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State & Local Tax Update - 9/17/12

Posted 12:00 PM by

Reassessment for Indiana Real Property Taxes: Indiana counties are currently wrapping up their 2012 statewide reassessments. During a reassessment year, county and township assessors are required to inspect all properties and adjust all assessed values to properly reflect market value in use. Counties were last required to reassess property in 2002; therefore, some property owners should expect significant changes as a result of the 2012 reassessment.

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. Some counties began mailing their assessment notices this month.

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 reassessed value of your commercial property to help you consider whether an appeal should be filed.

 

Alabama Issues New Rules on Sales Factor: Effective for tax years beginning after December 31, 2010, the Alabama Department of Revenue, has adopted Ala. Admin. Code § 810-27-1-4-.09.01 and 810-27-1-4-.17 regarding the apportionment factor. The adopted rules indicate that Alabama uses a double-weighted sales factor in the three-factor apportionment formula. The rules also provide that for taxpayers with a business interest in an unincorporated entity, the apportionment formula must include the pro rate share of the unincorporated entity's factor data. In addition, the rules address the new market-based sourcing methodology used to source sales other than sales of tangible personal to Alabama. Under the act, gross receipts from sales that do not involve tangible personal property are considered to be in Alabama if the taxpayer's market for the sale is in Alabama.

Georgia Issues Guidance on Pass Through Entity Withholding: Effective September 2, 2012, the Georgia Department of Revenue has adopted amendments to Rule 560-7-8-.34 to conform the regulation with current state law and clarify provisions. Among other changes:

  • An entity is required to include guaranteed payments as part of its taxable income sourced to Georgia;
  • The term "entity" does not include a Subchapter "S" corporation that is treated as a "C" corporation for Georgia purposes;
  • Estimated tax payment dates for entities that file a composite return are made the same as for individuals;
  • A fiscal year entity is required to adjust its estimated payment dates and extension dates as if it were an individual filing a fiscal year return;
  • It is clarified that the 4% withholding is required with respect to the nonresident member's share of taxable income sourced to Georgia; and
  • The filing of estimated tax payments by the member does not relieve the entity from the responsibility of the withholding requirement.

Michigan Tribunal Rules on Discharge of Single Business Tax Under Bankruptcy : A taxpayer's assessment for a company's unpaid single business tax (SBT) as a corporate officer was not dischargeable in bankruptcy because it was a non-dischargeable excise tax under 11 U.S.C. § 507(a)(8)(E). The SBTs at issue arose from the business activity of a limited liability company, of which the taxpayer was an manager or member. The return date for the taxes at issue was more than three years before the date of the filing of the taxpayer's petition in bankruptcy, which would mean the taxes would be dischargeable under 11 U.S.C. § 507(a)(8)(E) unless they were an excise tax on a transaction. The SBT is a tax upon the privilege of doing business that is measured by the "adjusted tax base" of persons with business activity in Michigan. The SBT cannot be substantially distinguished from the Texas franchise tax, which a federal bankruptcy court has held to be a privilege tax on a transaction. In addition, a federal district court in Michigan, Quiroz v. State , U.S. Dist. Ct., E.D. Mich., Dkt. No. 11-CV-12672, 03/27/2012 , has held that an officer liability assessment arising from a corporation's failure to pay SBT was a debt for a non-dischargeable excise tax on a transaction under 11 U.S.C. § 507(a)(8)(E). Although the Tribunal was asked to determine whether the taxpayer's officer liability fell within the scope of a federal bankruptcy discharge of 11 U.S.C. § 523(a) issued by the U.S. Bankruptcy Court for the Southern District of Florida, the Tribunal found that the Florida bankruptcy court would have come to the same conclusion as the court in Quiroz . In addition, while the taxpayer is not the "taxpayer" that initially incurred the tax liability, an officer is liable for payment of the tax under Mich. Comp. Laws Ann. § 211.27a(5), and so is a payer of tax (a taxpayer). The debt that the taxpayer in this case listed on his bankruptcy schedule is a debt for a tax, which the taxpayer became liable to pay by virtue of the officer liability statute. Paul A. Henderson v. Mich Department of Treasury

New York Court Holds Metropolitan Commuter Transportation Mobility Tax Unconstitutional : On August 22, the Supreme Court for Nassau County, New York, held that the metropolitan commuter transportation mobility tax (MCTMT) is unconstitutional because the New York State Legislature did not follow proper procedures in enacting the law. In its decision, the Court held that the MCTMT was unconstitutionally passed by the legislature. Because the MCTMT was a special law that did not serve a substantial state interest, the law should have been passed with either a home rule message or by a message of necessity with a two-thirds vote of each house. Accordingly, the Court granted the municipalities' motion for summary judgment. However, the New York State Department of Taxation and Finance has announced that the litigation has not concluded and taxpayers that have been paying the MCTMT should continue to pay and file returns. See Mangano v. Silver, New York Supreme Court, Nassau County, No. 14444/10, Aug. 22, 2012 for details of the decision.

Rhode Island Kicks off Amnesty Program : From September 2, 2012, to November 15, 2012, Rhode Island will offer an amnesty program for delinquent taxpayers. The amnesty program applies to the following taxes due on or before December 31, 2011: Corporate income tax, estate tax, fiduciary income tax, personal income tax, sales and use tax, cigarette and tobacco products taxes, and employer taxes. The amnesty includes 2011 Rhode Island personal income tax returns that were due April 17, 2012. In exchange for coming forward, taxpayers will pay the full amount of overdue taxes plus 75% of any interest due, without having to pay the remaining interest and any penalty amounts due and without being subject to any other civil or criminal penalties. Taxpayers who are eligible for tax amnesty may set up a payment plan; however, the full amount of the tax and 75% of any interest due must be paid no later than December 14, 2012. For details visit: http://www.taxamnesty.ri.gov/.

Texas Issues Sales Tax Guidance on Cloud Computing : A company's information technology infrastructure services offered to customers in the form of web services are subject to sales and use taxes. The services, commonly referred to as "cloud computing" services include the ability for customers to store, retrieve and maintain content, data, applications and software on the company's servers; run applications, monitor computers and computer usage, send electronic communications, and host web domains; and copy information to sites within the company's network and route end user requests for customer data to the site that can deliver the information most quickly. The fees charged for these services, along with incidental usage fees, are taxable data processing services pursuant to Tex. Tax Code Ann. § 151.0035. Advanced email software services provided by the company are taxable as telecommunications services while a service that provides customers with access to data gathered from the internet is taxable as an information service. Local taxes due on the sales of data processing and information services sold by the company are sourced to the local taxing jurisdictions in effect at the customer's Texas location. See Policy Letter Ruling 201207533L for details.




 

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