Insights & Developments

IRS issues Notice 2010-59 and Rev. Rul. 2010-23, which provide guidance reflecting statutory changes to flexible spending arrangements, the service says in a news release (IR-2010-95). Under the new standard, established by the Patient Protection and Affordable Care Act (P L. 111-148), effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from an FSA or health reimbursement arrangement unless a prescription is obtained, the release says. Prescriptions must be obtained regardless of whether a medication is available without a prescription to qualify for reimbursement from an FSA or HRA, IRS says in Notice 2010–59.

By Matthew Stevens and Clay Littlefield
Alston & Bird, Washington, DC and Charlotte NC

Section 1058 of the Internal Revenue Code provides that no gain or loss is recognized when an owner of securities transfers ("loans") them to another party who is obligated to return identical securities. There are other various requirements including that the stock loaned cannot reduce the stock lender's risk of loss or opportunity for gain on the loaned shares.

Section 1259 of the Code mandates gain if a taxpayer has an "appreciated financial position" and enters into a "constructive sale transaction."

By David I. Kempler and Elizabeth Minnigh
Buchanan Ingersoll & Rooney PC, Washington, DC

Section 6702 of the Internal Revenue Code was amended in 2006 to not only increase the penalty for frivolous returns but to apply it to all federal taxes not just income taxes. The penalty now applies to a "person" which includes individuals, trusts, estates, partnerships, associates, companies or corporations.

IRS and Treasury have not yet responded to an Aug. 2 letter from 30 lawmakers asking that regulators exempt nonsigning tax preparers from their plans to oversee all preparers, Rep. Sherman tells BNA. Sherman and Rep. Conaway, who also are CPAs, want IRS to back off of its plan to include nonsigning tax preparers at CPA firms under the proposed rules (REG-138637-07), saying it will require hundreds of thousands of employees at the firms to register with IRS needlessly. IRS has proposed to require any preparer who prepares all or substantially all of a tax return—whether that preparer signs a return or not—to obtain a PTIN and be tested for competency. 

Insured group health plans will face “new and complex challenges” in meeting tax regulations designed to prevent discrimination in favor of high-paid employees under the new health care reform law, says a white paper sent by America's Health Insurance Plans to its executive members. There is “substantial overlap” between nondiscrimination requirements for cafeteria-type employee benefit plans and those that insured group health plans will be required to follow as of Sept. 23, but there also are substantial differences, the paper says. Definitions for highly compensated employees differ, and tests that are used to determine if benefits are being given disproportionately to highly compensated executives are not the same, the white paper says.