Registration is underway for our exciting summary seminars. We have scheduled a Farm Income Tax, Estate, and Business Planning Seminar, at the West Baden Springs, Indiana Hotel (French Lick Resort) and a Farm Income Tax, Estate, and Business Planning Seminar in West Yellowstone, Montana. Learn more and register today!
We cover legal developments as they unfold. This month, we analyzed a number of tax and agricultural issues of significance, including assumption of risk, adverse possession, hot assets in farm partnership interest dispositions, railroad right of way abandoment, "debt arising out of a farming operation," and more. Read all of our recent legal articles here.
For instant updates as they occur, follow us on Twitter. We've begun alerting our followers to important agricultural and tax law developments as they occur.
To print or download the March 2014 newsletter in PDF, click here.
As the March thaw begins (we're optimistic here at CALT!), Roger McEowen analyzes several key tax provisions and proposals of particular importance this month.
Under Obamacare (the "Act") a new refundable tax credit for lower income individuals was created effective for tax years beginning after 2013 to help offset the higher cost of health insurance as a result of the Act. This “premium assistance tax credit” is contained in I.R.C. §36B. To claim the credit, a taxpayer must have income between 100 percent and 400 percent of the federal poverty level (FPL) and not be eligible for other qualifying coverage (e.g., Medicare or “affordable” employer-sponsored health insurance plans that provide “minimum value”).
For purposes of computing the credit on 2014 returns, the 2013 FPL will be used. We addressed this new credit at the tax schools last fall, and went through the amount of the credit that is available based on a taxpayer’s income. But, it is helpful to reiterate the extreme “income cliff” that comes with the credit. Under I.R.C. §36B(b)(3)(A)(i), a taxpayer with income between 300 percent and 400 percent of the FPL is potentially eligible for a credit that equals the excess of the premium cost that exceeds 9.5 percent of “household income.” (Refer to your tax workbook from last fall for the definitions of these terms). For a single person, the FPL is $11,490 for 2013. Thus, 400 percent of that would be $45,960. 9.5 percent of that number is $4,366.20. So, if this person’s premium cost exceeds $4,366.20 ($363.85/month), the credit will be the amount of the cost that exceeds $4,366.20. But, if the taxpayer’s income exceeds the 400 percent threshold by any amount, the credit is completely unavailable.
That’s a very steep cliff that could cost your clients thousands of dollars. Plan now to minimize the potential of your client’s falling off of the cliff or the damage done if they do. Consider accelerating deductions, deferring income and other related strategies. But, remember, the I.R.C. §36B credit is only available for insurance purchased through an exchange (either federally-facilitated exchanges or state-based exchange) where the taxpayer cannot get other government-approved insurance.
The I.R.C. §36B is being challenged in several courts. The argument is that the plain language of the Act says the credit is only available to taxpayers that acquire insurance through a state-based exchange. However, a regulation specifies that the credit is potentially available to taxpayers that acquire insurance through either a federally-funded exchange or a state-based exchange. This issue could eventually reach the U.S. Supreme Court.
In late February and early March tax proposal were released by the Chairman of the House Ways and Means Committee, David Camp (R-MI) and by the President as contained in the Fiscal Year 2015 budget proposal. While neither of the proposals will go anywhere at the moment, it is instructive to keep any eye on those items that impact agriculture.
The following items are contained in the Chairman’s proposal:
The following items are in the FY 2015 budget proposal:
Last June, the U.S. Tax Court held that CRP income is subject to self-employment tax in all situations except where the taxpayer is covered by the 2008 Farm Bill provision (i.e., receiving Social Security). The outcome of the case is particularly bad for retired farm landlords and investors, and could lead to reduced acres being bid into the CRP. The court also agreed with the absurd IRS proposition that because the taxpayer entered into the CRP with a profit intent that was also a reason that self-employment tax should apply to the CRP rents that the taxpayer received. That point of law has implications well beyond the CRP if it is allowed to stick. The case is presently on appeal with the United States Circuit Court of Appeals for the 8th Circuit, with oral argument likely to occur later this year. While the dollars at stake in the case are relatively small, the implications of the case are of national importance. In recognition of the case’s importance and the cost of appealing the Tax Court’s decision, Pheasants Forever has established a fund to accept tax deductible contributions to financially assist the appeal for the taxpayer, Rollin Morehouse. The fundraising goal is $40,000.
Contributions in support of the appeal can be sent to the following:
CRP Defense Fund
c/o Pheasants Forever
1783 Buerkle Circle
St. Paul, MN 55110
As you know, our work at the Center is dependent on the fees generated by seminar registrations and gifts. If you would like to donate to further the Center's efforts, please contact our Program Administrator, Tiffany Kayser at firstname.lastname@example.org or (515) 294-5217. You can also give online with a credit card. We thank you for your generous support.
CALT is pleased to announce that Kristy Maitre, the former IRS Senior Stakeholder Liaison for the State of Iowa, has joined our staff. Kristy brings 27 years of IRS experience to her role as CALT’s new tax specialist.
Practitioners who have attended our seminars are already familiar with Kristy and her vast breadth of practical knowledge of tax and estate planning. Kristy has taught hundreds of continuing education classes to tax practitioners around the country. At CALT, she will continue to offer training through live seminars, but will expand her reach with frequent webinars and other educational offerings through the CALT website. Stay tuned as CALT will soon unveil more exciting changes enabling us to better serve the tax practitioner community.
Kristy can be reached by phone at (515) 296-3810 or by email at email@example.com.
We've summarized a number of new cases this month. Check out the full version of our most recent annotations here.
Mc Vicars v. Christensen, No. 38705, 2014 Ida. LEXIS 59 (Idaho Feb. 20, 2014), substituted opinion for McVicars v. Christensen, No. 38705, 2013 Ida. LEXIS 371 (Ida. Sup. Ct. Dec. 27, 2013) (nuisance case).
Williams v. Comr., No. 23883-12 (U.S. Tax Court Mar. 10, 2014) (self rental rule triggered and negated passive losses where taxpayer rented real estate to taxpayer's C corp.)
Clark v. Van Meter, No. 2012-CA-000169-MR, 2014 Ky. App. Unpub. LEXIS 116 (Ky. Ct. App. Feb. 14, 2014)(plaintiff failed to establish adverse possession claim)
CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.