Environmental Lawyer BLog

If you are considering requesting a private letter ruling from the IRS, there is a process which can save you significant time and expense. Prior to submitting an extensive private ruling request, you can first file a request for a pre-submission conference. This procedure allows the IRS to evaluate a brief overview of the issue, after which the IRS will recommend that you (a) schedule a conference with IRS attorneys to discuss the matter further, (b) submit a full-fledged private ruling request, or (c) not move forward with a private ruling request. You will then be able to assess the strength of your request without incurring the legal and administrative fees associated with a full-fledged letter ruling request.

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Income tax treaties are good. As tax analyst Lee Sheppard noted, "a tax treaty announces to the world that a country is open to business investment." Tax lawyers are quite fond of tax treaties. Because they supersede local law, if a tax treaty applies, it is possible to give a client meaningful advice on the tax treatment of an investment in a particular country without becoming an expert on that country's internal tax rules or engaging local counsel.

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The Internal Revenue Code contains numerous requirements for U.S. taxpayers to report their interests in foreign corporations, partnerships, trusts and estates, and certain transactions involving foreign entities.

Heavy penalties can apply for failure to file these returns in a timely manner. In most cases, the forms must be filed as part of your regular federal income tax return.

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In an effort to retain film and television production in California, the state has enacted a film production tax credit, to be claimed against California personal income and corporate franchise taxes. The credit applies to costs of production starting July 1, 2009 although the credit may not be claimed on tax returns for years prior to 2011. The amount of the credit is 20% of production costs for feature films with a production budget between $2 million and $75 million, for certain mini-series or made-for-television movies and for television series licensed for basic cable, and 25% of the production costs for a television series that filmed all of its prior episodes outside California, or for an independent film (a film with a budget between $1 million and $190 million not produced by a publicly-traded company or a company in which publicly-traded companies own more than a 25% interest).

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California businesses with 20 or fewer employees should be aware that the state provides a $3,000 tax credit for each additional full-time employee hired during 2009. The credit applies to hourly wage employees averaging at least 35 hours per week and full-time (at least 40 hours per week) salaried employees. An employer will not qualify for the credit unless it has a net increase in full-time employees compared to its number of full-time employees for 2008.

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In 2007, California enacted legislation to address the unconstitutionality of the CA LLC fee based on gross receipts assessed on LLCs doing business in California. The legislation amends CA Rev. & Tax. Code §17942, effective for tax years beginning on or after January 1, 2007, to limit the amount of gross receipts subject to the fee to only those gross receipts generated from CA sources. The legislation also limits the amount of refunds that may be claimed for fees assessed in prior years. Refunds are limited to the amount by which the fee paid, plus any interest assessed, exceeds the amount of the fee that would have been assessed if the fee had been determined under Section 17942, as amended in 2007 (limits refunds to only the excess paid on account of unfair apportionment).

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Many people have taken advantage of a long-existing rule that a vehicle purchased outside of California and kept outside the state for more than 90 days after purchase is not subject to California use tax when brought into California. That rule has now been changed.

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Generally, if you renegotiate a loan and reduce the amount owed, the reduction is subject to income tax as “cancellation of indebtedness income.” However, both California and federal income tax laws have special, temporary provisions under which reduction of mortgage debt on a taxpayer’s principal residence is not subject to tax. Unfortunately, these two provisions are confusingly different.

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California’s State Controller tracks and has identified 3 new email tax-related scams. One scam is an offer to check on the status of a taxpayer’s tax refund claim. This is a “phishing” scam which attempts to get the taxpayer to reveal his or her social security number. Unsolicited offers like this should be ignored.

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Lenders will be surprised to learn that they may be liable for a borrower’s unpaid payroll tax obligations. Lenders supplying funds to borrowers for the specific purpose of paying wages, with knowledge that the borrower will not be able to meet its payroll tax obligations, may be personally liable for such unpaid taxes. This liability can extend to lenders who have no knowledge of a borrower’s inability to meet payroll tax obligations if the lender could have found out by exercising due diligence.

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