The Mayo case involved a substantially revised, prospective regulation which imposed an irrebuttable presumption that a medical resident working 40 hours or more is not a student regularly attending ...classes and, therefore, does not qualify for an exemption from FICA taxes. There is ample legislative history supporting this regulation - which was utilized by the Eighth Circuit, but not by the Supreme Court. The unanimous Supreme Court applied Chevron and determined the regulation was not arbitrary or capricious. Mayo would suggest the pro-taxpayer direction of these six changes and, in itself, would support the taxpayer since, in determining the reasonableness of the applicable regulations in Mayo, the Court pointed to an anti-medical school resident provision in a related section, noting that such a choice casts doubt that Congress intended to insulate medical residents from FICA's reach.
Recognizing the need for clearer standards regarding the degree of deference that the federal courts should confer on guidance issued by the Department of Treasury and the Internal Revenue Service, ...the Tax Section created a Task Force on Judicial Deference in 2000. Based on the agency-by-agency approach required by the Supreme Court in United States v. Mead Corporation (2001), the Task Force analyzed the differences in the degree of authority and degree of deliberation underlying the various forms of such guidance and the impact of those differences on whether, and to what degree, judicial deference is appropriate. The Task Force recognizes that in light of Mead, there is a need for an agency-by-agency consideration of the extent to which courts should give deference to administrative pronouncements under the mandate of Chevron v. Natural Resources Defense Council (1984), which instructs a reviewing court to accept certain administrative interpretations rather than to impose its own interpretations when Congress has not spoken to the precise question at issue.
The Rite Aid Corp. v. US (2001) case has destroyed more than 100 carefully developed paragraphs of Treasury Reg. Section 1.1502-20, dealing with the disallowance of losses related to consolidated ...subsidiaries. It has also endangered about a dozen other consolidated return provisions, and it has displaced the current judicial deference standard of Chevron with the National Muffler standard. Rite Aid has the potential to be a historic case - a "Supercase" by any standard. The implications and opportunities presented by this case are examined.
Though Gramm-Leach-Bliley has lowered barriers for insurance companies affiliating with securities firms and banks, merging a life with a nonlife company remains unnecessarily complex. Under section ...1504(c)(1), two or more US domestic insurance companies can be an affiliated group, partially negating Section 1504(b)(2), which specifies that insurance companies are excluded from the definition of "includible corporation." Although a nonlife company added to a consolidated group becomes an immediate member of the life/nonlife troup, the operating losses of the nonlife member cannot offset life income unless it has been a member for a full five years. To guard against incubating a shell corporation for five years, Reg. 1.1502-47(d)(12) provides four tests for eligibility. If nonlife consolidated net operating loss includes eligible and ineligible losses, rather than applying the normal pro rata method to determine which losses will be absorbed by nonmember income, a special stacking rule applies all income of the nonlife subgroup to the eligible loss.
The critical emerging tax issue in preparation for the Year 2000 is whether the staggering costs of assessing, remediating, testing, and maintaining non-compliant software will be currently ...deductible and ordinary and necessary business expenses, or will constitute capital improvements to be written off over a period of years. Unfortunately, the Y2K issue arises at a time the IRS has aggressively pursued a wide range of potential capitalization issues following its victory in the 1992 Supreme Court decision in INDOPCO. The IRS, to its credit, published a solution (Rev. Proc. 97-50) in an effort to head off a major controversy. This article analyzes this pronouncement, concluding that in certain ways it is very helpful. Yet it essentially trades one set of issues (under Section 162) for another set (under Section 174) and in the process raises a number of tax policy issues and traps for the unwary.
Since Sept. 11, insurance coverage has been harder to obtain and is far more expensive. Fortuitously, both the courts and the IRS have opened a door previously considered problematic - brother-sister ...companies that are members of the same affiliate group can deduct premiums paid to an insurer which is a sibling. Accordingly, it behooves affiliated groups to think captive insurance while seeking adequate and affordable insurance coverage. This article analyzes the developments and the open questions.
The proposed regulations under Internal Revenue Code Section 338 that reserve strengthening following an acquisition should be capitalized represents a radical departure from existing law and should ...be reconsidered by the IRS/Treasury for many reasons. Until the March 2002 proposed regulations, the IRS had not issued any formal guidance on precisely how the assumption reinsurance rules should be applied to the transaction deemed to occur as a result of the Section 338(h)(10) election. A key question the IRS had not addressed was whether the measure of liabilities assumed by New Target in a Section 338(h)(10) transaction is the insurance company's statutory reserve or its discounted reserves as determined for federal income tax purposes. There is little or no authority with respect to the proper treatment of liabilities related to the normal ongoing business operations of a target company before the closing that are paid by an acquirer of the business in the ordinary course of its operations.
