Tax News Highlights

August 29, 2013

Decision Highlights Importance of Tax Sharing Agreements

The recent case Zucker v. FDIC highlights the need for carefully crafted corporate tax sharing agreements among members of a consolidated group.

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IRS Consolidates Procedures to Request Relief for Late S Corporation Elections

On Aug. 14, 2013, the IRS released Revenue Procedure 2013-30, which consolidates the procedures to request automatic relief for late S corporation elections, electing small business trust (ESBT) elections, qualified subchapter S trust (QSST) elections, qualified subchapter S subsidiary (Q-Sub) elections, and corporate classification elections intended to be effective on the same date as an S corporation election. Relief is available only in certain circumstances, and reasonable cause must be demonstrated to justify relief. Taxpayers can still request relief through a letter ruling if they do not qualify for relief under the Revenue Procedure.

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Healthcare Reform – Employers Required to Distribute Notice of Exchange to Employees

The Obama administration recently announced that the effective date of the employer “pay-or-play” mandate is delayed until 2015. As such, employers with 50 or more full-time-equivalent employees will not be subject to penalties until 2015 for not offering group medical coverage that is adequate and affordable.

There are other important requirements of healthcare reform, however.

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In-Store Photo Processing Qualifies for Domestic Production Deduction

The domestic production deduction (DPD) is a 9 percent deduction available for income from qualified manufacturing activities (6 percent for oil-related manufacturing and production activities). In an IRS legal advice memorandum released on Aug. 16, 2013, the IRS permitted a large pharmacy chain to claim the DPD for photo processing activities at its retail locations. Although the advice is not binding to any other taxpayer or the IRS, retailers should review their operations to determine if they have any similar activities that might qualify for the DPD based on the internal legal advice.

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Howard Wagner

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Howard M. Wagner
Partner, National Tax Services