2013 Trending for Indiana Real Property Taxes
Indiana counties are currently wrapping up their 2013 trending assessments. During a trending year, county and township assessors are required to review arms-length transaction sales within a given time period and trend values up or down accordingly. Once the values have been updated, ratio studies are required to be submitted to the Department of Local Government Finance (DLGF). The DLGF will review the ratio study and approve or deny it. Once the ratio study has been approved and values have been certified, counties will start releasing notice of assessments.
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 have already mailed their notice of assessments, and the 45-day appeal period is well underway.
We would be happy to review the reassessed value of your commercial property to help you consider whether an appeal should be filed. For assistance, contact your KSM advisor or KSM property tax leader Chad Miller as soon as you receive your Form-11.
Indiana Issues Guidance on New Lake County Local Option Income Tax
The Indiana Department of Revenue has issued guidance concerning the Lake County local option income tax (LOIT). Effective Oct. 1, 2013, Lake County has adopted a 1.5 percent net rate; however, because the tax does not become effective until October, a prorated rate of 0.375 percent will be used for calculating the Lake County tax on the 2013 income tax returns. Lake County residents working in Indiana will have the county tax withheld from their paychecks beginning in October 2013; taxpayers making estimated tax payments during the year should increase the amount paid to accommodate the new county tax. Finally, the taxpayer's county tax will be calculated when filing the 2013 Indiana individual income tax return. (See Lake County LOIT FAQs for more information.)
Idaho Changes Position on Guaranteed Payments
The Idaho State Tax Commission announced the reporting of partners' guaranteed payments from partnerships for tax year 2013 is significantly different due to legislative changes. Effective Jan. 1, 2013, guaranteed payments to an individual nonresident or part-year resident partner up to $250,000 in a calendar year are sourced as compensation for services. Any amount over $250,000 is sourced to Idaho, based on the Idaho apportionment factor. The $250,000 threshold is adjusted annually for inflation in future years.
Illinois Court Rules on Cook County Non-Titled Personal Property Use Tax
The Cook County Circuit Court has issued preliminary injunctions ordering the Cook County non-titled personal property use tax is preliminarily enjoined and cannot be imposed until further order of the Cook Court Circuit Court. For the pendency of the order, Cook County cannot cash any check received from any non-titled personal property use tax taxpayer for payment of the tax for any return date following the July 20, 2013, return date (Reed Smith v. Ali, Cook County Cir. Ct., Dkt. No. 2013 L 050454, 08/01/2013; Horwood Marcus & Berk Chtd. v. Cook County Department of Revenue, Cook County Cir. Ct., Dkt. No. 13 L 050470, 08/01/2013).
Kentucky Issues Guidance on Cost of Goods Sold Deduction for Limited Liability Entity Tax
The Kentucky Department of Revenue has issued a Tax Alert explaining the costs of goods sold for purposes of calculating the limited liability entity tax (LLET). For taxpayers who are engaged in manufacturing, producing, reselling, retailing or wholesaling, the amounts allowable as cost of goods sold must be directly incurred in acquiring or producing a tangible product generating the Kentucky gross receipts. Tangible product means both real and tangible personal property. Cost of goods sold for purposes of computing the LLET only includes direct labor costs and direct material costs. The test is whether the cost is direct or indirect, not whether the cost is necessary. For example, an assembly line worker is direct labor, while an administrative assistant in human resources or an engineer in quality control is not. Examples of the categories of costs that are not allowed in cost of goods sold for purposes of computing LLET (and are typically listed as indirect costs) include: utilities, repairs, maintenance, rent, depreciation, insurance and quality control. For taxpayers who are not engaged in manufacturing, producing, reselling, retailing, or wholesaling, no costs are included in cost of goods sold. For those taxpayers, Kentucky gross profits would be reduced only by returns and allowances attributable to Kentucky gross receipts. See Kentucky Tax Alert for details.
Ohio Creates New Deduction for Pass-Through Income
In recently passed HB 59, Ohio’s definition of adjusted gross income was amended to exclude 50 percent of an individual taxpayer’s apportioned Ohio income from a pass-through entity. The so-called small business tax deduction is capped at $125,000 in business income. Although limited guidance has been issued by the Ohio Department of Taxation, it appears as though the taxpayer must file a return at the individual level to avail itself of the deduction. Pass-through entities, including those filing composite returns on behalf of nonresident shareholders, will not be afforded the deduction. The deduction is effective for the 2013 tax year.
Oklahoma Changes Eligibility for Participation in Composite Return
Oklahoma Administrative Code § 710:50-19-1, effective July 11, 2013, has been amended to provide that any partnership with two or more nonresident eligible partners is eligible to file a composite partnership return and eliminate a rule that partners who were S-Corporations (or elect to be so treated), partnerships, trusts, and C-Corporations generally could not be included in the composite return.
Tennessee Rules on Deductibility of IC-Disc Dividends
The Tennessee Department of Revenue has ruled compensation paid by an IC-DISC in the form of a dividend for federal tax purposes is not deductible from net earnings for Tennessee excise tax purposes. The Internal Revenue Code does not provide a deduction for dividends paid to individual shareholders of an IC-DISC, even if the dividends are paid in lieu of a salary. Thus, the dividends paid by the IC-DISC to its shareholders are not deductible as compensation and, consequently, are included in federal taxable income. It follows that IC-DISC dividends paid to shareholders and included in federal taxable income are also included in “net earnings” for purposes of the Tennessee franchise and excise tax. (See Tennessee Letter Ruling 13-08 for details.)