SC&H Group Blog: "Expertise Beyond the Numbers"

State & Local Tax Updates: Alabama Personal Income Tax; Arizona Sales & Use Tax; and Pennsylvania Corporate Income Tax

Through its content-sharing partnership with Thomson Reuters Checkpoint, SC&H Group’s State and Local Tax practice has compiled the following round up of actionable state tax news.

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AlabamaPersonal Income Tax — Electronically filed notice of appeal invalid.
The Alabama Court of Civil Appeals (Court) has dismissed as untimely an appeal by the Alabama Department of Revenue of a trial court’s denial of its motion to set aside a default judgement entered in favor of taxpayers on their appeal from an administrative law judge’s order upholding of the Department’s final assessment of income tax owed by the taxpayers. The trial court had entered a default judgment in favor of the taxpayers based on the Department’s failure to file an action or otherwise appear in the action. The Department had argued that its electronic filing of the appeal was timely. The Court, however, determined that a notice of appeal to an appellate court may not be filed electronically. The Court pointed out that the Department should have been aware that its notice of appeal could not be electronically filed since both the electronic filing manual issued by the Alabama Unified Judicial System and the electronic filing web site itself warn filers that certain documents, including notices of appeal, could not be electronically filed. (Ala. Dept. of Rev. v. Frederick, Ala. Ct. Civ. App., Dkt. No. 2130711, 10/24/2014.)

ArizonaSales And Use Tax — TPT Simplification—upcoming developments.
Earlier this week, the Arizona Department of Revenue (ADOR) discussed transaction privilege tax (TPT) Simplification (see State & Local Taxes Weekly, Vol. 25, No. 43, 10/27/2014) and said that it would post information about additional TPT Simplification changes on its website. The ADOR has now posted on its website a list of other things for taxpayers to look for in the coming months. Those other things are as follows: (1) geo coding “look up” functionality by January 1, 2015; (2) bulk filing by jurisdiction, by January 1, 2015; (3) a new joint tax application (JT-1) with geo coding: July 1, 2015; (4) an enhanced AZTaxes.gov e-file system: October 1, 2015; (5) a new TPT-1 (Transaction Privilege, Use, and Severance Tax Return) for filing monthly TPT returns, which will allow taxpayers to report data by business location: October 1, 2015; (6) bulk filing capabilities for taxpayers to file by business location: October 1, 2015; (7) location-based reporting: October 1, 2015; and (8) an electronic license renewal process for all taxpayers, including non-program city taxpayers, between October and December, 2015. (TPT Simplification Changes Are Coming, Arizona Department of Revenue, 10/23/2014.)

CaliforniaReal Property — Petroleum refining properties—proposed re-adoption of Regulation 474.
The California State Board of Equalization (SBE) has issued a notice of proposed regulatory action regarding its plan to readopt California Code of Regulations, Title 18, §474, Petroleum Refining Properties. Proposed Rule 474 implements, interprets, and makes specific certain sections of the California Constitution and the Revenue and Taxation Code, as interpreted by the California Supreme Court in Western States Petroleum Assn. v. Bd. of Equalization, 159 Cal Rptr 3d 702 (2013), by defining the terms “petroleum refinery property” and “appraisal unit,” and establishing a rebuttable presumption that the land, improvements, and fixtures and other machinery and equipment classified as improvements for a petroleum refining property constitute a single appraisal unit, except when measuring declines in value caused by disaster. The SBE will conduct a meeting in Room 121, at 450 N Street, Sacramento, California, on December 17–18, 2014, at which it will hold a public hearing regarding the proposed regulation, which will begin at 9:30 a.m. or as soon thereafter as the matter may be heard on December 17 or 18. Questions regarding the substance of proposed Rule 474 should be directed to Bradley M. Heller, Tax Counsel IV, by telephone at (916) 323-3091, by email at Bradley.Heller@boe.ca.gov, or by mail at State Board of Equalization, Attn: Bradley M. Heller, MIC:82, 450 N Street, P.O. Box 942879, Sacramento, CA 94279-0082. Written comments for the SBE’s consideration, notice of intent to present testimony or witnesses at the public hearing, and inquiries concerning the proposed administrative action should be directed to Mr. Rick Bennion, Regulations Coordinator, by telephone at (916) 445-2130, by fax at (916) 324-3984, by email at Richard.Bennion@boe.ca.gov, or by mail at State Board of Equalization, Attn: Rick Bennion, MIC:80, 450 N Street, P.O. Box 942879, Sacramento, CA 94279-0080. The SBE also has prepared an initial statement of reasons for the adoption of the proposed rule, which along with the text of the proposed regulation and other documents related to the proposed regulation, is available at its website. ( California State Board of Equalization Letter to Assessors 2014/051, 10/24/2014 .)

CaliforniaPublic Utilities — Emergency telephone users (911) surcharge.
The California State Board of Equalization has updated Emergency Telephone Users (911) Surcharge, its publication that is designed to provide basic information about California’s Emergency Telephone Users Surcharge Program. The revised publication includes a number of substantive changes: (1) in the section on what service providers are required to do, it says that they are required to collect the 911 surcharge from their customers and file a monthly, quarterly, or yearly return (previously, the publication said they were required to collect the surcharge and file monthly returns); (2) it adds a discussion on what mandated charges are not subject to the 911 surcharge (the Access Recovery Charge, the Universal Service Fund Charge, the Universal Lifeline Telephone Surcharge, the California High-Cost Fund-A and Fund-B, California Teleconnect Fund, the Deaf and Disabled Telecommunication Program, and California Advanced Service Fund) and states that the only CPUC (California Public Utilities Commission) charge subject to the 911 surcharge is the CPUC Reimbursement Fee; and (3) in the section on what is the tax rate, it says that the Governor’s Office of Emergency Services determines the annual surcharge rate by October 1 each year (previously, the publication said the California Technology Agency determined that rate by that date each year). The revised publication also includes a number of nonsubstantive changes. ( California SBE Information Publication 39A, 10/01/2014 .)

FloridaSales And Use Tax — Self-service key-cutting machines not exempt in Florida.
The taxpayer’s purchases of self-service key-cutting machines, for use in Florida, do not qualify for exemption as industrial machinery and equipment used in new or expanding businesses that manufacture tangible personal property for subsequent resale in Florida under Fla. Stat. § 212.08(5)(b) and Fla. Admin. Code Ann. § 12A-1.096 . The machinery and equipment purchased by the taxpayer is encased in self-service kiosks that are located in big-box stores. This machinery and equipment does appear to meet the definition of “industrial machinery and equipment” under Fla. Stat. § 212.08(5)(b) . However, the taxpayer would not be considered a “new business” under the provisions of Fla. Admin. Code Ann. § 12A-1.096(2)(e)(3) . This subparagraph defines a new business to mean the opening of a new facility or plant, at a fixed location in Florida, to manufacture, process, compound, or produce an item of tangible personal property for sale. The placement of a kiosk in a big-box store does not constitute the “opening of new facility” for purposes of this exemption. In addition, the taxpayer is not manufacturing, processing, compounding, or producing the key. The kiosk key-cutting machines are self-service machines that do not require the taxpayer’s direct involvement to produce a key. ( Florida Technical Assistance Advisement 14A-021, 09/16/2014 .)

FloridaSales And Use Tax — Taxability of non-profit gift shop sales.
The taxpayer’s gift shop sales are subject to tax. The taxpayer, is an extended ministry of a church, but is a separate legal entity that provides social benefits and services to at-risk youth through residential group home care and foster care services throughout Florida. The taxpayer holds a valid Consumer’s Certificate of Exemption as a IRC § 501(c)(3) organization. The taxpayer operates a gift shop on its main campus, and currently collects and remits sales tax for various items purchased by the taxpayer (at fair market value) and sold to consumers. The taxpayer also plans to open an off-site thrift shop that will sell a variety of donated items and may also occasionally purchase “heavily discounted” items to sell. The taxpayer does not qualify as a religious institution, as specified in Fla. Stat. §  212.08(7)(p) , and is not categorized as a religious institution on the consumer’s certificate of exemption because the taxpayer is a separate legal entity from the church. As such, the sales of tangible personal property by the gift shop, and by the proposed thrift shop, remain subject to sales tax. However, if the taxpayer applies for, and is issued, a valid consumer’s certificate of exemption from the Department of Revenue as an organization benefitting minors under Fla. Stat. § 212.08(7)(l) , then the sales of donated property would be exempt from sales tax, as long as the gift shop and thrift shop operate as the same legal entity as the taxpayer. ( Florida Technical Assistance Advisement 14A-022, 09/29/2014 .)

HawaiiReal Property — Honolulu County—credit for low-income homeowners.
The City Council of the City and County of Honolulu has adopted Ordinance 14-33 (Bill 54 (2014)), relating to the credit for low-income homeowners. Effective October 23, 2014, the ordinance amends Revised Ordinances of the City and County of Honolulu 1990 § 8-13.2 to provide that an owner is entitled to a credit equal to the amount by which the taxes owed for the same tax year in which the application is filed for the property exceed 4% of the titleholders’ income, provided the taxes owed for the same tax year in which the application is filed for the credit exceed 4% of the titleholders’ combined income for the calendar year immediately preceding the date of the application, the combined income of all titleholders of the property for the calendar year immediately preceding the date of the application does not exceed $60,000, and the grant of the application of a credit entitles the owner to a credit only for the tax year succeeding the tax year in which the application was filed. Other eligibility qualifications for the credit remain the same. There will be no carryover credit. In lieu of the above credit, certain owners are entitled to a credit equal to the amount by which the taxes owed for the property for the tax year in which the application was filed exceed 3% of the titleholders’ combined income: to be eligible, the owner must otherwise qualify for the Honolulu County property tax credit; any titleholder of the property must be 75 years of age or older on or before June 30 preceding the tax year for which the credit is claimed; and the combined income of all titleholders of the property for the calendar year immediately preceding the application date cannot exceed $60,000. The ordinance is applicable to applications due on September 30, 2015 and every year thereafter.

IndianaReal Property — Notice of intent to petition for tax deed.
The Indiana Court of Appeals ruled that the trial court did not err in its determination that the purchaser of property at a tax sale substantially complied with the requirements of Ind. Code § 6-1.1-25-4.5(e) . Ind. Code § 6-1.1-25-4.5(e) requires that the purchaser of property sold at a tax sale notify the owner of record of the purchaser’s intent to petition for a tax deed on or after a specified date. In this case, the purchaser of the property (petitioner) gave notice to the owner of record of the date on which it planned to petition for a tax deed, however, the owner of record argued that the notice was devoid of any statement as to the date on or after which the petitioner intends for a tax deed to be issued; therefore, the petitioner did not comply with requirements of Ind. Code § 6-1.1-25-4.5(e) . The court disagreed, concluding that the statute does not require the petitioner to predict when the court will actually issue the tax deed, instead, the statute requires the petitioner to inform the owner of record of the date on or after which the petitioner intends to petition for a tax deed to be issued; it is the date of petitioning that the statute is concerned with, not the date of issuance. (219 Kenwood Holdings, LLC v. Properties 2006, LLC, Ind. Ct. App., Dkt. No. 45A03-1401-MI-49, 10/24/2014.)

MichiganReal Property — Principal residence exemption denied.
The taxpayer’s claim for a principal residence exemption (PRE) for the property at issue was properly denied because the taxpayer failed to show that the property was the taxpayer’s principal residence for the tax years in question. The Residential Small Claims Division of the Tax Tribunal had denied the taxpayer’s PRE request, stating that the taxpayer had claimed a PRE in another jurisdiction. The Tax Tribunal then found that the taxpayer had not proved his entitlement to the PRE exemption for the subject property for the tax years at issue by a preponderance of the evidence, and the appeals court concluded that when viewed as a whole, the evidence tends to refute the taxpayer’s claims about the subject property and so could not find that the Tribunal’s decision was unsupported by competent, material, and substantial evidence. The court rejected the taxpayer’s claims that the Tribunal did not allow him to persuade the Tribunal that he owned and occupied the subject property as a principal residence since the taxpayer was clearly allowed to file numerous documents in support of his position and there is no evidence in the record that the Tribunal somehow cut off the taxpayer’s attempts to advocate his position. The court also rejected the taxpayer’s arguments concerning the Tribunal’s reliance on certain documents, but these documents when viewed in conjunction with other evidence, lent some support to the position that the subject property had never been the taxpayer’s primary residence. (Trifonov v. City of Eastpointe, Mich. Ct. App., Dkt. No. 317104, 10/23/2014 (unpublished).)

New YorkFranchise Tax — New York updates Corporate Tax Reform FAQs.
The New York State Department of Taxation and Finance updated the Corporate Tax Reform FAQs, which address the corporate tax reform changes enacted under the 2014-2015 budget bill, to include new questions. The new questions address combined reporting, credit carryforwards, and mandatory first installments. (Corporate Tax Reform FAQs, New York State Department of Taxation and Finance, 10/23/2014.)

New YorkReal Property — Trial court’s valuation adjustments upheld.
The New York Supreme Court, Appellate Division, Third Department, affirmed a trial court’s determination adjusting the contested assessments of 22 of 29 separate residential parcels and one roadway parcel, which resulted in a net assessment reduction to $775,753.99 for the taxpayer’s property. The taxpayer contended that the trial court should have valued the property as a whole, on a per-acre basis, and not assigned a separate value to each parcel. The Appellate Division disagreed, stating that whether a property should be valued as a whole or as the sum of separate parcels is a factual determination, and where conflicting expert evidence is presented it defers to the trial court’s resolution of credibility issues. The Appellate Division added that the trial court properly rejected the taxpayer’s opinion, as its expert failed to recognize that, although unimproved, the subject property had been legally subdivided into 29 separate parcels and that seven were immediately marketable. Stating that the lower court’s factual finding was entitled to deference as it was adequately explained and supported by the record, the Appellate Division held that the lower court properly exercised its authority to adjust the parties’ valuations. (In the Matter of Goodhue Wilton Properties, Inc. v. Assessor, Town of Wilton, N.Y.S. S.Ct., App. Div., 3rd Dept., 517488, 10/23/2014.)

New YorkReal Property — Federal definition of household goods preempts state for highway use tax purposes.
The New York Supreme Court, Appellate Division, Third Department, confirmed the Tax Appeals Tribunal determination that the taxpayer, a corporation engaged in the interstate transportation of household goods and other items, was not entitled to the exemption from highway use tax under N.Y. Tax Law § 504(5) on certain items it transported, because it failed to establish that either its more expansive definition of “household goods” was the only tenable definition, or that the more restrictive definition relied on by the Division of Taxation was unreasonable. The Appellate Division rejected the taxpayer’s contention that it was entitled to the exemption as long as it was able to demonstrate that it transported household goods within the meaning of NYS Transportation Law § 2(15) regardless of any change in the definition of household goods under federal law, stating that although the taxpayer was subject to Department of Transportation rules and regulations it remained a federally registered interstate motor carrier and was subject to federal law. That is, the taxpayer could not “ignore the applicable federal regulatory scheme and statutes simply because it perceive[d] state law to afford more advantageous tax benefits.” The court therefore concluded that “the federal and state definitions of household goods [stood] in direct conflict with one another and, consistent with the doctrine of conflict preemption, the more expansive definition of household goods set forth in NYS Transportation Law § 2(15)(b) and (c) must yield to its more restrictive federal counterpart.” (In the Matter of Atlas Van Lines, Inc. v. NYS Tax Appeals Tribunal, et al., N.Y.S. S.Ct., App. Div., 3rd Dept., 516631, 10/23/2014.)

New YorkReal Property — Assessment upheld.
The taxpayer’s challenge to its property tax assessment was properly denied. Both the town’s and taxpayer’s appraisers utilized the sales comparison approach in arriving at a value for the subject property based upon its highest and best use as vacant land in transition to retail development. The taxpayer’s appraiser placed the property’s fair market value at $1.3 million for the 2008 tax year and $1.4 million for the 2009 tax year, while the town’s appraiser valued the property at $3.5 million for both years. In rejecting the taxpayer’s appraisal as not being an accurate assessment of the property’s fair market value, the court specifically relied upon the recent sale of the property as the best indicator of value. Although the taxpayer’s appraiser testified that he did not rely upon the recent sale of the subject property as a comparable because he believed that other factors affected the sale price, his report was devoid of any reference to or analysis of such factors. The town’s appraiser, on the other hand, utilized the recent sale of the subject property in his analysis and concluded that the $3.5 million purchase price best reflected the property’s fair market value, emphasizing that the additional three sales he analyzed and compared were consistent with his valuation. The court rejected as speculative the taxpayer’s appraiser’s testimony that other considerations affected the actual purchase price of the transaction, and upheld the findings of the town’s appraiser. (Highbridge Dev. BR, LLC v. Assessor of The Town of Niskayuna, N.Y.S. S.Ct., App. Div. 3rd Dept., 516152, 10/23/2014.)

New YorkSales And Use Tax — Tax treatment of New York scaffolding systems discussed.
The Department of Taxation and Finance has issued a memorandum explaining its application of sales and use taxes to temporary scaffolding, pedestrian walkways, and hoisting systems installed at construction sites. The memorandum describes the scaffolding systems at issue, and explains that, generally, scaffolding services provided in capital improvement projects are excluded from sales tax, but the subcontractor providing the services for a construction project that qualifies as a capital improvement is liable for the payment of sales tax on its own purchases or rentals of material to provide the scaffolding service. Scaffolding services provided in installation, maintenance, servicing, or repair projects are taxable services subject to sales tax (whether billed as a lump sum or on a separately stated basis), and the subcontractor or repairmen is liable for payment of sales tax on its purchases of material obtained to provide the service. The Department states that the memorandum reflects the Tax Appeals Tribunal’s decision in Matter of L & L Painting Co., Inc. , 822266; 822227, 06/02/2011, regarding the exclusion from sales tax for the installation of a “temporary facility” at a construction site, and sets forth rules and guidelines with respect to other related sales tax issues affecting the scaffolding systems industry, adding that to the extent that its policy concerning any of any of the other related issues is new, it will be effective January 1, 2015. The Department cautions that any other statements previously issued suggesting contrary conclusions do not represent current policy and can no longer be relied on. ( New York Technical Service Bureau Memorandum TSB-M-14(15)S, 10/23/2014 .)

OhioSales And Use Tax — Mark-up analysis valid—incomplete records.
The Ohio Board of Tax Appeals (BTA) affirmed the determination of the Tax Commissioner that imposed a sales tax assessment on the taxpayer, a retail convenience store. The taxpayer contested the percentage used by the auditor in calculating an allowance for purchases of soda and energy drinks with food stamps. The BTA found that while the taxpayer found fault with the mark-up analysis and conclusions reached, he ignored that the fact that such approach was necessitated due to the taxpayer’s failure to maintain complete and accurate records. This failure meant that the Tax Commissioner was entitled to gather information from other sources and estimate the amount of taxes that should have been collected. As there was no evidence in the record to establish the specific items purchased with food stamps during the audit period, the standard deduction was used as nothing was provided to justify a higher percentage. Without competent and probative evidence submitted by the taxpayer to demonstrate that the Tax Commissioner’s findings were incorrect, the BTA must affirm the Tax Commissioner’s findings. (Murali, Inc. v. Testa, Ohio BTA, Case No. 2014-1169, 10/22/2014.)

OhioSales And Use Tax — Burden of proof not met—assessment affirmed.
The Ohio Board of Tax Appeals (BTA) affirmed the determination of the Tax Commissioner after finding that no competent and probative evidence was presented demonstrating that the Tax Commissioner’s findings were incorrect. After a sales tax assessment was imposed against the taxpayer, a retail convenience store, the taxpayer contested the findings claiming that it was not provided with the basis of the audit findings. The taxpayer further claimed that the conclusion that its records were incomplete for the assessment period was inaccurate but there was no evidence in the record to support that contention. Where no competent and probative evidence was developed and presented by the taxpayer to demonstrate that the Tax Commissioner’s findings were incorrect, the BTA must affirm the Tax Commissioner’s findings. (Tabateh, Inc. v. Testa, Ohio BTA, Case No. 2014-1150, 10/22/2014.)

OhioSales And Use Tax — Property not resold—use tax assessment affirmed.
The Ohio Board of Tax Appeals (BTA) affirmed the determination of the Tax Commissioner that assessed use tax based on the taxpayer’s purchases of electronic camera parts and equipment and cabinet housing used in the vehicle monitoring and enforcement services it provided to seven municipalities in Ohio. Pursuant to contracts with each of the municipalities, the taxpayer designed, installed, maintained, and used the equipment to monitor speed and/or red-light traffic violations to allow the municipalities to issue citations for such violations. The taxpayer contended that its arrangements with the municipalities were such that it resold the subject property to the municipalities, and therefore, was not subject to use tax. However, the Tax Commissioner determined that no sale occurred since there was no separate consideration for the property, and the contracts with the taxpayer’s customers granted them a right to access and use the taxpayer’s system, rather than the tangible personal property itself. The BTA agreed with the Tax Commissioner, finding that the taxpayer retained exclusive title and possession of the property as it continued to maintain and upgrade the property following installation. The customers merely contracted for services with the assistance of the subject property. Since the property was not resold, it did not qualify for an exemption. Lastly, the BTA found no evidence that the requisite change, conversion, or transformation took place to render the process “manufacturing” so as to qualify for the manufacturing exemption. (Redflex Traffic Systems, Inc. v. Testa, Ohio BTA, Case No. 2012-2997, 10/24/2014.)

PennsylvaniaCorporate Income Tax — Pennsylvania corporate transactions.
L. 2014, H2234 (Act 172), effective 07/01/2015, creates the Associations Transactions Act by amending Title 15 (Corporation and Unincorporated Associations). The Act is intended to modernize the law related to corporations by creating a framework for business entities to change business models to reflect business growth and change and to improve the integration of various Pennsylvania entity laws into a more coherent code. The Act reorganizes portions of Title 15 to consolidate specific provisions that apply to all types of entities, and to repeal similar provisions in the individual entity laws that apply to only one type of entity. The Act gives all types of entities the ability to engage in five fundamental transactions: mergers, interest exchanges, conversions, divisions, and domestications without first having to dissolve. The Act also provides that certain “associations” that were organized under a law other than Title 15 may engage in certain types of specified transactions.

PennsylvaniaReal Property — Charitable exemption.
A real estate holding company that rents properties to charitable entities is not entitled to an exemption from real property tax because the taxpayer cannot demonstrate that it uses and occupies the property as required under the Assessment Law (Pa. Cons. Stat. Ann. 53 § 8812 ). The taxpayer argued that it is entitled to exemption because it was formed for the narrow purpose of providing real estate for use by the charitable entities to which it leases the properties in direct fulfillment of their charitable purposes. However, the Commonwealth Court held inAppeal of Northwestern Corp., 665 A2d 856 (1995) that the charitable activity of the entity requesting the exemption must occur on the specific property for which it seeks exemption, and that the entity must be the owner and occupier of the property. In this case, even assuming the taxpayer qualifies as a purely public charity, the evidence clearly establishes that the taxpayer does not use or maintain any presence on the properties at issue. The taxpayer is merely a holding company that owns and leases the property to separate nonprofit entities, and therefore is not entitled to exemption. (CMRS, Inc. v. Chester County Board of Assessment Appeals, Pa. Commw. Ct., Dkt. Nos. 2258 C.D. 2302-2321 2013; 2415 C.D. 2013, 10/23/2014.)

PennsylvaniaReal Property — Tax collectors.
L. 2014, H1590 (Act 164), effective 10/22/2015, amends provisions related to the training of tax collectors and requires that all persons elected to the office of tax collector complete a basic training program before taking the oath of office, with two exceptions. Tax collectors in office on the effective date of the Act will be qualified tax collectors and will be issued a qualified tax collector certificate, and individuals appointed to fill a vacancy will be allowed 60 days in which to become qualified by taking the basic training course. The Act also provides annual continuing education requirements for tax collectors and requires reporting of any criminal history for persons seeking nomination as tax collectors. Effective October 22, 2014, the Act also requires the appointment of a deputy tax collector to collect and settle taxes during any period in which the tax collector is incapacitated.

PennsylvaniaReal Property — Property tax/rent rebate—income limits.
L. 2014, H1067 (Act 156), effective 10/22/2014, amends the definition of “income” so that income increases due solely to Social Security cost-of-living adjustments (COLAs) will no longer disqualify claimants from receiving rebates under the Property Tax/Rent Rebate Program. The amendment specifically provides that, notwithstanding any other provision to the contrary, persons who are eligible for the property tax or rent rebate as of December 31, 2012 will remain eligible if the household income limit is exceeded due solely to a Social Security cost-of-living adjustment. The bill also provides that eligibility in the property tax and rent rebate program based on this amendment will expire on December 31, 2016. (NOTE: The Department of Revenue has provided a news release more thoroughly explaining the impact of this amendment, and notifies taxpayers that the Department is automatically reviewing previously denied claims 2013 where the rebate was denied due to income exceeding the household income limits. (See News Release: Property Tax/Rent Rebate Program Income Guidelines Increased to Accommodate Social Security Cost-of-Living Increases, Pa. Dept. of Rev., 10/24/2014.)

PennsylvaniaPublic Utilities — Public utility fees.
L. 2013, H939 (Act 155), effective 12/22/2014, amends the Public Utility Commission Fee to provide that the estimate of the Commission’s total expenditures for the fiscal year may exceed the 3/10 or 1% cap to reflect federal funds received by the Commission and funds received from other sources to perform functions that are not related to the regulation of public utilities. The final estimate must be presented to the General Assembly at the same time as the final estimate is presented to the governor, however, estimated fees related to services rendered by the Commission during the fiscal year and the estimated balance of the appropriation related to the disposition, appropriation and disbursement of assessments and fees must be subtracted from the final estimate to arrive at the total estimate to be allocated to, and paid by, the public utilities in the next fiscal year. If the General Assembly fails to approve the Budget by March 30, then the Commission must assess the public utilities based on the last approved budget. The Act makes further amendments to the Public Utility Code related to responsible utility customer protection, and authorizes the Commission to establish annual oversight fees to be charges for activities related to the oversight of natural gas suppliers and electric generation suppliers.

South CarolinaCorporate Income Tax — South Carolina abandoned building site rehabilitation credit.
The Department of Revenue issued a private letter ruling regarding eligibility for the tax credit for the rehabilitation of abandoned buildings and site. The taxpayer owned real property with a building that met the requirements of an “abandoned building” and a “building site” as defined in S.C. Code Ann. § 12-67-120(1) and S.C. Code Ann. § 12-67-120(2) , which govern the tax credit for the renovation and redevelopment of abandoned building sites. The taxpayer planned to demolish and remove the abandoned building and build a new structure at the same location as the current abandoned building, and the building to be demolished is not on the register of National Historic Places. Under the statute, rehabilitation expenses that increase the square footage on the building site above 200% of the amount of square footage of the buildings that previously existed on the building site and demolition expenses incurred for demolishing a building on the National Register for Historic Places do not qualify as rehabilitation expenses for purposes of calculating any credit. Because the taxpayer meets the statutory requirements, the taxpayer will be allowed to claim a tax credit equal to 25% of the total amount of eligible rehabilitation expenses incurred in renovating or redeveloping the building site subject to certain limitations. ( South Carolina Private Letter Ruling 14-3, 10/23/2014 .)

South CarolinaCredits and Incentives — Abandoned building site rehabilitation credit.
The Department of Revenue issued a private letter ruling regarding eligibility for the tax credit for the rehabilitation of abandoned buildings and site. The taxpayer owned real property with a building that met the requirements of an “abandoned building” and a “building site” as defined in S.C. Code Ann. § 12-67-120(1) and S.C. Code Ann. § 12-67-120(2) , which govern the tax credit for the renovation and redevelopment of abandoned building sites. The taxpayer planned to demolish and remove the abandoned building and build a new structure at the same location as the current abandoned building, and the building to be demolished is not on the register of National Historic Places. Under the statute, rehabilitation expenses that increase the square footage on the building site above 200% of the amount of square footage of the buildings that previously existed on the building site and demolition expenses incurred for demolishing a building on the National Register for Historic Places do not qualify as rehabilitation expenses for purposes of calculating any credit. Because the taxpayer meets the statutory requirements, the taxpayer will be allowed to claim a tax credit equal to 25% of the total amount of eligible rehabilitation expenses incurred in renovating or redeveloping the building site subject to certain limitations. ( South Carolina Private Letter Ruling 14-3, 10/23/2014 .)

South CarolinaPersonal Income Tax — Abandoned building site rehabilitation credit.
The Department of Revenue issued a private letter ruling regarding eligibility for the tax credit for the rehabilitation of abandoned buildings and site. The taxpayer owned real property with a building that met the requirements of an “abandoned building” and a “building site” as defined in S.C. Code Ann. § 12-67-120(1) and S.C. Code Ann. § 12-67-120(2) , which govern the tax credit for the renovation and redevelopment of abandoned building sites. The taxpayer planned to demolish and remove the abandoned building and build a new structure at the same location as the current abandoned building, and the building to be demolished is not on the register of National Historic Places. Under the statute, rehabilitation expenses that increase the square footage on the building site above 200% of the amount of square footage of the buildings that previously existed on the building site and demolition expenses incurred for demolishing a building on the National Register for Historic Places do not qualify as rehabilitation expenses for purposes of calculating any credit. Because the taxpayer meets the statutory requirements, the taxpayer will be allowed to claim a tax credit equal to 25% of the total amount of eligible rehabilitation expenses incurred in renovating or redeveloping the building site subject to certain limitations. ( South Carolina Private Letter Ruling 14-3, 10/23/2014 .)

South CarolinaReal Property — South Carolina abandoned building site rehabilitation credit.
The Department of Revenue issued a private letter ruling regarding eligibility for the tax credit for the rehabilitation of abandoned buildings and site. The taxpayer owned real property with a building that met the requirements of an “abandoned building” and a “building site” as defined in S.C. Code Ann. § 12-67-120(1) and S.C. Code Ann. § 12-67-120(2) , which govern the tax credit for the renovation and redevelopment of abandoned building sites. The taxpayer planned to demolish and remove the abandoned building and build a new structure at the same location as the current abandoned building, and the building to be demolished is not on the register of National Historic Places. Under the statute, rehabilitation expenses that increase the square footage on the building site above 200% of the amount of square footage of the buildings that previously existed on the building site and demolition expenses incurred for demolishing a building on the National Register for Historic Places do not qualify as rehabilitation expenses for purposes of calculating any credit. Because the taxpayer meets the statutory requirements, the taxpayer will be allowed to claim a tax credit equal to 25% of the total amount of eligible rehabilitation expenses incurred in renovating or redeveloping the building site subject to certain limitations. ( South Carolina Private Letter Ruling 14-3, 10/23/2014 .)

TennesseeCigarette, Alcohol & Miscellaneous Taxes — Taxpayers providing exempt and taxable services.
The Tennessee Department of Revenue has issued a notice to explain how the business tax applies to taxpayers who provide both taxable and exempt services. Taxpayers who provide exempt services are exempt only on the receipts from the exempt services and are subject to business tax on sales of tangible property and taxable services. For example, while a veterinarian is exempt from business tax on his or her receipts from veterinary medical services, a veterinarian is not exempt on sales of pet food, grooming services and medications. If pet food and grooming services make up the majority of the veterinarian’s taxable sales, the veterinarian will be a Classification 3 taxpayer and pay tax on all taxable sales at the Classification 3 rate. If medications make up the majority of the veterinarian’s taxable sales, the veterinarian will be a Classification 2 taxpayer and pay tax on all taxable sales at the Classification 2 rate. ( Tennessee Important Notice 14-13, 10/01/2014 .)

TexasFranchise Tax — Waiver of penalty and interest in Texas.
The Texas Comptroller of Public Accounts has adopted amendments to the waiver of penalty and interest regulations (34 Tex. Admin. Code § 3.5, effective 10/28/2014). The amendments reflect long-standing policy that Tex. Tax Code Ann. § 111.103 gives the comptroller discretion to settle penalty or interest on a tax liability if the comptroller determines that the taxpayer exercised reasonable diligence to comply with the state’s tax laws. Also, references to “audit manager” are changed to “Audit Division.”

TexasGeneral Administrative Provisions — Waiver of penalty and interest.
The Texas Comptroller of Public Accounts has adopted amendments to the waiver of penalty and interest regulations (34 Tex. Admin. Code § 3.5, effective 10/28/2014). The amendments reflect long-standing policy that Tex. Tax Code Ann. § 111.103 gives the comptroller discretion to settle penalty or interest on a tax liability if the comptroller determines that the taxpayer exercised reasonable diligence to comply with the state’s tax laws. Also, references to “audit manager” are changed to “Audit Division.”

TexasSales And Use Tax — Waiver of penalty and interest.
The Texas Comptroller of Public Accounts has adopted amendments to the waiver of penalty and interest regulations (34 Tex. Admin. Code § 3.5, effective 10/28/2014). The amendments reflect long-standing policy that Tex. Tax Code Ann. § 111.103 gives the comptroller discretion to settle penalty or interest on a tax liability if the comptroller determines that the taxpayer exercised reasonable diligence to comply with the state’s tax laws. Also, references to “audit manager” are changed to “Audit Division.”

VermontPersonal Income Tax — Reducing filing errors—individual returns.
The Vermont Department of Taxes has issued a fact sheet to provide information on reducing filing errors for individual income tax returns, and notes the following common errors should be avoided: (1) when there is a capital loss, Form IN-153 should not be included; (2) when current year bonus depreciation is added back, do not enter using a minus sign; (3) when an adjustment for prior year bonus depreciation is entered, do not use a minus sign; (4) The VT Higher Education Investment Tax Credit must be a VSAC account; and (5) for the Low Income Child & Dependent Care Credit to be claimed, be sure the day care provider must be accredited. For amended returns, the Department notes that the required Form 1040X/Notice of Change from the IRS and additional federal and Vermont schedules must be attached and when needed an amended Schedule HI-144 must also be included. (Reduce Individual Tax Return Errors-FS, Vt. Dept. of Taxes, 07/01/2014(released 10/23/2014).)

VermontReal Property — Reducing filing errors—property tax and renters rebate.
The Vermont Department of Taxes has issued a fact sheet to provide information on reducing filing errors for individual income tax and property tax returns. For property taxes, the Department notes that when an income tax extension is filed, the taxpayer should ensure that Form HS-122 Section A (Homestead Declaration) is filed by the April 15 due date. Forms HS-122 Section B (Property Tax Adjustment Claim) are considered late after the April 15 due date. Taxpayers should not submit photocopies, and should verify the following: the income of all the members of the household, while members of the household, including nontaxable income, and the percent that is rental or business use. For the rental rebate (Form PR-141 Form LC-142/Schedule HI-144) the Department notes that Landlord Certificates must equal the full 12 calendar months of rental (with some exceptions) and should not be altered or filled for clients. When there is more than one renter on the Landlord Certificate, the income of all renters must be included on Schedule HI-14. Owners of mobile homes should not file a renter rebate claim. For mobile home lot rent, enter the allocable lot rent from Line 16 of Form LC-142 (Landlord Certificate) on Line B9 of Form HS-122 (Property Tax Adjustment Claim). (Reduce Individual Tax Return Errors-FS, Vt. Dept. of Taxes, 07/01/2014 (released 10/23/2014).)

WashingtonSales And Use Tax — Amended regulation.
The Washington Department of Revenue has amended Wash. Admin. Code § 458-20-17802, effective January 12, 2015. The revised rule reflects the increase of the purchase price threshold below which a vehicle’s sales price is assumed to represent its true value from $3,000 to $5,000. In addition, various technical and wording changes were implemented.

WyomingReal Property — Residential property valuation.
The Wyoming Board of Equalization (BOE) denied the taxpayer’s appeal of the valuation of a parcel of real property. The taxpayer, owner of a residential property, challenged the assessor’s valuation of the property, citing the lower valuation of similar properties and the damaged condition of the property’s roof. The BOE noted that the comparable properties presented were not available to assessor and therefore could not be used to challenge the assessment. In addition, although the BOE determined that the assessor should have taken the damaged roof into account, the taxpayer failed to establish whether the roof damaged occurred within the assessment period. (Appeal of Doug and Sheila Staab, Wyo. BOE, Dkt. No. 2013-40, 10/24/2014.)

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