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BHBM Tax Alert 2/26/2010

Friday, February 26, 2010

FEDERAL

Foreign Bank Accounts

FinCEN, the Financial Crimes Enforcement Network, which is a bureau of the Department of the Treasury, has proposed new rules regarding the Report of Foreign Bank Accounts (FBAR).  The proposed rules clarify which persons must file the reports and which accounts must be reported.  The proposed rules also revise the reporting rules for certain taxpayers with signature authority over foreign financial accounts.  Finally, the proposed rules contain a new definition of a "United States Person" for the purposes of filing an FBAR.
 
Jobs Bill Passes Senate With Key Tax Provisions

On Wednesday, February 24, 2010, the U.S. Senate passed the proposed Jobs Bill by a vote of 70-28.  The bill will now be sent back to the House, which passed a far more costly measure in December.  The bill, as passed by the Senate, contains one major tax provision.  Namely, the bill would exempt businesses hiring new employees from the 6.2% Social Security payroll tax through December and give them an additional $1,000 credit if new workers stay on the job a full year.  However, both the exemption and the credit will only apply to new employees who were unemployed at the time they are hired.  Senate democratic leaders have promised that more "jobs bills" will be coming soon.
 
Practitioner's Comments Sought on Reporting Proposal

The IRS has requested comments from practitioners regarding a proposal to require large businesses to proactively report their uncertain tax positions on a new schedule.  According to Announcement 2010-9, the proposal would require reporting from taxpayers with assets in excess of $10 million and a financial statement prepared under FASB No. 48, or other similar accounting standards reflecting uncertain tax positions.  One issue which many tax preparers are faced with regarding this reporting requirement is whether or not, under IRC §6692, they will be able to sign tax returns with the schedule attached.  The IRS has stated that they plan to address this issue shortly.  The IRS is hoping to implement this proposal for 2010 returns filed in 2011.
 
STATE
 
Motion Picture Investor Tax Credit Rules

Louisiana has published the final rules regarding the Motion Picture Investor Tax Credit Program as established by LSA R.S. 47:6007.  These rules were published in the Louisiana Administrative Code. See LA. Admin. Code tit. 61, §1601-1613. These rules were implemented to: encourage development of a strong capital and infrastructure base within the state for the motion picture and related industries; to achieve a self-supporting, independent, indigenous industry; and to encourage development of state of the art motion picture production and post-production facilities.  The rules allow a credit for a film's production costs and for costs of a state-certified infrastructure project.

These credits are transferable only after the state has certified all of the expenditures that give rise to such credits.
 
SUPREME COURT DEVELOPMENTS
 
Federal Jurisdiction

In the Hertz Corp v. Friend case, the United States Supreme Court held that a corporation's principal place of business for purposes of federal jurisdiction is its "nerve center," which the court said will typically be the place where the corporate headquarters are located.  The Court further provided that under the "nerve center" approach, the principal place of business is best read as referring to the place where a corporation's officers direct, control and coordinate the corporation's activities.  

The statute in question in this case, 28 U.S.C. §1332(c)(1), provides that a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.  In reaching its conclusion, the Court resolved a dispute among the federal circuits as to the proper interpretation of a corporation's principal place of business.

If you would like to receive BHBM Email Tax Alerts to stay informed on the latest changes in tax law on the Federal and State level, please email Stacey Lala at slala@bhbmlaw.com.