Tax News E-Alert

July, 2008

Recent Tax Law Changes

Overview of relevant tax changes in the Heroes Earnings Assistance and Relief Act of 2008 for non-military members

The recently enacted “Heroes Earnings Assistance and Relief Tax Act of 2008” (the 2008 Heroes Act) provides targeted tax relief for military members and their families.  The following is a discussion of certain provisions of the Act for non-military members:

●  U.S. citizens and long-term U.S. residents are subject to tax on their worldwide income.  The Act tightens the expatriation rules to ensure that certain high net-worth taxpayers can’t renounce their U.S. citizenship or terminate their U.S. residency in order to avoid U.S. taxes.  Under this provision, high net-worth individuals are treated as if they sold all of their property for its fair market value on the day before they expatriate or terminate their residency.  Gain is recognized to the extent that the aggregate gain recognized exceeds $600,000.  The provision applies for those who relinquish U.S. citizenship or terminate their U.S. residency on or after June 17, 2008.

● The Act treats foreign subsidiaries of U.S. companies performing services under a U.S. government contract as American employers for employment tax purposes.  Under the new law, the domestic parent is jointly liable for employment taxes imposed on the foreign subsidiary.  The new provision applies to services performed in calendar months beginning more than 30 days after June 17, 2008.

●  The Act increases the minimum penalty for failure to file an individual tax return within 60 days of the due date to the lesser of $135 (up from $100) or 100 percent of the amount of tax required to be shown on the return, effective for tax returns required to be filed after 2008.

Heartland, Habitat, Harvest, and Horticulture Act of 2008

The recently enacted “Heartland, Habitat, Harvest, and Horticulture Act of 2008” (the 2008 Farm Act) contains a package of tax changes including specialized tax breaks for the farming industry and new and modified credits related to the production of certain fuels, among other things.

Please feel free to contact me at 310-697-1505 or jchung@rwac.com if you have any questions.

Best regards,

James Chung

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