Meek Speaks to Annual Meeting of CPAs and Accountants

On October 9, 2012, Jerry Meek was one of five speakers at a day-long continuing education program, attended by approximately 150 CPAs and accountants from all over North Carolina.

Meek’s presentation highlighted some of the top tax law developments of 2012.  Among others, the list included the following:

1. Nat. Fed. of Independent Business v. Sebelius.  The U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act.  The bill includes several tax-related features, including:  (1) a new 3.8% tax on net investment income for high income taxpayers; (2) a new 0.9% hospital insurance tax on high income taxpayers; (3) an increase (for most taxpayers) in the threshold for itemized deduction of medical expenses from 7.5% to 10%; and (4) codification of the economic substance doctrine, with new penalties.

2. Voss v. Commissioner.  The U.S. Tax Court rejected the argument of unmarried co-owners of two residences that each was entitled to a full $1.1 million mortgage interest deduction.  Instead, the $1.1 million limitation amounts must be allocated among them in some manner, such as by percentage of ownership.

3. U.S. v. Home Concrete & Supply.  Interpreting a provision which extends the statute of limitations for assessment of tax from 3 years to 6 years when then the taxpayer “omits” from income an amount greater than 25% of the income actually reported, the U.S. Supreme Court held that the overstatement of basis (and resulting underreporting of income) does not constitute an omission triggering the longer statute of limitations.

4. FATCA.  The Treasury issued 400 pages of regulation implementing FATCA (the “Foreign Account Tax Compliance Act”) and also announced its intent to enter into intergovernmental agreements with other nations to cooperatively implement the act.

5. In re Quality Stores, Inc.  Rejecting the exact argument previously adopted by the Federal Circuit, the Sixth Circuit held that severance payments are not subject to FICA tax, even when paid in a lump sum and regardless of whether the former employee is receiving unemployment compensation benefits.

6. Notice 2012-8.  The IRS announced a new, more flexible approach to granting § 6015(f) innocent spouse relief.  In particular, the IRS will no longer require that the application for relief be filed within 2 years of the first collection activity.  While other provisions of the Code permit innocent spouse relief when there has been an understatement of income on a tax return, only § 6015(f) permits relief in the case of an underpayment of tax (that is, when the tax due has been accurately reported but has not been paid).

7. Massachusetts v. DHHS.  The First Circuit held that the Defense of Marriage Act, which defines marriage as between a man and a woman for purposes of federal tax law (and for other purposes), was unconstitutional, but stayed its mandate pending appeal.  If ultimately affirmed by the Supreme Court, gay couples legally married under the laws of their State will be entitled to file joint returns.  Couples who have filed protective refund claims for past years will be also be entitled to receive those refunds.