Author: jfortenberry@fortenberrylaw.com

From the Wall Street Journal:

Federal officials are considering easing a 2004 law that requires the IRS to set mandatory heavy penalties on companies and individuals who purchase certain illegal tax shelters.

The law imposes penalties for making use of so-called listed tax shelters, or ones the Internal Revenue Service places on a list of the most-abusive transactions. Currently, there are 34 different types of tax shelters on the IRS list. . .

Robert Mathew, who owns a small Indiana asphalt-paving company. . . purchased a type of life-insurance policy known as a “springing cash value” plan as an alternative to a straightforward pension plan for his employees. Two years later, the IRS added this type of plan to its list of abusive tax shelters, and Mr. Mathew should have disclosed his purchase to the IRS. But he says the financial adviser who sold him the insurance plan at no point told him he needed to make such a disclosure.

Now, Mr. Mathew says, the IRS is demanding taxes and interest totaling $60,000. On top of that, the IRS has set penalties in the amount of $600,000, but has so far granted him several extensions, he says.

“I trusted people, my adviser, to take care of this. Then the IRS came and said, ‘Here’s $600,000 you’re going to have to pay.’ If I had to pay these fees, I would actually have to go bankrupt,” Mr. Mathew said. . .

You can view the IRS’s list of Abusive Tax Shelters and Transactions here. A number of them involve benefits-related transactions. You can access a benefits-related list here.

See also: Abusive Transactions That Affect Availability of Programs under EPCRS.

(These links are helpful for practitioners whose clients unfortunately meander into these types of transactions.)

From Bruce Carton at Compliance Week: Notes from Today’s Senate Banking Committee Madoff Hearing.

Interesting excerpts:

Thomsen–Ponzis hard to detect because nobody complains until money stops flowing out. Hard to detect before it stops.

Harbeck–Experts say Lehman Bros. and Madoff are cases that should occur every 5,000 years and they occurred in a one year period.

Thomsen–we have huge amounts of information. Need to find best ways to mine it.

Thomsen says SEC gets 100,000 unsolicited tips/complaints per year.

Prof. Coffee say no mutual fund has ever failed because of a Ponzi scheme because an independent custodian holds funds.

A link to Hearing testimony is here.

The Supreme Court released its opinion today in the case of Kennedy v. Plan Administrators for Dupont Savings (07-636). Justice Souter wrote the opinion for a unanimous Court. The opinion is available here.

The Tax Foundation writes about the City of Hoboken’s 47% property tax hike here. Hoboken homeowners are outraged and have organized a taxpayer advocacy group calling it the Hoboken Revolt.

Last Thursday, the House Committee on Ways and Means voted to support the “economic recovery” package contained in H.R. 598. The legislation passed “by a party-line vote of 24 to 13.” The legislation will now be combined with other components of the recovery package from other House Committees into H.R. 1, the American Recovery and Reinvestment Act for consideration by the full House of Representatives this coming week.

The Tax Prof Blog has all the relevant links here, including:

Text of the Bill
Joint Committee on Taxation Description of Bill
Joint Committee on Taxation description of Chairman’s Amendment

The White House has asked in a Memo that any new or pending regulation “should not be sent to the Federal Register for publication unless and until it has been reviewed and approved by a department or agency head appointed or designated by the President. . .” The White House has also indicated that all “proposed or final regulations that have not been published in the Federal Register” be withdrawn until review. Finally, for the regulations that have been published, but that have not taken effect (which would include these regulations), the White House is urging extension of the effective date for another 60 days.

Yesterday, the Senate passed the Lilly Ledbetter Fair Pay Act of 2009. It is a bill to “amend Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and to modify the operation of the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973, to clarify that a discriminatory compensation decision or other practice that is unlawful under such Acts occurs each time compensation is paid pursuant to the discriminatory compensation decision or other practice, and for other purposes.”

From this article here:

The Lilly Ledbetter Fair Pay Act reverses a 2007 Supreme Court ruling that had narrowed to 180 days the time period during which an employee can file a claim of wage discrimination after the original pay-setting decision.

Under the proposed legislation, employees would have 180 days from receiving a discriminatory paycheck to file their claim. . .

The House of Representatives approved the bill on January 9 during the first week of the new session of Congress, along with other labor rights legislation. The bill must return to the House for a second approval because the House had combined the bill with a measure the Senate did not consider.

On another front, what is the status of the Employee Free Choice Act? Some speculation going on here.

The DOL has issued their final regulations relating to the provision of investment advice by a fiduciary adviser to participants and beneficiaries in participant-directed individual account plans, such as 401(k) plans, and beneficiaries of individual retirement accounts (and certain similar plans). Read about the controversy surrounding these regulations here.

The Tax Update Blog has the results of its polling of this question: What was the worst newly-enacted Bush-era tax provision? Section 409A won hands down. View the results here.

This is an important age discrimination case for the times we are in: Carras v. MGS 782 Lex, Inc.. The Second Circuit Civil Rights Blog writes about it here. The case involves a likely scenario in our day: an older higly-paid worker being replaced by a younger less-experienced worker for “cost-cutting” reasons. Excerpt from the case:

Although the record shows that MGS was in a difficult financial position and was attempting to cut costs, the District Court’s repeated references to the company’s financial situation reflect, in our view, an impermissible weighing of the evidence. For example, although the District Court acknowledged plaintiff’s offer to work for a reduced salary, the Court concluded that “even a $60,000 salary would have presented a substantial [financial] issue.” (Opinion 14.) However, a jury could have determined, based on plaintiff’s offer to work for less than what was paid to Winegard, that the employer’s motivation for firing him was not cost cutting but was rather discrimination against his age.