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

State & Local Tax Updates: Alabama Franchise Tax Deadlines; Maine Public Utilities Reform; and Tennessee Nursing Home Assessment Fees

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.

Alabama — Corporate Income Tax — Late payment of Alabama business income tax—penalty waived.
The administrative law judge (ALJ) waived penalties due as a result of a delinquent tax payment. The taxpayer, after submitting an extension request with an electronic payment, received a transaction receipt acknowledging the extension request and stating that a prepayment had been made. The Department of Revenue (DOR) informed the taxpayer several months later that the payment had not, in fact, been received and assessed a penalty and interest. The ALJ determined that it was reasonable for the taxpayer to have relied on the DOR’s electronic transfer receipt indicating that the correct amount of tax had been remitted and waived the penalty due. (Lindsay Goldberg & Bessemer NNAIV, LP v. Ala. Dept. of Rev., Administrative Law Division, Dkt. No. BIT. 13-736, 04/16/2014.)

Alabama — Corporate Income Tax — Alabama preparers’ good faith efforts averted filing penalty.
A corporation was not penalized for failing to attach Alabama Form 2220-AL (Estimated Tax Penalties for Corporations) to its 2011 annual return because its tax return preparers made every good faith effort to ensure that the Form 2220-AL was submitted with the taxpayer’s 2011 return. Unfortunately, through a CCH software error, the Form 2220-AL was not subsequently transmitted to the Department with the return. In preparing the taxpayer’s 2011 return, the taxpayer’s CPAs double checked to ensure that they had indicated on the return that Form 2220-AL was to be electronically remitted to the Department with the return. The preparers submitted the return to the taxpayer for approval, the taxpayer signed the electronic filing authorization form, and the preparers then electronically submitted the return to an authorized third party vendor, Wolters Klower, the parent of CCH, for subsequent filing with the Department. The taxpayer’s tax preparers explained that after receiving the 2011 final assessment, they contacted CCH and inquired about why the Form 2220-AL had not been electronically submitted with the taxpayer’s 2011 return The taxpayer’s tax preparers clearly made a good faith effort to ensure that the Form 2220-AL would be electronically submitted with the taxpayer’s 2011 Alabama return. The fact that the third party vendor authorized to remit the return failed to transmit the Form 2220-AL due to a software glitch does not negate that good faith effort. Under the circumstances, the penalties for failure to were waived for reasonable cause. (Radiance Technologies, Inc. v. Ala. Dept. of Rev., Admin. Law Div., Dkt. No. BIT. 13-528, 04/21/2014.)

Alabama — Corporate Income Tax — Electronic filing software—requirements.
Effective May 9, 2014, the Alabama Department of Revenue has amended Rule 810-3-39-.10, Requirements for Electronic Filing Software-Corporate Tax Returns, to amend the requirements for software vendors to obtain approval to provide software that allows corporate tax returns to be electronically filed through the Alabama Modernized E-File Program. Among other changes, the amended rule provides that software developers are required to complete the Business MeF Software Intent to Participate and Agreement on an annual basis.

Alabama — Limited Liability Companies — Electronic filing software requirements.
Effective May 9, 2014, the Alabama Department of Revenue has amended Rule 810-3-28-.05, Requirements for Electronic Filing Software-Partnership/LLC Returns, to amend the requirements for software vendors to obtain approval to provide software that allows partnership/LLC returns to be electronically filed through the Alabama Modernized E-File Program. Among other changes, the amended rule provides that software developers are required to complete the Business MeF Software Intent to Participate and Agreement on an annual basis.

Alabama — Cigarette, Alcohol & Miscellaneous Taxes — Distributor subject to tobacco tax.
An administrative law judge (ALJ) has found that the taxpayer, a company that sold non-cigarette tobacco products to customers in Alabama, was liable for the tobacco products tax as a distributor. The taxpayer failed to file monthly tobacco reports with the Department of Revenue for the periods at issue. The Department conducted audits and assessed the tax for the period at issue on the taxpayer as a wholesaler. The taxpayer, however, argued that it did not fit the definition of a wholesaler, and was therefore not subject to the tax, because it only sold to Alabama customers that resold the products to wholesalers and never sold to licensed retail dealers in Alabama. The ALJ found that while it was inconclusive as to whether the taxpayer was a wholesaler, it was clear that the taxpayer was a distributor during the subject tax periods and thus liable for the tax. Since the term distributor is not defined by Alabama tobacco tax statutes, the ALJ noted that the commonly understood meaning of the term applied. The ALJ cited the definition of distributor provided by the American Heritage Dictionary, Fourth College Ed. , i.e., “one that markets or sells merchandise, esp. a wholesaler.” The ALJ determined that the taxpayer indisputably sold tobacco products, i.e., merchandise, to Alabama customers during the periods in issue. The ALJ did however remove the 50% fraud penalty imposed on taxpayer finding that the Department had failed to show that the taxpayer willfully intended to evade a know duty to collect and remit the tax. (Star Importers & Wholesalers v. State of Alabama, Dept. of Rev., Administrative Law Division, Dkt. No. MISC. 13-420, 04/21/2014 (preliminary order).)

Alabama — Personal Income Tax — Electronic filing software requirements—fiduciary returns.
Effective May 9, 2014, the Alabama Department of Revenue has adopted Rule 810-3-29-.05, Requirements for Electronic Filing Software-Fiduciary Tax Returns, in order to provide requirements for software vendors to obtain approval to provide software that allows fiduciary tax returns to be electronically filed through the Alabama Modernized E-File Program.

Alabama — Personal Income Tax — Refund petition for tax withheld from wages.
The Alabama Department of Revenue received IRS information indicating that taxpayer, a truck driver, had failed to file income tax returns for the 2009 tax year. The Department subsequently discovered that taxpayer had also failed to file returns for tax years 1997 through 2003. The taxpayer explained that he believed that his wife, who passed away in 2009, had timely filed their returns for the tax years at issue. The Department assessed the taxpayer for the tax due in those years. The taxpayer petitioned the Department for refunds for the years at issue, arguing that Alabama tax was withheld from his wages in the subject years but he could not now obtain the Alabama withholding information from his employer, or the IRS, due to the extended lapse of time. When the Department denied the refund petitions, the taxpayer requested relief from the Taxpayer Advocate (TA). The TA issued a taxpayer assistance order for the 2002 tax year for which it obtained the withholding amount paid by the taxpayer, but took no further action for the other tax years for which the taxpayer had requested relief. The administrative law judge (ALJ) found that despite the lack of W-2 information, the evidence strongly suggested that Alabama tax was also withheld from the taxpayer’s wages in the other years in question. The ALJ requested the TA to attempt to obtain, from the same source it had obtained the 2002 withholding information or otherwise, the amount of Alabama tax withheld from the taxpayer’s wages for these tax years . The ALJ also noted that the TA, at her sole discretion, has the authority to estimate the amounts withheld in those tax years using the percentage of tax withheld from the taxpayer’s wages in 2002. The ALJ ordered the TA to notify the Administrative Law Division of her decision upon which the court would then take further action. (Roberts v. State of Alabama, Dept. of Rev., Administrative Law Division, Dkt. No. INC. 13-475, 04/08/2014 (preliminary order).)

Alabama — Partnership — Penalty waived.
The administrative law judge (ALJ) waived penalties due as a result of a delinquent tax payment. The taxpayer, after submitting an extension request with an electronic payment, received a transaction receipt acknowledging the extension request and stating that a prepayment had been made. The Department of Revenue (DOR) informed the taxpayer several months later that the payment had not, in fact, been received and assessed a penalty and interest. The ALJ determined that it was reasonable for the taxpayer to have relied on the DOR’s electronic transfer receipt indicating that the correct amount of tax had been remitted and waived the penalty due. (Lindsay Goldberg & Bessemer NNAIV, LP v. Ala. Dept. of Rev., Administrative Law Division, Dkt. No. BIT. 13-736, 04/16/2014.)

Alabama — Partnership — Electronic filing software requirements.
Effective May 9, 2014, the Alabama Department of Revenue has amended Rule 810-3-28-.05, Requirements for Electronic Filing Software-Partnership/LLC Returns, to amend the requirements for software vendors to obtain approval to provide software that allows partnership/LLC returns to be electronically filed through the Alabama Modernized E-File Program. Among other changes, the amended rule provides that software developers are required to complete the Business MeF Software Intent to Participate and Agreement on an annual basis.

Arkansas — Franchise Tax — Deadline extended for tornado victims.
The Arkansas Secretary of State has announced that the deadline for filing and paying franchise taxes due on May 1, 2014 will be extended an additional 30 days for taxpayers affected by the recent tornadoes. Businesses from Faulkner, Pulaski and White counties needing an extension may contact the Business and Commercial Services (BCS) division for further information. Corporations may file franchise taxes online, 24 hours a day, by visiting the Secretary of State’s website; pay in person; or mail their franchise tax returns. Credit cards and electronic checks are accepted. (News Details: Franchise Tax Deadline Extended for Tornado Victims, Arkansas Secretary of State, 04/30/2014.)

Arizona — Corporate Income Tax — Annual technical corrections bill enacted.
L. 2014, S1301, generally effective 07/24/2014, corrects errors, strikes obsolete language, and makes clarifying and conforming changes to the Arizona Revised Statutes that are related to taxation. Among other things, the legislation deletes obsolete and unnecessary language relating to the computation of Arizona gross income for corporations; repeals the following obsolete provisions: Ariz. Rev. Stat. Ann. § 43-1024 relating to the amortization of private commercial capital investment by a qualified defense contractor, and Ariz. Rev. Stat. Ann. § 43-1124 relating to the Arizona corporate capital loss carryover; and repeals the following expired credits: the credit for taxpayers participating in agricultural preservation district under Ariz. Rev. Stat. Ann. § 43-1180 , and the credit for water conservation system plumbing stub outs installed in houses constructed by taxpayer under Ariz. Rev. Stat. Ann. § 43-1182 .

Arizona — Credits and Incentives — Annual technical corrections bill enacted.
L. 2014, S1301, generally effective 07/24/2014, corrects errors, strikes obsolete language, and makes clarifying and conforming changes to the Arizona Revised Statutes that are related to taxation. Among other things, the legislation repeals the expired credit for water conservation system plumbing stub outs installed in houses constructed by taxpayer under Ariz. Rev. Stat. Ann. § 43-1182 .

Arizona — Personal Income Tax — Annual technical corrections bill enacted.
L. 2014, S1301, generally effective 07/24/2014, corrects errors, strikes obsolete language, and makes clarifying and conforming changes to the Arizona Revised Statutes that are related to taxation. Among other things, the legislation includes amounts withdrawn from a long-term health care savings account used for non-medical expenses in Arizona adjusted gross income; requires the administrator of a long-term health care savings account to file an annual report with Arizona Department of Revenue and outlines the report requirements; deletes obsolete and unnecessary language relating to the computation of Arizona adjusted gross income for individuals; repeals the following obsolete provisions: Ariz. Rev. Stat. Ann. § 43-1024 relating to the amortization of private commercial capital investment by a qualified defense contractor, and Ariz. Rev. Stat. Ann. § 43-1028 relating to medical savings accounts reports; repeals the following expired credits: the credit for taxpayers participating in agricultural preservation district under Ariz. Rev. Stat. Ann. § 43-1081.02 , the credit for construction materials incorporated into qualifying facility under Ariz. Rev. Stat. Ann. § 43-1082 , and the credit for water conservation systems under Ariz. Rev. Stat. Ann. § 43-1090.01 ; and stipulates that the repeal of tax credits relating to water conservation systems does not affect the use of carryovers.

Arizona — Real Property — Valuation of renewable energy property.
L. 2014, H2403, effective on the 91st day following the close of the 2014 legislative session, limits the valuation of certain real property in cases where: (1) real property is leased by the owner to an unaffiliated lessee; (2) the lessee maintains renewable energy equipment on the property; (3) the lessee has defaulted on the lease payments and abandoned the renewable energy equipment; (4) the property had been class 2 agricultural property for the tax year prior to being leased to the renewal energy equipment operator, and; (5) the total payments collected by the owner under the lease in default are less than the assessed value of the property under class 1. The valuation of such property is limited to the greater of the total lease payments collected by the real property owner during the tax year or the assessed value of the leased property if it were classified as class two property.

Arizona — Real Property — Tax roll collection—notice and valuation changes.
L.2014, S1352, effective on the 91st day following the close of the 2014 legislative session, makes technical corrections and changes to statutes related to tax roll collection correction. The changes include: (1) Allowing 60 days for the assessor to amend a notice of valuation, if an incorrect valuation is discovered. The assessor must send notice to the Department of Revenue (DOR) and the board of supervisors (Board) of the amended notice, and receive approval by the DOR prior to sending an amended notice to the property owner. (2) It also allows property owners to file a notice of claim to prorate the property’s value from the date of destruction, if the property is destroyed after the assessor closes the tax rolls, and requires the assessor to prorate the property value from the lien date to the date of destruction. (3) It removes language allowing the assessor from delivering notices of valuation, by common carrier or transmitting them electronically. (4) For a notice of proposed correction, a the tax officer is required to mail a notice of the proposed correction, and taxpayers may appeal any valuation or legal classification issue that arises from the proposed correction. The taxpayer and the tax officer must meet and discuss the proposed correction, and if a settlement is reached, an agreement must be signed and the tax roll must be corrected immediately. and a notice must be mailed to the taxpayer within 30 days after the meeting date, informing the taxpayer that the tax roll will be corrected to the extent agreed on. (5) If the parties fail to agree a taxpayer may file a petition with the State Board of Equalization within 30 days after the date of the notice, and also requires the tax officer to notify a taxpayer of the time and place of a meeting with in sixty days of receiving a notice of claim, if the tax officer disputes the error brought forth by the notice. (6) The county treasurer is required to mail a corrected billing to the taxpayer if any of the above occur, and that any assessed taxes must be paid within 60 days, and any overpayment must be refunded with interest.

Arizona — Real Property — Annual technical corrections bill enacted.
L. 2014, S1301, generally effective 07/24/2014, corrects errors, strikes obsolete language, and makes clarifying and conforming changes to the Arizona Revised Statutes that are related to taxation. Among other things, the legislation clarifies language relating to the classification of real and personal property of electric cooperatives as Class 1 property.

Arizona — Sales And Use Tax — Exemption for qualified health sciences educational institutions.
L. 2014, H2701, effective on and after 12/31/2014 , exempts personal property that is sold to a qualified health sciences educational institution from transaction privilege and use tax; exempts the purchase of tangible personal property by a qualifying health sciences educational institution from use tax; deducts gross proceeds of sales or gross income derived from sales of personal property to qualifying health sciences educational institutions from the tax base for the publication and job printing transaction privilege classifications; prohibits the levy of a transaction privilege, use, sales or similar municipal tax on the tangible personal property of qualifying health sciences educational institutions and tangible personal property leased, rented or licensed for use by qualifying health sciences educational institutions; and makes technical and conforming changes. A “qualified health sciences educational institution” is defined as an entity that is recognized as a nonprofit entity under IRC § 501, and that solely provides graduate and postgraduate education in the health sciences. For the purposes of this paragraph, “health sciences” “Health Sciences,” for purposes of the exemption, includes medicine, nursing, physician’s assistant studies, pharmacy, physical therapy, occupational therapy, biomedical sciences, podiatry, clinical psychology, cardiovascular science, nurse anesthesia, dentistry, optometry and veterinary medicine.

Arizona — Sales And Use Tax — Changes to implement 2013 TPT simplification legislation.
L. 2014, H2389, generally effective from and after 12/31/2014, makes changes to the Arizona statutes governing the transaction privilege (sales) tax (TPT) in order to implement the 2013 legislation that simplified TPT administration (for a discussion of that legislation, see State & Local Taxes Weekly, Vol. 24, No. 27, 07/01/2013). The changes are primarily with regard to licensing, the prime contracting and restaurant classifications, and administration. With regard to licensing, the legislation amends provisions so that the state and municipal TPT licensing processes are the same (a person engaging or continuing in business must annually apply for a license, a license is valid for only the calendar year in which it is issued, and licenses must be renewed January 1); maintains the current $12 TPT licensing fee and stipulates that there is no fee for license renewal; sets the municipal TPT licensing fee at up to $50 and the renewal fee at up to $50; provides that a taxpayer who operates in multiple locations or under multiple names must obtain a TPT and municipal TPT license for each location, is required to pay only one municipal TPT renewal fee for each jurisdiction if the taxpayer files a consolidated return, and is required to pay a license renewal fee for each location in each jurisdiction if the taxpayer does not file a consolidated tax return. With regard to the prime contracting classification, the legislation revises language pertaining to the TPT exemption certificates required for certain contractors. With regard to the restaurant classification, the legislation exempts qualifying transactions made by members of the Supplemental Nutrition Assistance Program (SNAP) under the Restaurant Program from TPT. With regard to administration, the legislation allows the Arizona Department of Revenue (ADOR) to accept credit cards for all payments, not just tax payments; specifies that municipal TPT levied by a city or town is governed by state general and TPT specific administration statutes; prohibits a trained and authorized auditor from representing a taxpayer in any tax matter; provides that appeals of audit assessments are administered pursuant to state procedures; repeals the municipal TPT refund statute and provides procedures to address refund requests related to returns filed before January 1, 2015; provides that hearings under the Model City Tax Code for non-program cities relating to liabilities established before January 1, 2013, and appeals from supplementary audits performed by program cities for all audits and assessments initiated before January 1, 2015, must be heard by the Municipal Tax Hearing Office; states that all matters initiated by a city or town after January 1, 2015, are subject to ADOR procedures; and requires the ADOR, as of October 1, 2014, to mail a single notice to each license holder that includes all license renewals for TPT and municipal TPT.

Arizona — Sales And Use Tax — Annual technical corrections bill enacted.
L. 2014, S1301, generally effective 07/24/2014 but certain provisions are effective from and after 12/31/2014, corrects errors, strikes obsolete language, and makes clarifying and conforming changes to the Arizona Revised Statutes that are related to taxation. Among other things, the legislation makes changes to blend language and to comply with the 2013 transaction privilege (sales) tax (TPT) changes; clarifies that the gross proceeds of sales or gross income derived by a qualified destination management company from transactions that are not part of a qualified contract for destination management services are subject to TPT; and defines “affiliated persons” and “members of an individual’s family” under provisions governing commercial lease classification and exemption from municipal tax.

California — General Administrative Provisions — OPEN BOE data portal launched.
The California State Board of Equalization’s (BOE’s) Customer Service and Administrative Efficiency Committee has announced the launch of the OPEN BOE Data Portal. The data portal consolidates a range of historical data, such as taxable sales in California and information for other tax and fee programs, some currently available on the BOE website, into one uniform view with easy access. OPEN BOE allows users to easily download or export the data into various formats, including charts and graphs. Users may view, export, redistribute, and republish this information. The data portal eases access to aggregate tax, revenue, and expenditure data by the public. The portal does not provide access to confidential taxpayer information. ( California SBE News Release 59-14-G, 05/01/2014 .)

California — Sales And Use Tax — Sales tax refund under consumer protection statutes barred.
The plaintiffs (Loeffler and other consumers) were precluded from suing a retailer under two consumer protection statutes (unfair competition law (UCL) and the Consumer Legal Remedies Act (CLRA)), to seek a refund of the assertedly unlawful charges, damages, and obtain injunction forbidding collection of sales tax reimbursement for such sales. Loeffler and other consumers contended that the retailer (Target) represented that it properly was charging and in fact charged them sales tax reimbursement on sales of hot coffee sold “to go,” when, according to Loeffler, the tax code rendered such sales exempt from sales tax. The Court of Appeal concluded that Loeffler’s action was not authorized under the tax code and was barred by Cal. Constitution XIII § 32 , that limits the manner in which taxpayers may seek a refund of taxes from the taxing entity. The California Supreme Court affirmed the judgment of the Court of Appeal, based on its conclusion that the tax code provides the exclusive means by which Loeffler and others’ dispute over the taxability of a retail sale may be resolved and that their current lawsuit is inconsistent with tax code procedures. The consumer protection statutes under which Loeffler and other consumers brought their action cannot be employed to avoid the limitations and procedures set out by the Revenue and Taxation Code. A UCL or CLRA cause of action such as Loeffler’s cannot be reconciled with the primary decisionmaking role that the tax code vests in the State Board of Equalization (SBE) with respect to tax issues. Moreover, Cal. Rev. & Tax. Cd. § 6901.5 provides a safe harbor for a retailer/taxpayer like Target who remitted reimbursement charges to the SBE. For these reasons, the tax code precludes claims such as Loeffler’s and other consumers. (Loeffler et al. v. Target Corp., Cal. S. Ct., Dkt. No. S173972, 05/01/2014.)

Connecticut — Fuels And Minerals — Quarterly list of distributors.
The Connecticut Department of Revenue Services has issued the quarterly list of distributors for motor vehicle fuels tax purposes. The announcement identifies persons who have become, or are no longer, licensed as motor fuels distributors, since the current annual list was published. ( Connecticut Announcement 2014(3.1), 05/01/2014 .)

Georgia — Real Property — 2014 Forest Land Act and use values—regulations adopted.
The Georgia Department of Revenue has adopted, effective May 12, 2014, the 2014 Conservation Use and Forest Land Protect Act covenants as set forth in Reg. § 560-11-6-.09, Table of Conservation Use Land Values; and Reg. § 560-11-11-.12, Table of Forest Land Protection Act Land Use Values.

Illinois — Corporate Income Tax — Illinois regulations amended.
The Illinois Department of Revenue has amended regulations 86 Ill. Adm. Code 100.2110, 100.2120, 100.2160, 100.2185, 100.2190, 100.2480, 100.2655, 100.2657, effective April 21, 2014. The amendments clarify that the basis of qualified property will be the basis used to compute the depreciation deduction for federal income tax purposes, and will include any bonus depreciation deduction allowed under IRC § 168(k). The amendments include changes to various tax credits including the following: providing an automatic sunset of credit for river edge redevelopment zone property; adding the river edge redevelopment zone to the repeal of the jobs tax credit; clarifying that the film production services credit may not be claimed in taxable years beginning on or after May 6, 2021; and changing the sunset date of the affordable housing credit from December 31, 2006 to December 31, 2016. The regulations provide that the dividend subtraction already provided for dividends paid by a corporation conducting business operations in an enterprise zone will now also include dividends paid by corporations operating in a river edge redevelopment zone, and the subtraction for loan interest secured by property eligible for the enterprise zone investment credit is allowed only for interest received or accrued prior to August 7, 2012. The regulations also add a section providing guidance for financial organizations entitled to claim a subtraction for interest income from loans secured by property that qualifies for the high impact business investment credit. Additionally, the amendments make non‐substantive technical changes related to grammar and punctuation.

Illinois — Credits and Incentives — Regulations amended.
The Illinois Department of Revenue has amended regulations 86 Ill. Adm. Code 100.2110, 100.2120, 100.2160, 100.2185, 100.2190, 100.2480, 100.2655, 100.2657, effective April 21, 2014. The amendments clarify that the basis of qualified property will be the basis used to compute the depreciation deduction for federal income tax purposes, and will include any bonus depreciation deduction allowed under IRC § 168(k). The amendments include changes to various tax credits including the following: providing an automatic sunset of credit for river edge redevelopment zone property; adding the river edge redevelopment zone to the repeal of the jobs tax credit; clarifying that the film production services credit may not be claimed in taxable years beginning on or after May 6, 2021; and changing the sunset date of the affordable housing credit from December 31, 2006 to December 31, 2016. The regulations provide that the dividend subtraction already provided for dividends paid by a corporation conducting business operations in an enterprise zone will now also include dividends paid by corporations operating in a river edge redevelopment zone, and the subtraction for loan interest secured by property eligible for the enterprise zone investment credit is allowed only for interest received or accrued prior to August 7, 2012. The regulations also add a section providing guidance for financial organizations entitled to claim a subtraction for interest income from loans secured by property that qualifies for the high impact business investment credit. Additionally, the amendments make non‐substantive technical changes related to grammar and punctuation.

Illinois — Personal Income Tax — Regulations amended.
The Illinois Department of Revenue has amended regulations 86 Ill. Adm. Code 100.2110, 100.2120, 100.2160, 100.2185, 100.2190, 100.2480, 100.2655, 100.2657, effective April 21, 2014. The amendments clarify that the basis of qualified property will be the basis used to compute the depreciation deduction for federal income tax purposes, and will include any bonus depreciation deduction allowed under IRC § 168(k). The amendments include changes to various tax credits including the following: providing an automatic sunset of credit for river edge redevelopment zone property; adding the river edge redevelopment zone to the repeal of the jobs tax credit; clarifying that the film production services credit may not be claimed in taxable years beginning on or after May 6, 2021; and changing the sunset date of the affordable housing credit from December 31, 2006 to December 31, 2016. The regulations provide that the dividend subtraction already provided for dividends paid by a corporation conducting business operations in an enterprise zone will now also include dividends paid by corporations operating in a river edge redevelopment zone, and the subtraction for loan interest secured by property eligible for the enterprise zone investment credit is allowed only for interest received or accrued prior to August 7, 2012. The regulations also add a section providing guidance for financial organizations entitled to claim a subtraction for interest income from loans secured by property that qualifies for the high impact business investment credit. Additionally, the amendments make non‐substantive technical changes related to grammar and punctuation.

Maine — Sales Tax Rates — Products transferred electronically.
L. 2014, H1323 (P.L. 588), effective 04/30/2014, provides that products transferred electronically are subject to the general sales and use tax rate. The general sales tax rate in effect from October 1, 2013 to June 30, 2015 is 5.5%.

Maine — Personal Income Tax — Medical and dental expenses.
L. 2014, H1349 (P.L. 595), effective 05/01/2014 and applicable to tax years beginning on or after 01/01/2014, provides that the $27,500 limitation on Maine total itemized deductions from Maine adjusted gross income does not apply to medical and dental expenses included in an individual’s itemized deductions from federal adjusted gross income.

Maine — Personal Income Tax — Tax credit for primary care professionals.
L. 2014, S172 (P.L. 599), effective 90 days following adjournment of the 126th Legislature, Second Regular Session, provides that the primary care access credit is available for tax years beginning on or after January 1, 2014 but before January 1, 2019 to eligible primary care professionals practicing full time in an underserved area. An “underserved area” means an area in Maine that is a health professional shortage area or medically underserved area or that contains a medically underserved population as defined by the federal Department of Health and Human Services, Health Resources and Services Administration. An eligible primary care professional may claim the primary care access tax credit in an amount equal to the annual payments made on the professional’s student loan not to exceed $6,000 in the first year, $9,000 in the second year, $12,000 in the third year, $15,000 in the fourth year and $18,000 in the fifth year.

Maine — Public Utilities — Telecommunications regulation reform.
L. 2014, H1060 (P.L. 600), effective 90 days following adjournment of the 126th Legislature, Second Regular Session, provides that “intrastate gross operating revenues” means: in the case of all utilities except telephone utilities, revenues derived from filed rates except revenues derived from sales for resale; in the case of a telephone utility, all intrastate revenues, except revenues derived from sales for resale, whether or not the rates from which those revenues are derived are required to be filed; and in the case of a qualified telecommunications provider, all intrastate revenues except revenues derived from sales for resale.

Maine — Sales And Use Tax — Products transferred electronically.
L. 2014, H1323 (P.L. 588), effective 04/30/2014, provides that products transferred electronically are subject to the general sales and use tax rate. The general sales tax rate in effect from October 1, 2013 to June 30, 2015 is 5.5%.

Minnesota — Sales Tax Rates — Becker County transit sales-use tax.
Effective July 1, 2014, Becker County will impose a 0.5% transit sales and use tax. The tax will be administered by the Minnesota Department of Revenue. This tax applies to retail sales made within Becker County. The use tax applies to taxable items used in the county if the local sales tax was not paid. This tax applies to the same items that are subject to the state Sales and Use Tax. It does not apply to sales of motor vehicles registered for road use. All retailers who are doing business in Becker County and are registered for Minnesota sales tax must register for the Becker County tax, including sellers outside the county that meet certain criteria. (Becker County 0.5% Transit Sales and Use Tax, 04/01/2014.)

Minnesota — Sales And Use Tax — Becker County transit sales-use tax.
Effective July 1, 2014, Becker County will impose a 0.5% transit sales and use tax. The tax will be administered by the Minnesota Department of Revenue. This tax applies to retail sales made within Becker County. The use tax applies to taxable items used in the county if the local sales tax was not paid. This tax applies to the same items that are subject to the state Sales and Use Tax. It does not apply to sales of motor vehicles registered for road use. All retailers who are doing business in Becker County and are registered for Minnesota sales tax must register for the Becker County tax, including sellers outside the county that meet certain criteria. (Becker County 0.5% Transit Sales and Use Tax, 04/01/2014.)

Missouri — Personal Income Tax — Income tax cut bill veto.
On May 1, 2014, Missouri Governor Jay Nixon vetoed S509, the income tax cut bill passed by the state legislature, as an ill-conceived, fiscally irresponsible experiment. The governor called the bill unaffordable, unfair, and potentially dangerous legislation that would harm public education and the vital services upon which Missourians rely, undermine Missouri’s long-term fiscal health, and provide extraordinary benefits to the few with little for the many.

Montana — Real Property — Taxpayer’s land lacked carrying capacity for grazing land classification.
The Montana Tax Appeal Board upheld the decision of the Lewis and Clark County Tax Appeal Board relating to the valuation of the taxpayer’s property for the tax year 2013. The taxpayer had argued that his land, consisting of 11.86 acres, was incorrectly classified as non-agricultural property and sought a grazing land classification. Nonagricultural property is taxed at seven times the rate of grazing land. In order to be classified as grazing land, Montana administrative rules provide criteria for agricultural land valuation for land totaling less than 20 acres. Specifically, the land must be capable of sustaining a minimum number of animal unit months of carrying capacity. The minimum number of animal unit months of carrying capacity must equate to $1,500 in annual gross income as determined by the Montana State University-Bozeman’s Department of Agricultural Economics and Economics, with cattle as the base. Based on the evidence presented, the Montana Tax Appeal Board found that the taxpayer’s land lacked sufficient carrying capacity to be classified as grazing land. Therefore, the taxpayer’s parcel was properly classified as nonagricultural property. (Gaunter v. The Department of Revenue Of The State of Montana, Montana Tax Appeal Board, Dkt. No. PT-2013-20, 05/01/2014.)

Montana — Real Property — Adjusted purchase price model for commercial property upheld.
The Montana Tax Appeal Board upheld the decision of the Yellowstone County Tax Appeal Board relating to the valuation of the taxpayer’s commercial property for the tax year 2013. The taxpayer’s property includes a 24,075 square foot historical brick building that was operating as an antique mall when purchased in 2007. Since that time, however, the taxpayer has been unable to find tenants to rent space in the building, and have found numerous flaws with the building making it difficult to update and to rent. The taxpayer argued that based on an income approach, the value of the property should be zero. The Montana Tax Appeal Board noted that under the income method of valuation, potential income must be calculated even if the property is vacant, using typical income and vacancy rates. The Board also noted that the Department of Revenue used market indicators, rather than income indicators, resulting in a lower valuation than if the income approach had been used. The Board found that the valuation of the taxpayer’s property using an adjusted purchase price model was reasonable and affirmed the Yellowstone County Tax Appeal Board’s decision. McCrone v. The Department of Revenue Of The State of Montana, Montana Tax Appeal Board ( Dkt. No. PT-2013-16, 05/01/2014.)

Nebraska — Sales And Use Tax — Farmer-owned cooperative entitled to machinery and equipment exemption.
The Lancaster County District Court held that a farmer-owned cooperative was entitled to a manufacturing machinery and equipment sales tax exemption. The taxpayer, a farmer-owned cooperative, appealed the Department of Revenue’s assessment of sales and use taxes regarding manufacturing machinery and equipment, tire disposal fees, and computer software certification expenses. The District Court held that the taxpayer’s purchases did in fact qualify for the manufacturing machinery and equipment exemption because the taxpayer was engaged in the business of manufacturing and did derive at least some gain, benefit, or advantage from those activities. The Court also held that a tire disposal charge, when associated with the sale of taxable tangible personal property, is properly subject to sales and use taxes. The taxable sales price of an item includes the tangible personal property plus any service costs or expenses of the seller. Finally, the court held that computer software training and certification services purchased by the taxpayer were subject to use tax. The court found these expenses were taxable whenever paid to the retailer of the software. (Farmers Cooperative v. Department of Revenue, District Court, 3rd Dist. (Nebraska), Dkt. No. Cl 13-2325, 03/04/2014 .)

New York — Sales Tax Rates — Quarterly cents-per-gallon tax on certain fuel sales.
The New York Department of Taxation and Finance has issued a notice regarding the sales tax rates on motor fuel and diesel motor fuel for the quarter beginning June 1, 2014. The Commissioner has established the required average price applicable for this quarter, and, as a result, no adjustment is to be made to the state or local cents-per-gallon tax rate or the MCTD cents-per-gallon rate for qualified fuel for this sales tax quarter. ( New York Special Tax Department Notice N-14-5, 05/01/2014 .)

New York — Real Property — Assessment upheld.
The taxpayer did not rebut the presumption of validity that attached to the tax assessment of its real property. The taxpayer, the board of managers of a residential condominium complex, failed to provide the factual and statistical information needed to substantiate its claims. The taxpayer’s appraiser did not support its proposed capitalization rate with objective data necessary to substantiate the component calculations. As a result of this deficiency in proof, the Board did not rebut the presumption that the town’s tax assessment was valid. (Matter of Board of Mgrs. of French Oaks Condominium v. Town of Amherst, N.Y. Ct. App., Dkt. No. 66, 05/01/2014.)

New York — Sales And Use Tax — Method for estimating tax upheld.
The Division’s methodology used for calculating estimated taxes due for the taxpayer’s restaurant was upheld. The taxpayer failed to provide the Division with requested records sufficient to verify all of its transactions. The documents provided to the Division were incomplete purchase invoices, incomplete bank statements, copies of the taxpayer’s lease and copies of utility bills. The taxpayer admitted that no register rolls were maintained and, thus, no records reflecting individual sales were kept during the audit period. As such, the Division was entitled to estimate the tax due. The auditor testified that a utility factor was used since she had a copy of the store lease and all utility bills and explained how she arrived at the additional amount of sales tax due. The taxpayer did not submit any evidence to demonstrate that the method of estimating tax using the utility bills was either unreasonable or erroneous in any way. Therefore, the amount of additional sales tax assessed by the Division is sustained. (In the Matter of the Petition of Jung Sung Corporation d/b/a Pranzo, NYS Division of Tax Appeals, ALJ, 824952, 04/24/2014.)

New York — Sales And Use Tax — Quarterly cents-per-gallon tax on certain fuel sales.
The New York Department of Taxation and Finance has issued a notice regarding the sales tax rates on motor fuel and diesel motor fuel for the quarter beginning June 1, 2014. The Commissioner has established the required average price applicable for this quarter, and, as a result, no adjustment is to be made to the state or local cents-per-gallon tax rate or the MCTD cents-per-gallon rate for qualified fuel for this sales tax quarter. ( New York Special Tax Department Notice N-14-5, 05/01/2014 .)

Ohio — Real Property — Breach of contract—clawback option authorized
The Ohio Court of Appeals granted summary judgment in favor of the City of Westlake, holding that the agreement between the parties required VSM to continue its operations for a specific duration of time and that the cessation of VSM’s operations prior to the expiration of the time period entitled Westlake to invoke the clawback provision of the agreement. Westlake had filed a complaint for money damages against VWS for breach of contract arising from a community reinvestment area agreement (CRA Agreement). The CRA Agreement allowed for the construction of a facility in Westlake’s community reinvestment area to be leased by VWS, set forth VSM’s hiring schedule and expected payroll increases, provided for Westlake’s rights in the event of a material breach including a “clawback provision,” and provided for various tax incentives including a 15-year tax exemption period. VSM operated the facility from 1999 until 2008 or 2009, meeting the income payroll tax level and receiving a real property tax abatement, but subsequently closed the facility and moved its headquarters out of Ohio, prompting the breach of contract claim seeking recovery of exempted taxes and annual unpaid fees. The court noted that the CRA Agreement included Westlake’s understanding that VSM would create and preserve employment opportunities in the community reinvestment area in exchange for Westlake’s promise to provide the 15-year tax-exemption period thereby expressing an intent by both parties to perform for 15 years under the CRA Agreement. As VSM was obligated to perform for the entire term of the agreement, and failed to fulfill its contractual obligations through the entire term of the agreement, Westlake was entitled to exercise the clawback option and to recover exempted taxes and annual unpaid fees. (City of Westlake v. VWS, Inc., et al., Ohio Ct. App., Dkt. No. 100180, 05/01/2014.)

Oklahoma — Sales And Use Tax — Local rate change announced.
Effective July 1, 2014, the city of Jennings, Oklahoma, increases its sales tax rate from 3% to 4%. Other local sales and use tax rate changes taking effect on July 1 were previously reported. (Oklahoma Tax Commission Press Release, 05/01/2014.)

Oklahoma — Sales And Use Tax — Local rate change announced.
Effective July 1, 2014, the city of Jennings, Oklahoma, increases its sales tax rate from 3% to 4%. Other local sales and use tax rate changes taking effect on July 1 were previously reported. (Oklahoma Tax Commission Press Release, 05/01/2014.)

Rhode Island — Sales And Use Tax — Tax Administrator’s report.
The Rhode Island Tax Administrator has released a report showing the total sales of alcoholic beverages, sales tax collections, and excise tax collections, by county, involving Class A licensees in Rhode Island for the preceding calendar year. Statutory law mandates the Tax Administrator to annually release such report on or before May 1. (Tax Administrator’s Report: Sales and Taxation of Alcoholic Beverages in Rhode Island, R.I. Div. of Taxation, 05/01/2014.)

South Carolina — Sales And Use Tax — Updated forms for local and accommodations taxes.
The Department of Revenue has updated two of its forms related to local taxes. It has issued a new ST-389 (Schedule for Local Taxes) that is to be attached to Forms ST-3, ST-388, ST-403, and ST-455 when filed The new form is for use May 1, 2014 and after. It has also updated Form ST-575, which lists by municipality the sales tax rate on accommodations, effective May 1, 2014. (South Carolina Sales Tax Rate on Accommodations by Municipality, S.C. Dept. of Rev., 04/02/2014.)

Tennessee — Cigarettes, Tobacco and Miscellaneous Tax Rates — Assessment on nursing homes extended.
L. 2014, H1783 (c. 859), effective 07/01/2014, extends for one year the nursing home annual assessment fee. The legislation also provides that the assessment will be 4.5% of the nursing home’s net patient service revenue rather than an annual assessment of $2,225 per licensed bed. The change in the rates is contingent upon the Bureau of TennCare receiving the necessary federal approval to make the change. If federal approval is not received, the per bed tax will remain in place.

Tennessee — Cigarette, Alcohol & Miscellaneous Taxes — Assessment on nursing homes extended.
L. 2014, H1783 (c. 859), effective 07/01/2014, extends for one year the nursing home annual assessment fee. The legislation also provides that the assessment will be 4.5% of the nursing home’s net patient service revenue rather than an annual assessment of $2,225 per licensed bed. The change in the rates is contingent upon the Bureau of TennCare receiving the necessary federal approval to make the change. If federal approval is not received, the per bed tax will remain in place.

Tennessee — Real Property — Payment of claims.
L. 2014, H2503 (c. 860), effective for claims for the 2014 tax year and thereafter, provides that if the Comptroller determines that annual appropriations are insufficient to permit full payment of claims reflecting the income and value standards for property tax refund claims, the Comptroller must calculate and apply a factor to uniformly adjust individual payments to permit all timely claims to be paid within the limits of the appropriation.

Wisconsin — Corporate Income Tax — Wisconsin publication on nonresident entertainers updated.
The Wisconsin Department of Revenue has updated its publication dealing with the tax responsibilities of nonresident entertainers. The revised publication provides that, effective for taxable years beginning on or after January 1, 2014, the threshold total contract price that subjects a nonresident entertainer to the requirement to file a surety bond or make a cash deposit increased to $7,000 from $3,200, and that the total contract price does not include travel expenses. The publication notes that the Department encourages cash deposits and withholding payments to be made electronically through its website at revenue.wi.gov: Go to “Online Services” and click on “Nonresident Entertainer’s Report” under the heading “Businesses.” In order to make a payment, a nonresident entertainer must have an account with the Department. The entertainer must contact the Department at (608) 266-2772 to set up an account. ( Wisconsin Dept. Rev. Tax Publication 508, 04/01/2014 .)

Wisconsin — Corporate Income Tax — Wisconsin withholding publication—nonresident entertainers.
The Wisconsin Department of Revenue has added a notice to its withholding publication to alert taxpayers that a new law has changed the requirement to withhold from a nonresident entertainer. Effective for taxable years beginning on or after January 1, 2014, 2013 Wisconsin Act 349 make the following changes to the requirement to withhold from a nonresident entertainer found on page 8 of Tax Publication W-166: (1) the threshold amount of payment subject to withholding increased to $7,000 from $3,200; and (2) the portion of a payment to a nonresident entertainer for travel expenses is not subject to withholding. Travel expenses are payments to, or on behalf of, an entertainer that are: (1) made under an accountable plan; and (2) for actual transportation, lodging, and meals that are directly related to the performance. (Wisconsin Dept. Rev. Tax Publication W-166, 04/01/2014 .)

Wisconsin — Personal Income Tax — Publication on nonresident entertainers updated.
The Wisconsin Department of Revenue has updated its publication dealing with the tax responsibilities of nonresident entertainers. The revised publication provides that, effective for taxable years beginning on or after January 1, 2014, the threshold total contract price that subjects a nonresident entertainer to the requirement to file a surety bond or make a cash deposit increased to $7,000 from $3,200, and that the total contract price does not include travel expenses. The publication notes that the Department encourages cash deposits and withholding payments to be made electronically through its website at revenue.wi.gov: Go to “Online Services” and click on “Nonresident Entertainer’s Report” under the heading “Businesses.” In order to make a payment, a nonresident entertainer must have an account with the Department. The entertainer must contact the Department at (608) 266-2772 to set up an account. ( Wisconsin Dept. Rev. Tax Publication 508, 04/01/2014 .)

Wisconsin — Personal Income Tax — Withholding publication—nonresident entertainers.
The Wisconsin Department of Revenue has added a notice to its withholding publication to alert taxpayers that a new law has changed the requirement to withhold from a nonresident entertainer. Effective for taxable years beginning on or after January 1, 2014, 2013 Wisconsin Act 349 make the following changes to the requirement to withhold from a nonresident entertainer found on page 8 of Tax Publication W-166: (1) the threshold amount of payment subject to withholding increased to $7,000 from $3,200; and (2) the portion of a payment to a nonresident entertainer for travel expenses is not subject to withholding. Travel expenses are payments to, or on behalf of, an entertainer that are: (1) made under an accountable plan; and (2) for actual transportation, lodging, and meals that are directly related to the performance. ( Wisconsin Dept. Rev. Tax Publication W-166, 04/01/2014 .)

 

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