The Treasury Department has released its long-awaited model agreements for intergovernmental information sharing under the Foreign Account Tax Compliance Act (FATCA). There is a reciprocal model agreement for countries with which the U.S. has in effect a tax treaty or tax information exchange act, and a largely identical nonreciprocal model agreement. Among other things, the agreements clarify the responsibilities of financial institutions in reviewing and reporting accounts based on the identity of the account holder and the balance or value of the account. They also suspend certain requirements relating to recalcitrant account holders.
IRS updates procedures for payment of tax by reporting agents
IRS has updated the procedures for how reporting agents remit taxes to IRS on behalf of clients to clarify that these Agents must use the Electronic Federal Tax Payment System (EFTPS) or Federal Tax Application (FTA). A companion update relates to EFTPS usage by Batch Providers and Bulk Providers.
Ruling explains limits for contributions to two multiemployer plans for same employees
A private letter ruling explains how (1) the limit on annual additions to a participant’s defined contribution account, and (2) the limit on an employer’s deduction for contributions to a defined contribution plan, apply in the case of contributions made to two different multiemployer plans by the same employer for the same employees.
In Brief-Federal Tax Updates Arranged by Code Section
Code Section 61—Gross income—capital vs. ordinary income—what constitutes capital asset—trade secrets—False Claims Act—qui tam relator awards.
District court properly determined that FCA qui tam relator award that former hospital CFO received in connection with Medicare fraud case, and portions of which he transferred to family through partnership, were taxable as ordinary income, not capital gain as taxpayers claimed. Argument that CFO completed sale or exchange of capital asset when he provided govt. information and know-how in connection with underlying suit was belied by fact that he didn’t merely exchange or sell his information in exchange for money/award. And in any event, that information didn’t qualify as capital asset under Code Sec. 1221 since it wasn’t CFO’s property, but rather was something he obtained through discovery, was known by other corp. officials, and wasn’t under CFO’s exclusive control. And award itself also didn’t qualify as capital asset since CFO didn’t receive same for any underlying capital investment; moreover, any increase in its value wasn’t sort of accretion in value that characterizes capital gain. Similarly, any such increase in value didn’t qualify for capital gain treatment under Code Sec. 1234A.
Code Section 162—Business deductions—business vs. personal expenses—transportation—travel from home to work—commuting—home office, regular work, and temporary distant worksite exceptions.
Pro se taxpayers/construction worker and wife were denied deductions above amount IRS allowed for auto expenses involving travel between husband’s residence and various worksites: expenses all came under general nondeductible personal expense rule for commuting costs. Commuting expenses weren’t allowed under home office exception where evidence didn’t suggest that husband maintained home office at his home; “regular work” location exception was unavailable since record indicated that only locations at which he worked during year at issue were temporary worksites and showed no other, regular work locations; and temporary distant worksite exception was unavailable because worksites at issue, although away from his home, were within normal distance/areas where he normally worked. Also, fact that husband was permitted to claim commuting expense deductions in prior year wasn’t binding on IRS as to current year.
Code Section 170—Charitable contribution deductions—conservation easements—substantiation—contemporaneous written acknowledgment.
Contributions of conservation easements that taxpayers made through their LLC on land it owned to wetlands trust were properly substantiated with contemporaneous written acknowledgment pursuant to Code Sec. 170(f)(8) . Argument that trust’s letters stating that it provided taxpayer members’ sons with pens and pendants in recognition of taxpayer members’ gifts met statute’s and Rev Proc 90-12, 1990-1 CB 471 ‘s substantiation requirements failed where such statements were inaccurate and sons never received those items; and even if they had, letters failed to inform taxpayer members how much of each payment was deductible contribution. However, conservation deed did constitute acknowledgment as it was signed by trust’s representative, provided detailed description of property and easement and was contemporaneous with donation. IRS’s suggestion that deed failed Code Sec. 170(f)(8)(B)(iii) since it didn’t include description and good faith estimate of “other good and valuable consideration” was rejected as deed stated that easement was unconditional gift and that deed constituted entire agreement between parties regarding contribution.
Code Section 1001—Capital gains—stock sales—basis allocation—ins. cos.; demutualization—open transaction doctrine—refunds—summary judgment.
Govt. and married taxpayers who purchased life ins. policies through trust were denied summary judgment in suit for refund alleging that they realized no income in connection with stock sale effected years after they elected to receive stock under mutual life ins. cos.’ demutualization plan: although taxpayers established their basis in mutual rights by proving that they paid premiums for policies that included policy rights and mutual rights, they failed to show that allocating basis between mutual rights and stock was so difficult that this case required application of open transaction doctrine. Despite disagreement as to what taxpayers may have paid for their mutual rights, there was no question that at time of demutualization, both stock’s value and market value of policy itself could be calculated; and applying doctrine would be inequitable here as it would permit taxpayers to realize untaxed gain of significant sum that postdated demutualization, and to avoid taxation entirely if they held their ins. policy until their death. So, basis in life ins. policies would be equitably apportioned under Reg. § 1.61-6(a) .
Code Section 6011—Return requirements—authorization of agent.
IRS provided requirements for completing and submitting Form 8655, Reporting Agent Authorization. Taxpayers may designate reporting agent to sign and electronically file Forms 940, 941 and other specified forms via Electronic Federal Tax Payment System or Federal Tax Application; sign and file specified other paper forms; make federal tax deposits (FTDs) and other federal tax payments (FTPs) and electronically submit FTD and FTP information; and receive duplicate copies of official notices, correspondence, deposit requirements, transcripts, or other information with respect to FTDs and FTPs. Rev Proc 2007-38, 2007-1 CB 1442 is modified and superseded.
Code Section 6302—Mode or time of collection—electronic fund transfer system.
IRS provided information about Electronic Federal Tax Payment System (EFTPS) programs for Batch Filers and Bulk Filers, and mandatory procedures to be followed by providers to participate. EFTPS is electronic remittance processing system for making federal tax deposits (FTDs) and federal tax payments (FTPs). Batch Filer and Bulk Filer programs are used by filers for electronically submitting enrollments, FTDs, and FTPs on behalf of multiple taxpayers.
Code Section 6320—Collection due process—review of administrative determination—notice of federal tax lien—equitable estoppel.
IRS’s administrative determination to proceed with lien filing for married taxpayers’ unpaid tax liabilities while their audit was open was upheld: IRS wasn’t estopped from filing NFTL where taxpayers’ own testimony showed that IRS agent and appeals officer “made mistake” and filed lien inaccurately due to “information given by these people”; and taxpayers offered no evidence of affirmative misconduct on part of IRS. Also, settlement officer verified that all applicable administrative or legal requirements were met and that lien balanced IRS’s efficient collection needs with taxpayers’ intrusiveness concerns.
Code Section 6330—Collection due process—review of administrative determination—prior opportunity to dispute underlying liabilities—effect of stipulated decisions—accuracy-related penalties.
IRS properly determined that closely owned corp. wasn’t entitled during CDP proceedings to dispute its underlying liabilities for accuracy-related penalties that were established in stipulated decision in earlier deficiency case: earlier case clearly gave taxpayer prior opportunity to dispute subject liabilities within meaning of Code Sec. 6330 . Argument that taxpayer didn’t know and couldn’t have known amounts that would be assessed because prior case was so old was rejected. (A-Valey Engineers, Inc. v. Commissioner, (2012) TC Memo 2012-199 , 2012 RIA TC Memo ¶2012-199 )
Code Section 6330—Collection due process—review of administrative determination—offer-in-compromise—computations.
IRS’s administrative determination to proceed with collection against closely owed corp., and reject 2 OICs it submitted over course of what were multiple/remanded CDP hearings, was upheld. Although IRS didn’t consider 2d OIC at initial hearing, it ultimately and promptly did so at subsequent hearing and made decisions thereon within requisite 24-month period. Further, IRS was within its discretion both in requesting additional information from taxpayer after receiving indications that taxpayer had significant outstanding loans to shareholders and in ultimately rejecting OICs when taxpayer failed to provide that requested information. Arguments that 2d OIC was deemed accepted because not rejected in 12 months or that IRS acted maliciously by relying on incorrect returns in evaluating and rejecting OICs were belied by above. (A-Valey Engineers, Inc. v. Commissioner, (2012) TC Memo 2012-199 , 2012 RIA TC Memo ¶2012-199 )
Code Section 6404—Interest abatement—error or delay—collection due process—evidence.
IRS’s CDP-related decision to deny closely owned corp.’s interest abatement request wasn’t abuse of discretion: record indicated that any delays in earlier proceedings were caused by taxpayer itself and not any minsiterial or managerial error on part of IRS. Although taxpayer alleged number of illegal delay-causing activities by IRS, there was no evidence of same.
Code Section 6511—Limitations periods on refunds and credits—suspension and tolling—financial disability; physical impairment—incarcerated taxpayers.
These issues weren’t discussed on appeal.
Code Section 6702—Actions against U.S. and IRS employees—frivolous returns penalties; wrongful assessment or collection; refunds; constitutional claims—sovereign immunity.
District court properly dismissed suit incarcerated taxpayer filed against IRS agents contesting Code Sec. 6702 penalty assessment: IRS agents couldn’t be sued for tax-related harms in their individual capacities. Or to extent taxpayer was seeking to sue govt. itself for damages under Code Sec. 7433 , suit still failed because Code Sec. 7433 ‘s sovereign immunity waiver extended only to collection claims, not those contesting underlying assessments. Also, court properly made dismissal without leave to amend since amendment would have been futile.
Code Section 7602—Summons enforcement—procedure.
Magistrate judge recommended enforcing IRS summons on taxpayer: govt. established prima facie enforcement case via IRS agent’s declaration that summons was issued pursuant to investigation into taxpayer’s liabilities, that summoned information was relevant to same and wasn’t already in IRS’s possession, that all administrative steps were followed, and that no Justice Dept. referral was in effect; and taxpayer didn’t answer or rebut govt.’s case.
Code Section 7602—Summons enforcement—procedure.
Magistrate judge’s unopposed recommendation to enforce IRS summons on pro se taxpayer was adopted. (U.S. v. Thompson, DC MO, 110 AFTR 2d ¶2012-5062 )
Judicial proceedings—Damage actions against Treas. Dept. and IRS—civil rights; constitutional claims; fraud—res judicata—failure to state claim for relief.
Taxpayer’s repeat suit against Treas. Dept., IRS, and Drug Enforcement Agency, alleging decades-long pattern of collusive and fraudulent activities by govt. that included confiscation of millions during raids on taxpayer’s homes and improper application of portion of same to tax accounts, was dismissed: suit was barred by res judicata where, although adding some new allegations, was based on same core issues as raised, litigated and decided in final decision on merits in earlier case with same parties. Or, even if not barred by res judicata, suit would fail since taxpayer was basing same largely on 42 USCS 1983 or Bivens, yet neither of those authorities provided for suit against federal agencies. And to extent relying on criminal statutes, suit still failed since enforcement of those statutes was vested in Justice Dept., not private persons. (Murray v. Dept. of Treas., et al., DC MI, 110 AFTR 2d ¶2012-5063 )
Judicial proceedings—Tax crimes—conspiracy to defraud U.S.—U.S. Sentencing Guidelines.
Sentence imposed on taxpayer pursuant to his guilty plea to conspiring to defraud U.S. by filing false returns was affirmed: sentence, which was both below applicable U.S.S.G range and less than 1/2 of maximum term allowable, was reasonable. And district court was within its discretion in rejecting taxpayer’s request for greater variance after considering his arguments about criminal history and immigration status.
State & Local Tax Updates
Georgetown Advanced State and Local Tax Institute to Be Held August 6 and 7, 2012
Georgetown Law CLE will hold its 2012 Advanced State and Local Tax Institute on August 6 and 7, 2012 at the Georgetown University Law Center, located at 600 New Jersey Avenue NW, Washington, D.C. Sessions include discussions of current developments in income and sales and use taxes as well as current trends in apportionment, tax issues related to cloud computing, and net operating losses. In addition, the latest trends on Section 18, intangible property taxes, administrative appeals, combined reporting, and indirect tax compliance will be reviewed.
Arkansas — Sales And Use Tax — Revised taxability matrix.
Arkansas has filed a revised taxability matrix with the Streamlined Sales Tax Governing Board. The revised matrix adds a section regarding tribal taxes, which provides that state and local sales taxes that are imposed on a seller are included in the sales price if the statute authorizing or imposing the tax provides that the seller may, but is not required, to collect the sales tax from the consumer; and provided the tax is separately stated on the invoice, bill or sales or similar document given to the purchaser. Tribal sales taxes imposed on the seller are also included in the sales price if the tribal law authorizing or imposing the sales tax provides that the seller may, but is not required, to collect the sales tax from the consumer. The change reflects amendments made to the Streamlined Sales and Use Tax Agreement (SSUTA) through December 31, 2011. The state has also filed a Certificate of Compliance and Recertification Letter for 2012. ( Streamlined Sales Tax Governing Board Section 328 Taxability Matrix, 07/25/2012 ; Certificate of Compliance-State of Arkansas, 07/25/2012 ; Arkansas Re-Certification Letter, 07/25/2012 .)
Colorado — Corporate Income Tax — Withholding coupon booklets no longer mailed.
The Colorado Department of Revenue has announced that it will no longer mail wage withholding coupon booklets to any withholding tax account holder and it will not mail 2013 wage withholding coupon booklets. Coupon booklets are normally mailed in January and February and the Department will not issue duplicate or replacement booklets if they are requested. Wage withholding tax can be filed and paid by electronic funds transfer without the need for coupon booklets. Withholding account holders are urged to sign up for account access on Revenue Online. Each new wage withholding tax license sent to businesses contain a letter ID number that can be used to sign up for Revenue Online login ID and password access to the tax account. ( State Withholding Coupon Booklets No Longer Mailed, Colorado Department of Revenue TaxInfo Blog, 07/26/2012 .)
Colorado — Personal Income Tax — Withholding coupon booklets no longer mailed.
The Colorado Department of Revenue has announced that it will no longer mail wage withholding coupon booklets to any withholding tax account holder and it will not mail 2013 wage withholding coupon booklets. Coupon booklets are normally mailed in January and February and the Department will not issue duplicate or replacement booklets if they are requested. Wage withholding tax can be filed and paid by electronic funds transfer without the need for coupon booklets. Withholding account holders are urged to sign up for account access on Revenue Online. Each new wage withholding tax license sent to businesses contain a letter ID number that can be used to sign up for Revenue Online login ID and password access to the tax account. ( State Withholding Coupon Booklets No Longer Mailed, Colorado Department of Revenue TaxInfo Blog, 07/26/2012 .)
Colorado — Property — Nonresidential classification affirmed.
The Colorado Court of Appeals upheld the nonresidential classification on the taxpayer’s property because there was insufficient evidence to support the taxpayer’s claims of actual residential use. In 2007, the taxpayer purchased the subject property, a 40-acre parcel containing five buildings built for commercial purposes, and which had been classified as a commercial warehouse property since at least 1996. The taxpayer allowed a caretaker to live in one of the buildings, which had previously been used as an incubator building for an ostrich farm. Residential use is a permitted non-conforming use under the mixed use zoning for the property and the taxpayer sought an abatement or refund claiming residential classification and valuation for the 2008 and 2009 tax years. The Board of County Commissioners denied the petition, which was upheld by the Board of Assessment Appeals (BAA). The court found no error in the BAA’s ruling continuing a commercial classification. Classification is based on use and characteristics of the property as of January 1 of the tax year (the assessment date) and the property remains classified until the actual use changes or the assessor discovers the classification is erroneous in which case the classification is adjusted for the next assessment date. For property to be classified as residential for a particular tax year, Colorado requires use of a residential improvement, which means a building, or a portion of such building, designed for use predominantly as a place of residency by a person, family, or families. Current actual use is just one factor in determining property classification; “designed for use” reflects the original architectural design and intended purpose of the building. Here, the incubator building was built and designed for commercial use and while the caretaker slept on the property during the subject period, it was only temporary occupancy and episodic residential use, the residential lease signed between the caretaker and the taxpayer was not signed until well after the relevant tax years, and only intermittent trash service and portable toilet service was provided to the property. Further, water and power were provided to the property under commercial accounts. (Club Deal 127 Merk Grand Junction v. Mesa Cty. Bd. of Assessment App., et al., Colo. Ct. App., No. 11CA1404, 07/19/2012 (not for publication).)
District of Columbia — Corporate Income Tax — Pending legislation—income tax abatement.
The Mayor has signed the “Social E-Commerce Job Creation Tax Incentive Act of 2012,” which will be sent to Congress for review. This legislation will abate the corporate income tax imposed on a Qualified High Technology Company (QHTC) with respect to taxable income earned by a Qualified Social E-Commerce Company (see “Property,” below) up to the amount of the resident employment credit for five years commencing on the date that the Qualified Social E-Commerce Company occupies qualified real property (see “Property,” below), or until the resident employment credit is exhausted or forfeited, or through fiscal year 2025, whichever occurs earlier. “Resident employment credit” means an amount ranging from $9 million to $17.5 million, if a Qualified Social E-Commerce Company (Company) maintains the proportion of newly hired employees as residents at or above specified levels during each 1-year period, beginning October 1, 2014, through September 30, 2015, and continuing each year through to the end of the abatement period. An abatement will only be granted if: (1) the Company continues for the duration of the abatement period to: (a) be a Qualified Social E-Commerce Company, and (b) hires at least 50 new hires annually in the District during each year of the abatement period, and certifies the new hires to the Department of Employment Services; (2) the Company employs at least 1,000 persons in the District during the period commencing on October 1, 2015, through the end of the abatement period, and certifies the employment to the Department of Employment Services; (3) within 180 days of the effective date of these provisions, the Mayor certifies that the Company has entered into a Business Activity Strategy agreement; (4) if the qualified real property is leased to the Company, the lease is for a period of at least 10 years and the property owner passes the abatement through to the Company; (5) the Company continues to occupy a qualified real property from its initial occupancy of the qualified real property throughout the duration of the abatement period; (6) if the Company owns the qualified real property, the qualified real property is not during the abatement period: (a) sold, transferred, exchanged, or otherwise conveyed, or (b) leased to an unrelated entity in excess of 50% of the gross floor area, unless the Company maintains occupancy of at least 200,000 square feet of gross floor area; (7) if the Company leases qualified real property, the lease is not during the abatement period: (a) assigned to a third party, other than to a related entity, or (b) subleased to an unrelated entity in excess of 50% of the gross floor area, unless the Company maintains occupancy of at least 200,000 square feet of gross floor area; and (8) the Company has not filed a petition in bankruptcy in connection with the Qualified Social E-Commerce Company’s business. A Company that utilizes or benefits from any of the following tax abatements, exemptions, or waivers during the abatement period is not eligible for the corporate income tax or real property (see “Property,” below) abatements, and utilizing or benefiting from these abatements will disqualify a Company from eligibility for such tax abatements, exemptions, or waivers: (1) the real property tax abatement for certain commercial properties in D.C. Code Ann. § 47-811.03 ; (2) earning and allowance of wage tax credits under D.C. Code Ann. § 47-1817.03 against the tax imposed on Qualified High Technology Companies during calendar years 2010 through 2015 (unless the credit amount exceeds $15 million, in which case the excess over $15 million may be allowed as a credit); (3) the waiver of corporate income tax on a QHTC for five years from the date of commencing business under D.C. Code Ann. § 47-1817.06(a)(2)(C) . (L. 2012, Act 19-398, effective after a 30-day period of Congressional review and publication in the D.C. Register.)
District of Columbia — Personal Income Tax — State and municipal bond interest.
L. 2012, Act 19-406, effective 07/24/2012 (expires 10/22/2012), enacts the “Fiscal Year 2012 Second Revised Budget Request Congressional Review Emergency Adjustment Act of 2012.” The emergency legislation keeps in effect a statutory amendment delaying the requirement that individuals, estates, and trusts include in the computation of District gross income any interest on the obligations of a state, territory of the United States, or any political subdivision thereof (but not including the District). The amendment provides that taxpayers must begin including bond interest in gross income if such bonds are acquired by the taxpayer on or after January 1, 2013.
District of Columbia — Property — Carver 2000 Housing Project exemption.
L. 2012, Act 19-407, effective 07/24/2012 (expires 10/22/2012), enacts the “Carver 2000 Low-Income and Senior Housing Project Congressional Review Emergency Act of 2012.” This emergency legislation keeps in effect a statutory amendment extending the exemption of the Carver 2000 Low-Income and Senior Housing Project for various lots, subject to available funding. The real property tax exemption will apply to Lots 806, 807, and 808 in Square 5190 and to Lots 1, 2, 3, 4, 5, 6. 7, and 8 in Square 5348 for 16 (currently, 8) consecutive real property tax years, beginning with tax year 2003.
District of Columbia — Property — Pending legislation—real property tax abatement.
The Mayor has signed the “Social E-Commerce Job Creation Tax Incentive Act of 2012,” which will be sent to Congress for review. This legislation will abate the real property taxes on qualified real property up to the amount of the new hire wage credit, beginning in fiscal year 2016 and continuing until the new hire wage credit is exhausted or forfeited, or through fiscal year 2025, whichever occurs earlier. No person can claim an abatement before October 1, 2015, and unless that person occupies qualified real property before April 1, 2017. “New hire wage credit” means a credit equal to 10% of the wages paid during the first 24 calendar months of employment to a newly hired employee hired after December 31, 2009, and before January 1, 2016, accrued annually up to $5,000 per new hire per tax year, up to the $15 million new hire wage credit cap. “Qualified real property” means real property located in the District on which a commercial office building totaling no less than 200,000 square feet is constructed, or substantially rehabilitated, and equipped after June 1, 2012, and which is owned or leased by a Qualified Social E-Commerce Company for use as a primary corporate headquarters. “Qualified Social E-Commerce Company” means a company that: (1) is a Qualified High Technology Company; (2) is engaged primarily in the business of marketing or the promoting of retail or service businesses by delivering or providing members or users with access to discounts or other commerce-based benefits; and (3) hired at least 850 persons to work in the District of Columbia after December 31, 2009, and before January 1, 2012. The abatement is subject to the same conditions and exceptions as the corporate income (franchise) tax credit (see “Income—Corporate,” above.) (L. 2012, Act 19-398, effective after a 30-day period of Congressional review and publication in the D.C. Register.)
Indiana — Sales And Use Tax — Mandatory gratuity charges.
A riverboat casino operator was not subject to sales tax on mandatory gratuity charges on its catering services. Ind. Code § 6-2.5-4-1(g) provides that gross retail income does not include income that represents charges for serving or delivering food and food ingredients furnished, prepared, or served for consumption at a location, or on equipment, provided by the retail merchant. However, the exclusion under this subsection only applies if the charges for the serving or delivery are stated separately from the price of the food and food ingredients when the purchaser pays the charges. In this instance, the taxpayer presented documentation, including customer contracts, employee compensation records, and gratuity distribution records which showed the mandatory gratuity as a separately stated item on the bill to the customer and the gratuities were entirely distributed to the employees and were not, in any part, retained by taxpayer. Therefore, the mandatory gratuities qualify as “charges for the serving of food” that are excluded from sales tax. ( Indiana Dept of State Rev. Letter of Finding 04-20110617, 07/01/2012 .)
Indiana — Sales And Use Tax — Resale exemption—gift certificates.
A taxpayer was entitled to the resale exemption on purchases of gift certificates from its corporate office. A Department audit resulted in the imposition of use tax on the gift certificate purchases; the gift certificates were purchased from the corporate office at the stated amount on the certificate and sold to the end consumer at the stated amount with no mark-up. The taxpayer provided documentation supporting its position that the purchases were subject to the resale exemption under Ind. Code § 6-2.5-5-8(b) and noted that sales tax was paid by the corporate office for the materials used to manufacture the gift certificates, meeting its burden of proving that the assessment of use tax on its purchases of gift certificates was incorrect. ( Indiana Dept of State Rev. Letter of Finding 04-20110623, 07/01/2012 .)
Indiana — Sales And Use Tax — Petroleum products distributor entitled to public transportation exemption.
A petroleum products distributor was entitled to the public transportation exemption for property purchased for two of its semi trailers that were predominantly used to transport fuel that it did not own. The public transportation exemption under Ind. Code § 6-2.5-5-27 applies to tangible personal property for predominant use in providing public transportation for third parties for which consideration is received; if a taxpayer is not predominantly engaged in transporting the property of another, it is not entitled to the exemption. The taxpayer purchases motor fuel, diesel fuel, heating oil, and lubricants, as well as, sells gasoline equipment. Although the semi trailers were used to transport the taxpayer’s own fuel to its bulk storage facilities part of the time, a majority of the time the semi trailers transported fuel that the taxpayer did not own. Transportation customers were charged a fee based upon the weight of the haul and number of miles the haul is driven. Documentation reflected that over 60% of the mileage for the two semi trailers resulted from transporting property owned by another for which taxpayer was compensated. Tangible personal property is predominantly used in public transportation if more than 50% of its use is attributable to transporting people or property for hire.
Massachusetts — Corporate Income Tax — Life sciences tax incentive program applications.
The Massachusetts Life Sciences Center announced on July 23, 2012 that applications are being accepted for the 2012 Life Sciences Tax Incentive Program, whose primary role is to incentivize life sciences companies to create new long-term jobs in Massachusetts. All applications are due by noon on October 25, 2012 and can be submitted online via the Center’s website. The Program offers tax incentives to companies engaged in life sciences research and development, commercialization, and manufacturing in Massachusetts. The life sciences initiative authorizes the Center to award up to $25 million in tax incentives each year. To qualify, companies must receive certification from the Center and must demonstrate both the scientific and economic merit of their expansion plans.
Michigan — Property — Charitable exemption allowed.
The Michigan Court of Appeals overturned the Michigan Tax Tribunal (MTT) in concluding that the taxpayer, a Michigan nonprofit corporation that sold donated merchandise, was entitled to a property tax exemption as a charitable institution. A nonprofit must be a “charitable institution” to qualify for a property tax exemption under Mich. Comp. Laws Ann. § 211.7o(1) . Contrary to the MTT’s conclusion, the court found that the taxpayer was a charitable institution pursuant to Mich. Comp. Laws Ann. § 211.7o(1) because it did not offer its charity on a discriminatory basis. The taxpayer did not discriminate by donating all of its net profits to another Michigan nonprofit corporation that used such profits to operate parochial schools because the donee offered its services to a sufficiently broad class of beneficiaries and charged tuition at approximately the cost of its services. Furthermore, the taxpayer re-donated items to various other charities on a nondiscriminatory basis. (Second Impressions, Inc. v. City of Kalamazoo, Mich. Ct. App., Dkt. No. 304608, 07/24/2012 .)
Missouri — Sales And Use Tax — Sales by online sports and athletic merchandise retailer.
The Missouri Department of Revenue ruled that sales of certain products, such as weights, books, DVDs, boxed software, weight training benches and equipment, clothing, athletic event equipment, athletic facility equipment, athletic training equipment, and athletic event management equipment by an out-of-state online sports and athletic merchandise retailer, and shipping charges, are subject to Missouri sales tax. The retailer has a salesperson located in Missouri selling to schools and universities, which is a sufficient connection with the state to subject the retailer’s sales to sales and use tax on its sales to customers in Missouri. The retailer’s sale of boxed software is taxable because the canned software is sold on a tangible medium. The retailer’s charges for installing flooring and weight equipment are not taxable but the retailer must pay use tax on the cost of the flooring brought into Missouri because it is the end user of the installed flooring and the installation of the equipment is a nontaxable service if optional and separately stated on the invoice. The Department further ruled that the registration fees customers pay to attend the retailer’s seminars in Missouri are not subject to sales tax because registration fees for seminars are not one of the enumerated taxable services. The retailer’s sales to Missouri elementary and secondary schools, public and private universities, religious groups, political subdivisions, and resellers are exempt from sales or use tax. The Department also ruled that if the retailer drop ships an order placed by a reseller to the reseller’s customers, the sale is not taxable if the retailer has a signed resale exemption certificate from the reseller. The retailer’s sales to an out-of-state school that is shipped to a track meet or seminar in Missouri are not subject to sales tax or use tax provided the out-of-state school is exempt from a similar tax in its own state.
Nebraska — Sales And Use Tax — Taxability matrix.
The Nebraska Department of Revenue has issued an updated sales and use taxability matrix. The matrix is available in a format approved by the Governing Board of the Streamlined Sales Tax Agreement. Sellers relying on information contained in the taxability matrix are relieved from liability for tax, penalty, or interest resulting from incorrect data in the matrix. Each of the items listed in the chart is defined in the Library of Definitions in the Streamlined Sales and Use Tax Agreement as amended through December 19, 2011.
New York — Sales And Use Tax — ALJ sustains use tax assessment on boat.
An administrative law judge (ALJ) has sustained a Notice of Determination that assessed use tax for a boat that the taxpayer, a New York resident, purchased and initially moored in Florida. The taxpayer bought the boat in 2003 for $267,000 and paid approximately $16,000 in sales tax to the state of Florida. In 2007, he brought the boat into New York State and moored it in Long Island; the taxpayer did not report or remit any use tax at that time. In 2009, the Department of Taxation and Finance assessed use tax on the boat of $3,419.06 based on a fair market value of $130,250, which was determined using the 2009 National Automobile Dealers Association (NADA) guidelines. The Department multiplied that figure by the 6% Florida sale tax rate and subtracted that amount as a credit to calculate the New York use tax owed. The ALJ rejected the taxpayer’s claim that he was entitled to a credit in the amount of the full sales tax he paid to Florida in 2003, stating that there was no statute or case law that allowed the credit to be calculated in that manner. Rather, the ALJ concluded that the Department’s calculation of the amount of tax liability was proper, adding that its use of the 2009 NADA guidelines favored the taxpayer because using a later year resulted in a lower value for the boat. (In the Matter of the Petition of Philip Cimino, NYS Division of Tax Appeals, ALJ, 823748, 07/19/2012 .)
Ohio — Property — Final appealable order.
The Court of Appeals dismissed appeals of three trial court judgments that essentially vacated a decree of confirmation of a sale of real estate for nonpayment of taxes at a sheriff’s sale. The sale was confirmed by the magistrate, but after the taxpayer filed objections, the trial court vacated the decree of confirmation in July 2011 and set a hearing to determine whether the decree of confirmation should actually be vacated (the “July entry”). In August 2011, the trial court sustained the taxpayer’s objections, but indicated that if the taxpayer did not redeem his property, the purchaser would be entitled to a reinstatement of the confirmation of the sheriff’s sale (the “August entry”); in September 2011, the trial court entered a judgment determining that the July and August entries were final, appealable orders (the “September entry”). The July entry was not a final appealable order because it neither prevented a judgment for either party nor definitively vacated a judgment; the August entry was not a final appealable order because it provided contingencies so that either party could “win” depending on the other party’s future actions; and the September entry was not a final appealable order because simply stating that an order is final and appealable does not make it so. Because none of the three entries were final and appealable, the court lacked jurisdiction to hear the appeals. (Goering v. Schille, Ohio Ct. App., Case Nos. C-110525; C-110604, 07/25/2012 .)
Pennsylvania — Personal Income Tax — Domicile.
The trial court did not err in finding that a taxpayer who maintained homes in Pennsylvania and Florida, but since 1998 has spent the majority of his time in Florida, was registered to vote in Florida, had his vehicles registered in Florida, maintained Florida bank accounts, had a Florida driver’s license, and used his Florida address on all tax filings, was domiciled in Florida prior to 2000 and therefore not liable for local income taxes in Pennsylvania. The Local Tax Enabling Act ( Pa. Stat. Ann. 53 § 6924.501 defines “domicile” as the place were a person has a permanent home and to which the person has the intention of returning whenever absent. The Tax Bureau argued that the taxpayer was not domiciled in Florida as he returned each year to Pennsylvania, however, the evidence showed that the taxpayer and his wife spent only a few weeks several times a year in Pennsylvania, and that Florida was the place to which they returned after each absence. The Bureau then argued that the evidence submitted was not sufficient to support a claim of Florida domicile where the taxpayer filed Pennsylvania returns for 2001 and 2005. However, there was no authority for the Bureau’s claim that the taxpayer’s testimony must be corroborated by documentary evidence, and the 2001 and 2005 returns were based on receipt of distributions from a Pennsylvania partnership, for which returns were required regardless of his residency status. (Southwest Regional Tax Bureau v. Kania, Pa. Commw. Ct., Dkt. No. 2038 C.D. 2011, 07/26/2012 .)
Wisconsin — Corporate Income Tax — Dairy manufacturing facility investment credit.
The Wisconsin Department of Revenue has updated its fact sheet which provides a general overview of the Wisconsin dairy manufacturing facility investment credit. The revised fact sheet clarifies that dairy cooperatives cannot claim the credit, but that the credit computed by a dairy cooperative can pass through to the members of the dairy cooperative.
Wisconsin — Personal Income Tax — Dairy manufacturing facility investment credit.
The Wisconsin Department of Revenue has updated its fact sheet which provides a general overview of the Wisconsin dairy manufacturing facility investment credit. The revised fact sheet clarifies that dairy cooperatives cannot claim the credit, but that the credit computed by a dairy cooperative can pass through to the members of the dairy cooperative.