September 01, 2000

 

 Agrees with spirit, not letter of tax resolution

DECISIONS 2000: AVMA HOUSE OF DELEGATES

 Posted Aug. 15, 2000


The AVMA House of Delegates voted in favor of referring back Resolution 2 to the AVMA Executive Board. The resolution directs the Association to obtain a statement from the Internal Revenue Service regarding the qualifications veterinary practices must meet to receive "C" corporation tax filing status.

Although agreeing with the resolution's intent, delegates referred it back for further technical considerations. The board has directed the AVMA Legislative Advisory Committee to look into the matter. The resolution directs the AVMA to obtain a Technical Advice Memorandum (TAM) from the IRS stating that if 5 percent of a veterinary practice comprises non-professional sales, including but not limited to boarding, grooming, and retail sales of pet products and pet food, then the veterinary practice be permitted to maintain its "C" corporation tax status (see JAVMA, July 1, 2000, page 7).

The resolution was precipitated by the IRS' initiation of an aggressive nationwide audit program in which veterinary hospitals operating as "C" corporations were reclassified as personal service corporations.

That change subjected former "C" corporations to a flat 35 percent tax rate as opposed to the lower graduated tax rates normally applied to these corporations, which begin at 15 percent.

It is believed that nearly 20 percent of the corporations in the United States still retain a "C" corporation status and would be favorably affected by a TAM ruling from the IRS.