Daily Tax Update - November 17, 2015: IRS Requests Information on PEO Industry Practices

IRS Requests Information on PEO Industry Practices:  Today, the IRS announced that it is requesting information regarding current professional employer organization (PEO) industry practices.  Under the Achieving a Better Life Experience (ABLE) Act of 2014, the IRS is required to establish a voluntary certification program for PEOs.  The law requires that a certified PEO meet a number of requirements, including certain bond and independent financial review requirements.  The IRS plans to begin accepting applications for PEO certification on July 1, 2016.

In an effort to streamline the implementation of the new federal certified PEO program, the IRS is requesting information on a number of topics, including: financial audits, verification of payroll tax obligations, working capital and net worth requirements, and covered employees.  The deadline for submissions is January 8, 2016.

Tax Court Determines Private Foundation, its Manager Must Pay Excise Taxes on Political Radio Messages:  Today, the U.S. Tax Court issued an opinion in Parks v. Commissioner, holding in part that a private foundation (PF) and its manager (P) were liable for excise taxes under sections 4945(a)(1) and (2), respectively.  During its taxable years ending November 30, 1997 through 2000, PF made cumulative expenditures of $639,073 to produce and broadcast 30- and 60-second radio messages.  As the foundation’s manager, P agreed to the making of such expenditures.  The IRS ultimately determined that the expenditures were “attempts to influence legislation and/or the opinion of the general public” and therefore taxable expenditures.  In a division opinion issued today, the Tax Court agreed with the IRS that PF and P owed excise taxes on radio messages that attempted to influence legislation.  In addition, the Tax Court concluded that the application of section 4945 and the regulations thereunder to PF and P did not violate the First Amendment and that such regulations are not unconstitutionally vague.