Required Reporting of Offshore Assets

US individual and business taxpayers with interests in certain foreign or offshore financial assets or accounts are required to disclose those assets on their federal income tax returns or file additional forms. A failure to file the necessary forms or a failure to disclose reportable assets can lead to both criminal and substantial monetary penalties.

The IRS has established various programs for remedying certain non-compliance issues and limiting liability for taxpayers that either fail to file or make proper disclosure. The programs typically involve voluntary disclosure of the reportable assets or the filing of amended returns. These voluntary programs must normally be undertaken prior to any IRS investigation of the matter. The correct remedy and actual eligibility for the various programs depends on the circumstances surrounding the failure to disclose the reportable assets or the failure to file the necessary forms.

In 2014, the IRS announced modifications of certain programs, but expanded others to accommodate additional taxpayers. For more information, see http://www.irs.gov/uac/Newsroom/IRS-Makes-Changes-to-Offshore-Programs;-Revisions-Ease-Burden-and-Help-More-Taxpayers-Come-into-Compliance. IRS, IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance; IR-2014-73, June 18, 2014.

If you have foreign or offshore assets, it is best to contact an attorney to determine whether those assets are reportable, and if you have failed to report those assets, it is important to determine what steps should be taken to limit the risks associated with the previous failure to report foreign or offshore assets.

© 2015 Houghton Vandenack Williams

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B-Corp and Benefit Corporation Status

Currently, in 28 jurisdictions including Nebraska, Benefit Corporation status exists as an option for forming a legal corporate entity. This is distinguished from B-Corp. status, which is a certification by B-labs, a 501(c)(3) organization. Although the purpose and intent of the certification and the legal status are similar, each have important differences.

A Benefit Corporation is organized under the laws of the state and requires the company to make decisions that benefit the shareholder, the employees, and society at-large. In Nebraska, for example, the state officially started recognizing this form of corporate entity in April, 2014. If elected, the corporation must have a general public benefit as measured by a third party standard and meet transparency and accountability requirements. It is expected that the volume of states recognizing Benefit Corporation status will grow.

Electing Benefit Corporation status means society and the public will benefit, generally, in accordance with the intent of the founder. More importantly, should the owner/founder leave the company or somehow no longer be in charge, the company will be required to consider the societal benefit aspects of the company in their decision making.

B-Corp status, on the other hand, requires a certification process by B-labs. The certification process varies depending upon the size of the company, but includes a company assessment and a fee. This allows the company to advertise their B-Corp status and show that they are looking beyond the shareholder profit motive, to a larger, moral and societal perspective regarding their company.

Although becoming B-Corp certified is distinct from using Benefit Corporation as a legal entity, they both encourage a broader, societal perspective in corporate decision making. Depending upon the specific organization contemplating one of the two options, a careful review of the requirements for each will ensure a proper selection.

© 2015 Houghton Vandenack Williams

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Beware of Potential Tax Return Fraud

Many doctors and health practitioners around the nation are experiencing tax return fraud issues. Tax return fraud occurs when another person or entity fraudulently files a tax return for another individual, looking to receive the victim’s refund. Across the nation, over the past two tax years, this has been a growing problem targeting doctors and similar health professionals. In Nebraska, it appears that this could also be a growing trend.

If you attempt to file a return and the Internal Revenue Service rejects it because a return has already been filed under your Social Security number, this signals tax return fraud. In this event, please contact an attorney for guidance.

© 2015 Houghton Vandenack Williams

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IRS Issues Notice Regarding PPACA Excise Tax

Part of the Patient Protection and Affordable Care Act (“PPACA”) efforts to reduce healthcare costs include an excise tax on health insurers that provide benefits to employees above a threshold limit. This tax is designed to discourage insurance programs that allow employees to receive unusually generous benefits under the insurance plan, which is believed to encourage heavy usage of healthcare. By reducing the overall usage, it will decrease costs. Moreover, it is expected that this tax will help fund the PPACA and off-set the cost of healthcare for those who are not enrolled in a qualified welfare plan. The 40% excise tax is set to take effect in 2018 for the cost of an applicable coverage plan that is above the threshold limit.

In preparing for the implementation of the excise tax, the Internal Revenue Service (“IRS”) has issued Notice 2015-16. This notice serves to clarify “the definition of applicable coverage,” “the determination of the cost of applicable coverage,” and “the application of the annual statutory dollar limit to the cost of applicable coverage.” The notice also seeks input on these issues.

This notice is only the start of implementing the new excise tax and the IRS anticipates issuing further notices. Eventually, the IRS intends to propose regulations and will invite further comments. For details regarding Notice 2015-16, the notice may found at the following link: http://www.irs.gov/pub/irs-drop/n-15-16.pdf .

© 2015 Houghton Vandenack Williams

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Update to FMLA Definition of “Spouse”

The Department of Labor (“DOL”) has updated selected regulations to the Family and Medical Leave Act (“FMLA”). The updates change the definition of spouse to mean: “husband or wife refers to the other person with whom an individual entered into marriage as defined or recognized under state law for purposes of marriage in the State in which the marriage was entered into . . . .”

Essentially, the change now requires employers to recognize FMLA leave for same sex individuals if the marriage is recognized and valid in the state where they were married. This change departs from the previous rule that requires recognition of the marriage by the state where the employee resides. This update will impact several parts of FMLA regulations, including leave for pregnancy, adoption, next of kin, and the care of a parent.

Although this new rule brings FMLA closer to the definition of spouse in other federal regulations and Supreme Court precedent, it does not include domestic partners. It must be a legally recognized marriage, including common law marriage, but it does not include a domestic partnership.

For employers, this may mean updating employee manuals and handbooks, as well as being aware of the laws of the various states when an individual applies for FMLA leave. The DOL does not expect compliance with the new regulations to add substantial cost.

The update to the federal regulations can be found at the following link: https://s3.amazonaws.com/public-inspection.federalregister.gov/2015-03569.pdf

© 2015 Houghton Vandenack Williams
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Potential Employer Requirements Due to Anthem, Inc. Data Breach

On February 4, 2015, Anthem Inc., one of the largest U.S. health insurers, notified the public that their data systems were breached. This breach potentially left customer names, social security numbers, and other personal information vulnerable. Subsequently, Anthem Inc. has already seen a customer lawsuit filed in California over the breach, with many more expected.

Health plan participants that have been affected will be notified in compliance with federal law. However, as this investigation continues, this may place additional burdens on employers. Depending upon the nature of the breach, of which further details are expected soon, employers may have to issue breach notifications under the Health Insurance Portability and Accountability (HIPAA). Until it becomes clear what information was taken, specific notification requirements are unclear. For example, a key question is whether protected health information was taken.

Depending upon the type of health plan an employer offers, it will have a varying impact upon the obligations for each company. The requirements will become clearer once further information is released. Beyond the federal HIPAA requirements, 47 states have unique breach notification laws that may impose obligations.

If you have questions pertaining how this may impact your requirements under the law, please contact Houghton Vandenack Williams for further information.

© 2015 Houghton Vandenack Williams

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Updates Made to Nebraska Homestead Exemption Information Guide

By Joshua A. Diveley.

The Nebraska Department of Revenue (NDOR) has updated its information guide regarding the Nebraska property tax homestead exemption. The homestead exemption provides property tax relief to certain homeowners by exempting from tax all or a portion of the taxable value of the taxpayer’s residence. The homestead exemption is available to persons over the age of 65, qualified disabled individuals and qualified disabled veterans and their widow(er)s. Specifically, revisions were made in the disabled veterans category to remove the requirement, effective for periods prior to January 1, 2015, that a veteran had to serve during a recognized war of the United States to be an eligible disabled veteran. Effective January 1, 2015, military service during peace is sufficient to qualify as a disabled veteran.

The homestead exemption form must be filed with the county assessor by June 30, 2015.

The updated homestead exemption information guide may be viewed on the NDOR’s website at: http://www.revenue.nebraska.gov/info/96-299.pdf. Release, Nebraska Department of Revenue, February 9, 2015

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IRS Announces There Will Be No Refunds of Taxes on Severance Payments

After the United States Supreme Court decision in United States v. Quality Stores, Inc., the Internal Revenue Service (IRS) has responded in kind with Announcement 2015-8. The issue in both the Supreme Court decision and the IRS announcement pertain to refunds of taxes on severance payments.

The United States Supreme Court in Quality Stores determined that severance payments to employees were taxable wages, subject to Federal Insurance Contributions Act tax (FICA). Other cases have found that severance payments were subject to other taxes, such as the Federal Unemployment Tax Act (FUTA) and Railroad Retirement Tax Act (RUTA).

The IRS announcement made clear that no refunds will be issued for taxes paid on severance payments. However, the only exception is a FICA tax exemption for severance payments in conjunction with state unemployment benefits, as per Revenue Ruling 90-72. A claimant may still appeal for a refund of FICA taxes if it is on an “additional or different basis,” such as taxes on certain fringe benefits. However, generally, severance payments are taxable and the IRS will not issue refunds thereupon.

 Further information may be found in the IRS announcement, found here: http://www.irs.gov/pub/irs-drop/a-15-08.pdf

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Nebraska Department of Revenue Issues Guidance on Market-Based Sourcing Method for Sales Tax Collection

The Nebraska Department of Revenue issued guidance on the market-based sourcing method for sales tax collection. For the year-end 2014 and subsequent years, the market-based sourcing method replaces the previously used costs of performance method. This guidance applies to the sale of intangible property or services, but not to tangible personal property.

The market-based sourcing method focuses on the receipt or use of the product. This method allocates Nebraska taxes based upon the proportion of the sale received or used within the state of Nebraska. In contrast, the previous rule applied the tax based upon the location where the costs of the income producing activity were incurred.

Specific details regarding the various rules for different types of sales may be found at the following link or by going to the Nebraska Department of Revenue website.

http://www.revenue.nebraska.gov/info/market_based_sourcing.html.

© 2015 Houghton Vandenack Williams Whitted Weaver Parsonage LLC
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IRA Charitable Rollover Remains an Option for 2014

By Mary E. Vandenack.

The tax law provision allowing a taxpayer age 70.5 or older to direct up to $100,000 of the taxpayer’s minimum required distribution to charity has been extended. Thus, taxpayers can choose to accomplish such a rollover to charity through December 31, 2014.

© 2014 Parsonage Vandenack Williams LLC

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