Practice Management

Senate Finance Committee chair Chuck Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., announced a plan Tuesday to extend the period of time in which Americans can claim tax deductions for charitable donations to assist victims of the earthquake and tsunami that hit Southeast Asia on Dec. 26.

Local CPA firms Grimaldi & Associates CPAs and Nelkin, Griesel and Graves CPAs have merged their practices to form Grimaldi & Nelkin CPAs.

H&R Block subsidiary RSM McGladrey Inc., a national accounting and consulting firm focused on serving the middle market, has boosted its presence in northern Illinois with the acquisition of the non-attest assets of the Rockford office of BDO Seidman LLP.

As the Internal Revenue Service kicked off its 2005 tax filing season this week, it announced that it expects that its e-file program will hit a milestone.

Midwestern accounting and consulting powerhouse Virchow, Krause & Co. is kicking off the New Year by flexing its acquisition muscle.

The Treasury Department tapped Robert Carroll, deputy assistant secretary for tax analysis, and deputy assistant secretary for regulatory affairs, Eric Solomon, to assume interim leadership roles in tax policy until a new assistant secretary for tax policy is appointed. In those roles, Carroll will provide economic advice and analysis with regard to tax policy issues on behalf of the Treasury, while Solomon will continue to direct the regulatory guidance process in his current role as deputy assistant secretary for regulatory affairs. He also will serve as the acting deputy assistant secretary for tax policy. The moves come roughly one week following the Dec. 17 resignation of Greg Jenner, who served as acting assistant secretary for tax policy. Jenner assumed that post after incumbent Pamela Olson left the Treasury for a job in the private sector. Under current law, the president must either nominate a new Treasury assistant secretary for tax policy or designate an acting leader.

Before the end of the year, President Bush intends to select panelists to comprise a bipartisan tax reform commission, which would be charged with reporting any and all recommendations related to reforming the tax code to the Treasury Dept. According to Tax Analysts, the panel's recommendations will be given to Treasury secretary John Snow who in turn, will refer them to the president. However, as previously reported, heading the "to-do" list on the president's second term agenda will be the overhaul of the Social Security system and non-defense spending cuts rather than tax code reform. Most Capitol Hill observers believe that any tax reform would most likely be incremental and not be addressed until 2006.

With a planned overhaul of Social Security and pressing budget issues occupying center stage during the onset of the second Bush administration term, the president's planned reform of the tax code would most likely be pushed back at least one year. According to the Washington Post, the president plans to name a panel to examine the current tax policy but reportedly will assign the Treasury Department to monitor the panel's progress. The report said that Treasury Secretary John Snow would most likely recommend incremental changes to the tax code, rather than more dramatic reforms such as supplanting it with a "flat tax" or national sales tax. A White House spokeswoman, however, maintained that overhauling the tax code remains a priority.

Technology researcher Gartner Inc. agreed to acquire research competitor META Group for $162 million in cash. Gartner, which reported $858 million in revenues in fiscal 2003, will pay $10 per share in cash for META, which posted revenues of $122 million last year. Gartner said the purchase of META, which is also headquartered in Stamford, would help bolster its research capabilities. Gartner said it would finance the acquisition with its cash on hand, as well as borrowing from its existing credit line.

The Internal Revenue Service has issued letters to 1,700 businesses and retirement plan sponsors alerting them to new income and excise taxes applicable to S Corporation employee stock ownership plans, and warning of the consequences of participating in abusive schemes involving ESOPs and S Corporations. The letters are being mailed to S Corporation ESOPs reporting 10 or fewer participants. The letters follow recently issued temporary regulations on ESOPs and S Corporations, which provide guidance concerning the application of Internal Revenue Code section 409(p). Section 409(p) was enacted to address concerns about ownership structures involving S Corporations and ESOPs that concentrate the benefits of the ESOP in a small number of persons. For S Corporation ESOPs in existence on March 14, 2001, section 409(p) is effective for plan years beginning after Dec. 31, 2004. This delayed effective date has allowed existing S Corporations that maintain ESOPs some time to restructure the stock ownership in order to avoid the tax effects of section 409(p). The IRS letters also call attention to other abuses connected with S corporation ESOPs. "The IRS has determined that many existing arrangements designed to take advantage of the benefits of S corporation ESOP rules would not only involve taxation under section 409(p) but would also violate qualification requirements of the tax law, such as the coverage rules under Code section 410(b)," said Carol Gold, director of the IRS Employee Plans division."When an ESOP is not qualified under such circumstances, the subchapter S Corporation may be taxable as a C Corporation and any highly compensated ESOP participant may be taxable on the value of his or her account balance."