Tax

Health Care Giant Receives $1.7 Billion Refund Despite Paying no Federal Tax in 2018

Health Care Service Corp. — the parent company for Blue Cross Blue Shield health plans in Illinois, Montana, New Mexico, Oklahoma and Texas — received a $1.7 billion tax refund despite paying no federal taxes in 2018, Axios reports. The company showed $4.1 billion profit on $35.9 billion of revenue in 2018 vs. $1.3 billion net profit on $32.6 billion of revenue in 2017, for which it paid about $467 million in federal taxes. The company credited the surplus to the repeal of the corporate alternative minimum tax as part of the Tax Cut and Jobs Act of 2017.

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New York Considers Tax on Second Homes

Lawmakers in New York are considering a singular solution to funding future NYC projects — a tax hike on multi-million-dollar second homes, The New York Times reports. The so-called “pied-à-terre tax” would institute an annual tariff on homes worth $5 million or more that do not serve as the buyer’s primary residence. The proposed hike would feature a sliding scale, with properties valued between $5 million and $6 million subject to a 0.5 percent surcharge on any valuation over $5 million, incrementally topping out at four percent for homes valued at over $25 million. Though unclear how much money the tax would raise, the New York City Comptroller's office estimated the tax would bring in a minimum of $650 million annually if enacted today and could raise $9 billion in state bonds based on expected revenue.

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U.S. Senate Democrats Support Increase, Changes to Child Tax Credits

U.S. Senate Democrats are rallying around a bill that intends to make strides in tackling child poverty, Vox.com reports. Initially introduced in 2017, the American Family Act would expand the child tax credit to $3,000 per year for income-qualifying families with a child ages six to 16, and $3,600 per year for families with a child aged from zero to five. The benefits would be distributed monthly, in advance, to help the families with budgeting concerns.

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IRS Faces Huge Backlog After Government Shutdown

The IRS is facing a considerable backlog after the shutdown, as employees returned to an estimated 5 million unanswered pieces of mail after the 35-day hiatus, Forbes reports. This is a wrench in the cog of an already hectic tax season, with the agency stretched because of changes in code from the Tax Cuts and Jobs Act and a revised 1040 form that has at least six additional schedules. The recent furlough, compounded with customer service questions on these changes, is expected to delay the agency considerably this tax season. While it’s currently back to business for the IRS, there is no guarantee of continued funding with another shutdown looming, as the government was only guaranteed budgeting for three weeks. 

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Senate Republicans Move to Kill 'Death Tax'

Three Republican Senators on Monday proposed a plan to repeal the federal estate tax, The Washington Post reports. Senate Majority Leader Mitch McConnell (R-Ky.), Sen. Charles E. Grassley (R-Iowa) and Sen. John Thune (R-SD) introduced the bill that aims to kill the already weakened “death tax,” of which the American College of Trust and Estate Counsel estimates only 5,000 taxpayers are expected to claim. The Tax Cuts and Jobs Act of 2017 currently allows married couples to gift up to $22,360,000 exempt from federal estate and gift taxes. According to the Joint Committee on Taxation, the estate tax is projected to account for about 0.6 percent of the federal budget in 2018, down from more than 1 percent in the 2000s. 

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State Lawmakers to Consider Transparency Measures for Business Tax Incentives

State lawmakers are reconsidering state laws that keep information on business tax credits confidential, the Tennessean reports. Proponents of transparency will introduce a bill that would require companies seeking incentives to release tax information along with business grant details, an approach that advocates contend is essential for formulating good economic development policy. Gov. Bill Lee after a budget hearing last Friday for the Department of Economic and Community Development, referring to the release of tax information for these companies, said: "Under the right circumstances things would be made public, but until it's the right timing … If it may not allow a job creating deal to come to Tennessee, then we certainly would be smart about that so that we bring jobs here." Details of the legislation will be made public by the bill filing deadline on Feb. 7.

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Tax Changes to be Aware of in 2019

The Tax Cuts and Jobs Act of 2017 has made sweeping changes to U.S. tax code, affecting estate planning, retirement contributions and insurance penalties. In addition, the IRS will be updating its tax brackets for 2019 to adjust them for inflation. This brief summary from CNBC puts these changes in a nutshell, offering a synopsis of issues relevant to your practice and allowing you to stay on top of these recent developments.

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Tullahoma Tax Dispute Headed to Supreme Court

An ongoing lawsuit between the City of Tullahoma and the Coffee County Board of Education (CCBOE) is headed to the Tennessee Supreme Court, the Tullahoma News reports. The suit stems from the county’s interpretation of two different state statutes regarding collection and distribution of liquor-by-the-drink taxes. The city won the case in the Coffee County Chancery Court but lost when CCBOE appealed the decision. The case is scheduled to be heard by the Tennessee Supreme Court on Oct. 4.

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East Tennessee Meatpacking Plant Owner Admits Tax Evasion

The owner of the East Tennessee Southeastern Provision meatpacking plant, James Brantley, agreed to plead guilty to federal charges of tax evasion, wire fraud and employing unauthorized immigrants, the Knoxville News Sentinel reports. In April, I.C.E. agents and I.R.S. investigators conducted the nation’s largest single immigration crackdown in more than 10 years at the plant; they rounded up 97 people on illegal entry charges. This action sparked statewide protests and unsuccessful attempts to toughen punishments for employers who knowingly hire undocumented workers. Brantley’s hiring of undocumented workers allowed him to pocket millions of dollars by ignoring safety regulations, violating federal wage and hour laws and avoiding unemployment and workers’ comp premiums. He will enter a formal plea in court on Sept. 12.

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Legal Practice Tip: Who May Redeem from a Tax Sale

On April 26, the Court of Appeals for the Western Section announced their decision in the case of MADISON COUNTY, TENNESSEE, ET AL. v. DELINQUENT TAXPAYERS FOR 2012, ET AL., maintaining that one attempting to redeem from a tax sale pursuant to TCA § 67-5-2701(a)(3)(C) needs to have their interest in the property both on the date the tax sale occurs as well as on the date the motion to redeem is filed. The statute reads:
 
“Person entitled to redeem” means, with respect to a parcel, any interested person, as defined in this chapter, as of the date of the sale and the date the motion to redeem is filed[.]
 
This position is contra to the position taken by the Eastern Section of the court in CITY OF CHATTANOOGA, ET AL. v. TAX YEAR 2011 CITY DELINQUENT REAL ESTATE TAXPAYERS where the court allowed a redemption from someone who purchased the redemptive right after the tax sale. The most recent case attempts to reconcile the divergent rulings based upon their opinion that the Chattanooga case was based upon a prior version of the cited statute (see footnote 3 in the Madison County case).

Joseph "Joe" Kirkland is an attorney and Senior Escrow Officer at the East Memphis office of CloseTrak, Closing & Title Services. Kirkland is active in the Tennessee Land Title Association (Chair of the standing Legislative Committee 2017-19, Director – Board of Directors 2018-19) and the Immediate Past Chair of the Tennessee Bar Association's Real Estate Law Section.

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