Baldwin Haspel Burke & Mayer LLC

BHBM Tax Law Alert 7/5/2013

Posted on by Baldwin, Haspel, Burke & Mayer

WELCOME

In this newsletter you will find information on updates and changes in the law on both the Federal and State level. If you have any questions, please feel free to contact us at (504) 569-2900.

FEDERAL TAX LAW UPDATES

Defense of Marriage Act

In Windsor v. United States, 570 U.S. ___ (2013) the United States Supreme Court held Section 3 of the Federal Defense of Marriage Act (“DOMA”) unconstitutional. DOMA defined for all federal law purposes the word “marriage” to mean only a legal union between a man and a woman as husband and wife and the word “spouse” to mean only a person of the opposite sex who is a husband or a wife. In a 5-4 decision, the United States Supreme Court held that Section 3 of DOMA was an unconstitutional deprivation of due process and equal protection.

The decision in Windsor stemmed from the denial of a marital deduction for a homosexual couple who had been registered as domestic partners in New York City and married in Canada. DOMA did not allow the couple to claim a marital deduction under IRC §2056(a), and as a result, the estate of the first-to-die paid $363,053 in federal estate tax. In the decision, the United States Supreme Court upheld the decision of the lower courts that the estate was entitled to a refund of the federal estate tax previously paid.

This decision will have far-reaching tax implications as it now paves the way for same-sex marriages to enjoy the same benefits and burdens under federal law that heterosexual marriages enjoy. Particularly, some of the provisions in the federal tax code which would apply to same-sex marriages are: the right to file a married filing joint return, the right to receive employer-provided health coverage, the right to claim the marital deduction, the opportunity to participate in gift-splitting, the opportunity to make transfers tax-free to the other spouse, etc.

The decision will also likely have an effect on employers who may have to amend their employer-sponsored health, welfare and retirement plans to now account for the same-sex spouse.

Same-sex married couples may also have an opportunity to amend their previous federal income, gift and estate tax returns to claim refunds for previously-filed returns. The IRS will likely provide guidance on the impact of the decision and the three year statute of limitations for claiming refunds for federal tax returns. The IRS has updated its website to state that the IRS is reviewing the important June 26 Supreme Court decision on the Defense of Marriage Act. The IRS will be working with the Department of Treasury and Department of Justice, and the IRS will move swiftly to provide revised guidance in the near future.

Married same-sex couples should consult their tax adviser to take full advantage of the impact of the Windsor decision.

Enforcement of Major Provision of Affordable Care Act Delayed by White House

On Tuesday, July 2, 2013, the Obama Administration announced that it will delay the enforcement of a major provision of the president’s health care reform, the requirement that medium and large companies offer health care coverage. The Affordable Care Act requires that all employers with more than fifty employees provide affordable coverage for their workers or face potentially large fines if just one worker receives taxpayer-subsidized insurance. This provision of the Act has raised concerns about companies downsizing their workforce or cutting worker’s hours in an attempt to dodge the new mandate. Mark Mazur, Assistant Secretary of Tax Policy, wrote late Tuesday in a blog post, “We have heard concerns about the complexity of the requirements and the needs for more time to implement them effectively. We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”

IRS Corporate Letter Rulings

In Rev. Proc. 2013-32, the IRS announced that it would no longer rule on whether a transaction qualifies for nonrecognition treatment under sections 332, 351, 355 or 1036 of the Internal Revenue Code, or on whether a transaction constitutes a reorganization within the meaning of section 368 of the Internal Revenue Code. Rather, the IRS announced that it will instead only rule on “significant issues” under sections 332, 351, 355, 368 or 1036 of the Internal Revenue Code. Rev. Proc. 2013-32 defines a significant issue as, “an issue of law, the resolution of which is not essentially free from doubt, and that is germane to determining the tax consequences of the transaction.”

Rev. Proc. 2013-32 also provides that before submitting a letter ruling request on a significant issue under this revenue procedure, a taxpayer is encouraged to call the Office of Associate Chief Counsel to discuss whether the IRS will entertain such a letter ruling request.

STATE TAX LAW UPDATES

Louisiana Amnesty Program

Governor Bobby Jindal has signed new legislation (H.B. 456) creating the Louisiana Tax Amnesty Program, which applies to all taxes administered by the Louisiana Department of Revenue except for motor fuels tax. The bill provides that there shall be an amnesty program for at least two (2) months in 2013 (occurring prior to December 31, 2013), for at least one (1) month in 2014 (occurring between July 1, 2014 and December 31, 2014) and for at least one (1) month in 2015 (occurring between July 1, 2015 and December 31, 2015).

The interest and penalty waiver will vary depending upon the above-referenced periods. The taxpayer must pay all taxes and all applicable interest and penalties if the taxpayer wishes to participate in the tax amnesty program.

The following taxes are eligible for the amnesty program:

-taxes due prior to January 1, 2013 for which the department has issued an individual or business proposed assessment, notice of assessment, bill, notice or demand for payment no later than May 31, 2013; or

-taxes for taxable periods that began before January 1, 2013; or

-taxes for which the taxpayer and the department have entered into an agreement to interrupt the running of prescription pursuant to La. R.S. 47:1580 and said agreement suspends the running or prescription until December 31, 2013.

Please contact us if you would like more information on this program.

Louisiana Solar Tax Credit

Governor Bobby Jindal has signed new legislation (H.B. 705) that will phase out Louisiana’s current state tax credit for solar energy. The current Louisiana tax credit will expire at the end of 2017, while honoring existing leases between solar power suppliers and customers. Louisiana currently provides a tax credit for solar and wind energy systems purchased and installed in an amount equal to fifty percent (50%) of the first $25,000 of the cost of the system. Beginning July 1, 2013, the credit only applies to certain types of solar systems on single family residences and no longer applies to multi-unit residences. The credit will be reduced and will cover an even smaller percentage of solar units until the credit expires at the end of 2017.

If you would like to receive BHBM Email Tax Alerts to stay informed on the latest changes in tax law, subscribe here.


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