Shaking things up in state and local tax
Shaking things up in state and local tax
With the last day for introduction of California legislation ending on February 18, a number of significant bills that could potentially affect California businesses snuck into the fray.
The new tax bills include legislation that provides for “clawbacks” and sunsets of tax incentive legislation, disclosure of some recipients of tax incentives, and the ability of local governments to impose personal and corporate income taxes.
Proposing to significantly overhaul Georgia’s tax code, including an interesting attempt to eliminate sales tax exemptions for “Holy Bibles” and Girl Scout Cookies, H.B. 385 was introduced on February 24. The 127-page bill is intended to be revenue neutral and largely mirrors the recommendations of the Special Council on Tax Reform and Fairness for Georgians (the Council) (see Sutherland Legal Alert, January 10, 2011 for detailed coverage of the Council’s report). H.B. 385 would eliminate most sales tax exemptions and subject certain services to tax, reduce or eliminate most income tax credits and personal deductions, phase in lower personal and corporate income tax rates, and implement a communications services tax. The bill, introduced by the Special Joint Committee on Georgia Revenue Structure (the Committee), is expected to be amended while still in Committee, but will then require an up or down vote when introduced to both houses of the Legislature.
Continue Reading Get Out Your Dustpan: Georgia Bill Proposes Sweeping Tax Reform
In a recent decision by the Washington Supreme Court, the court found that a taxpayer had nexus in Washington for B&O tax purposes even though the taxpayer’s sole presence in the state consisted only of infrequent visits by sales employees to customers. Lamtec Corp. v. Dep’t of Revenue, Docket No. 83579-9 (Wash. Jan. 20, 2011) (en banc). In holding that Lamtec had B&O nexus in Washington, the court stated that, “to the extent there is a physical presence requirement, it can be satisfied by the presence of activities within the state” (emphasis added).
Lamtec, a manufacturer of insulation and vapor barrier in New Jersey, sold its products wholesale to customers via telephone. Lamtec had no facilities, offices, or employees located in Washington. However, several times a year, Lamtec sales employees visited customers in Washington to provide information regarding Lamtec products. The sales employees did not solicit sales. The Washington Department of Revenue (Department) asserted that Lamtec had nexus in Washington and issued an assessment to Lamtec for the period in which it was not registered. Lamtec challenged the assessment.
Continue Reading Washington Supreme Court Finds Nexus, Confuses the Rest of Us
The Multistate Tax Commission (MTC) is in the midst of two projects that focus on the financial services industry. The first project is an effort to amend the recommended formula for the apportionment and allocation of the net income of financial institutions, first adopted by the MTC in 1994. The second project, referred to as the “non-income taxpayer project,” involves the MTC’s drafting of a model statute that would subject certain partnerships and other pass-through entities to an entity level state income tax to the extent their income passes through to an entity that is not itself subject to the state’s income tax.
The California Board of Equalization (BOE) recently issued a decision holding that dividends received by an out-of-state corporate taxpayer were business income because the dividend payor played an integral and operational role in the taxpayer’s unitary business. The BOE also denied the taxpayer’s dividends received deduction (DRD) under Cal. Revenue & Tax Code (R&TC) § 24402. Appeal of Rio Doce Ltd., No. 402204 (Cal. Bd. of Eq. Nov. 17, 2010) (released Jan. 17, 2011).
Continue Reading California Double Whammy: Dividends Are Apportionable Income, Not Deductible
Ever the trendsetter, California is hip to transparency and has posted proposed budget trailer bill language on the Department of Finance Web site, www.dof.ca.gov. The language confirms what taxpayers already knew: A target is on their backs as budget negotiations begin. The tax provisions specific to business taxpayers include a repeal of California’s Enterprise Zone Program and all related credit carryovers; mandatory single sales factor apportionment; mandatory market sourcing; tax shelter amnesty; and a financial institutions records match (FIRM) program. Other language includes a legislative constitutional amendment to extend current tax rates for five years. All of these proposals require a two-thirds legislative vote. However, the tax shelter amnesty and FIRM provisions could be enacted with a mere majority vote.
On January 26, 2011, the U.S. District Court for the District of Colorado granted the Direct Marketing Association’s (DMA) motion for a preliminary injunction preventing the Colorado Department of Revenue (Department) from enforcing its sales tax notice and reporting regime enacted in 2010 and set to become effective January 31, 2011. The Direct Mktg. Ass’n v. Roxy Huber, Civil Case No. 10-cv-01546-REB-CBS, Order Granting Motion for Preliminary Injunction (D. Colo. Jan. 26, 2011). The DMA’s amended complaint, which provided the basis for the injunction, alleged constitutional violations under the Commerce Clause, the First Amendment right to free speech of businesses and consumers, the right to privacy of Colorado residents, and the deprivation of the value of proprietary customer lists without due process or fair compensation. The preliminary injunction was premised only on the Commerce Clause claims and left open the consideration of the other claims in the amended complaint.
The court concluded that the DMA had demonstrated the four requirements to be granted a preliminary injunction:
Continue Reading Oh No You Didn’t! Colorado Enjoined From Enforcing Reporting Requirements
