Under prior law, both the regular Code 36 first-time homebuyer credit of $8,000 and the reduced credit of $6,500 for long-term residents generally expired for homes purchased after Apr. 30, 2010. However, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit could be claimed if the purchase closed before July 1, 2010.

The Act amends Code Sec. 36(h)(2) to provide that if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit may be claimed if the purchase is closed before Oct. 1, 2010. Thus, this extension allows homebuyers who signed a contract no later than the April 30th deadline to complete their closing by the end of September.

The three-month extension of the closing date provides tax relief for those who couldn’t close on time because of backlogs at lenders and federal programs involved in homebuyer loans. In the words of the Act’s supporters, the three-month extension “will give time for all the new mortgages to be processed and not punish those homeowners who have been delayed through no fault of their own.”

The cost of the three-month closing reprieve is fully offset with revenue raisers, including these tax changes: expanding the bad check penalty under Code Sec. 6657 to cover electronic payments, effective for instruments tendered after the enactment date; and providing for disclosure of prisoner return information under Code Sec. 6103(k)(10) to state prisons, effective for disclosures after the enactment date.

Source: © 2010 Thomson Reuters/RIA. All rights reserved.

Who has to file an FBAR, Report of Foreign Bank and Financial Accounts form number TD F 90-22.1?
Any United States person which includes a citizen or resident of the United States, a domestic partnership, a domestic corporation, and a domestic estate or trust who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
A single-member LLC, which is a disregarded entity for U.S. tax purposes is considered a United States person for FBAR purposes.  The tax rules concerning disregarded entities do not apply with respect to the FBAR reporting requirement.

What constitutes signature or other authority over an account?
A person has signature authority over an account if the person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained.  Other authority exists if a person who can exercise power that is comparable to signature authority over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means.

When is the FBAR due?
The FBAR is due by June 30 of the year following the year that the account holder meets the $10,000 threshold. The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR. Filers cannot request an extension of the FBAR due date, however, persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts.

Contact us or visit the IRS website for more information on filing the FBAR.

For purposes of this exemption, the investment must be made in a company which:

1)      Has annual gross receipts for the most recent fiscal year which are not more than $3 million.

2)      Has its principal office or facility in Virginia.

3)      Is engaged in business primarily in or substantially produces its product in Virginia.

4)      Has not obtained during its existence more than $3 million, in aggregate, equity and debt, not including bank debt, financing.

5)      Is primarily engaged, or is primarily organized to engage in, the fields of advanced computing, advanced materials, advanced manufacturing, agricultural technologies, biotechnology, medical device technology, nanotechnology, or any similar technology related field determined by the Virginia Department of Taxation.

The Virginia Secretary of Technology is also authorized to approve any other business as qualified.

Finally, if a taxpayer has claimed a Virginia qualified equity and subordinated debt investment tax credit in a qualified business, the taxpayer is not eligible for the tax incentive for investment income for technology and science start-ups for the same business.  The Virginia qualified equity and subordinated debt investment tax credit is a credit of up to $50,000.  Eligible taxpayers can claim either the incentive for investment income for technology and science start-ups or the qualified equity and subordinated debt investment tax credit.  Taxpayers should analyze which tax incentive provides the greatest tax benefit based on the facts and circumstances.

If you have any questions regarding the above described tax incentive or the qualified equity and subordinated debt investment tax credit, please call or e-mail Robert Tobey at rtobey (at) kshgs (dot) com.

As part of its project to converge with International Auditing and Assurance Standards Board (IAASB) standards, the AICPA issued SSAE No. 16, which will be effective for reporting periods on or after June 15, 2010.

The new standards include a number of changes for both auditors and companies obtaining SAS 70 audit reports. Two changes that service organizations should be aware of include:

-       The auditor will be required to document the criteria used when auditing a service providers internal controls.
-       The company will be required to provide a written assertion on the subject matter of the engagement.

If you are a service provider with questions on internal control reports or SAS 70 reports, please feel free to contact Scott McAuliffe, Keiter Stephens’ Principal in charge of Risk Advisory Services, at 804-273-6247 or smcauliffe (at) kshgs (dot) com.

Levin Expects Phased-In Carried Interest Change to Be Key Offset for Extenders

House Ways and Means Committee Chairman Sander Levin (D-Mich.) said May 11 that he expects a phased-in change to the tax treatment of carried interest to be a main offset for the tax extenders legislation moving toward the House floor.

Levin said the exact details of the carried interest provision are still being worked out, but the legislation (H.R. 4213) would not include any carve-outs to exempt particular industries and would ultimately match the tax rate paid on carried interest income to ordinary income tax rates.

The bill, which was renamed the Promoting American Jobs and Closing Tax Loopholes Act, will have a total of roughly $50 billion in fully offset tax provisions. It is expected to go to the House floor during the week of May 17, Levin said. He added that there will not be any full committee hearing or markup of the legislation because most of the provisions have already been vetted by the committee in prior bills.

The legislation will include a slightly scaled back version of the Build America Bonds provision originally in the small business tax bill (H.R. 4849). Levin said he and Senate Finance Committee Chairman Max Baucus (D-Mont.) opted to tailor bonds provision back because of its cost.

Levin also said lawmakers are still discussing whether to include a provision from the small business tax bill that would raise $7.7 billion by stopping companies from using subsidiaries to channel deductible payments through U.S. tax treaty countries before earnings are repatriated to a tax haven. Information provided by BNA.com – posted May 11, 2010

“The more we can use the Form 990 to figure out who needs our attention and who doesn’t, the less likely we are to show up on your doorstep when you are a compliant taxpayer,” said IRS Tax Exempt and Government Entities Commissioner Sarah Hall Ingram.

Speaking at a nonprofit governance conference cosponsored by the Independent Sector and IRS, Ingram also said it is too early to discuss trends, but IRS is exploring why some organizations have failed to answer new questions or fill out new schedules on governance on the revised Form 990.

“We would like to look a little more closely at the patterns on blank spaces,” she said, “and we will be talking with some folks on some of those.” The IRS may address the lack of compliance by talking to stakeholders, sending letters to charities, or adding clarifications to the instructions for the Form 990 for the coming year, she said, in case there is any “ambiguity” on whether IRS wanted something filled out.

Information provided by BNA.com – posted April 21, 2010

Please contact Tom Denson or Ginny Gunther at 804-747-0000 if you would like to discuss your nonprofit’s Form 990.

This new tax credit was added to the IRC under the Patient Protection and Affordable Care Act (P.L. 111-148).  It provides that a taxpayer, which is a company employing no more than 250 people, through either a tax credit or cash grant, may seek to recover up to 50% for a qualified investment made in 2009 and 2010 in a qualifying therapeutic discovery project.

A qualified investment is described in the legislation as the aggregate amount of costs paid or incurred in 2009 and 2010 for expenses necessary for and directly related to the conduct of a qualifying therapeutic discovery project.  A qualifying investment does not include compensation paid to the company’s CEO or certain other officers, interest expense, facilities maintenance expense, certain indirect general and administrative costs, or any other expenditure as determined by the Secretary of the Treasury as appropriate to carry out the purpose of the legislation.

A qualifying therapeutic discovery project is a project designed to develop a product, process, or therapy to diagnose, treat, or prevent diseases and afflictions by conducting pre-clinical activities, clinical trials, clinical studies, and research protocols, or by developing technology or products designed to diagnose diseases and conditions, including molecular and companion drugs and diagnostic, or to further the delivery or administration of therapeutics.

A taxpayer interested in qualifying for these credits must first apply for IRS/ Department of Health and Human Service (HHS) certification, explaining, in a compelling, well-written, believable narrative which nonscientists can understand, why the taxpayer and the project qualify for the credit.  In evaluating applications the IRS and HHS are seeking projects which will reasonably result in:

1)      new ways to treat unmet medical needs;

2)      prevention, treatment, or detection of chronic or acute diseases;

3)      reduced U.S. healthcare costs over time; or

4)      significant advances toward curing cancer within 30 years.

It is expected competition for the $1billion of tax credits allotted under IRC §48D will be stiff.  A taxpayer interested in applying for these credits must be ready to submit its application as soon as the program commences, which is currently planned for May 23.
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Contact Robert Tobey if you would like to discuss how your company may qualify for the IRC §41D credit or would like to engage us to help draft your application.  We will post updates on guidance for applying for these credits as it becomes available.

http://newsletters.cchgroup.com/node/338

The FASB recently issued Accounting Standards Update No. 2010-17, Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition (a consensus of the FASB Emerging Issues Task Force).  The new guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. Accounting Standards Update.

Essentially, this is some more tweaking of the milestone method by the EITF impacting research and development-type contract.  The main factors seem to be more emphasis that a milestone be “substantive” and that all aspects of the milestone achieved before revenue can be recognized.  Here is an excerpt:

“The consideration earned by achieving the milestone should:

1. Be commensurate with either of the following:
a. The vendor’s performance to achieve the milestone
b. The enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone

2. Relate solely to past performance

3. Be reasonable relative to all deliverables and payment terms in the arrangement.

A milestone should be considered substantive in its entirety. An individual milestone may not be bifurcated. An arrangement may include more than one milestone, and each milestone should be evaluated separately to determine whether the milestone is substantive. Accordingly, an arrangement may contain both substantive and nonsubstantive milestones.”

Still a lot of judgment involved.  Welcome to “principles-based” accounting!

We have created a summary of certain key tax provisions in these new health reform Acts and their effective dates that may impact you and your business. The summary includes the following areas:

Health-Related Revenue Raisers

• Additional Hospital Insurance tax for high wage workers
• Surtax on unearned income
• Excise tax on high-cost employer-sponsored health coverage
• New limit on health FSA contributions
• Restricted definition of medical expenses for employer provided coverage
• Increased tax on nonqualifying HSA or Archer MSA distributions
• Modified threshold for claiming medical expense deductions
• Deduction for employer Medicare Part D is eliminated

Tax Changes Relating to Universal Health Coverage Mandate

• Penalty for remaining uninsured
• Low-income tax credits for participating in health exchanges
• Employer responsibilities
• “Free choice vouchers”
• Tax credits for small employers offering health coverage
• Dependent coverage in employer health plans

To access the detailed summary of these tax provisions, click this link: http://tinyurl.com/ybcu52a