Posts Tagged ‘Demutualizaton’

Tax Roundup, 1/23/2013: PTIN Paralysis! And: pay Iowa taxes with a cell phone?

Wednesday, January 23rd, 2013 by Joe Kristan

20130121-2The IRS has turned off its preparer registration initiative following the federal court decision enjoining the program.  The Service issued this statement yesterday:

As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. It is considering how best to address the court’s order and will take further action shortly. Please continue to check this site as additional information becomes available.

The second paragraph is the most interesting. While the IRS doesn’t admit that it overreached, this is far short of a vow to fight to the last appeals brief.  One can only hope they will reconsider the whole misbegotten regulatory scheme.

Meanwhile, Accounting Today confirms reports the IRS has shut down the PTIN registration system and the Registered Tax Return Preparer testing program.  They report the PTIN system is expected to come online again after the RTRP registration system is removed from it.  Meanwhile, the Return Preparer Office has apparently turned off its phones.

All of this makes me believe that the IRS is not seeking any emergency stay of Friday’s decision and is planning to do without the RTRP rules for this season, anyway.

 

TaxGrrrl posts a great interview with the winning attorney in the preparer regulation decision, Dan Alban.  She encounters a new perspective on whether regulation actually does more good than harm (my emphasis?:

Finally, with all of the legal niceties out of the way, I asked Alban the really tough questions: What about all of those folks who say that regulation is a good thing? What does this ruling mean for taxpayers? And why would you embrace a scheme that wouldn’t require – at a very basic level – some semblance of regulation to ensure that preparers are competent?

Alban didn’t hesitate. Intent, he says, is key. The intent of any kind of licensing scheme should be to protect the consumer. But Alban, who focuses on a occupational licensing in his practice, noted that frequently, these kinds of laws instead protect established interests from competition. That is, he says, not in the best interest of the consumer.

And with that, I paused. You see, in all of the years that I’ve been writing this blog, I’ve only received a phone call from IRS complaining about a post once. And it was for this one. The IRS wanted to assure me that the exemptions had nothing to do with any special interests. None. Not a whit. Interestingly, many preparers at smaller firms thought differently. I received a number of supportive emails and “off the record” comments about how the new rules felt discriminatory.

Bingo. Regulation always favors the big.  It’s no big deal for H&R Block headquarters staff to deal with regulations for all of its franchises.   It’s a different story for small operators like Sabina Loving, the solo preparer in a low-income South Side Chicago neighborhood who was lead plaintiff in last week’s decision.

It would appear that attorneys benefited disproportionately from the regulations; as a point of context, the American Bar Association (ABA) has encouraged the regulation of “other” preparers for years. Why is that? Is there maybe something to Alban’s idea that these kinds of laws protect established interests from competition?

And then Alban said something else that struck me:  about fifty years ago, only 1 in 20 workers in the U.S. needed government permission (in the way of regulations) to earn a living. Today, that number is 1 in 3. That, he said, is troubling. We are increasingly relying on the government to decide who is qualified to perform services for us. Is that something we want? Does regulation really make someone competent? Or honest?

No, it just gives them one more way to control things.

Russ Fox: Alphabet Soup

Trish McIntire, Voluntary Licensing?

 

Paying taxes with cell phone money?  The Iowa Department of Revenue yesterday announced a venture with Dwolla to enable taxpayers to pay taxes with Dwolla’s mobile device online payment technology.  The Des Moines Register Reports:

 Dwolla is a cash-based payment network that provides real-time, low-cost, online and mobile payments, officials said. Instead of charging a floating percentage and fixed fee per transaction for goods and services or dealing with administrative issues of checks, Dwolla’s network costs a flat 25-cent fee on any payment over $10, and it’s free for transactions under $10.

Iowa Department of Revenue Director Courtney Decker said the state’s first use of Dwolla will allow businesses that already pay more than $100 million in cigarette stamp taxes the option of using the Dwolla network. She added, “This is just the tip of the iceberg” in terms of Dwolla’s potential in state government.

Dwolla’s service is cheaper and safer than mailing and processing a paper check, Decker said, and it will allow participating businesses to receive their tax stamps more quickly. She added that 89 percent of Iowa individual income taxes are  filed electronically, but the percentage of people paying taxes electronically to her department is far lower.

Paying online now requires a slow application process and analog mail delivery to receive permission to make electronic payments.  The Dwolla system will be a big improvement if the Department enables it for individual income taxes.

 

IRS wins another demutualization case.  The IRS continues to fight the to tax proceeds on the demutualization of insurance companies.  They famously lost the Fisherdecision, which held that taxpayers could treat their payments for insurance premiums as basis when they received shares of stock in an insurance company changing from mutual ownership to a stock company.  But earlier this month the IRS won a Federal District Court Decision in California rejecting the Fisher“open transaction” scheme.  If the IRS wins on appeal, this will likely end up settled by the Supreme Court.  This is the second IRS victory since the Fisher decision.

Cite:  Reuben, DC CACD, CV 11-09448

 

Roger McEowen, Two Important Tax  Developments:

On January 18, two key tax developments occurred.  First, a federal district court wiped out the  IRS preparer regulations.  Later, IRS  announced that farmers aren’t stuck with the March 1 deadline and can file  timely by April 15.

 

David Brunori, Jindal’s Bold Move (Tax.com):

Republican Louisiana Governor Bobby Jindal has made the most provocative tax reform recommendation in many years. Jindal said he was going to overhaul the tax law. If he has his way, he will revolutionize it.

Pay attention, Governor Branstad.

 

Donald Marron,  Five Key Facts about the House Debt Limit Bill (Tax Vox)

Howard Gleckman,  How Obama’s Inaugural Address Frames the Policy Debate for the Next Decade (TaxVox).  I don’t think so.

Kay Bell,  Tax Carnival #111: Countdown to Filing.  It’s Kay’s roundup of tax tax-related posts from all over.

Jack Townsend,  Steps in OVDI/P Processing and Opting Out.  Dealing with the IRS when you have an undisclosed offshore account.

Jason Dinesen,  Home Office Deduction: IRS Offers a Simplified Calculation Option, But the Qualifying Rules Haven’t Changed

Patrick Temple-West,  Private equity tax breaks in jeopardy, and more (Tax Break)

William McBride,  Phil Mickelson’s Tax Rate

Robert D. Flach is Buzzing!  He also has posted What to Give Your Tax Preparer at Mainstreet.com.

Jim Maule, Tax Ignorance and Its Siblings.  “Tax ignorance, of course, is but one part of political ignorance, as I explored in When Tax Ignorance Meets Political Ignorance.”  Yet the good professor insists that 50% + 1 voting by ignorant voters works better than trusting individual decisions in the marketplace.

 

News you can use: Life After Big 4: What You May Miss and Won’t Miss At All (Going Concern).  I don’t miss it one tiny bit.

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Demutualization: what to do now?

Thursday, October 22nd, 2009 by Joe Kristan

Now that an appeals court has upheld the Fisher case allowing a taxpayer to offset gain on the stock of a de-mutualized insurance company with life premiums paid, what should taxpayers do now? Roger McEowen has some thoughts. He also lists demutualization transactions and discusses the practicalities of refund filings.

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Don’t tell anybody, but…

Monday, October 19th, 2009 by Joe Kristan

…the Federal Circuit Court of Appeals on October 9 apparently upheld the taxpayer victory in the Fisher demutualization case, without comment.
It seems to be a secret. I can’t find it in Tax Analysts, and the Thompson/RIA Citator shows nothing.
Very strange. Not long ago a panel of the Federal Circuit went rogue and threatened to hollow out the income tax before thinking better of it. Now they get a closely watched case affecting every policyholder of a mutual insurance company that has gone public, and they can’t rouse themselves to an opinion.
The case allows taxpayers to offset premiums paid on mutual insurance policies against the proceeds of stock sold in a demutualization transaction. It will be interesting to see how the IRS and Congress address the case, now that they have lost on appeal in a court with nationwide jurisdiction. It remains unclear whether you get your entire premium as basis, or the IPO price, or some other number (limited by your premiums paid, presumably). It will also be interesting to see how far creative tax advisors will take the Fisher “open transaction” approach in other areas.
Prior Tax Update Coverage: IRS LOSES DEMUTUALIZATION ARGUMENT IN COURT OF CLAIMS
(Hat tip: Frank Carroll)

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