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Pooja Shah Kothari is an associate in the firm’s Washington office and a member of the Tax Practice Group. She also has experience in corporate bankruptcy and restructuring.

For the second time in the past year, the IRS Office of Chief Counsel issued a ruling addressing how transactions are counted for purposes of applying the de minimis threshold applicable to third party settlement organizations (“TPSOs”) under section 6050W.  In recently released PLR 201907006, the IRS considered the facts related to a payment processing service provided by a taxpayer to online sellers.  After considering the facts, the IRS ruled that the taxpayer was a TPSO.  The IRS then turned to the second ruling request, namely, whether the number of transactions for purposes of the de minimis rules are determined based upon the number of payments processed on behalf of payers rather than the number of times the customer receives payments from the TPSO through the taxpayer’s platform.  The IRS again determined that the number of transactions is determined by reference to the number of buy-sell transactions between buyers and sellers processed by the TPSO.

Continue Reading IRS Again Addresses De Minimis Standard for Third Party Network Transactions

On February 14, 2019, Senator Roy Blunt (R-Mo.) introduced bill S. 503 “to provide the opportunity for responsible health savings to all American families.”  The bill would increase the annual maximum amount that can be contributed to health flexible spending accounts (“FSAs”) as well as permit unused benefits to carry forward by amending section 125(i) of the Internal Revenue Code.  Currently, the bill has been referred to the Senate Finance Committee.

A health FSA is an arrangement between an employer and employee in which an employee elects to set aside wages for the upcoming year to pay for out-of-pocket health expenses with pre-tax dollars.  Permissible health expenses are those medical expenses treated as deductible under section 213 of the Code, which includes insurance copays and deductibles, qualified prescription drugs, medical devices, etc.

Continue Reading Proposed Senate Bill Would Expand Health FSA Limits

On February 19, 2019, the IRS issued AOD 2019-01, 2019 IRB 569, acquiescing in the result only in the Tax Court’s decision in Jacobs v. Commissioner, 148 T.C. 24 (2017). (Earlier coverage, here.)  By virtue of the AOD on Jacobs, the IRS indicated its acceptance of the Tax Court’s holding and will follow Jacobs “only with respect to cases involving sports teams in which the material facts are substantially identical.”

In Jacobs, the owners of the Boston Bruins, a team in the National Hockey League (“Bruins”), contracted with various hotels during the team’s away games to provide team employees pregame meals in hotel meeting rooms.  At issue was whether the owners were entitled to a full deduction for the cost of the meals provided in 2009 and 2010.  The Tax Court held in favor of the Bruins’ owners, holding that they were entitled to the full deduction because they provided the meals at “employer-operated eating facilities,” which qualified as a de minimis fringe benefit under Treasury Regulation § 1.132-7 (prior to January 1, 2018, a de minimis fringe benefit was excepted from the 50% limit typically applied to a deduction for a meal expense).  The Tax Court’s determination that the hotel meeting rooms constituted an “employer-operated eating facility” relied on the reasoning that (1) the hotels in which the Bruins held pregame meals were the team’s “business premises”; (2) the Bruins “leased” the hotel meeting rooms; and (3) the Bruins did not provide meals in a manner that discriminated in favor of highly compensated employees.

Continue Reading IRS Issues Action on Decision in Jacobs v. Commissioner