturing arrangements, and another on recent developments for companies doing business in India. "Proposed Regulations May Affect Taxation of Contract Manufacturing Arrangements" will take place on Thurs., March 13, at 2:00 p.m. EST, and will examine the Treasury and Internal Revenue Services' Feb. 27 proposed regulations on the foreign-based company sales income consequences under the Subpart F provisions of U.S. tax law. The proposed regulations are intended to modernize the FBCSI rules to reflect new manufacturing arrangements. Experts from KPMG's national tax, international corporate tax, and global transfer pricing services practices will discuss the proposed regulations and their potential impact on the supply chains of multinational companies. The other Webcast, "2008 India Budget Briefing," will take place on Wed., March 12, at 2:00 p.m. EST, and will discuss the potential implications of the country's recently introduced budget proposal for U.S. multinational companies with investments or operations in India, with a focus on various tax changes, and will include a Q&A session. Continuing professional education credits are available for both Webcasts, for participants who meet the eligibility requirements. To register, go to www.kpmgtaxwatch.com.

The Internal Revenue Service has issued guidance for the proper pooling treatment of automobiles, light-duty trucks, and crossover vehicles that have the characteristics of trucks and cars under the dollar-value, last-in, first-out inventory method. To address the distinctions between cars and light-duty trucks, and in response to an Industry Issue Resolution Program request submitted by Miller Chevalier Chartered and the National Auto Dealership Association, the Treasury Department and the Internal Revenue Service issued Revenue Procedure 2008-23. Light-duty trucks are trucks with a gross vehicle weight of 14,000 pounds or less. Effective for tax years ending on or after Dec. 31, 2007, the revenue procedure provides a safe harbor pooling method, the Vehicle-Pool Method, for resellers of cars and light-duty trucks. The Vehicle-Pool Method allows a reseller to establish a new vehicle pool for inventories of new vehicles including new cars, new light-duty trucks, and new crossover vehicles including SUVs, minivans and other similar vehicles and a used vehicle pool for inventories of used vehicles. Revenue Procedure 2008-23 also provides the procedures for a reseller subject to the LIFO pooling requirements to obtain automatic consent to change to the Vehicle-Pool Method.

The House Ways and Means Oversight Subcommittee plans to hold a hearing on the 2008 tax-filing season, Internal Revenue Service operations, fiscal year 2009 budget proposals and the IRS National Taxpayer Advocate's annual report.

Governments in large countries seem to be turning away from taxes as a way to force their citizens to follow better environmental practices, according to a report by KPMG.

The American Institute of CPAs has ramped up its mobility efforts to allow CPAs to practice in other states, with mobility bills enacted now in 12 states and legislation pending in 22 other states.

The Internal Revenue Service has opened its IRS Free File program to individuals who do not normally file tax returns so they can receive economic stimulus payments.

Democratic lawmakers in the New York State Assembly are reportedly considering the idea of levying an extra 1 percent income tax on everyone with income over $1 million in order to balance the state's budget and help fund transportation costs, but the proposal is likely to run into opposition from the governor and the State Senate.

The Internal Revenue Service has issued final regulations for tax deductions on domestic film productions, while revising the definition of the types of films that qualify for the deduction.

The House Subcommittee on Select Revenue Measures held a hearing to examine whether there is a need for a more uniform treatment of various derivative structures.

Representatives from PricewaterhouseCoopers outlined the benefits of an international tax treaty between the United States and Belgium at a seminar in New York.

Tax refund expectations could be tied to a taxpayer's astrological sign, according to a survey last tax season by credit-counseling agency Money Management International.

The Internal Revenue Service said it won't challenge the accuracy of income tax returns filed by eligible individuals who claim just $1.00 in adjusted gross income in order to receive an economic stimulus payment.

Financial services firm Gilman Ciocia is capitalizing on two perennials for this time of year - tax season and Major League Baseball spring training - to offer free tax prep services to attendees at several upcoming spring training games in Florida.

The Internal Revenue Service has automated user fee calculations for taxpayers who enter into installment agreements to make it easier to determine their eligibility for fee reductions for low-income taxpayers.

CCH has begun offering batch processing for its Tax Zone Locator and other products on the CCH Tax Research NetWork.