Policy and Legislation

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Several states are turning to contingent-fee audit contractors, sometimes referred to as “bounty hunters,” as a means of increasing corporate income tax collections. Bounty hunter firms are compensated based on the tax assessed, thus encouraging these firms to aggressively assess taxpayers.

Not surprisingly, contingent-fee-based auditors are supporting legislation in several states that would require state tax agencies to enter into contingent-fee audit contracts. Contingent-fee audits are viewed by corporate taxpayers (and some courts) as unfair, hostile, and bad public policy because the auditors have a financial stake in the outcome of the audit.Continue Reading Bounty Hunters Gone Wild! States Turn to Controversial Contingent-Fee Auditors

Sin City, Lost Wages, Glitter Gulch, or just plain old Las Vegas. What immediately comes to mind? Probably not unclaimed property. But the state of Nevada has finally discovered a way to add insult to injury by requiring unclaimed property holders (e.g., casinos) to remit uncashed “wagering instruments.”

On March 1, 2011, the Nevada Legislature introduced Assembly Bill No. 219. This bill, if passed, would add the following property type and dormancy period to the state’s unclaimed property law reporting and remittance requirements: Any wagering instrument, one year after the wager is placed, unless the Nevada Gaming Commission specifies by regulation a different period in which the wagering instrument must be redeemed is presumed abandoned.Continue Reading Unclaimed Property…Nevada is Betting on a Sure Thing

New York amended its False Claims Act (FCA) to allow whistleblowers to bring qui tam actions against taxpayers for false claims under New York tax law. If subject to the FCA, a taxpayer could be subject to civil penalties, treble damages, and reimbursement of the plaintiff’s costs including attorney fees. N.Y. STATE FIN. LAW § 189(1)(g), (3).

While the FCA has been in existence in New York since 2007, the recent amendment repeals a statutory preclusion for actions related to the tax law. Under the amendment, a taxpayer is subject to the FCA if it has at least $1 million in income or sales in a tax year and the whistleblower pleads damages in excess of $350,000. Id. § 189(4)(a). This dramatic change occurred quietly because the FCA is in the Finance Law rather than the Tax Law. Interestingly, Eric Schneiderman, New York’s Attorney General, was a chief proponent of the amendment while a member of the New York Senate, and he now has enhanced authority to investigate and commence civil actions under the amended FCA. Id. § 190(1).Continue Reading Rise of the Tax “Snitch”: How Amendments to New York’s False Claims Act May Ensnare Taxpayers and Practitioners Alike

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.Continue Reading Last Call – New Tax Bills in Play As Last Day to Introduce California Legislation Passes

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

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.Continue Reading California Mischief: Budget Tax Proposals Repeal Credits, Limit Apportionment Methods

On January 10, 2011, the New Jersey Division of Taxation (the Division) started the new year off with a bang by issuing a Technical Advisory Memorandum (TAM), TAM-6 (Jan. 10, 2011) regarding the Division’s Corporate Business Tax (CBT) nexus policy. The issuance of this TAM sent both overt and subliminal messages to foreign corporations, particularly financial institutions.  

The Division advised that for privilege periods and taxable years beginning on or after January 1, 2002, amendments to the CBT made it clear that foreign corporations are subject to the CBT “for the privilege of deriving receipts from sources within this state, or for the privilege of engaging in contacts within this state.” N.J. Stat. Ann. § 54:10A-2. In addition, the Division adopted the holding of Tax Comm’r of W.Va. v. MBNA America Bank, N.A., 640 S.E.2d 226 (W.Va. 2006), cert. denied sub nom FIA Card Services, N.A. v. Tax Commissioner of W.Va., 127 S. Ct. 2997 (2007), as the constitutional standard by which New Jersey’s nexus statute would be measured. Based on this foundation, the Division set stated: “taxpayers performing services and domiciled outside the State that solicit business within the state or derive receipts from sources within the State must file a [CBT] return” (emphasis added). The Division expressly targeted this nexus policy at financial institutions by stating that “a [financial institution] that has its commercial domicile in another state [is] subject to tax in this State if during any year it obtains or solicits business or receives gross receipts from sources within this state.”Continue Reading New Jersey’s “Situation”: Economic Nexus and Endless Possibilities

The Washington legislature has enacted the state’s first-ever amnesty program. The legislation (L. 2010, SB6892) allows the Department of Revenue to waive most interest and penalties on delinquent state and local sales and use tax, state business and occupation (B&O) taxes, and state public utility taxes. The amnesty program began on February 1, 2011, and will end on April 30, 2011.  Washington expects the program to generate $24.4 million for the state and $3.9 million for local governments.Continue Reading Washington B&O Amnesty: Does It Stink?

At both the federal and state levels, the GOP won a number of game-changing races that will impact state and local tax policy in 2011 and beyond.  Of the 37 gubernatorial races held in 2010, Republicans won 23.  All six Republican incumbents won; Republicans defeated Democratic incumbents in two of the seven other incumbent races. …

Recently, the Connecticut Department of Revenue Services issued an informational publication explaining its position on the application of the Connecticut Corporate Business Tax on real estate investment trusts (REITs) and revised a previously issued publication on the implications of the state’s economic nexus provisions to foreign (non-U.S.) companies.

The Department’s newly issued guidelines treat REITs in a manner that is similar to the Internal Revenue Code, but the Department strays in certain areas. IP 2010(21) (Dec. 1, 2010).Continue Reading Connecticut “WREITS” Guidance for REITs and Economic Nexus