In this issue: Senate Passes Job Creation Bill Eliminating Employer Share of Social Security Tax for New Hires in 2010. The Hiring Incentives to Restore Employment (HIRE) Act, passed by the Senate on February 24, would create a limited social security tax "holiday" for the employer share of social security tax on wages paid to previously unemployed new hires and a business tax credit if those employees are employed for at least a year. H.R. 2847. HIRE Act Presents Significant Implementation Challenges. See "Inside Washington" for March. Congress Approves One-Month Extension of COBRA Premium Assistance Deadline. Once President Obama signs it into law, the Temporary Extension Act, passed by the House on February 26 and approved by the Senate on March 2, will extend the deadline for involuntary terminations qualifying for COBRA premium assistance for one month, to March 31, 2010. H.R. 4691. IRS Releases Form 941 for 2010. The form, which includes primarily cosmetic changes this year, has been posted on the APA website together with its instructions, revised instructions for Schedule B, and new Schedule R (Allocation Schedule for Aggregate Form 941 Filers). Federal Court Says Severance Payments Were Not FICA Wages. A U.S. District Court has rejected the IRS' position on the treatment of SUB (supplemental unemployment benefits) pay as well as the Federal Circuit Court of Appeals' (CSX Corp., Inc. v. U.S.) reading of IRC §3402(o). A comment from the APA's tax counsel is provided. U.S. v. Quality Stores, Inc. Many Obama Administration Fiscal 2011 Budget Proposals Would Impact Payroll. The fiscal 2011 budget includes proposals to extend the Making Work Pay (MWP) credit, extend COBRA health insurance premium assistance, end taxation of employer-provided cell phone use, mandate automatic enrollment in individual retirement accounts (IRAs), reinstate the 39.6% and 36% income tax rates, make the FUTA surtax permanent, restructure the federal wage reporting process, and more. APA Testifies on Vermont, Connecticut Paycard Bills. See "Inside Washington" for March. Tax Court Says Costs of Sex Change Operation Are Deductible. The court said the costs of gender reassignment surgery and hormone therapy were deductible medical expenses under IRC §213 as treatment for gender identity disorder, while the cost of breast augmentation surgery was not. O'Donnabhain v. Commissioner. Employee's MBA Expenses Were Job-Related Educational Expenses. The court said that expenses incurred by a nurse in obtaining a Master's degree in Business Administration (MBA) were deductible, job-related educational expenses because the MBA was not a prerequisite for her job and did not qualify her for a new trade or business. Singleton-Clarke v. Commissioner. APA Testifies on Kansas Garnishment Bill. See "Inside Washington" for March. Helicopter Pilots Were Not FLSA-Exempt Learned Professionals. Pignataro v. Port Authority of New York and New Jersey. DOL Recovers $1 Million in Back Wages for Hurricane Katrina Workers. Solis v. Universal Project Management, Inc. IRS Issues Instructions for 2010 Forms 1099, 1098, 3921, 3922, 5498, and W-2G. The instructions have been posted on the APA website. DOL Revises Form for Review of Denial of COBRA Premium Reduction. The U.S. Department of Labor has posted on its website an updated application for those who believe they have been improperly denied a COBRA premium subsidy under the American Recovery and Reinvestment Act of 2009, as modified by the Department of Defense Appropriations Act, 2010. IRS Lists Countries for Which Foreign Earned Income Exclusion Requirements Are Waived for 2009. Rev. Proc. 2010-17. Update on Income Tax Treaties. Since PAYROLL CURRENTLY last reported on the subject, a replacement income tax treaty with Italy and a protocol updating the treaty with France have entered into force. Spring Ahead to Daylight Saving Time. Freight Engineers' Layover Time Was Not Hours Worked for FMLA Eligibility. Brotherhood of Locomotive Engineers and Trainmen v. Union Pacific Railroad Co. SIFL Rates for 1st Half of 2010 Announced. Air Time Sales Rep Was a Common Law Employee, Not a Direct Seller or Statutory Employee. Sloan v. Commissioner. IRS Announces Quarterly Interest Rates. Convenience Store Manager Was FLSA-Exempt Executive. Grace v. Family Dollar Stores, Inc. State and Local News.   • Alaska – online new hire reporting available • California – San Francisco HCSO annual reporting form available • Connecticut – same-sex civil union law repealed, conversion of unions to marriages anticipated • Illinois – child support penalties of employee's work state apply, court rules; UI contribution rate calculation method changed, online reporting programs updated • Iowa – NACHA operating rules amended for international ACH transactions; new online UI filing and payment system available • New Jersey – employer audits with suspension or revocation of business licenses for labor, tax law violations authorized • Ohio – electronic remittance of child support payments mandated • Oklahoma – electronic withholding tax reporting and payment mandated; online UI filing and payment available

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