Insights & News

Tax Insights, January 27, 2015
Tracking Tax News You Need to Know

January 27, 2015

IRS Releases Guidance on Accounting Method Changes
The IRS released Rev. Procs. 2015-13 and 2015-14 in which it updated and revised the procedures under which a taxpayer may obtain automatic consent for a change in an accounting method. The guidance also contains a list of automatic changes to which the procedures apply, and modifies the procedures for obtaining the IRS's advance consent to change to an accounting method (non-automatic consent). Generally, the changes are effective for IRS Forms 3115 (Application for Change in Accounting Method) filed on or after Jan. 16, 2015, for a year of change ending on or after May 31, 2014.

White House Releases Fact Sheet Outlining Proposed Tax Increases
On Jan. 17, the White House released a fact sheet outlining President Obama's tax increases designed to generate revenue of approximately $320 billion over the next decade. The President's tax proposals include: increasing the capital gains and dividend tax rates to 28 percent; for married couples, the 28 percent rate would apply when income is in excess of $500,000 annually; imposing a seven-basis-points fee on the amount of liabilities of financial institutions with assets greater than $50 billion (the fee would discourage excessive borrowing); and closing the "trust fund loophole" by requiring payment of capital gains tax on the increase in value of securities at the time they are inherited; however, for couples, no tax would be due until the death of the second spouse. The fact sheet can be found here.

Senate Finance Committee Tax Working Groups Announced
Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) announced the launch of five separate bipartisan Finance Committee Tax Working Groups to spur congressional comprehensive tax reform efforts in the 114th Congress. Policy focus areas for the working groups include: 1) individual income tax; 2) business income tax; 3) savings & investment; 4) international tax; and 5) community development & infrastructure. The press release on the formation of the working groups can be found here.

IRS Releases Ruling Classifying Steel Racking Structures As Real Property Under REIT Rules
On Jan. 16, the IRS released Private Letter Ruling 201503010 concluding that steel racking structures used by a Real Estate Investment Trust (REITs) qualified as real property for purposes of Sec. 856 of the Internal Revenue Code. Under Sec. 856 at the close of each quarter of a REIT's tax year, at least 75 percent of the value of its total assets must be represented by real estate assets, cash and cash items (including receivables). The racking structures described in the ruling have multiple levels (each up to 24 feet high), aisles and shelving and all or almost all of the racking structures have features such as sprinklers, inert gas, or both fire suppression systems, smoke detection systems, and lighting systems. The racking structures also may include stairways, floors, catwalks, carton elevators, personnel elevators and other improvements.

Variable Contracts; Investor Control Rule

  • In Private Letter Ruling 201502003, the IRS ruled that a fund's investments will not cause a partnership to be treated as the owner of separate account assets related to two variable life insurance contracts for federal income tax purposes. The ruling can be found here.
  • Private Letter Ruling 201504005 involves various Regulated Investment Companies (RICs) whose shares are offered, except as otherwise permitted under applicable Treasury Regulations, exclusively to separate accounts of life insurance companies for funding of variable annuity contracts and variable life insurance policies. The IRS ruled that the RIC's investments in publicly available RICs will not cause the contract holders to be treated as owners of the shares of the RICs for federal income tax purposes. The ruling can be found here.

Senate Judiciary Committee Reviewing Hospital for Compliance With Community Benefit Standard
In a January 16 letter, Senate Judiciary Committee Chair Chuck Grassley, R-Iowa, asked for information on the financial assistance, billing and collection practices of Mosaic Life Care based on reports that the hospital might be failing to satisfy the community benefit standard necessary for it to claim tax-exempt status as a 501(c)(3) organization.

Separate Existence of Subsidiary Respected; No UBI
In Private Letter Ruling 201503018, the IRS ruled a college's or university's ownership of a for-profit subsidiary engaged in the development of software for an online educational program did not affect the college's or university's tax-exempt status as an organization described in Section 501(c)(3) of the Internal Revenue Code; gross income realized by the subsidiary is not unrelated business taxable income to the school because the separate existence of the subsidiary will be respected; and that dividends paid by the subsidiary will not be treated as unrelated business taxable income to the college or university. The ruling can be found here.

JCT Lists Expiring Federal Tax Provisions
The Joint Committee on Taxation has released a report listing federal tax provisions that expired or are scheduled to expire between 2014 and 2025. The report can be found here.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

Copyright © 2015 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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