2015 Changes to Nebraska Sales and Use Tax

The Nebraska Legislature has made several changes to the sales and use tax. Starting in 2016, zoo admissions and memberships will be exempt from sales tax. The Nebraska Legislature enacted LB 419, a sales and use tax exemption primarily to support Nebraska’s nationally accredited zoos and aquariums. There are four nationally accredited zoos in Nebraska—Omaha’s Henry Doorly Zoo and Aquarium, Lincoln’s Children’s Zoo, Lee G. Simmons Conservation Park and Wildlife Safari, and Riverside Discovery Center. Zoo purchases and gross receipts from the sale of daily admission and memberships will no longer be subject to sales and use tax. Gross receipts derived from sales other than admissions or memberships, such as concessions, will still be subject to tax. The intent of the new law is to allow these zoos to reinvest the funds to further attract visitors and boost local tourism.

Also starting in 2016, purchases by sanitary drainage districts will be exempt from sales and use tax.

Lastly, the Legislature also passed a law which prepares Nebraska for the use of funds that would be generated if Congress expands the states’ authority to tax transactions with out-of-state retailers. If the federal government passes this type of legislation, LB 200 authorizes the funds to be credited to the Property Tax Credit Cash Fund—a fund for reducing property taxes. LB 200 was passed in anticipation of federal legislation such as the Marketplace Fairness Act, which would grant states the additional power for taxing transactions with out-of-state retailers. At this time, no federal legislation has made it through the House of Representatives. We will provide additional updates as this issue and pending federal legislation develops.

© 2015 Houghton Vandenack Williams
For more information, Contact Us

IRS Prepares Forms and Instructions for Employer Mandate Reporting under Obamacare

Starting in 2016, all “Applicable Large Employers”–meaning those with 50 or more employees—will need to file reports with the IRS regarding whether minimum essential healthcare coverage has been made available to employees under the Patient Protection and Affordable Care Act, also known as Obamacare. The information reporting requirements will first be effective for coverage that was offered (or not offered) in 2015. The information reported will be used to determine whether an employer owes a payment under the employer mandate and for determining employee eligibility for the premium tax credit.

Employer reports will be made on IRS Forms 1094-C and 1095-C. On August 6, 2015, the Internal Revenue Service released substantially final instructions for reporting employee health coverage on those Forms. The instructions specify who must file, how to file, and what to file with the IRS.

For the first year, the IRS will not impose noncompliance penalties on employers that make good faith efforts to meet the reporting requirements. Specifically, relief from penalties for reporting incorrect or incomplete information may be provided for 2015 information included on returns and statements filed in 2016. However, penalties will still apply to employers that cannot show a good faith effort to comply or fail to timely file the required forms.

More detailed information on the Applicable Large Employer reporting requirements is available from the IRS at the following link: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Reporting-of-Offers-of-Health-Insurance-Coverage-by-Employers-Section-6056.

© 2015 Houghton Vandenack Williams
For more information, Contact Us

IRS Warns of Tax Scams

On August 7, 2015, the Internal Revenue Service (“IRS”) issued a warning to all taxpayers about recent tax scams. There are reports of nearly 4,000 victims and over $20 million in financial losses caused by the scams. Most of the scams involve individuals posing as representatives of the IRS and are targeting both personal and financial data. The IRS warned that tax scams continue to evolve and can occur through many mediums—phone, email, or by mail with the use of authentic looking IRS letterheads.

As tips to avoid these scams, the IRS warns they will not:

  • Angrily demand immediate payment over the phone or call about taxes without first mailing a bill
  • Threaten arrest for lack of payment
  • Demand payment without the opportunity to question or appeal the amount
  • Require specific payment methods, such as prepaid debit cards
  • Ask for credit or debit card numbers over the phone

Additionally, the IRS wants taxpayers to remember that the official website of the IRS is IRS.gov. Any other variation is likely fraudulent.

For more information, see IRS Warns Taxpayers to Guard Against New Tricks by Scam Artists; Losses Top $20 Million, available at http://www.irs.gov/uac/Newsroom/IRS-Warns-Taxpayers-to-Guard-Against-New-Tricks-by-Scam-Artists.

If would like to further educate yourself about the most common scams for 2015, the IRS provided a list of the 12 most common scams for 2015. See, IRS Completes the “Dirty Dozen” Tax Scams for 2015, available at http://www.irs.gov/uac/Newsroom/IRS-Completes-the-Dirty-Dozen-Tax-Scams-for-2015.

If you believe you have been contacted as part of one of these scams, you can report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484 and the Federal Trade Commission at FTC.gov.

© 2015 Houghton Vandenack Williams

For more information, Contact Us

CMS Proposes New Exceptions to the Stark Law

The Centers for Medicare and Medicaid Services (“CMS”) has proposed revisions to the regulations governing enforcement of the physician self-referral law, commonly known as the Stark Law.   The changes are part of a 282-page proposed rulemaking that establishes the 2016 Medicare Physician Fee Schedule.  According to CMS, the proposed changes to the Stark regulations are intended to accommodate delivery and payment system reform, to reduce regulatory burdens, and to facilitate compliance.  Many aspects of the proposal appear to be in response to physician self-disclosures of highly technical violations that have been submitted under the Medicare self-referral disclosure protocol (“SRDP”) adopted as part of the Patient Protection and Affordable Care, also known as Obamacare.

The Stark law  generally prohibits a physician from making referrals for certain designated health services (“DHS”) that are payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership or compensation), unless an exception applies.  Among other things, the proposal would add two new exceptions, primarily targeted at rural and underserved areas.  As with all things Stark-related, the proposed exceptions are highly technical.

The first new exception to Stark would permit a hospital, federal qualified health center, or rural health center to subsidize a physician’s payment of a nonphysician practitioner’s salary.  The proposed exception would apply only where the nonphysician practitioner is a bona fide employee of the physician or the physician’s practice and the purpose of the employment is to provide primary care services to the physician’s patients.  To qualify under this exception, a non-physician practitioner would have to be a physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse midwife.  The subsidy would also be subject to a financial cap and two year time limitation.

The second new exception would expressly permit “timeshare arrangements,” and is intended to benefit communities where there is a need for certain specialty services but that need is not great enough to support a full-time physician specialist.   Under timeshare arrangements, a hospital or local physician practice may ask a specialist from a neighboring community to provide the services in space owned by the hospital or practice on a limited or as-needed basis. In such circumstances, the visiting physician may not have exclusive use of the premises and there may not be a one-year arrangement as required by the current exception for leased office space.

The proposed timeshare exception would provide relief from Stark where the visiting physician is a temporary licensee of the space rather than a lessor.  However, the proposed exception includes numerous technical requirements, including limitations on certain types of equipment that may be used in connection with the license.  In addition, the proposed exception would not protect a license of office space that is primarily used to furnish DHS to patients.

The proposed rule impacting the Stark Law can be found at the following link: http://www.gpo.gov/fdsys/pkg/FR-2015-07-15/pdf/2015-16875.pdf

© 2015 Houghton Vandenack Williams
For more information, Contact Us

IRS Issues Notice on PPACA “Cadillac” Tax

On July 30, 2015, the Internal Revenue Service (IRS) issued Notice 2015-52, addressing issues and seeking public comments on the implementation of the “Cadillac” tax on high-cost health insurance under the Patient Protection and Affordable Care Act (“PPACA”). The Cadillac tax is intended to discourage expensive health care plans by imposing a non-deductible 40 percent excise tax on the portion of health plan costs that exceed a predetermined dollar amount. The tax, which will go into effect in 2018, generally applies to healthcare benefit packages costing more than $10,200 for individuals and $27,500 for families, subject to certain proposed adjustments. Although the law was passed in 2010, many details of how the tax will be implemented still remain to be sorted out.

For example, one of the basic issues with the Cadillac tax is determining who has the responsibility to pay it. The law provides that the tax must be paid by the “coverage provider.” Depending on the circumstances, that may be the insurance company, the employer or “the person that administers the plan benefits.” However, some key terminology impacting these determinations have yet to be defined. Other unresolved complexities addressed the in IRS notice include: timing issues relating to calculation and payment of the tax, circumstances under which employers will be aggregated for purposes of the tax, and adjustments to the dollar limit based on age and gender.

The IRS has invited public comments on the issues raised in the Notice, as well as any other issues relating to the Cadillac Tax. Public comments are due no later than October 1, 2015. Comments received will be used in the preparation of forthcoming Treasury Regulations governing the Cadillac tax.

Notice 2015-52 is available at the following link: http://www.irs.gov/pub/irs-drop/n-15-52.pdf.

© 2015 Houghton Vandenack Williams
For more information, Contact Us

ABLE Accounts for Individuals with Disabilities

Financial planning for a family that includes an individual with disabilities, especially those without the resources to fully fund a special needs trust, often has substantial challenges. In December of 2014, the United States Congress passed legislation permitting families with individuals who develop a disability before age 26 to save for future expenses in an account that will grow tax-free. The Stephen Beck, Jr., Achieving a Better Life Experience (“ABLE”) Act of 2014, allows families to save in an account akin to a 529 college savings account. Those hoping to take advantage of the program must wait for their state to statutorily adopt the program, however many states, including Nebraska, have already acted.

An ABLE account holder can save up to $100,000 in the account and still be eligible for social security, Medicaid, and other federal programs. The annual limit for all contributions to an account is $14,000, paid from after-tax contributions. Although the contributions are after-tax, the disbursements, including the interest growth in the account, are tax free if spent on qualifying expenses. A qualifying expense for an individual with a disability includes “education, housing, transportation, employment training and support, assistive technology and personal supports services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight.”

On June 22, 2015, the Internal Revenue Service (“IRS”) issued proposed regulations to implement the law pertaining to ABLE accounts, enabling states to fully adopt the program. These proposed regulations have a variety of limitations, such as requiring the beneficiary to be a resident of the state where the ABLE account is created, requiring the beneficiary to have an eligible disability, limiting each beneficiary to one account, and limiting the investment direction a designated beneficiary can make to twice a year. Other aspects of the proposed regulations include limitations on types of contributions, specific accounting procedures, and options for states to contract with other states for administering programs.

The tax provisions in the proposed regulation include applying Internal Revenue Code (“IRC”) § 72 to distributions from the ABLE account. Under this section, all distributions during a tax year are treated as one distribution in that year and the value of the account is computed at the end of the calendar year. Further, if a distribution from an ABLE account is not for a qualifying expense, the distribution is includable in gross income for that taxable year. That means the distribution will be included as taxable income, as well as incurring an additional 10% tax on the amount of the distribution included in gross income. However, if the non-qualifying distribution occurs after the beneficiary dies or the distribution is a result of an excess contribution, the added 10% tax does not apply.

Another tax provision includes the application of the gift tax to ABLE account contributions by a person other than the designated beneficiary. Under the proposed regulation, the contribution is immediately considered a completed gift to the designated beneficiary and not a future transfer under IRC § 2503(e), thus any future distribution is not a taxable gift to the beneficiary. However, when the designated beneficiary dies, the amount remaining in the ABLE account is part of the beneficiary’s estate for purposes of the estate tax.

In Nebraska, Legislative Bill 591 was signed into law on May 27, 2015, formally adopting the program. The law, known as Nebraska ABLE, will allow qualifying individuals in Nebraska to take advantage of the program. At this time, however, it is unclear exactly how the state program will operate as the law allows the Nebraska State Treasurer to either establish a program within the state or contract with another state to provide for the accounts.

It is expected that final regulations will be issued at some point in the future, but the IRS states that the proposed regulations may be used and relied upon for creating programs and accounts. Those states that adopt programs and individuals who create an ABLE account based upon the proposed regulations will receive the benefits of IRC § 529(a), regardless of whether the final regulations impact the qualification of the ABLE program.

© 2015 Houghton Vandenack Williams
For more information, Contact Us

Workers’ Comp in Assault Cases

By Sarah E. Cavanagh.

The Nebraska Court of Appeals recently held that an employee is not entitled to collect workers’ compensation for an assault perpetrated by another employee if the assault is personal in nature and unrelated to the employment.

McDaniel v. Western Sugar Co-op, the employee, McDaniel, appealed a workers’ compensation court decision to deny benefits. McDaniel was working at Western Sugar Co-op when another employee harassed and assaulted him based on his past criminal history. McDaniel claimed that his injuries should be compensable by workers’ compensation because the injury took place at the workplace and he would not have interacted with the other employee had it not been for the job.

Whether a workers’ compensation claim will be granted depends on whether the injury “arises out of the employment.” This phrase is used to describe the accident – its origin, cause and character. The Court places risks into three categories for purposes of worker’s compensation: (1) Risks associated with employment, (2) personal risks, and (3) neutral risks. In order for an injury of a personal nature to have arisen out of the employment, “the employment must somehow exacerbate the animosity or dispute or facilitate an assault which would not otherwise be made.”

While the injury occurred at the workplace and likely would not have occurred had the parties not worked together, the reason for the incident was personal and not work-related. The assault stemmed from McDaniel’s criminal history, and was wholly disconnected from the place of employment or the parties’ relationship as co-workers. Therefore the Court found that workers’ compensation benefits were properly denied.

© 2015 Houghton Vandenack Williams
For more information, Contact Us

Domain Blocks Now Available for “.sucks” Domain Extensions

By Tom Langan. Earlier this year, over 550 new domain name extensions were created.  Examples include .basketball, .college, .miami, and .fishing.  Among the more controversial additions is “.sucks” which allows nearly anyone to obtain the domain www.[InsertYourName].sucks.  A “domain block” feature is now available that would allow individuals and/or business owners to reserve .sucks domain extensions and prevent others from using it. A domain block costs $199 and is valid for one (1) year.

© 2015 Houghton Vandenack Williams
For more information, Contact Us

The Supreme Court PPACA Ruling and Your Taxes

On June 25, 2015, the United States Supreme Court made headlines by ruling on King v. Burwell, No. 14-114, pertaining to the Patient Protection and Affordable Care Act (the “Act”). At issue, whether the Internal Revenue Service (IRS) may promulgate regulations that extend subsidies to individuals purchasing health insurance from a federal healthcare exchange instead of a state-based exchange. The question arose because the language of the Act itself suggested the insurance must be purchased through a state exchange in order for the individual to receive a subsidy. The Supreme Court found in favor of the IRS, allowing tax subsidies in the dozens of states that did not establish a state exchange and instead rely solely on the federal exchange.

What does this mean for the individual consumer, from a tax perspective? This means that regardless of the state in which you live, or whether the insurance was purchased on a state or federal exchange, subsidies for health insurance are available. Generally, an individual may receive assistance in obtaining health insurance by qualifying for a premium tax credit, cost sharing reduction subsidy, or Medicaid and CHIP. The premium tax credit,  the focal point of the King v. Burwell case, provides a subsidy based upon the applicant’s income.

Internal Revenue Code § 36B provides a potential premium tax credit for health insurance purchasers, dependent upon the modified adjusted gross income (MAGI) of the taxpayer and individuals in the taxpayer’s household required to file a tax return. If the income is between 100% and 400% of the federal poverty line, currently $11,770 for a one person household, a tax credit may be available. Depending upon the MAGI, the IRS limits the amount a taxpayer is required to pay for a health insurance premium, with a maximum payment range of 2% to 9.5% of the total MAGI. Any premium in excess of the applicable maximum percentage of income will be covered by the premium tax credit. The tax credit is payable in advance, to the insurer, to reduce the premium directly paid by the taxpayer. However, should the advance payments be made, the individual taxpayer must submit IRS Form 8962 with the individual’s annual tax return in order to reconcile the advance tax credit payments provided with the amount of the eligible tax credit based on the income shown on the return. In the event the reconciliation results in the taxpayer receiving a higher or lower tax credit than the amount for which the individual is eligible, an additional credit may be available, or a portion of the advanced credit the taxpayer received may need to be repaid.

King v. Burwell, No. 14-114, allows those purchasing health insurance on the federal healthcare exchange who are receiving subsidies to continue to do so. Although the tax credits are still available, an individual receiving the premium tax credit should be careful to recognize the potential tax implications on their next annual income tax return.

© 2015 Houghton Vandenack Williams

For more information, Contact Us

IRS System Compromised for 104,000 Individuals

The Internal Revenue Service (IRS) recently announced that one of their systems has been hacked by organized criminals believed to be linked to one or more foreign countries. The system, “Get Transcript,” is traditionally used by taxpayers to retrieve tax returns from prior years. The hackers were able to access the information from this system for approximately 104,000 individuals, although attempts were made on over 200,000.

In order for the hackers to access the system through the multi-step authentication process, the hackers had substantial information regarding these individuals prior to this event. Information that the hackers had on each person prior to this incident likely included social security numbers, dates of birth, tax filing statuses, and street addresses.

The result from the data breach includes approximately 15,000 fraudulently filed tax returns, however, the IRS notes that the volume and type of data retrieved may be used to perpetrate other frauds.  These frauds include opening new lines of credit or credit cards in the victim’s name, filing future fraudulent tax returns, or otherwise taking advantage from the sensitive information.

For those 200,000 individuals directly impacted, the IRS will notify them regarding the data breach and monitor their tax returns closely next year. For the 104,000 accounts actually hacked, the IRS will provide free credit monitoring services and a secure PIN, to add another security layer for future tax filings.

© 2015 Houghton Vandenack Williams

For more information, Contact Us