State & Local Tax Updates

Think your business can't make use of incentives? Think again!
Programs that are quite creative in the types of benefits they offer are becoming more prevalent at the state and local levels, as discussed in this Journal of Multistate Taxation and Incentives article. (G.J. Parikh, S. Hardwick, T.N. Byron, and M. Bernier, 22 Journal of Multistate Taxation and Incentives, No. 9, 20 (January 2013).

More State Tax News

Alabama — Personal Income Tax — Alabama tax refund card.
The Alabama Department of Revenue has announced that taxpayers will be able to receive their 2012 Alabama state income tax refund on a debit card. The card, known as the Alabama tax refund card, will allow taxpayers to access and manage their refunds without the payment of fees. In order to receive their 2012 refund on a debit card, taxpayers must check the box provided under "REFUND" on their 2012 Alabama individual income tax form. The debit card can be used at: ATMs, banks and credit unions displaying the VISA logo, retail locations that accept VISA, merchant websites to shop or pay bills online, and gasoline stations. Married taxpayers filing jointly will receive two cards drawn from the same account. ( Notice, Alabama Department of Revenue, 01/04/2013. )

Alabama — Sales And Use Tax — Severe weather preparedness sales tax holiday participants.
Baldwin County (7002) has informed the Alabama Department of Revenue that it will participate in the 2013 severe weather preparedness sales tax holiday being held this year from February 22 to February 24. The following localities have informed the Department that they will not participate in this year's sales tax holiday: Gantt (9741), Goshen (9476), and Ozark (9339). A county or municipality can, by resolution or ordinance adopted at least 30 days before the first full weekend of February, provide for the exemption of covered items from county or municipal sales or use taxes during the same time period, under the same terms, conditions, and definitions as provided for the state sales tax holiday. (See RIA State and Local Taxation Service ¶ 21,997 .)

California — Property — Aircraft assessment periods for 2013.
The State Board of Equalization (SBE) has sent a letter to assessors designating representative periods for assessing aircraft operated by certificated air carriers and scheduled air taxi operators for 2013. The 7-day representative period for measuring scheduled activity begins at 12:01 a.m. on Sunday, January 6, 2013, and runs through midnight on Saturday January 12, 2013. The representative periods for measuring nonscheduled activities differ depending on when the aircraft was first used by the reporting carrier in revenue service; a separate flight-and-ground-time factor and arrival-and-departure factor must be computed for each type of aircraft. ( California State Board of Equalization Letter to Assessors 2013/002, 01/07/2013 .)

California — Property — Air taxi.
The State Board of Equalization (SBE) has sent a letter to county assessors reminding them that, effective January 1, 2013, the definition of “air taxi” has been updated to include aircraft used by an air carrier which does not utilize aircraft having a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 lbs. in air transportation and which holds a certificate of public convenience and necessity or other economic authority issued by the U.S. Department of Transportation. ( California State Board of Equalization Letter to Assessors 2013/005, 01/07/2013 .)

California — Property — 2013 property tax calendar.
The California Board of Equalization has released the 2013 Property Tax Calendar. The calendar identifies important action and compliance dates for assessing officials and taxpayers. The calendar will be posted to the Property Taxes Law Guide, which can be viewed on the Board of Equalization's website. ( California State Board of Equalization Letter to Assessors 2013/003, 01/07/2013 .)

California — Property — Rules and regulations—effective dates.
Effective January 1, 2013, Senate Bill 1099 amends Cal. Gov't. Code § 11343.4 to provide that rules and regulations adopted by state agencies must take effect on January 1, April 1, July 1, or October 1 after filing with the Secretary of State (instead of 30 days from the filing date). Under current law, a rule or regulation or an order of repeal generally becomes effective 30 days after it is filed with the Secretary, unless a different date is prescribed by statute, or the state agency makes a written request to the Office of Administrative Law demonstrating good cause for an earlier effective date. The bill also requires a state agency to post the rule or regulation on its website in an easily identifiable location and to keep the rule or regulation on its website for at least six months from the date it was filed with the Secretary of State. ( California State Board of Equalization Letter to Assessors 2013/006, 01/07/2013 )

California — Property — New Sonoma county assessor.
The State Board of Equalization has announced that effective December 11, 2012, William F. Rousseau was appointed as the Sonoma County Assessor/Clerk Recorder/Registrar of Voters. Mr. Rousseau will complete the term of Janice Atkinson who retired in December 2012. ( California State Board of Equalization Letter to Assessors 2013/004, 01/07/2013 .)

District of Columbia — Personal Income Tax — Standard deduction and personal exemption.
The Office of the Chief Financial Officer has announced the inflation adjustments for the standard deduction and personal exemption. Effective January 1, 2013, the standard deduction for all filers except a married person filing separately will increase to $4,050 from $4,000 (amount rounded down to nearest $50). The standard deduction for a married person filing separately will be $2,000 (amount rounded down to nearest $50). Effective January 1, 2013, the personal exemption will be $1,675 (amount rounded down to nearest $50). ( Office of the Chief Financial Officer, Amended Notice of Increases in the 2013 Standard Deduction, Personal Exemption, Homestead Deduction, and Trash Collection Credit Amounts, 01/04/2013. )

District of Columbia — Property — Homestead deduction and trash credit.
The Office of the Chief Financial Officer has announced the inflation adjustment for the homestead deduction and the trash credit. Effective October 1, 2012, the homestead deduction is $69,100 (rounded to the nearest $50; previously $67,500). Effective October 1, 2013, the condominium and cooperative trash collection credit amount is $103 (rounded to the nearest whole dollar; previously $101). ( Office of the Chief Financial Officer, Amended Notice of Increases in the 2013 Standard Deduction, Personal Exemption, Homestead Deduction, and Trash Collection Credit Amounts, 01/04/2013. )

Indiana — Corporate Income Tax — E-filing mandate reminder.
The Indiana Department of Revenue has issued a reminder to taxpayers regarding the new electronic filing and payment mandates. Last year the Indiana state legislature passed a few laws changing the way business taxpayers are required to file and remit sales and withholding taxes. As of June 30, 2012, anyone who is required to file more than 25 W-2, 1099-R, or WH-18 forms with Indiana must file them electronically. In addition, all retail merchants must report and remit sales tax electronically and all withholding agents must report and remit withholding taxes electronically by no later than January 1, 2013. Quarterly withholding filings will be eliminated. Indiana has a free online tax filing system for sales and withholding tax returns called INtax. The Department offers tutorials to help taxpayers and service providers learn how to use INtax. Additional information and assistance is available by calling the Department at (317) 232-2337 or by visiting the Department's website. ( Electrifying mandate for business tax filers, Indiana Dept. of Rev., 01/07/2013 .)

Indiana — Personal Income Tax — Residency.
Taxpayers with a current Florida address and owning a house in Indiana were required to file an Indiana income tax return because they were domiciled in Indiana during the taxable year. The taxpayers, a husband and wife, claimed Florida residency for the taxable year, despite owning a home in Indiana, as well as, automobiles which were properly titled and registered at the Indiana Bureau of Motor Vehicles. Additionally, the husband incorporated an Indiana company in 1999 and has been the president of the company since. Although the taxpayers purchased another house and additional vehicles in Florida, the Department determined that they were taxable at the place which they were originally domiciled, provided the opening of the other home has not involved an abandonment of the original domicile and the acquisition of a new one. Because documentation provided by the taxpayers showed that the husband continued to work for the company located in Indiana as the president of the company and the company's filings to the state of Indiana for the year at issue listed that the husband resided in the Indiana residence, the compensation received from the company would have been Indiana source income and subject to Indiana income tax. Therefore, the taxpayers were obligated to file their Indiana income tax return and their income is taxable in Indiana. ( Indiana Dept of State Rev. Letter of Finding 01-20120180, 12/01/2012 .)

Indiana — Personal Income Tax — Collection fees.
A taxpayer was not entitled to a refund of collection fees assessed by the Department of Revenue even though the taxpayer did not owe the taxes at issue. Upon discovering that the taxpayer had not filed Indiana income tax returns for two tax periods, the Department sent proposed assessments and demand notices to the taxpayer, but received no response. As a result, the matter was turned over to a third-party collection agency and the assessed amounts were removed from the taxpayer's bank account. Subsequently, the taxpayer responded to the notices and the Department determined that the taxpayer did not owe the taxes at issue; the Department refunded the funds removed from the taxpayer's bank account, minus the amounts of collection fees incurred. While the taxpayer established that the tax was not due, the deadline for response to the demand notice was missed and consequently, the Department incurred collection fees which it would not have incurred with a timely response and explanation. Therefore, the Department was correct in retaining an amount equal to the collection fees it incurred. ( Indiana Dept of State Rev. Letter of Finding 01-20120230, 12/01/2012 .)

Indiana — Sales And Use Tax — E-filing mandate reminder.
The Indiana Department of Revenue has issued a reminder to taxpayers regarding the new electronic filing and payment mandates. Last year the Indiana state legislature passed a few laws changing the way business taxpayers are required to file and remit sales and withholding taxes. As of June 30, 2012, anyone who is required to file more than 25 W-2, 1099-R, or WH-18 forms with Indiana must file them electronically. In addition, all retail merchants must report and remit sales tax electronically and all withholding agents must report and remit withholding taxes electronically by no later than January 1, 2013. Quarterly withholding filings will be eliminated. Indiana has a free online tax filing system for sales and withholding tax returns called INtax. The Department offers tutorials to help taxpayers and service providers learn how to use INtax. Additional information and assistance is available by calling the Department at (317) 232-2337 or by visiting the Department's website. ( Electrifying mandate for business tax filers, Indiana Dept. of Rev., 01/07/2013 .)

New Jersey — Personal Income Tax — Ownership of underlying S corp assets.
The New Jersey Tax Court granted summary judgment to a New York trustee and denied summary judgment to the Division of Taxation in a case involving the will of a New Jersey decedent that created a resident trust that owned cash, bonds, and stock, including stock of four corporations that elected to be treated as S corporations, where the Director concluded that the trust was subject to tax on 100% of its undistributed income, including its net pro rata share of an S corporation that was allocated outside New Jersey. The court noted that the trust was not administered in New Jersey and the trustee was a resident of New York, and precedent established that the trust could only be taxed on undistributed income if it owned assets in New Jersey. In addition, the court rejected the Director's argument that, simply by virtue of owning stock in the four S corporations, the trust could be treated as owning the assets of the corporations, thus establishing requisite nexus. While the Director argued that, unlike the C corporation shareholder, the shareholder of an S corporation owns the underlying assets of the S corporation because profits and losses are reported on the owner's returns, the court found that the Director incorrectly conflated pass-through taxation with ownership. Despite the language of the taxing statute, the court could not subject the trust to tax on its out-of-state income because the trust did not have sufficient contacts with the state to satisfy constitutional due process requirements. Accordingly, the trust did not owe tax on the interest income earned in the year in question. (Residuary Trust A v. Director, N.J. Tax Ct., Dkt. No. 000364-2010, 01/03/2013 .)

New York — Personal Income Tax — Hiring household help.
The Department of Taxation and Finance has issued a multi-tax bulletin that summarizes New York State reporting and filing requirements for taxpayers hiring household help, such as a housekeeper, babysitter, or caretaker. The bulletin discusses who qualifies as a household employer, how to register as a new employer, reporting a newly hired employee, paying unemployment insurance, withholding income taxes, and providing workers' compensation and disability taxes. ( NY Tax Bulletin, TB-MU-350, 12/31/2012 .)

New York — Recordation Taxes, Realty — Mortgages partially securing multiple debts or obligations.
The Department of Taxation and Finance has issued a bulletin that explains how the mortgage recording tax is applied to mortgages partially securing multiple debts or obligations when the amounts secured by the mortgages are subject to a cap that limits the maximum amount that may be secured. ( New York Recording Tax Bulletin TB-MR-580, 01/07/2013 .)

New York — Sales And Use Tax — Hiring household help.
The Department of Taxation and Finance has issued a multi-tax bulletin that summarizes New York State reporting and filing requirements for taxpayers hiring household help, such as a housekeeper, babysitter, or caretaker. The bulletin also provides general information about New York State sales tax requirements when a taxpayer hires someone to do a repair and maintenance services in and round his or her home. ( NY Tax Bulletin, TB-MU-350, 12/31/2012 .)

Oklahoma — Corporate Income Tax — Withholding tables.
The Oklahoma Tax Commission has issued the 2013 Oklahoma Income Tax Withholding Tables, which apply to everyone receiving compensation for services rendered in Oklahoma, with the exception of a few excluded services. ( 2013 Oklahoma Income Tax Withholding Tables, Oklahoma Tax Commission, 01/04/2013 .)

Oregon — Special Local Tax Rates — TriMet rate for 2013.
The Oregon Department of Revenue announced that effective January 1, 2013, the Tri-County Metropolitan Transportation District (TriMet) rate for 2013 is 0.007137. This change is due to the City of Boring changing from being partially in the district to outside of the district. This change will apply to both transit payroll excise and transit self employment taxes. Also, effective January 1, 2013 taxpayers are now able to submit electronic files through iWire for the 2012 year. This is true for iWire Direct and uploading an EFW2 file or 1099 file. ( Oregon Department of Revenue Release, 01/01/2013. )

Oregon — Special Local Taxes — TriMet rate for 2013.
The Oregon Department of Revenue announced that effective January 1, 2013, the TriMet rate for 2013 is 0.007137. This change is due to the City of Boring changing from being partially in the district to outside of the district. This change will apply to both transit payroll excise and transit self employment taxes. Also, effective January 1, 2013 taxpayers are now able to submit electronic files through iWire for the 2012 year. ( Oregon Department of Revenue Release, 01/01/2013. )

Virginia — Corporate Income Tax — Allocation of low-income housing tax credits amended.
The Virginia Housing Development Authority has amended regulations (13 VAC §§ 10-180-50; 10-180-60; 10-180-120, effective 01/01/2013) to revise the low-income housing tax credits. The amendment requires each applicant to use a property management company to manage proposed tax credit developments. Miscellaneous administrative clarifications have been addressed in the amendments as well as changes to the amenity point categories. In addition, the amendment repeals the section on application for tax credit assistance funds and credit exchange funds. The register notes that the Virginia Housing Development Authority is claiming an exemption from the Administrative Process Act.

Virginia — Corporate Income Tax — Alternative method of allocation and apportionment denied.
The Virginia Department of Revenue has denied a taxpayer's request for an alternative method of allocation and apportionment because the income from a pass-through entity is operational and subtraction of the gain was properly disallowed. The taxpayer is an out-of-state S corporation with Virginia taxable income and files a unified nonresident return on behalf of shareholders. The taxpayer subtracted a gain from distribution of corporate stock to its shareholders, which was disallowed by the Department and reduced the refund claimed. The taxpayer contends they did not have a unitary relationship with the corporation and its ownership was a passive investment rather than serving as an operational function. The Department treated the taxpayers protest as a request for an alternative method of allocation and apportionment. In accordance with Va. Code Ann. § 58.1-421 the taxpayer must show its investments are not operational assets involved in a unitary business. The Department determined that it was clear no unitary relationship existed. However, the Department noted that holding companies are used to facilitate entity reorganizations and investment transfers and the Department considers the distribution of stock to shareholders an activity conducted in the normal operations of a holding company. Additionally, the Department noted that income retains its character as income from the operations of a pass-through entity when computing Virginia taxable income and is properly included in the apportionable income of the shareholder. ( Virginia Public Document Ruling 12-218, 12/21/2012 .)

Wisconsin — Cigarette, Alcohol & Miscellaneous Taxes — Alcoholic beverage tax publication updated.
The Wisconsin Department of Revenue has updated its publication about alcohol beverage taxes. The publication provides information concerning who needs an alcohol beverage permit, when returns are due, interest and penalties imposed on returns filed late or incorrectly, what records to keep, and related topics. The information in the publication reflects the position of the Department on laws enacted by the Wisconsin Legislature as of November 1, 2012. ( Wisconsin Dept. Rev. Tax Publication 303, 01/01/2013 .)

West Virginia — Personal Income Tax — 2012 purchaser's use tax schedule released.
The West Virginia Tax Department has released 2012 Schedule UT (Form IT-140, Purchaser's Use Tax Schedule). The schedule is used to report use tax due on purchases for which no West Virginia sales tax was paid and is filed along with the West Virginia Personal Income Tax Return. Use tax applies to Internet purchases, magazine subscriptions, mail order purchases, out-of-state purchases, telephone purchases originating out of state, television shopping networks, and other purchases of taxable items.

Wyoming — Sales And Use Tax — Wind energy taxation—emergency rules.
The Wyoming Department of Revenue has adopted emergency rules (Wyo. Rules Dept. Rev. Ch.3 §§ 1-7) pertaining to the taxation of electricity derived from wind resources. The new rules set forth the reporting requirements and time frames for producers of electricity from wind resources and include definitions for terms such as “generation tax,” “producers,” and “wind turbine.” Generation taxes are assessed against each megawatt hour (or portion thereof) of electricity produced for sale or trade by the producer, and must be reported on Department forms. For any wind turbine that began production of electricity for sale or trade prior to January 1, 2009, all electricity produced is subject to the generation tax. If the wind turbine began production for sale or trade at some time during 2009 then only that power produced in 2012 after the 3-year exclusion will be subject to the generation tax. Producers must provide an annual report to the Department postmarked on or before February 1 for the prior calendar year's production. These rules are effective December 31, 2012, and are no longer in effect 120 days thereafter.



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