Yearly Archives: 2017

The district court has made several rulings regarding Code Sec. 280E, the Code section that disallows deductions in carrying on a trade or business that consists of trafficking in controlled substances.

One such ruling was that Code Sec. 7609(c)(2)(E)(i), which provides an exception to the Code's third-party summons rules where the summons is issued by an IRS criminal investigator, doesn't apply when the summons is issued by a regular IRS agent to obtain information pertinent to enforcement of Code Sec. 280E. (High Desert Relief Inc., (DC NM 3/31/2017) 119 AFTR 2d ¶ 2017-621).

The Tenth Circuit declined to revive a Colorado marijuana dispensary’s efforts to keep the IRS from investigating its business records, finding that such a suit is barred by a law preventing courts from interfering with tax collection efforts.

The Green Solution Retail Inc. had sued to block the Internal Revenue Service from investigating its business records after the agency initially found, as part of an audit, that the dispensary had trafficked a controlled substance, which would disqualify it for federal tax deductions and credits. But a Colorado federal district court in June dismissed the company’s suit, citing in part the Anti-Injunction Act, which prohibits federal courts from taking actions that would restrict the collection of taxes.

In asking the circuit court to vacate and remand the dismissal order, Green Solution had argued that although the Tenth Circuit had ruled in Lowrie v. United States that the AIA applies to activities leading up to the collection of taxes, a subsequent U.S. Supreme Court ruling undermined that decision.

In that ruling, issued in March 2015 in Direct Marketing Association v. Brohl, the Supreme Court held that businesses weren't barred under the Tax Injunction Act from challenging the reporting requirements in Colorado’s “Amazon tax” law.

But in a published decision affirming the district court’s dismissal, a three-judge panel on  found that there were significant differences in those two opinions. Direct Marketing involved the TIA, while Lowrie considered the AIA, the panel said, noting that those acts serve different purposes. The panel also ruled that the Declaratory Judgment Act, which prohibits declaratory judgments in certain federal tax matters, bars Green Solution’s suit.

Despite its legalization in 28 states and Washington, D.C., for medical use and in eight states and Washington, D.C., for recreational use, marijuana is still classified as a federal “controlled substance” under the CSA, the panel noted.

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IRS has recently notified foreign CAAs by email that, effective Apr. 17, 2017, IRS has rescinded the termination letter that they had previously been sent. 
 
In the email, IRS stated that if a CAA's Certified Acceptance Agent Agreement was not set to expire on Dec. 31, 2016, then no further action was required on their part for the CAA to resume participation in the CAA program as of Apr. 17, 2017. The CAA was told that he would receive an official letter in the mail in the next few weeks.

The email further stated that if the CAA submitted a renewing application prior to Dec. 31, 2016 and received a preliminary agreement, no action was required from the CAA at this time. A final agreement would be sent to the CAA in the mail within the next few weeks.

If the CAA or his organization submitted a “New” or “Renewing” application that was rejected because of the termination of the foreign CAA agreements, IRS indicated that the CAA could resubmit his application with the required documentation to participate in the program. If the CAA's agreement expired on Dec. 31, 2016 and the CAA did not submit a renewing application, he or she would have to submit a “New” application to continue participation in the program.

The email stated that all new and renewing applicants must complete the following four steps:

• (1)  Take the Mandatory Acceptance Agent training.
• (2)  Complete the Application Form 13551 (IRS Application to Participate in the IRS Acceptance Agent Program) and attach the fingerprint card (if applicable).
• (3)  Attach the original mandatory training certification form for each authorized representative.
• (4)  Complete forensic training and submit the original certificate of completion to the IRS with Form 13551.

Any individual filing a U.S. tax return is required to state his or her taxpayer identification number (TIN) on that return. Generally, a TIN is the individual's Social Security Number (SSN).

However, in the case of individuals who are not eligible to be issued an SSN, but who still have a tax filing obligation, IRS issues Individual Taxpayer Identification Numbers (ITINs) for use in connection with the individual's tax filing requirements. (Reg. § 301.6109-1(d)(3)(I))

The PATH Act provides that IRS may issue ITINs if the applicant provides the documentation required by IRS either (a) in person to an IRS employee or to a Community-based certified Acceptance Agent (CAA), or (b) by mail. Individuals who were issued ITINs before 2013 are required to renew their ITINs on a staggered schedule between 2017 and 2020.

A CAA is a person or an entity (business or organization) who, pursuant to a written agreement with IRS, is authorized to assist individuals and other foreign persons who do not qualify for a SSN but who still need a TIN to file a Form 1040 and other tax schedules.

The CAA facilitates the application process by reviewing the necessary documents, authenticating the identity when able, and forwarding the completed forms to IRS.