2014 Trending for Indiana Real Property Taxes
Indiana counties are currently wrapping up their 2014 trending assessments. During trending years, assessors are required to review recent sales and verify that the assessments are accurate using mass appraisal techniques. This process can become difficult for commercial properties due to the lack of arms-length sale transactions.
Property owners are encouraged to review their assessment notices (Form-11) as soon as they receive them to make sure the assessed value looks appropriate. The property owner has 45 days to file an appeal after the mailing of the first notice of assessment. When a property owner receives their tax bill, it is often too late to appeal the assessed value for that year. Many counties have already mailed their assessments, and the 45-day appeal period is well underway. In fact, Allen County mailed Form-11s June 26, which means the deadline to appeal the assessment is Aug. 10, 2014.
Contact your KSM advisor, or KSM property tax leader Chad Miller, as soon as you receive your Form-11. We would be happy to review the assessed value of your commercial property to help you consider whether an appeal should be filed.
Indiana Updates Guidance on Eligible 529 Contributions
The Indiana Department of Revenue has revised Information Bulletin 98 concerning the Indiana College Choice 529 Education Savings Plan in order to clarify that contributions must be received by the program manager by Dec. 31 of the tax year to qualify for the state income tax credit.
Indiana Tax Court Rules on Manufacturing Exemption
The Indiana Tax Court ruled that a taxpayer, in the business of converting slabs of raw steel, aluminum and paper pulp into “sheets” of finished product for its customers, produces other tangible personal property when it processes its customers' work rolls and is, therefore, entitled to an exemption on its purchases of equipment it used and materials it consumed in its grinding and calibration operation.
The Department argued that the taxpayer does not produce a new good, rather, it provides a repair service that is designed merely to perpetuate the useable life of the work roll. However, the court disagreed, finding that the taxpayer’s operations met the four pronged test set forth in Rotation Products. See Hoosier Roll Shop Services, LLC, v. Indiana Department of State Revenue for details of the decision.
Colorado Enacts Income Tax Credit for Personal Property Tax Paid
Colorado recently enacted a refundable credit to reimburse a business for personal property taxes paid in the state. For any income tax year commencing on or after Jan. 1, 2015, but before Jan. 1, 2020, a qualified taxpayer is allowed a credit equal to a percentage of the property taxes paid for personal property in Colorado during the income tax year.
To qualify for a tax credit, a taxpayer must have $15,000 or less worth of personal property on which property taxes are paid in Colorado during an income tax year commencing in 2015, or have less than an inflation-adjusted amount for each income tax year thereafter. Such annual limits are based on the total actual value of the taxpayer's personal property. See HB 14-1279 for details on the credit.
Connecticut Enacts Changes to Nonresident Income Calculations
Recently enacted HB 5466 makes two important changes to the calculation of taxable income for nonresidents: 1) requires nonresidents to pay Connecticut income tax on gains or losses from the sale or disposition of an interest in an entity, such as a partnership, limited liability company, or S corporation, that owns real property in Connecticut, which has a fair market value that equals or exceeds 50% of all the assets of the entity on the date of sale or disposition of the nonresident's interest in the entity; and 2) alters how nonresidents' sales of property are sourced to Connecticut.
Gross receipts from sales of property are considered to be earned within Connecticut when the property is delivered or shipped to a purchaser within the state, regardless of the freight-on-board point or other conditions of the sale. Gross receipts from sales of services are considered to be earned within the state when the services are performed by an employee, agent, agency or independent contractor chiefly situated at, connected by contract or otherwise, with or sent out from, offices or branches of the business, trade, profession or occupation or other agencies or locations situated within Connecticut.
Georgia Removes Postage from Definition of Delivery Charges
Recently enacted HB 816 redefines “delivery charges” to clarify that postage charges are not included in delivery charges subject to sales and use taxes if the postage charges are passed on dollar-for-dollar to the direct mail purchaser and are separately stated on the invoice.
Illinois Issues Decision on Sales Factor Sourcing
The Illinois Department of Revenue has ruled that a taxpayer's dedicated hosting, clouding computing and remote customer supports are services for Illinois sales factor apportionment purposes and should be sourced to its customers' billing addresses. The taxpayer is an information technology hosting service, and the agreements entered into with cloud computing customers are properly characterized as service contracts.
Specifically, the Department noted that the contractual provisions of the taxpayer's contracts demonstrated the following characteristics: taxpayer's customers are not in physical possession of taxpayer-provided hardware and software; taxpayer's customers do not control taxpayer-provided hardware and software; taxpayer customers do not have a significant economic or possessory interest in taxpayer-provided hardware or software; taxpayer bears the risk of substantially diminished receipts or substantially increased expenditures if there is nonperformance under the contract; the taxpayer uses the hardware and software concurrently to provide services to unrelated customers; and the total contract price substantially exceeds the rental value of the hardware and software for the contract period.
Because the taxpayer is not able to determine where a customer is physically located, the services are deemed received at the location of the office of the customer from which the services were ordered. Alternatively, if an ordering office cannot be determined, then services are deemed received where the services are billed. See PLR IT 14-0003 for details.
Kansas Repeals Nonresident Withholding Requirements
The Kansas Department of Revenue has issued Notice 14-09, which describes in further detail the repeal of nonresident withholding requirements. The Department noted that although the repeal is effective July 1, 2014, as a practical matter, the repeal is effective immediately because withholding is not reported until the end of the year. If income tax is withheld from a shareholder, partner or member and remitted to Kansas during tax year 2014, a 2014 income tax return may be filed and a refund claimed, if appropriate.
Michigan Court of Appeals Rules on Online Subscriptions
The sale of the taxpayer's Checkpoint online tax and accounting research program was not subject to use tax because any transfer of tangible personal property was incidental to the service provided. Subscribers to the program primarily sought access to up-to-date information relevant to their needs and sought the expert knowledge of the product's content creators in synthesizing, compiling and organizing the materials, thereby rendering research more efficient. There is no evidence that any de minimus amount of software transferred was the object of the transaction, or that customers sought to own or otherwise have responsibility for the prewritten computer software.
Considering the transaction as a whole, the fact that the license agreement entitles users to access the Checkpoint program does not establish that users primarily sought the physical software. Also, the manner in which Checkpoint was marketed indicates that the taxpayer was in the business of selling an information service, distinct from its print and software products, and its intent was to profit from providing a service, and not from selling any prewritten computer software. (Thomson Reuters Inc. v. Department of Treasury, Mich. Ct. App., Dkt. No. 313825, 05/13/2014 (unpublished).)
Minnesota Court Rules on Taxability of Pick-Up Charges
Charges imposed by a retailer to retrieve rented equipment at the end of a rental term are subject to tax as part of the gross receipts from a retail sale because those charges are part of the total amount of consideration received as the “sales price” and are necessary to complete the sale.
The taxpayer rents traffic control equipment to contractors working on road construction projects, and its invoices include a mandatory charge for pick-up of that equipment covering the costs associated with retrieving and returning the equipment to the taxpayer, the labor costs for those activities, and any costs incurred to repair the equipment. The taxpayer's pick-up charges are part of the sales price because the pick-up charges are part of the consideration for the rental transaction because they represent something of value given in return for the services it provides to its rental customers. See Interstate Traffic Signs, Inc. v. Commissioner of Revenue, Minn. S. Ct., Dkt. No. A13-1610, 04/23/2014 for details of the decision.