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Massachusetts FY2015 Budget Includes Several Tax Changes

  
  
  
FY2015

Authors: Tarra Curran, CPA, MST and Leo Drury, CPA

Massachusetts Gov. Deval Patrick on July 11, 2014 signed into law the Commonwealth’s $36.5 billion FY2015 budget, which includes a number of business and tax-related topics, among them authorizing a tax amnesty program, clarifying how corporations compute net worth for excise tax purposes, and delaying the FAS 109 deduction.

At the same time, the governor issued $16.1 million in non-tax-related, line-item spending vetoes, including $2.2 million for the Department of Correction, $1.8 million for state parks and recreation, and $549,000 for a state dam program. The new budget also eliminates earmarks for a variety of smaller projects.

New Rhode Island Budget Enhances State’s Competitiveness

  
  
  
curran

Rhode Island Governor Lincoln Chafee on June 19, 2014 signed the state’s FY2015 budget, pro-business legislation intended to spur economic recovery and encourage job creation. Supporters praised the new budget as one designed to help Rhode Island attract and retain business and create new jobs in part by reducing the corporate tax rate, which boosts the state’s competitiveness. With this new budget, Rhode Island goes from having one of New England’s highest tax rates to the lowest.

Highlights of the FY2015 budget include:

First Quarter Accounting and Financial Reporting Issues Update

  
  
  
Larry Kaplan

The first quarter of 2014 saw a number of activities by the governing regulatory bodies in the accounting profession. Several significant final standards were released that may impact financial reporting for private companies. We presented a summary of this information in our CBIZ & Mayer Hoffman McCann Executive Education Series webinar. This article provides a brief recap of the first quarter activities. For more detailed information, please see the respective publications issued on each topic.

Private Companies

There was significant activity related to the Private Company Council's (PCC) proposed accounting alternatives for qualifying private companies during the first quarter of 2014. These activities included the issuance of three final accounting standards and the removal of a project from their agenda as described below.

Transfer Pricing Roadmap Gives Insight on Examination Issues

  
  
  
transfer pricing

In February 2014, the IRS Transfer Pricing Operations (TPO) team issued a Transfer Pricing Audit Roadmap. The roadmap is intended to assist IRS examination teams with identifying and auditing transfer pricing issues. The creation of this roadmap reflects the Service's increased focus on transfer pricing matters. The roadmap also gives us insight into which transfer pricing issues will be scrutinized more closely and what kind of documentation the IRS expects to be in place to support the taxpayer's position.

FASB Raises the Threshold for Discontinued Operations

  
  
  
FASB

Accounting Standards Update 2014-08 Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08) was issued by the Financial Accounting Standards Board (FASB) in April. Among other things, this standard creates a higher threshold for meeting the criteria for discontinued operations which is expected to result in fewer disposals, or classifications as held for sale, meeting the criteria of a discontinued operation.

The Issue

In 2001, the FASB had broadened the definition of discontinued operations resulting in the inclusion of many small groups of assets that were recurring in nature. The inclusion of these disposals in discontinued operations resulted in excessive cost to preparers in preparing financial statements.

The project to modify the reporting of discontinued operations began in 2008, and as discussed in our prior article, the FASB had proposed a new standard in 2013. Most of the 2013 proposal remains intact with the issuance of this standard.

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Supreme Court Holds Severance Payments are Wages for FICA Purposes

  
  
  

On March 25, in an 8-0 decision, the Supreme Court reversed the Sixth Circuit Court of Appeals' decision in U.S. v. Quality Stores, Inc. and held that severance payments constitute wages for purposes of FICA withholding. This ruling resolves a conflict between circuits and ends any possibilities that taxpayers may receive refunds from protective claims filed for previous tax years.

Final Revenue Recognition Standard Issued

  
  
  
Revenue Recognition Standard

The FASB's much-anticipated final standard on revenue recognition has been issued. FASB Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers: Topic 606, is the culmination of a joint project with the IASB which simultaneously issued IFRS 15, Revenue from Contracts with Customers. The issuance of these documents completes the joint effort by the FASB and the IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and IFRS.

The new revenue recognition guidance affects all entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or leasing contracts). This ASU will supersede the current revenue recognition requirements found in Topic 605, Revenue Recognition, and does away with most industry-specific guidance that has been developed over several decades.

New Tangible Property Guidance Allows Late Partial Disposition Elections

  
  
  
Tangible Property Guidelines

On February 28, the IRS issued new guidance that allows taxpayers to claim a loss on structural components of buildings retired in prior years. Rev. Proc. 2014-17 provides updated automatic consent procedures for accounting method changes, which allows taxpayers to make a late partial disposition election accounting method change. The guidance also allows taxpayers to revoke any general asset account elections made under the temporary regulations. Rev. Proc. 2014-17 supersedes Rev. Proc. 2012-20.

A Pushdown Accounting Proposal for All

  
  
  

Pushdown accounting — the recording of a new basis in assets and liabilities in the stand-alone financial statements of a newly acquired subsidiary entity — has been addressed by the Securities and Exchange Commission (SEC), but the Financial Accounting Standards Board (FASB) has not previously provided guidance that would apply to all nonregistrants.

IRS’ Latest Compliance Check Program Targets the Roth Feature in 401(k) Plans

  
  
  
IRS

IRS Sending Employers with Retirement Plans Containing the Roth Feature Questionnaires Seeking Information on Noncompliance Issues

The IRS Employee Plans Compliance Unit has recently launched a Roth Compliance Check Questionnaire Program aimed at helping the IRS understand compliance related to the Roth deferral provision in 401(k) plans. It is intended to verify whether the plans randomly selected comply with the Code as it relates to the Roth provisions, as well as identify any noncompliance issues. If noncompliance is discovered, the IRS may launch a plan audit or advise the employer to seek voluntary correction through the IRS.

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