Newsletters

The Financial Crimes Enforcement Network (FinCEN) has announced that the mandatory beneficial ownership information (BOI) reporting requirement under the Corporate Transparency Act (CTA) is back in effect. Because reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.

The Financial Crimes Enforcement Network (FinCEN) has announced that the mandatory beneficial ownership information (BOI) reporting requirement under the Corporate Transparency Act (CTA) is back in effect. Because reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.

FinCEN's announcement is based on the decision by the U.S. District Court for the Eastern District of Texas (Tyler Division) to stay its prior nationwide injunction order against the reporting requirement (Smith v. U.S. Department of the Treasury, DC Tex., 6:24-cv-00336, Feb. 17, 2025). This district court stayed its prior order, pending appeal, in light of the U.S. Supreme Court’s recent order to stay the nationwide injunction against the reporting requirement that had been ordered by a different federal district court in Texas (McHenry v. Texas Top Cop Shop, Inc., SCt, No. 24A653, Jan. 23, 2025).

Given this latest district court decision, the regulations implementing the BOI reporting requirements of the CTA are no longer stayed.

Updated Reporting Deadlines

Subject to any applicable court orders, BOI reporting is now mandatory, but FinCEN is providing additional time for companies to report:

• For most reporting companies, the extended deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. FinCEN expects to provide an update before that date of any further modification of the deadline, recognizing that reporting companies may need additional time to comply.
• Reporting companies that were previously given a reporting deadline later than March 21, 2025, must file their initial BOI report by that later deadline. For example, if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.

Plaintiffs in National Small Business United v. Yellen, DC Ala., No. 5:22-cv-01448, are not required to report their beneficial ownership information to FinCEN at this time.

FinCEN Notice FIN-2025-CTA1

The IRS has issued Notice 2025-15, providing guidance on an alternative method for furnishing health coverage statements under Code Secs. 6055 and 6056. This method allows insurers and applicable large employers (ALEs) to comply with their reporting obligations by posting an online notice rather than automatically furnishing statements to individuals.

The IRS has issued Notice 2025-15, providing guidance on an alternative method for furnishing health coverage statements under Code Secs. 6055 and 6056. This method allows insurers and applicable large employers (ALEs) to comply with their reporting obligations by posting an online notice rather than automatically furnishing statements to individuals.

Under Code Sec. 6055, entities providing minimum essential coverage must report coverage details to the IRS and furnish statements to responsible individuals. Similarly, Code Sec. 6056 requires ALEs, generally those with 50 or more full-time employees, to report health insurance information for those employees. The Paperwork Burden Reduction Act amended these sections to introduce an alternative furnishing method, effective for statements related to returns for calendar years after 2023.

Instead of automatically providing statements, reporting entities may post a clear and conspicuous notice on their websites, informing individuals that they may request a copy of their statement. The notice must be posted by the original furnishing deadline, including any automatic 30-day extension, and must remain accessible through October 15 of the following year. If a responsible individual or full-time employee requests a statement, the reporting entity must furnish it within 30 days of the request or by January 31 of the following year, whichever is later.

For statements related to the 2024 calendar year, the notice must be posted by March 3, 2025. Statements may be furnished electronically if permitted under Reg. § 1.6055-2 for minimum essential coverage providers and Reg. § 301.6056-2 for ALEs.

This alternative method applies regardless of whether the individual shared responsibility payment under Code Sec. 5000A is zero. The guidance clarifies that this method applies to statements required under both Code Sec. 6055 and Code Sec. 6056. Reg. § 1.6055-1(g)(4)(ii)(B) sets forth the requirements for the alternative manner of furnishing statements under Code Sec. 6055, while the same framework applies to Code Sec. 6056 with relevant terminology adjustments. Form 1095-B, used for reporting minimum essential coverage, and Form 1095-C, used by ALEs to report health insurance offers, may be provided under this alternative method.

Notice 2025-15

The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2025 and the lease inclusion amounts for business vehicles first leased in 2025.

The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2025 and the lease inclusion amounts for business vehicles first leased in 2025.

Luxury Passenger Car Depreciation Caps

The luxury car depreciation caps for a passenger car placed in service in 2025 limit annual depreciation deductions to:

• $12,200 for the first year without bonus depreciation
• $20,200 for the first year with bonus depreciation
• $19,600 for the second year
• $11,800 for the third year
• $7,060 for the fourth through sixth year

Depreciation Caps for SUVs, Trucks and Vans

The luxury car depreciation caps for a sport utility vehicle, truck, or van placed in service in 2025 are:

• $12,200 for the first year without bonus depreciation
• $20,200 for the first year with bonus depreciation
• $19,600 for the second year
• $11,800 for the third year
• $7,060 for the fourth through sixth year

Excess Depreciation on Luxury Vehicles

If depreciation exceeds the annual cap, the excess depreciation is deducted beginning in the year after the vehicle’s regular depreciation period ends.

The annual cap for this excess depreciation is:

• $7,060 for passenger cars and
• $7,060 for SUVS, trucks, and vans.

Lease Inclusion Amounts for Cars, SUVs, Trucks and Vans

If a vehicle is first leased in 2025, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of the lease is more than:

• $62,000 for a passenger car, or
• $62,000 for an SUV, truck or van.

The 2025 lease inclusion tables provide the lease inclusion amounts for each year of the lease.

The lease inclusion amount results in a permanent reduction in the taxpayer’s deduction for the lease payments.

Rev. Proc. 2025-16

The leadership of the Senate Finance Committee have issued a discussion draft of bipartisan legislative proposals to make administrative and procedural improvements to the Internal Revenue Service.

A limited liability company (LLC) classified as a TEFRA partnership could not claim a charitable contribution deduction for a conservation easement because the easement deed failed to comply with the perpetuity requirements under Code Sec. 170(h)(5)(A) and Reg. § 1.170A-14(g)(6). The Tax Court determined that the language of the deed did not satisfy statutory requirements, rendering the claimed deduction invalid.

A limited liability company (LLC) classified as a TEFRA partnership could not claim a charitable contribution deduction for a conservation easement because the easement deed failed to comply with the perpetuity requirements under Code Sec. 170(h)(5)(A) and Reg. § 1.170A-14(g)(6). The Tax Court determined that the language of the deed did not satisfy statutory requirements, rendering the claimed deduction invalid.

Easement Valuation

The taxpayer asserted that the highest and best use of the property was as a commercial mining site, supporting a valuation significantly higher than its purchase price. However, the Court concluded that the record did not support this assertion. The Court found that the proposed mining use was not financially feasible or maximally productive. The IRS’s expert relied on comparable sales data, while the taxpayer’s valuation method was based on a discounted cash-flow analysis, which the Court found speculative and not supported by market data.

Penalties

The taxpayer contended that the IRS did not comply with supervisory approval process under Code Sec. 6751(b) prior to imposing penalties. However, the Court found that the concerned IRS revenue agent duly obtained prior supervisory approval and the IRS satisfied the procedural requirements under Code Sec. 6751(b). Because the valuation of the easement reported on the taxpayer’s return exceeded 200 percent of the Court-determined value, the misstatement was deemed "gross" under Code Sec. 6662(h)(2)(A)(i). Accordingly, the Court upheld accuracy-related penalties under Code Sec. 6662 for gross valuation misstatement, substantial understatement, and negligence.

Green Valley Investors, LLC, TC Memo. 2025-15, Dec. 62,617(M)

The Tax Court ruled that IRS Appeals Officers and Team Managers were not "Officers of the United States." Therefore, they did not need to be appointed under the Appointments Clause.

The Tax Court ruled that IRS Appeals Officers and Team Managers were not "Officers of the United States." Therefore, they did not need to be appointed under the Appointments Clause.

The taxpayer filed income taxes for tax years 2012 (TY) through TY 2017, but he did not pay tax. During a Collection Due Process (CDP) hearing, the taxpayer raised constitutional arguments that IRS Appeals and associated employees serve in violation of the Appointments Clause and the constitutional separation of powers.

No Significant Authority

The court noted that IRS Appeals officers do not wield significant authority. For instance, the officers do not have authority to examine witnesses, unlike Tax Court Special Trial Judges (STJs) and SEC Administrative Law Judges (ALJs). The Appeals officers also lack the power to issue, serve, and enforce summonses through the IRS’s general power to examine books and witnesses.

The court found no reason to deviate from earlier judgments in Tucker v. Commissioner (Tucker I), 135 T.C. 114, Dec. 58,279); and Tucker v. Commissioner (Tucker II), CA-DC, 676 F.3d 1129, 2012-1 ustc ¶50,312). Both judgments emphasized the court’s observations in the current case. In Buckley v. Valeo, 424 U.S. 1 (per curiam), the Supreme Court similarly held that Federal Election Commission (FEC) commissioners were not appointed in accordance with the Appointments Clause, and thus none of them were permitted to exercise "significant authority."

The taxpayer lacked standing to challenge the appointment of the IRS Appeals Chief, and said officers under the Appointments Clause, and the removal of the Chief under the separation of powers doctrine.

IRC Chief of Appeals

The taxpayer failed to prove that the Chief’s tenure affected his hearing and prejudiced him in some way, under standards in United States v. Smith, 962 F.3d 755 (4th Cir. 2020) and United States v. Castillo, 772 F. App’x 11 (3d Cir. 2019). The Chief did not participate in the taxpayer's CDP hearing, and so the Chief did not injure the taxpayer. The taxpayer's injury was not fairly traceable to the appointment (or lack thereof) of the Chief, and the Chief was too distant from the case for any court order pointed to him to redress the taxpayer's harm.

C.C. Tooke III, 164 TC No. 2, Dec. 62,610

In light of the IRS’s new Voluntary Worker Classification Settlement Program (VCSP), which it announced this fall, the distinction between independent contractors and employees has become a “hot issue” for many businesses. The IRS has devoted considerable effort to rectifying worker misclassification in the past, and continues the trend with this new program.  It is available to employers that have misclassified employees as independent contractors and wish to voluntarily rectify the situation before the IRS or Department of Labor initiates an examination.

The distinction between independent contractors and employees is significant for employers, especially when they file their federal tax returns. While employers owe only the payment to independent contractors, employers owe employees a series of federal payroll taxes, including Social Security, Medicare, Unemployment, and federal tax withholding. Thus, it is often tempting for employers to avoid these taxes by classifying their workers as independent contractors rather than employees.

If, however, the IRS discovers this misclassification, the consequences might include not only the requirement that the employer pay all owed payroll taxes, but also hefty penalties. It is important that employers be aware of the risk they take by classifying a worker who should or could be an employee as an independent contractor.

“All the facts and circumstances”

The IRS considers all the facts and circumstances of the parties in determining whether a worker is an employee or an independent contractor. These are numerous and sometimes confusing, but in short summary, the IRS traditionally considers 20 factors, which can be categorized according to three aspects: (1) behavioral control; (2) financial control; (3) and the relationship of the parties.

Examples of behavioral and financial factors that tend to indicate a worker is an employee include:

• The worker is required to comply with instructions about when, where, and how to work;
• The worker is trained by an experienced employee, indicating the employer wants services performed in a particular manner;
• The worker’s hours are set by the employer;
• The worker must submit regular oral or written reports to the employer;
• The worker is paid by the hour, week, or month;
• The worker receives payment or reimbursement from the employer for his or her business and traveling expenses; and
• The worker has the right to end the employment relationship at any time without incurring liability.

In other words, any existing facts or circumstances that point to an employer’s having more behavioral and/or financial control over the worker tip the balance towards classifying that worker as an employee rather than a contractor. The IRS’s factors do not always apply, however; and if one or several factors indicate independent contractor status, but more indicate the worker is an employee, the IRS may still determine the worker is an employee.

Finally, in examining the relationship of the parties, benefits, permanency of the employment term, and issuance of a Form W-2 rather than a Form 1099 are some indicators that the relationship is that of an employer–employee.

Conclusion

Worker classification is fact-sensitive, and the IRS may see a worker you may label an independent contractor in a very different light. One key point to remember is that the IRS generally frowns on independent contractors and actively looks for factors that indicate employee status.

Please do not hesitate to call our offices if you would like a reassessment of how you are currently classifying workers in your business, as well as an evaluation of whether IRS’s new Voluntary Classification Program may be worth investigating.

Charitable contributions traditionally peak at the end of the year-end. While tax savings may not be your prime motivator for making a gift to charity, your donation could help your tax bottom-line for 2015. As with many tax incentives, the rules for tax-deductible charitable contributions are complex, especially the rules for substantiating your donation. Also important to keep in mind are some enhanced charitable giving incentives scheduled to expire at the end of 2015.

Year-end charitable giving can benefit your 2015 tax bottom-line

Charitable contributions traditionally peak at the end of the year-end. While tax savings may not be your prime motivator for making a gift to charity, your donation could help your tax bottom-line for 2015. As with many tax incentives, the rules for tax-deductible charitable contributions are complex, especially the rules for substantiating your donation. Also important to keep in mind are some enhanced charitable giving incentives scheduled to expire at the end of 2015.

Tips

The IRS has posted tips for deducting charitable contributions on its website. The tips are a good refresher of the fundamental rules for deducting charitable contributions:

• To be tax-deductible, a contribution must be made to a qualified organization.
• To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
• If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
• Donations of clothing and household items must generally be in good used condition or better to be tax-deductible.
• Special rules apply to donations of motor vehicles.
• Many donations must be substantiated; the substantiation rules vary for different donations.

Qualified organizations

Some individuals are surprised to learn that their donation is not tax-deductible because the recipient is not a qualified charitable organization. Generally, churches, temples, synagogues, mosques, and other religious organizations are qualified charitable organizations. Nonprofit community service, educational, and health organizations are also generally qualified charitable organizations. Special rules apply to foreign charities. If you have any questions whether the organization is a qualified charitable organization, please contact our office.

Substantiation rules

Unless a charitable contribution is properly substantiated, the IRS may deny your deduction.

Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. Remember, this rule applies to all cash contributions, even contributions of small monetary amounts. The IRS will not accept certain personal records. For example, you cannot substantiate a contribution by reference to a diary or notes made at the time of the donation.

In recent years, text message donations have grown in popularity. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.

To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift.

One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

Additional rules apply for donations valued at more than $5,000. These donations generally require an appraisal and you must advise the IRS of that appraisal by filing a special form.

Expiring provisions

Under current law, certain IRA owners can directly transfer tax-free, up to $100,000 annually from the IRA to a qualified charitable organization. The benefit is limited. The IRA owner must be age 70 ½ or older. Additionally, the contribution does not qualify for the deduction for charitable donations. To qualify, the IRA funds must be contributed directly by the IRA trustee to the qualified charitable organization. You can also take advantage of this tax incentive if you itemize or do not itemize deductions.

Unless extended, this incentive will have officially expired after December 31, 2014. It is unclear if Congress will extend the incentive retroactively for 2015 or beyond. If you are considering a charitable contribution from your IRA, please contact our office so we can review the rules in detail.

Several other enhanced charitable giving incentives will no longer be available for the 2015 tax year and beyond. They include special rules for contributions of food inventory.

Clothing and household items

Cleaning out your closet can help generate year-end tax savings. However, not all charitable contributions of clothing and household items are deductible. Generally, clothing and household items donated to a charitable organization must be in good used or better condition. Other rules also apply to donations of clothing and household items. Properly valuing the items to withstand any IRS examination is also important.

Motor vehicles and other types of donations

The tax deduction for a motor vehicle, boat or airplane donated to charity is fraught with complexity. The substantiation requirements depend on the amount of your claimed deduction. If you are considering donating a motor vehicle, boat or airplane to charity, please contact our office so we can help you navigate the substantiation rules to maximize your tax benefits.

The rules for donations of conservation easements, intellectual property and other items likewise require expert planning. Otherwise, you could miss the tax benefit.

Limitations

The Tax Code includes a number of provisions limiting tax-deductible contributions. Limitations may be based on the individual’s income, the type of donation and the nature of the recipient organization. Our office can describe how these limitations may impact you.

As in past years, a provision known as the limitation on itemized deductions applied to higher-income individuals. This provision reduces the total amount of a higher-income individual's allowable deductions; however, some deductions are not impacted. For purposes of the limitation on itemized deduction, a taxpayer's total, itemized deductions do not include deductions for medical expenses, investment interest expenses, casualty or theft losses, and allowable wagering losses; charitable deductions do count, however.

If you have any questions about the mechanics of tax-deductible charitable contributions, please contact our office.