Newly enacted H.R. 1586 modifies limitation period in HIRE Act

Section 6501(c)(8) provides an exception to the normal three-year period of limitations for assessments if the taxpayer fails to provide complete foreign transaction reporting as specified in that provision. HIRE Act, which was enacted on March 18, 2010, added additional foreign information items that will extend the assessment period and provided that only the extended limitation period applies to the entire return rather than to the item or items related to the information failure.
Recently enacted H.R. 1586 modifies this provision and includes a technical correction to the HIRE Act.  Accordingly, the expanded period of limitations for assessments under section 6501(c)(8) applies to the entire tax return unless the reporting failure is due to reasonable cause and not willful neglect.  If the taxpayer has reasonable cause, the expanded period of limitations for assessment applies only to the item or items related to the failure. This certainly is a welcome news.

UK tax law likely to scare away Tiger Woods and other sports folks – “The Independent” reports

 Tiger Woods’ reluctance to accept a Ryder Cup wild card may in part be due to a £1m tax bill he could face for playing in the event, which pays no prize money. Aside from any sporting price his team-mates might face because of his wretched form, the issue highlights a problem that is causing concern for many British sporting events. 

Sportsmen and women who earn money in the UK while not resident have been targeted by HMRC after it won a high-profile case against Andre Agassi four years ago. The implications are now being felt. Previously HM Revenue & Customs had only gone after a portion of “active income”, earnings from prize money or appearance fees. But the so-called “passive income” – mainly from endorsements – was not deemed liable for UK tax. Now attempts are made to claim tax not just on a foreign sportsperson’s direct earnings on British soil (for example, prize money) but also on a proportion of the sportsperson’s |global endorsement earnings. The Independent understands that leading players have voiced their concerns to the European Tour, the organisers of the Ryder Cup, and a Tour spokesman last night confirmed that they are in “discussions” with HMRC. HMRC told The Independent yesterday that Woods and the other players would still probably be liable on their equipment sponsorships. 

“Product endorsements that are directly connected to the sportsperson’s performances are subject to UK tax,” explained an HMRC spokesperson. “Though full UK expenses arising from the performance can be claimed against the income chargeable to UK tax.” 

Woods’ deal with Nike is rumoured to pay $40m a year. So if he played 14 events this year, and one of those is the Ryder Cup, he would be billed to pay tax, at 50 per cent, on one-fourteenth of that amount, leaving the potential tax bill as high as £900,000. The taxman would no doubt also be interested in the reported $10m he receives from EA Sports, for whom his name and images appear in a computer game based on the Ryder Cup. 

House speaker calls house from recess to tighten international tax rules

The Senate last week approved $11 billion in tax hikes for multinationals. The provisions would tighten foreign tax credit rules and close the international tax loopholes. The revenue is intended to be used to bolster Medicare funds and provide aid to states to prevent teacher layoffs. The House speaker Nancy Pelosi took the unusual step and convened the House to interrupt its summer recess to ensure that the teacher funding provisions are approved before the start of school year. Since these international offsets are similar to those included in extenders legislation approved by the House in May, it is expected that it will clear the House and President Obama will quickly sign into law.