Recent legislation: parts of 2005 Gulf Opportunity Zone Act apply nationally.

• Author: Josephs, Stuart R.

President Bush signed the 2005 Gulf Opportunity Zone Act (P.L. 109-135) into law Dec. 21, 2005. Some of its provisions apply nationally.

S Corporations

The 2004 American Jobs Creation Act (Jobs Act) allowed any family member to elect to treat all family members as one shareholder in determining the permissible number of shareholders (California CPA, January/February 2006, Page 6). The new law eliminates this election requirement and also treats a family member's estate as a family member for this purpose.

Family members include a common ancestor, that ancestor's decendants and any spouse (or former spouse) of these individuals. An individual cannot be considered a common ancestor if, on the "applicable date," the individual is more than six generations removed from the youngest generation of shareholders who would otherwise be family members. The "applicable date" is the latest date the S election is made or a family member first holds stock in the S corp or Oct. 22, 2004.

Suspension of Interest and Certain Penalties

If an individual files an income tax return by its due date, including extensions, the IRS must suspend accruing interest and certain penalties if it does not notify the taxpayer--specifically stating the taxpayer's liability and its basis--before the close of the 18-month period beginning on the later of the return's filing date or its due date, excluding extensions.

The suspension period starts the day after the end of this 18-month period and terminates 21 days after the IRS sends the required notice.

Under the new law, if a taxpayer files an amended return or other signed written documents showing additional tax due, this 18-month period is measured from the latest date these documents were provided, instead of from the original return's filing date. This change applies to documents provided after Dec. 20, 2005.

Under existing law, the suspension of interest does not apply to interest accruing after Oct. 3, 2004, on tax underpayments resulting from listed transactions or undisclosed reportable transactions. Under the new law, this interest suspension exception for listed and undisclosed reportable transactions also applies generally to interest accruing before Oct. 4, 2004.

Nonqualified Deferred Compensation (NQDC) Plans

Under the Jobs Act, generally for amounts deferred after 2004, all amounts deferred under these plans are taxable unless certain requirements are satisfied (California CPA, December 2004, Page 19). Interest...