On June 7, 2013, the Supreme Court of Texas issued its ruling in Combs v. Health Care Services Corporation, which upheld a government contactor’s refund claim for sales taxes paid on purchases of tangible personal property used by the contractor in performing nontaxable services for the government. The decision should cause similarly situated contractors to consider if they have potential refund claims for open tax periods. However, the decision’s impact is limited by the Texas legislature’s enactment of legislation in 2011 narrowing the types of service contracts for which a government contractor can make tax-free purchases. The refund claims at issue in the case were for tax periods prior to 2011.
The main issue in Combs v. Health Care Services Corporation was whether the taxpayer’s purchases of tangible personal property, such as chairs, printers, and office supplies, were exempt from sales tax because Continue reading »
Under the Patient Protection and Affordable Care Act “PPACA,” certain types of health insurance arrangements will be required to pay a new fee by July 31, 2013. The fee is called the Comparative Effectiveness Research Fee or the PCORI fee because the monies will be used to help fund the Patient-Centered Outcomes Research Institute. The types of arrangements subject to the fee are:
- Fully insured medical plans
- Self-insured medical plans
- Plans sponsored by private, government, nonprofit and church employers
- Individuals on a temporary U.S. visa who reside in the U.S.
- Retiree-only plans
- Health Reimbursement Accounts (HRAs)
- Certain Flexible Spending Accounts (FSAs) if the employer contribution is greater than $500 and it is more than the employee contribution
The fee will be reported to the IRS via Form 720, but the revised Form 720 has not yet been made available.
In general, plans with year-ends between October 1, 2012 and December 31, 2012 must file Continue reading »
2012 Foreign Bank Account Reports (FBARs) must be RECEIVED on or before June 28, 2013 and NOT just postmarked by that date. June 30th falls on a Sunday this year, so the FBARs are due on the preceding Friday, which is June 28, 2013. The FBAR is filed with the U.S. Treasury Department in Detroit, Michigan. The FBAR is not filed with the IRS Center where the U.S. taxpayer files their U.S. federal tax return.
The U.S. Treasury Department released its General Explanations of the Obama Administration’s Fiscal Year 2014 Revenue Proposals on April 10, 2013. The publication, known as the Greenbook, includes the following international tax proposals that would effectuate reform of the U.S. international tax system. (See General Explanations.)
1. Defer Interest Expense Deduction Related to Deferred Income of Foreign Subsidiaries
The proposal would defer the deduction of interest expense. The deferral rule would apply to the extent that interest expense is properly allocated and apportioned to stock of a foreign corporation that exceeds an amount proportionate to the U.S. taxpayer’s pro rata share of income from such subsidiaries that is currently subject to Continue reading »
Generally, to be eligible for the domestic production activities deduction (DPAD), a taxpayer must earn gross receipts from a disposition of qualifying production property. This typically involves a sale and delivery of a manufactured product by the taxpayer to a customer. However, the IRS recently ruled that a government contractor made a disposition for DPAD purposes despite the fact that title to the property reverted back to the contractor (Technical Advice Memorandum 201314043, 04/05/2013). The ruling disposition was not requiring
Continue reading »
On May 2, 2013, Governor Martin O’Malley signed into law the Cybersecurity Investment Incentive Tax Credit. The Governor proposed the credit earlier this year as part of his proposed FY 2014 budget. The credit takes effect July 1, 2013, and applies to tax year 2014 through 2018.
Based on Maryland’s biotechnology investment credit, the new cybersecurity credit allows an investor who invests at least $25,000 in a qualified Maryland cybersecurity company to claim a credit in the amount of 33% of investments made in a Maryland cybersecurity company. An investor can receive a refund if the credit exceeds tax otherwise payable for the taxable year. An eligible investment is a contribution to a qualified cybersecurity company in exchange for stock or ownership interest as long as the investor does not acquire an ownership interest in a company that exceeds 25%. Continue reading »
A recent Virginia sales and use tax ruling illustrates how ignoring basic sales and use principles can be costly for businesses. The concept is simple – a sales tax is a consumption tax imposed on the end user of a product. Thus, if your company purchases tangible personal property with the intent of reselling the property (i.e., not consuming it), it generally should not pay sales tax on that purchase. This concept holds true for leases as well. However, a purchaser must notify a seller of this intent by providing a certificate to the seller indicating that the purchased product will be resold. Otherwise, the seller is obligated to collect sales tax.
The failure to apply this foundational sales and use tax concept had a costly result for Continue reading »
Federal courts have consistently ruled that retailers must have a physical presence in a state to be required to collect sales taxes. That has allowed online retailers to offer many customers tax-free shopping. Equally important, the physical presence requirement has allowed smaller businesses using common carriers to expand their customer base without the administrative burden of collecting sales tax. But, with Congress making headway on federal legislation that would eliminate the physical presence rule for many retailers and a recent New York State Court of Appeals decision going against Amazon and Overstock.com, the sales tax collection obligations for retailers may soon become more burdensome.
On March 19th, 75 U.S. Senators supported a non-binding vote of approval for the Marketplace Fairness Act of 2013, a heavily-debated bill that is backed by a coalition of brick-and-mortar retailers such as Wal-Mart and Best Buy and vehemently opposed by certain online retailers such as eBay. Although the vote was only a preliminary approval of a vague summary of the bill that was an amendment to a budget bill, the bipartisan nature of the vote suggests that remote seller legislation could be voted into law this year.
If enacted as is, the bill would allow states to require remote sellers with over Continue reading »
The Obama Administration’s recently released fiscal year 2014 budget contains several provisions that are less than advantageous as they relate to retirement plans. These provisions are by no means final, however, as Congress has yet to work its way through them.
The proposed budget contains two specific provisions that would greatly reduce the attractiveness of retirement plans to small businesses: Continue reading »
Caution: Nonresident Foreign Individuals Must Comply with New IRS Documentation Requirements when Filing a Form W-7 U.S. TIN Application
Depending on a foreign individual’s inbound activities in the United States, the person could be required to obtain a U.S. Taxpayer Identification Number (TIN) if the person is not eligible to obtain a U.S. Social Security Number (SSN). Foreign individuals who are required to obtain a U.S. Taxpayer Identification Number must file a Form W-7 with the Internal Revenue Service (IRS).
A U.S. TIN generally is required if a nonresident foreign individual is required to file a U.S. federal tax return on the Form 1040-NR. A nonresident foreign individual generally must file a Form 1040-NR if the person has income that is effectively connected with a U.S. trade or business. A nonresident foreign individual who has ordinary trade or business income from a U.S. partnership generally is considered to have effectively connected income that must be reported on a Form 1040-NR.
A U.S. TIN also could be required if Continue reading »
What We Are Writing
- A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause
- Emerging Small Businesses: To Grow Your Business, You Must Plan For Growth
- Government Contracting: Look Before You Leap!
- GSA Schedules – Strategies for Success
- New Employee vs. Independent Contractor Considerations
- Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications
- The GSA Schedule: Your Ticket to the Federal Market (May 2010)
- The New FAR Codes of Conduct and Compliance Program Provisions
- The Seven Deadly Sins (of contract compliance)