Understand the ACA
Our August 22, 2014, seminar "The Affordable Care Act: What Practitioners Need to Know," is filling up fast. This four-hour seminar is designed to give practitioners practical advice to guide their clients successfully through complex ACA requirements. For more information or to sign up, click here. This seminar is designed to give an in-depth look at ACA provisions critical to practitioners. There will not be time to address the ACA at this level during our Farm and Urban Tax Schools this fall.
Kristy will also be offering a series of one-hour webinars on ACA issues in October. Information regarding these webinars is available on the website.
TaxPlace, the new subscriber service we are unveiling this fall, will include detailed ACA information and seminar replays. More information regarding this exciting new service is coming soon!
D.C. Circuit Says IRS Illegally Created Obamacare Tax; Fourth Circuit Sees No Evil
The U.S. Court of Appeals for the D.C. Circuit has ruled that the IRS illegally expanded a tax under Obamacare (Act) that hit an estimated 4.5 million people that shouldn't have been subject to the tax. Halbig, et al. v. Burwell, No. 14-5018, 2014 U.S. App. LEXIS 13880 (D.C. Cir. Jul. 22, 2014). The court ruled that the I.R.C. Sec. 36B credit, according to the plain language of the Act, is only available to persons who purchase their government-mandated insurance through a health insurance Exchange established by a state. Accordingly, when the IRS developed a regulation (Treas. Reg. Sec. 1.36B-2(a)(1)) that allowed persons who bought health insurance through a federal Exchange, it created a tax on millions of additional people that only the Congress has the Constitutional power to do. But, none of this bothered the U.S. Court of Appeals for the Fourth Circuit, who ruled that the IRS was entitled to "Chevron" deference when adopting a regulation that dramatically changes clear statutory language enacted by the Congress. King, et al. v. Burwell, No. 14-1158, 2014 U.S. App. LEXIS 13902 (4th Cir. Jul. 22, 2014). Read the full article.
For Real Estate Professionals, IRS Concedes That 750-Hour Test Inapplicable On Per-Activity Basis Without Election
A taxpayer cannot fully deduct losses from a trade or business unless the taxpayer is a material participant in the business. The tests for material participation are listed below. If material participation is not present, the losses associated with the activity are passive. In general, rental activities are passive irrespective of how much time or effort the taxpayer puts into the activity. Thus, if the rental activity produces losses, those losses only offset other passive income (if the taxpayer has any). Excess losses that can’t be currently deducted get carried forward to years when they can be deducted. There is also a “fallback” rule of active participation which allows the deduction of up to $25,000 of net rental real estate losses, but the $25,000 amount is phased-out by $1 for every $2 that the taxpayer’s adjusted gross income exceeds $100,000.
However, “real estate professionals” get to fully deduct losses associated with real estate activities. Under I.R.C. §469(c)(7), a real estate professional spends most of their time conducting real estate trades or businesses as compared to non-real estate activities (the “50 percent” test), and puts in over 750 hours in real estate activities (the “750-hour” test). A real estate professional must also materially participate in real estate activities for the two tests to be satisfied – the activity has to be a real estate trade or business. In the past, IRS has taken the litigating position that the 750-hour test has to be satisfied on a per activity basis absent an election to aggregate all of the taxpayer’s rental activities. However, the Tax Court said that position was incorrect in a 2011 opinion and now the IRS has conceded the issue. Read the full article.
Agricultural Drones Need New Regulations to Take Off
The technology is here. The uses are many. Unfortunately, for those wishing to take off, the commercial use of unmanned aerial vehicles (UAVs), also known as drones, is illegal, and a clear regulatory framework is yet to be developed.
Drones, like other aircraft, are regulated by the Federal Aviation Administration (FAA). The FAA has taken the position that it is illegal to fly nearly all commercial drones. In recent publications, the FAA has contended that “commercial operations are only authorized on a case-by-case basis.” Currently, the only approval the FAA is granting for the use of commercial drones is an “experimental airworthiness certificate” to conduct research and development, training, and flight demonstrations. Commercial drone operations must have certified aircraft and pilots, in addition to their operating approval. The FAA also allows public entities such as federal and state governments and public universities to apply for a Certificate of Authorization (COAs). Under COAs, governments have used drones in limited operations such as search and rescue, military training, border patrol, and firefighting. Read the full article.
Update on the Proposed Rule Redefining “Waters of the United States” Under the Clean Water Act
We wrote in April about the proposed rule jointly released by the Environmental Protection Agency (EPA) and the United States Army Corps of Engineers (the Corps) redefining “waters of the United States” under the Clean Water Act (CWA). As we stated, the proposed definition appears to greatly expand the jurisdiction of the EPA and the Corps over farmland. Specifically, the broad definitions of “tributaries” and “adjacent waters” raises concerns that for the first time many ditches, temporary streams, and wetlands will be subject to federal regulation and permit requirements. Agricultural groups have strongly opposed the rule, concerned that it grants the agencies much greater power to control land use and farming practices and to subject farmers to costly permits and fines. EPA Chief Gina McCarthy continues to assert that the proposed rule is only a “clarification” of existing law, and she expressed shock during a recent Midwest tour that the unveiling of the rule has “fallen totally flat on its face.” The agencies continue to tout the agricultural exemptions as evidence that current farming practices will not be impacted by the rule. These exemptions, however, do not cover many common farming activities such as applying fertilizer or spraying pesticides.
Due to the overwhelming controversy, the EPA and the Corps has extended the public comment period (which was to end on July 21, 2014), to October 20, 2014. Anyone wishing to submit comments may do so by following the instructions at http://www.regulations.gov, using Docket ID No. EPA-HQ-OW-2011-0880. They may also send email comments to email@example.com, including EPA-HQ-OW-2011-0880 in the subject line of the message.
We will continue to keep you posted on this very important issue.
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Join us in September!
Registration for our Ames September Seminars has begun. Our Agricultural Law Seminar is September 11, 2014, and our Farm Estate and Business Planning Seminar is September 12, 2014. These seminars are designed to provide timely, critically objective information to producers, professionals, and agribusinesses concerning the application of important developments in agricultural law and taxation (federal and state legal opinions of relevance, as well as critical legislative developments. They are a primary source of professional educational training in agricultural law and taxation.
Recent Case Review
Following is a sample of recent legal cases summarized on our website. See the complete collection here.
The Center for Agricultural Law and Taxation 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. The Center'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.