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State & Local Tax Update - 4/22/15

Posted 7:58 PM by

2015 Indiana Real Property Tax Bills

Many Indiana counties have begun mailing property tax bills for 2015. The spring 2015 tax bill will be due Monday, May 11. The 2015 tax bill is calculated based upon the March 1, 2014, assessed value.

This is the perfect time for property owners to review their assessed value and tax bill for accuracy. The assessed value should be representative of market value. One way to determine if your assessed value is accurate is to ask, "Could I sell my property for the assessed amount?" If the answer is no, then there is still an opportunity to appeal your assessed value in many counties.

KSM’s property tax professionals would be happy to review the assessed value of your commercial property in order to determine whether an appeal should be filed. For assistance, contact your KSM advisor or KSM property tax leader Chad Miller as soon as possible. Or, use KSM's property tax savings calculator to calculate your potential savings.

 
 

Indiana Real Property Exemption for Early Childhood Education

Effective Jan. 1, 2015, IC 6-1.1-10-46 has been added to reflect a new real property exemption for early childhood education providers. The exemption applies to tangible property owned, occupied or used by a for-profit provider of early childhood education. If the provider provides educational services to children who are at least 4 but less than 6 years of age and meet certain requirements, they may qualify for a property tax exemption on their property.

Indiana Issues LOF Interpreting Cost of Performance Rules

The Indiana Department of Revenue (IDOR) ruled that a taxpayer's application of the cost of performance methodology to its income derived from providing services to local restaurant stores was inappropriate. The Minnesota-based taxpayer franchises its restaurant store business in various states, including Indiana; however, the taxpayer does not own any of its local restaurant stores.

The taxpayer supports its franchisees' retail business by managing and marketing intellectual property rights, as well as providing centrally located administrative functions, including accounting, finance, marketing, data processing and numerous other functions; royalties are collected from its Indiana franchisees for the right to use the intellectual property, trademarks and trade names in the franchisees' retail businesses, and the taxpayer receives income from training and consulting services offered to the locally owned stores.

The taxpayer applied the cost of performance methodology to its apportionment, arguing that the majority of the income producing activity performed in conjunction with its franchisees located in Indiana occurs in another state, and that its method of apportionment fairly reflects the taxpayer's income in Indiana.

The IDOR disagreed, finding that the taxpayer's services were rendered in Indiana because Indiana is the location where the franchisees purchased the taxpayer's services. Further, the Department concluded the cost of performance method is only relevant if the Department attempts to apportion income-producing activity performed both within and without Indiana, or if a corporation has income from services or other intangibles and it is not possible to identify the market for services or other intangibles. In this instance, the locations of the costs associated with services can be identified. See LOF 02-20130402 for more information.

Maryland to Offer Amnesty Program

Both the Maryland House of Delegates and Maryland Senate have passed companion bills providing for a tax amnesty program. Pending signature by the governor, the amnesty would provide an opportunity for delinquent taxpayers to get current with taxes without being penalized or paying interest on the liabilities. The program is set to run from Sept. 1, 2015, through Oct. 30, 2015.

Massachusetts Amnesty Underway

From March 16, 2015, through May 15, 2015, Massachusetts is offering a tax amnesty program. Eligible taxpayers will receive a notice from the state of Massachusetts and, if the liability is timely paid during the amnesty period, the state will waive penalties. See Massachusetts Department of Revenue’s FAQ page for additional information.

Michigan Enacts Click-Through Nexus Provisions

Effective Oct. 1, 2015, sales tax nexus can be established via a “click-through” relationship with an Internet vendor. Specifically, a seller of tangible personal property is presumed to be engaged in the business of making sales at retail of tangible personal property in this state if the seller enters into an agreement, directly or indirectly, with one or more Michigan residents under which the resident, for a commission or other consideration, directly or indirectly, refers potential purchasers, whether by a link on an Internet website, in-person oral presentation, or otherwise, to the seller, if the referrals result in greater than $10,000 of receipts and the total Michigan receipts of the taxpayer are greater than $50,000. See MCL 205-52b for more information.

About the Author
Donna Niesen is a partner in Katz, Sapper & Miller’s State and Local Tax Group. Donna provides a wide variety of tax consulting services in the areas of multistate sales and income taxes, business incentives, controversy services, and other state taxes. Connect with her on LinkedIn.

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