* TAX REFORM PANEL GETS TWO-MONTH REPRIEVE: The President's Advisory Panel on Tax Reform will get an additional two months to complete its work. The White House amended the executive order creating the panel to give the group until Sept. 30, 2005, to complete its work. The original deadline was July 31, 2005.The panel will present Treasury Secretary John Snow with a report that includes revenue-neutral policy options for reforming the Internal Revenue Code. Those options are supposed to simplify federal tax laws to reduce the costs and the administrative burden of compliance, and to include at least one option that uses the federal income tax as the base for its recommended reforms.
In a statement, panel chairman Connie Mack and vice chairman John Breaux said, "We were on track to issue our report by July 31. Nevertheless, we are comfortable taking additional time to complete our work. We look forward to issuing our recommendations in September and giving this important presidential priority the full public debate and dialogue that it deserves."
Mack and Breaux noted that, since its creation in January, the panel has held ten meetings, heard testimony from nearly 90 witnesses, and received more than 4,300 written comments.
* IRS GIVES GUIDANCE ON WHAT IS INSURANCE: In just-released Revenue Ruling 2005-40, the Internal Revenue Service has underscored the fact that risk distribution must be present for smaller arrangements to qualify as insurance for federal income tax purposes. The ruling does not call into question the vast majority of insurance contracts issued by commercial insurance companies in the ordinary course of business.
Since the Supreme Court's 1941 decision in Helvering v. LeGierse, both risk shifting and risk distribution have been required for an arrangement to constitute insurance for federal income tax purposes. The ruling concludes that an arrangement with an entity that "insures" the risks of only one policyholder does not qualify as insurance for tax purposes, because the risks are not distributed among other policyholders.
The ruling also explains how this conclusion applies to single-member limited liability companies, which in some cases are treated as entities separate from their owners and in other cases are disregarded.
Qualification of an arrangement as insurance may affect whether the issuer is taxed as an insurance company and whether or when amounts paid under the arrangement may be deductible. If an arrangement does not qualify as insurance, it may instead be characterized as a deposit, a loan, a contribution to capital or an indemnity arrangement other than an insurance contract.
The ruling was accompanied by Notice 2005-49, soliciting comments from the public on additional standards relating to what constitutes insurance.
* MORGANTE, WATSON TO LEAD LARGEST IRS DIVISION: Richard J. Morgante and Pamela G. Watson have been named to the top two posts in the Wage and Investment Division, the Internal Revenue Service unit that serves most individual taxpayers.
Morgante, currently the division's deputy commissioner, will move up to W&I commissioner, and Watson, now the division's compliance director,will succeed him as W&I's second highest executive. Both appointments took effect in early July.
Morgante succeeds Henry Lamar, who is retiring after 34 years with the IRS, the last two as W&I commissioner.
"Rich and Pam make a strong team, and their leadership and experience will help us effectively serve taxpayers and enforce the law," said IRS Commissioner Mark W. Everson.
Based in Atlanta, the division has processing and customer service responsibility for virtually all taxpayers, processing approximately 175 million paper and electronic returns for individuals and businesses last year, answering 67.3 million automated and assistor calls, and serving over 7 million customers face to face.
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