Daily Tax Update - June 28, 2007

IRS LAUNCHES FOUR NEW “LIFE CYCLES” FOR TAX-EXEMPT ORGANIZATIONS:  Today, the IRS launched four new "Life Cycles" — Web-based information tools — to help guide tax-exempt organizations through federal tax rules and requirements that pertain to them.

  • According to the IRS, “The new life cycles explain an array of issues, such as how to acquire an employer identification number; how to avoid jeopardizing an organization’s exemption; how political campaign involvement could affect the organization’s status and tax responsibilities; and how disclosure requirements must be met.”
  • Lois Lerner, director of the IRS’s Exempt Organizations division said, "The exempt organizations community has enthusiastically embraced the life cycle concept for public charities and private foundations. We thought it made sense to develop similar helpful tools for other sectors of the exempt organizations community.  These Web pages are designed to be an easy-to-use service for this community.”
  • Additional information can be accessed via: http://www.irs.gov/charities/article/0,,id=169727,00.html 

EC VAT AND THE MEANING OF “SPECIAL INVESTMENT FUNDS”:  The European Court of Justice has today held that, for VAT purposes, "special investment funds" may include closed-ended investment funds as well and that Member States have a discretion in determining which type of funds are covered by the notion of "special investment funds".  However, in exercising its discretion the Member State must ensure fiscal neutrality from the view point of levying VAT on the provision of management services to different “special investment funds” which are competition with each other.  The Court also confirmed that the relevant VAT Directive has direct effect and can be relied upon before a national court in order to challenge any national legislation which is alleged to be incompatible with it.  The practical impact of this decision is that the provision of management services to investment funds will, in virtually all cases, now be exempt and thus no VAT will be chargeable by the manager providing such services.

EC VAT AND THE REFUND OF VAT UNDER THE EIGHTH AND THIRTEENTH VAT DIRECTIVES:  The European Court of Justice has today held that the certificate issues as prescribed by the Eighth VAT Directive does, in principle, allow the presumption that the person making the claim for refund in one Member State is subject to VAT and is established in another Member State.  There is however no prohibition in the tax authorities of the Member State in which the claim for refund is made from verifying the same through intra-Community administrative procedures if they have doubts as to the reality of the existence of the establishment in the other Member State.  The decision also encompassed claim for refund from a claimant who is not based in the Community which is made under the Thirteenth VAT Directive.  The Court held that whether the claimant is established outside the Community is determined by ascertaining where the essential decisions concerning its general management are taken and where the functions of its central administration are exercised.

EC LAW AND INDIRECT TAXES ON THE RAISING OF CAPITAL: The European Court of Justice has today held that it is not permitted to charge notarial fees for the authentication of a transfer of shares in a company made as a contribution in the course of an increase in the share capital of another company in a system where the notaries are employed as civil servants and the fees are, in part, paid to subsidize public expenditure.  It ruled that such fees are an indirect tax on the raising of capital which is in breach of EC Council Directive 69/335/EEC (as amended).

TRANSFER PRICING DOCUMENTATION DEADLINE ON SEPTEMBER 15, 2007 FOR CALENDAR YEAR TAXPAYERS:  To avoid penalties, taxpayers should have appropriate documentation of their transfer pricing methodologies and results by the time they file their tax returns.  For calendar year taxpayers, this means that the documentation must be completed by September 15.  IRS agents have been instructed to look critically at this documentation, so companies may want to reconsider the standards they have used in the past for determining whether their documentation is rigorous and specific enough.  Steptoe's transfer pricing group is available and particularly well-situated to assist with that work.  Click here for more information 

TAX BILLS INTRODUCED JUNE 27TH:
H.R. 2883: To amend the Internal Revenue Code of 1986 to treat gold, silver, platinum, and palladium, in either coin or bar form, in the same manner as equities and mutual funds for purposes of the maximum capital gains rate for individuals.
Sponsor: Rep. Berkley, Shelley [NV-1] (introduced 6/27/2007)      Cosponsors (7)

H.R. 2893: To amend the Internal Revenue Code of 1986 to provide that qualified homeowner downpayment assistance is a charitable purpose, and for other purposes.
Sponsor: Rep. Weldon, Dave [FL-15] (introduced 6/27/2007)      Cosponsors (None)

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.