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

State & Local Tax Updates: California Appeal of Property Tax Bills; Illinois Angel Investment Credit; and New York Sales and Use 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.

Please note that a subscription will be required to access the links through Thomson Reuters Checkpoint.

ArkansasSales And Use Tax — Arkansas rules—partial replacement/repair of machinery.
The Arkansas Economic Development Commission (AEDC) has issued a rule (168.00.14-004) aimed at the administration of refunds of sales and use tax paid on the partial replacement and repair of machinery and equipment used directly in manufacturing as provided under Act 1404 of 2013 (L. 2013, S334, effective 07/01/2014- see State and Local Taxes Weekly, Vol. 24, No. 18, 04/29/2013). The Act provides two options for obtaining a refund of sales tax paid on such machinery: the first allows a taxpayer to claim a refund of 1% of the 5.875% sales and use taxes levied under Ark. Code Ann. § 26-52-301 , Ark. Code Ann. § 26-52-302 , Ark. Code Ann. § 26-53-106 , and Ark. Code Ann. § 26-53-107 ; the second is a discretionary incentive that may be offered by the Director of the AEDC and allows an increased refund of sales and use tax for a taxpayer who undertakes a major maintenance and improvement project to purchase and install certain machinery and equipment used directly in manufacturing and processing. The rule provides definitions, information on the application process, and restrictions on claiming the credit. The rule is effective July 1, 2014.








CaliforniaReal Property — Appeal of property tax bills.
The California State Board of Equalization (SBE) is reminding California taxpayers who disagree with local assessors’ valuation of their property that they can contact the local assessor’s office to discuss the assessment or appeal their property tax bills. The window to file an appeal varies by county and ends either September 15 or December 1. That deadline applies only to taxpayers who are challenging the assessed value of their property as of January 1. Different appeal periods apply to taxpayers who are appealing an assessment after a property was sold, underwent new construction, or was damaged in a natural disaster or other calamity. Taxpayers who wish to appeal the assessed value of their properties can do so by filing Form BOE-305-AH (Application for Changed Assessment) with their county clerk of the board. Contact information for all 58 county assessors can be found on the SBE’s website. ( California SBE News Release 109-14-G, 07/24/2014 .)

CaliforniaReal Property — Annual jurisdictional boundary changes—new website location.
In California State Board of Equalization Letter to Assessors 2013/025, 03/29/2013 , the California State Board of Equalization (SBE) announced that the annual jurisdictional boundary changes will be posted on its website and provided the web address (URL) for those postings. The SBE is now advising that the URL for the annual jurisdictional boundary changes has been changed and has provided the new URL. There will be a redirect page set up at the old URL to lead to the new URL. ( California State Board of Equalization Letter to Assessors 2014/036, 07/24/2014 .)

ConnecticutGeneral Administrative Provisions — Mandatory electronic filing.
The Connecticut Department of Revenue (DRS) reminds taxpayers who use the Taxpayer Service Center to file and pay electronically for the period ending June 30, 2014 that they are required to initiate their transactions no later than Thursday July 31, 2014. Taxpayers who use ACH Credit should check with their banks to find out the deadline for initiating a timely payment.

FloridaCorporate Income Tax — IRC conformity date.
Each year the Florida Legislature must consider the adoption of the current Internal Revenue Code (Chapter 26, United States Code) so certain tax definitions and the calculation of adjusted federal income are consistent between the Internal Revenue Code and the Florida Income Tax Code (Chapter 220, Florida Statutes). The Florida corporate income tax “piggybacks” federal income tax determinations and uses adjusted federal income as the starting point for computing Florida net income. Section 1, Chapter 2014-25, Laws of Florida, amends the Florida Income Tax Code to adopt the Internal Revenue Code retroactively to January 1, 2014. This means Florida will follow the computation of federal taxable income. ( Florida Tax Information Publication 14C01-01, 07/23/2014 .)

IowaReal Property — Disabled Veterans Homestead Credit FAQ.
The Iowa Department of Revenue has created a frequently asked questions (FAQ) page on its website relating to the Disabled Veteran Homestead Property Tax Credit. The FAQ provides answers to questions on annual filing; application process; applicants receiving other tax credits; assessment issues; DD214 condition of discharge; extent of disability and unemployment; acceptable documentation; extent of property coverage, surviving spouse or dependent issues, and other related questions. The state legislature amended and expanded the credit effective May 26, 2014. (Disabled Veteran Homestead Property Tax Credit—FAQs, Iowa Dept. of Rev., 07/24/2014.)

IllinoisCorporate Income Tax — Illinois adopts angel investment credit regulation.
The Illinois Department of Revenue has adopted new regulation 86 IAC 100.2171, effective July 9, 2014, providing guidance for taxpayers entitled to the Angel Investment Credit for investments made in qualifying Illinois businesses. The Angel Investment Credit is available for taxable years beginning on and after January 1, 2011, and ending before January 1, 2017, and is awarded by the Department of Commerce and Economic Opportunity (DCEO). The regulation specifies that the credit may not exceed the taxpayer’s Illinois income tax liability for the taxable year, but excess credit may be carried forward for five years, and the credit is subject to recapture. To document the credit a taxpayer must attach a copy of the tax credit certificate, annual certification (if any) issued by the DCEO, and Schedule K‐1‐P for partners and shareholders, to its Illinois income tax return.

IllinoisCorporate Income Tax — Illinois ends joint filing program.
The Illinois Department of Revenue has amended regulation 86 IAC 100.7350, effective July 9, 2014, which reflects the termination of the joint filing program between the Illinois Department of Revenue and the Illinois Department of Employment Security to allow unemployment insurance and income tax withholding for domestic employees to be reported and paid on a single return.

IllinoisCredits and Incentives — Angel investment credit.
The Illinois Department of Revenue has adopted new regulation 86 IAC 100.2171, effective July 9, 2014, providing guidance for taxpayers entitled to the Angel Investment Credit for investments made in qualifying Illinois businesses. The Angel Investment Credit is available for taxable years beginning on and after January 1, 2011, and ending before January 1, 2017, and is awarded by the Department of Commerce and Economic Opportunity (DCEO). The regulation specifies that the credit may not exceed the taxpayer’s Illinois income tax liability for the taxable year, but excess credit may be carried forward for five years, and the credit is subject to recapture. To document the credit a taxpayer must attach a copy of the tax credit certificate, annual certification (if any) issued by the DCEO, and Schedule K‐1‐P for partners and shareholders, to its Illinois income tax return.

IllinoisPersonal Income Tax — Angel investment credit.
The Illinois Department of Revenue has adopted new regulation 86 IAC 100.2171, effective July 9, 2014, providing guidance for taxpayers entitled to the Angel Investment Credit for investments made in qualifying Illinois businesses. The Angel Investment Credit is available for taxable years beginning on and after January 1, 2011, and ending before January 1, 2017, and is awarded by the Department of Commerce and Economic Opportunity (DCEO). The regulation specifies that the credit may not exceed the taxpayer’s Illinois income tax liability for the taxable year, but excess credit may be carried forward for five years, and the credit is subject to recapture. To document the credit a taxpayer must attach a copy of the tax credit certificate, annual certification (if any) issued by the DCEO, and Schedule K‐1‐P for partners and shareholders, to its Illinois income tax return.

IllinoisPersonal Income Tax — End of joint filing program.
The Illinois Department of Revenue has amended regulation 86 IAC 100.7350, effective July 9, 2014, which reflects the termination of the joint filing program between the Illinois Department of Revenue and the Illinois Department of Employment Security to allow unemployment insurance and income tax withholding for domestic employees to be reported and paid on a single return.

IllinoisSales And Use Tax — Illinois telecommunications excise tax—place of primary use.
The Illinois Department of Revenue held that a taxpayer may use the address associated with a Registration IP as the service address to collect and remit Telecommunications Excise Tax and Simplified Municipal Telecommunications Tax. The taxpayer provides various telecommunications services to consumers, including subscriptions, per minute/pay‐as‐you‐go based telecommunications, and internet access. The taxpayer does not have accurate billing address information, and because consumers may use the taxpayer’s services from mobile devices, the consumer can use the services from any location with internet access. The Department noted that under the Mobile Telecommunications Sourcing Conformity Act, only charges for mobile telecommunications that are billed to the customer’s “place of primary use” (street address of customer and within the licensed service area of the home service provider) in Illinois by the customer’s home service provider may be subject to tax in Illinois. Thus, the taxpayer may use the address associated with the Registration IP as the service address to collect and remit the telecommunications excise tax, and any applicable simplified municipal telecommunications tax. Finally, the Department concluded that the tax‐inclusive price advertised to a consumer is acceptable, as long as the rate of tax imposed under the Telecommunications Excise Tax and the actual rate of tax imposed under Simplified Municipal Telecommunications Tax for a customer’s service address, is identified or can be determined by the customer. ( Illinois Private Letter Ruling 14-0003-PLR, 06/26/2014 .)

IllinoisSales And Use Tax — Illinois manufacturing machinery and equipment exemption.
The Illinois Department of Revenue ruled that post production storage facilities do not generally qualify for the manufacturing machinery and equipment exemption; however, the taxpayer’s freezer facility maintained at a specific temperature that is required to preserve a manufactured product can qualify for the exemption. The taxpayer is considering constructing a cold storage facility in an Illinois Enterprise Zone that would include refrigeration machinery and equipment, and racking equipment. The taxpayer contends that the equipment is essential to the manufacturing process to prevent spoilage and preserve the products. The Department concluded that the freezer machinery and equipment qualifies for the manufacturing machinery and equipment exemption, because the product would spoil and could not be subsequently sold for human consumption. The Department further held that the racking equipment is essential to an integrated manufacturing process, and consequently also qualifies for the manufacturing machinery and equipment exemption. ( Illinois Private Letter Ruling 14-0002-PLR, 06/26/2014 .)

MassachusettsPersonal Income Tax — Electronic filing and payment mandate.
The Massachusetts Appellate Tax Board held that a taxpayer, who failed to comply with the electronic filing and payment mandate, demonstrated reasonable cause for failing to comply with the mandate for the period at issue. The Board found credible the taxpayer’s testimony that it was his consistent practice to avoid electronic payment of all bills, not just his tax obligations, to keep his bank account information separate from his e-mail and other electronic media. The Commissioner’s blanket pronouncement in Massachusetts Administrative Procedure 633, 03/01/2014 , which states that the fact that a taxpayer does not own a computer or is uncomfortable with electronic data or funds transfer will not support a claim for reasonable cause, runs contrary to the treatment of electronic filing and payment requirements by the federal government and other state jurisdictions, which are instructive on the issue of ordinary business care and prudence. The single instance of an electronic payment made by the taxpayer some three years prior to the paper payment giving rise to the penalty at issue did not undermine the credibility of the taxpayer’s concerns regarding electronic payment during the period at issue. Therefore, the Board granted the taxpayer’s claim for an abatement of the $100 penalty for the taxpayer’s failure to electronically submit the payment that accompanied his extension application. (Haar v. Commissioner of Revenue, Mass App. Tax Bd., Dkt. No. C315058, 07/23/2014.)

MichiganReal Property — Dismissal of action for failing to appear.
The Tax Tribunal erred when it denied the taxpayers’ motion for reconsideration/motion to set aside dismissal because the Tribunal failed to determine whether the taxpayers received actual notice of a hearing. The Tribunal had scheduled three separate hearings on the taxpayers’ case, and for each hearing the Tribunal included a notice that failure to appear would result in a dismissal of the case. At the taxpayers’ request, the first two hearings were adjourned, but when the taxpayers failed to appear at the third scheduled hearing, the Tribunal entered an order of dismissal for failure to appear. While the Tribunal was within its discretion in issuing a dismissal order for failure to appear, the Tribunal was required to consider, on a subsequent motion to reinstate, whether the taxpayers had received actual notice of the scheduled hearing. Although the taxpayers did not submit affidavits, they submitted a signed pleading in which they expressly stated that the denied receiving the notice of the hearing, and this submission created a factual dispute regarding receipt of the notice. The record in the case does not indicate that the Tribunal determined whether the taxpayers received actual notice of the hearing, but instead appeared to have relied on the fact that the notice of hearing was sent to the taxpayers’ last known address and was not returned as undeliverable. The case was remanded with instructions to the Tribunal to first make a factual finding on whether the taxpayers received actual notice, and then determine whether the taxpayers established good cause to reinstate the case. (Dillon v. Township of Plymouth, Mich. Ct. App., Dkt. No. 315316, 07/24/2014 (unpublished).)

MichiganReal Property — Notice of foreclosure requirement met.
The taxpayer’s action to set aside the judgment of foreclosure on the subject property was properly denied because the county treasurer complied with the notice requirements of Mich. Comp. Laws Ann. § 211.78i and due process does not require actual notice of a tax sale to an owner. The taxpayer did not dispute that the county treasurer performed a search of the records enumerated in Mich. Comp. Laws Ann. § 211.78i(6) , mailed notices to those persons identified by certified mail return receipt requested, made a personal visit to the property, posted a notice, and additionally published notice as required by Mich. Comp. Laws Ann. § 211.789(5) . Unconverted record evidence supported that such notices were provided. The taxpayer provided no evidence that any certified letters were returned unclaimed; and the record evidence shows that at least one notice was signed for an address listed for the taxpayer, although it was apparently claimed by a person other than the taxpayer. More importantly, the country treasurer took “additional reasonable steps” as required by the U.S. Supreme Court, including a personal visit and posted notice on the property. The court rejected the taxpayer’s claim that he was misled by the county treasurer’s employees into believing he had more time to pay his 2009 taxes. The taxpayer’s support for this argument came in the form of a “self-serving” affidavit, devoid of identifying information, presented to the trial court for the first time during a motion for reconsideration, and containing inadmissible hearsay. While evidence need not be in admissible form, it must be substantially admissible to be considered at a summary disposition hearing, and inadmissible hearsay is not substantially admissible. (Mathew Streater v. Wayne County Treasurer, Mich. Ct. App., Dkt. No. 315534, 07/24/2014 (unpublished).)

MinnesotaPersonal Income Tax — Education expense credit and subtraction.
The Minnesota Department of Revenue is reminding parents to save receipts from all school supply purchases to help qualify parents for tax credits or subtractions on their 2014 state income tax returns. There are two tax options that help Minnesota families pay expenses related to their child’s education: the refundable K-12 education credit and the K-12 education subtraction. Both programs reduce the tax parents must pay and could provide a larger refund when filing a 2014 Minnesota Individual Income Tax Return. To qualify, a taxpayer must have purchased educational services or required materials during 2014 to assist with his or her child’s education, and the child also must be attending kindergarten through 12th grade at a public, private or home school. Generally, most expenses paid for educational instruction or materials qualify, including paper, pens and notebooks; textbooks; rental or purchases of educational equipment such as musical instruments; computer hardware and educational software; after-school tutoring and educational summer camps. There are no income limits to qualify for the education subtraction; income limits only apply to the education credit. (Minnesota Department of Revenue News Release, 07/25/2014.)

New YorkCredits and Incentives — QEZE credits.
An administrative law judge (ALJ) has determined that the taxpayers, the managing member of certain LLCs and his immediate family members, were not entitled to receive, as flow-through recipients, Qualified Empire Zone Enterprize (QEZE) real property tax credits and wage tax credits with respect to one of the two companies at issue. The ALJ agreed with the Division of Taxation’s position that the employment increase factor was not satisfied, as the company’s two employees had been previously employed by a related person within the preceding 60 months resulting in a zero employment increase factor and, therefore, zero credit. The ALJ disagreed with the Division about the QEZE real property and wage tax credits claimed with respect to the second company at issue, finding that the company’s sole employee was an eligible employee (i.e., was employed full-time for at least half of the taxable year) and received eligible wages for two of the years at issue. The ALJ added, however, that the wage tax credit claimed for the last year of the employee’s employment was properly denied, as the sole employee did not work for more than half of that taxable year. (In the Matter of the Petition of New Cingular Wireless PCS LLC, NYS Division of Tax Appeals, ALJ, Dkt. No. 825318, 07/17/2014.)

New YorkFuels And Minerals — Extension of tax exemptions for alternative fuels discussed.
The Division of Taxation and Finance has issued a technical memorandum that summarizes the amendment enacted as part of the 2014-2015 budget bill that extends the tax exemptions for alternative fuels (E85, compressed natural gas (CNG), hydrogen, and B20) and natural gas that is purchased in an uncompressed state to be converted into CNG for use in motor vehicles. The Department states that the exemptions, which were due to expire on August 31, 2014, have been extended through August 31, 2016. ( New York Technical Service Bureau Memorandum TSB-M-14(4)M, 07/24/2014 ; New York Technical Service Bureau Memorandum TSB-M-14(12)S, 07/24/2014 .)

New YorkFranchise Tax — Tax reform discussed.
The Department of Taxation and Finance has issued a release discussing the reform of New York State’s corporate tax system, which was enacted as part of the 2014-15 New York State Budget. The Department noted that these changes are generally effective for tax years beginning on or after January 1, 2015 and that the new tax structure: (1) the merges the bank tax and corporate franchise tax ; (2) modernizes and streamlines the tax code; (3) creates clarity and certainty; (4) addresses the most common areas of dispute between taxpayers and the Tax Department; and (5) provides tax cuts. (Corporate Tax Reform, The New York State Department of Taxation and Finance, 07/24/2014.)

New YorkPersonal Income Tax — QEZE credits.
An administrative law judge (ALJ) has determined that the taxpayers, the managing member of certain LLCs and his immediate family members, were not entitled to receive, as flow-through recipients, Qualified Empire Zone Enterprize (QEZE) real property tax credits and wage tax credits with respect to one of the two companies at issue. The ALJ agreed with the Division of Taxation’s position that the employment increase factor was not satisfied, as the company’s two employees had been previously employed by a related person within the preceding 60 months resulting in a zero employment increase factor and, therefore, zero credit. The ALJ disagreed with the Division about the QEZE real property and wage tax credits claimed with respect to the second company at issue, finding that the company’s sole employee was an eligible employee (i.e., was employed full-time for at least half of the taxable year) and received eligible wages for two of the years at issue. The ALJ added, however, that the wage tax credit claimed for the last year of the employee’s employment was properly denied, as the sole employee did not work for more than half of that taxable year. (In the Matter of the Petition of New Cingular Wireless PCS LLC, NYS Division of Tax Appeals, ALJ, Dkt. No. 825318, 07/17/2014.)

New YorkSales And Use Tax — Refund properly denied; taxpayer did not repay customers.
An administrative law judge (ALJ) has granted the Division of Taxation’s motion seeking a summary determination that the taxpayer, an internet access service provider that erroneously collected New York sales tax on internet access, was not entitled to a refund of monies erroneously paid, since it never refunded the tax paid to it by its customers or established a substantive right to a refund. The Tax Law provides that no refund or credit will be made for tax collected by a taxpayer from a customer until the taxpayer first establishes that it has repaid the tax to the customer. Here, the facts did not show that the taxpayer repaid the sales tax it erroneously collected, thus the ALJ determined that the denial of the taxpayer’s refund claim was proper. The ALJ rejected the taxpayer’s claim that it satisfied the repayment requirement because of the terms of a settlement agreement reached with its aggrieved customers, noting that the federal district court, in approving the settlement agreement, stated that the settlement “did not purport to dictate to any state the substance of its laws with regard to refunds or refund procedure.” The ALJ noted that a clarification to the agreement made it clear that the parties acknowledged that repayment of the erroneously collected taxes were required in New York before a refund would be made, adding that the taxpayer’s attempt to essentially shift the burden of establishing the amount of the refund to the state of New York by requesting the refund before repayment was made was unreasonable. (In the Matter of the Petition of New Cingular Wireless PCS LLC, NYS Division of Tax Appeals, ALJ, Dkt. No. 825318, 07/17/2014.)

New YorkSales And Use Tax — Extension of tax exemptions for alternative fuels discussed.
The Division of Taxation and Finance has issued a technical memorandum that summarizes the amendment enacted as part of the 2014-2015 budget bill that extends the tax exemptions for alternative fuels (E85, compressed natural gas (CNG), hydrogen, and B20) and natural gas that is purchased in an uncompressed state to be converted into CNG for use in motor vehicles. The Department states that the exemptions, which were due to expire on August 31, 2014, have been extended through August 31, 2016. ( New York Technical Service Bureau Memorandum TSB-M-14(4)M, 07/24/2014 ; New York Technical Service Bureau Memorandum TSB-M-14(12)S, 07/24/2014 .)

OhioPersonal Income Tax — Email campaign for nonpayment of taxes/failure to file.
The Ohio Department of Taxation has initiated an email campaign to notify taxpayers that Department records indicate that full payment of the personal income or school district income tax has not been received or that a return needs to be filed for their account. The email outlines when the payment or return was due and the steps necessary to meet their filing requirements before a bill or an assessment is issued. As part of the Department’s current email campaign, the Department has emailed taxpayers who should have received a previous School District Income Tax Failure to File notice by postal mail in May 2014. The Department sent follow-up emails on July 23 and 24 notifying taxpayers that an Ohio school district return (Ohio Form SD-100) for tax year 2010, 2011, or 2012 has not been received for their account. The notification is sent to notify taxpayers to file before the bill becomes a legal assessment, which will include interest and penalty. (Tax Alert: 2012 Ohio School District Income Tax Return Not Received, Ohio Dept. Taxation, 07/24/2014.)

OregonReal Property — Property improperly disqualified from Forestland Special Assessment.
The Oregon Tax Court held for the taxpayer because his property was improperly disqualified from the Western Oregon Forestland Special Assessment for the 2011-12 tax year. There are two ways for land in western Oregon to be “forestland” for purposes of special assessment: (1) it can be designated as forestland and held with the predominant use of growing trees for commercial timber harvest; or (2) it can be land with a “highest and best use” of growing trees for commercial harvest. Since neither party presented argument on the issue of highest and best use, the court focused exclusively on (1) and determined that the taxpayer’s conduct regarding the property was consistent with a predominant purpose of harvesting the marketable timber growing on the forestland property. Moreover, the taxpayer’s conduct toward the property during the time immediately leading up to the county’s issuance of the notice of disqualification for the property was more consistent with holding the property for future timber harvest than for any other purpose. (Joseph W. Angel v. Dept. of Rev., State of Oregon, and Multnomah County Assessor, Or. Tax Ct. Reg. Div., Dkt. No. TC 5126, 07/24/2014.)

OregonReal Property — Taxpayer proved property was for forestland purposes.
The Oregon Tax Court held for the taxpayer because his property was improperly disqualified from the Western Oregon Forestland Special Assessment for the 2011-12 tax year. There are two ways for land in western Oregon to be “forestland” for purposes of special assessment: (1) it can be designated as forestland and held with the predominant use of growing trees for commercial timber harvest; or (2) it can be land with a “highest and best use” of growing trees for commercial harvest. The court found that the taxpayer’s purpose for owning the real property was due to the fact that it was planted with marketable trees for future timber harvest. The taxpayer satisfied the burden of proving by a preponderance of the evidence that the subject property was “forestland” for purposes of Western Oregon Forestland Special Assessment during the 2011-12 tax year. (Rosalie Ridge LLC v. Dept. of Rev., State of Oregon, and Multnomah County Assessor, Or. Tax Ct. Reg. Div., Dkt. No. TC 5152, 07/24/2014.)

PennsylvaniaSales And Use Tax — Taxation of lap dances.
The Court of Common Pleas has affirmed a Philadelphia Tax Review Board decision which held that the city of Philadelphia was estopped from applying an expanded interpretation of the amusement tax in order to assess sales tax against three gentlemen’s clubs for fees paid for personal amusement services (aka lap dances). The fees in question were not charged by the establishment, but paid directly to the individual dancers for personal dances. Previous audits of these same taxpayers completed in 2006 had limited the assessment of amusement tax to admission fees charged at the door for two of the three taxpayers, and assessed amusement tax against a portion of the lap dance fees for the third. Since there had been no amendments to the ordinance, no new regulations promulgated, and no notice of any change in interpretation of the ordinance between the previous audits and the one at issue, the Tax Review Board ruled that the city was estopped from applying an expanded interpretation for a retroactive assessment that included fees charged for personal dances. After reviewing all briefs submitted by the parties, and the certified record of the hearing, the Court of Common Pleas determined that the Board committed no errors of law, and that its finding of fact and conclusions were well supported by substantial evidence. (City of Philadelphia v. Tax Review Board (sub nom In Re: Mag Enterprises, Inc. Delilah’s Den of Philadelphia, Conchetta, Inc.), Pa. Ct. Common Pleas, Dkt. Nos. 00999; 01003; 01044, 07/16/2014 .)

TexasFuels And Minerals — Crude oil and gas exemptions—June 2014.
The Texas Comptroller of Public Accounts has announced certification of the average taxable price of gas and oil for June 2014 in Texas Register, Vol. 39, No. 30, July 25, 2014. Since the comptroller has determined that the average taxable price of crude oil for reporting period June 2014 is $75.21 per barrel for the 3-month period beginning on March 1, 2014, and ending May 31, 2014, crude oil produced during the month of June 2014 from a qualified low-producing oil lease is not eligible for exemption from the crude oil production tax. Since the comptroller has determined that the average taxable price of gas for reporting period June 2014 is $3.56 per mcf for the 3-month period beginning on March 1, 2014, and ending May 31, 2014, gas produced during the month of June 2014 from a qualified low-producing well is not eligible for an exemption from the natural gas production tax.

TexasFranchise Tax — Texas oil and gas exclusions—June 2014.
The Texas Comptroller of Public Accounts has announced certification of the average taxable price of gas and oil for June 2014 in Texas Register, Vol. 39, No. 30, July 25, 2014. Since the comptroller has determined that the average closing price of West Texas Intermediate crude oil for the month of June 2014 is $105.15 per barrel, a taxable entity cannot exclude total revenue received from oil produced during the month of June 2014 from a qualified low-producing oil well. Since the comptroller has determined that the average closing price of gas for the month of June 2014 is $4.59 per MMBtu, a taxable entity must exclude total revenue received from gas produced during the month of June 2014 from a qualified low-producing gas well.

UtahCorporate Income Tax — Utah—Penalty waiver request granted; interest waiver request denied.
The administrative law judge (ALJ) granted the taxpayer’s request for penalty waiver but denied the request for interest waiver regarding the owners association’s failure to file timely returns. The taxpayer contended that it was given incorrect information from the developer and were told that the owners association was organized as a non-profit entity and that they had no filing obligation. After further investigation, the taxpayer realized that returns should have been filed in the prior years and did so. The Division claimed that the taxpayer did not do its due diligence to determine filing requirements. However, the ALJ determined that the taxpayer voluntarily filed returns for a period of nine years because of the initiative of its representative, not as a result of an audit or collection efforts by the Tax Commission. The ALJ noted that had the taxpayer’s representative contacted the Tax Commission and inquired about the Voluntary Disclosure Program, it is likely that the taxpayer could have limited the look-back period for having not filed, and would not have been assessed penalties. Under the circumstances, the penalties should be waived. However, because the taxpayer failed to show error on the part of the Tax Commission or a Tax Commission employee, the interest should not be waived. (Taxpayer v. Taxpayer Services Division of the Utah State Tax Comm’n, Utah State Tax Comm’n, Dkt. No. 13-352, 06/18/2013 (released July 2014).)

UtahPersonal Income Tax — Late payment penalty reduced.
The administrative law judge (ALJ) reduced penalties assessed for the 2009 tax year that included a 10% late filing penalty and a 10% late payment penalty after considering a combination of all the factors offered by the taxpayer. Here, the taxpayer testified that his tax advisor did not tell him he should be making a prepayment or that he could have paid an estimate prior to filing the actual return, and that it was always his understanding that the payment was made with the return when the return was filed. The taxpayer contended that he met the reasonable cause criteria because he relied on a competent tax advisor and that he was unaware that he should have paid an estimate in order to avoid late payment penalties. However, reasonable cause it not necessarily found where the CPA was just late in getting the return prepared, and in most cases ignorance of the law does not constitute reasonable cause for waiver. Because the taxpayer had filed late for the two prior years, but was not assessed penalties for either of those prior years until after a prepayment for 2009 was required and a penalty for that year would have already been incurred, and because the 2009 tax liability was so much higher than the preceding two years that the penalty was substantial, a reduction in the penalty amount was warranted. Failure to comply generally results in penalties and interest and the ALJ noted that penalties serve to get taxpayers’ attention and help insure compliance. However, the ALJ determined that reduced penalties in this case would be sufficient to insure compliance and reasonable under the circumstances. (Taxpayer 1& 2 v. Taxpayer Services Division of the Utah State Tax Comm’n, Utah State Tax Comm’n, Dkt. No. 11-2348, 03/15/2013 (released July 2014).)

WashingtonBusiness And Occupations — Exemptions—fruit and vegetable manufacturers.
The Department of Revenue has issued a publication reminding taxpayers of exemptions available to manufacturers of fruits and vegetables until June 30, 2015. Eligible manufacturing activities include canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables. The exemptions are applicable to the manufacturing business and occupation (B&O) tax on the value of products sold by fruit and vegetable manufacturers and the wholesaling B&O tax imposed on fruit and vegetable manufacturers who sell products at wholesale to customers who transport the products out of state in the normal course of business. Upon expiration of the exemptions, formerly exempt income will be subject to B&O tax at a reduced rate of 0.138%. ( Washington Special Notice 07/01/2014(Fruitsandvegetables), 07/01/2014 .)

WashingtonBusiness And Occupations — Exemptions—seafood product manufacturers.
The Department of Revenue (DOR) has issued a publication informing taxpayers of a change in the DOR’s administration of the business and occupation (B&O) tax exemption for seafood product manufacturers available under Wash. Rev. Code § 84.02.4269 . The DOR has recently determined that Wash. Rev. Code § 84.02.4269 provides an exemption for the retailing B&O tax on seafood products that remain in a raw, raw frozen, or raw salted state sold by manufacturers to customers that transport the products outside Washington in the normal course of business. Taxpayers who believe they have overpaid B&O tax may request a refund. The seafood manufacturer exemptions expire June 30, 2015, after which time B&O tax will apply to the formerly exempt income at a reduced rate of 0.138% for seafood product manufacturing or sales by manufacturers to customers who transport the products out of state or the regular B&O retail (0.471%) and wholesale (0.484%) rates for other retail and wholesale sales. Washington Special Notice 07/01/2014(Seafood), 07/01/2014 .)

 

Sign Up And Stay Informed

Your data is safe and secure. SC&H will never share or sell your information with any 3rd party vendors. Guaranteed.