Tax news April 27, 2012

April 27, 2012 — Leave a comment

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April 27, 2012

Federal Tax News

Witnesses Tell Lawmakers Simplification, Better Tools Needed to Improve Tax Filing (Apr. 27, 2012)
Return preparers and IRS officials told lawmakers at an April 26 Senate Finance Committee hearing that tax laws need simplification in order to improve compliance and Committee Chairman Max Baucus, D-Mont., acknowledged as much, telling participants that there are 132 tax provisions that frequently expire and create uncertainty for taxpayers. We need to simplify the tax code, he said, adding that the panel plans to look at how to effectively use technology and improve communication between…

Lawmakers Voice Support for Corporate Tax Extenders (Apr. 27, 2012)
Members of Congress took turns testifying at a hearing of the House Ways and Means Select Revenue Measures Subcommittee on April 26 in favor of extending the life of corporate and small business tax incentives. With the Bush-era tax incentives set to expire at the end of 2012 and talk of deficit reduction and tax reform continuing to draw congressional interest in 2012, lawmakers wanted to go on record in support of tax provisions they said would create jobs and provide a boost to the economy.…

Comments Requested on Alternative Approaches to Determining Minimum Value of Employer Health Plan; Essential Minimum Coverage Reporting Requirements and Large-Employer Reporting of Health Insurance Coverage Under Employer-Sponsored Plans (Notice 2012-31, Notice 2012-32, Notice 2012-33) (Apr. 27, 2012)
The IRS is seeking comments on a number of issues regarding employer-sponsored health care plans and reporting of health insurance coverage. Notice 2012-31 The IRS has requested comments on several possible approaches to determining whether health care coverage under an eligible employer-sponsored plan provides minimum value. Beginning in 2014, eligible individuals who purchase coverage under a qualified health plan through an Affordable Insurance Exchange may receive a premium tax credit…

Procedure for Filing and Reproducing Substitute 2011 Forms W-2 and W-3 Corrected (Ann. 2012-17) (Apr. 27, 2012)
The IRS has corrected Rev. Proc. 2011-62 , I.R.B. 2011-52, 1032, which provided general rules for filing, and IRS and Social Security Administration (SSA) requirements for reproducing, paper substitutes for Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, for wages paid during the 2011 calendar year. The dimensions provided for Exhibit-B in the list of exhibits have been clarified. Announcement 2012-17, 2012FED ¶46,354 Other References: Code Sec. 3501 CCH…

Charitable Contribution Deductions No Longer Allowed for Organizations (Ann. 2012-20) (Apr. 27, 2012)
The IRS has announced that the following organizations no longer qualify under Code Sec. 170(c)(2) as organizations for which deductions for charitable contributions are allowed. A Family Budget Counseling, Inc., of Huntington City, N.Y.; Angels Enterprise, Inc., of Buchanan, Mich.; Fisher Institute, of Irving, Tex.; and Graystone University Housing Corporation, of Malvern, Pa. However, contributions made to the organizations before April 30, 2012, will generally be deductible, unless made by…

IRS Releases I.R.B. 2012-18 (Apr. 27, 2012)
The IRS has released I.R.B. 2012-18, dated April 30, 2012. The new I.R.B. contains the following items: Announcement 2012-16, I.R.B. 2012-18, 876 (TAXDAY, 2012/04/06, I.2 ), 2012FED ¶46,339 Announcement 2012-17, I.R.B. 2012-18, 876 (TAXDAY, 2012/04/27, I.2 ), 2012FED ¶46,354 Announcement 2012-20 , I.R.B. 2012-18, 876 (TAXDAY, 2012/04/27, I.3 ) Notice 2012-29, I.R.B. 2012-18, 872 (TAXDAY, 2012/04/19, I.2 ), 2012FED ¶46,348 Notice 2012-30, I.R.B. 2012-18, 874 (TAXDAY, 2012/04/09, I.8 ), 2012FED…

May Maximum Per Diem Rates for Travel in Foreign Areas Released (Apr. 27, 2012)
The U.S. State Department has released a listing of maximum travel per diem allowances for travel in foreign areas. The rates apply to all government employees and contractors, and are effective as of May 1, 2012. May Maximum Travel Per Diem Allowances for Foreign Areas Other References: Code Sec. 274 CCH Reference – 2012FED ¶180.60 CCH Reference – 2012FED ¶14,417.421

SB/SE Memo Addresses Statutory Notice of Deficiency Revised Letter (Apr. 27, 2012)
IRS SB/SE Interim Guidance Memorandum: Revised Letter 531, Statutory Notice of Deficiency (SBSE-04-0412-040)

Motion to Dismiss for Lack of Prosecution Granted; Fraud Penalties Assessed (Branson, TCM) (Apr. 27, 2012)
A couple’s petition to the Tax Court, which alleged that the determinations in the notice of deficiency that they received were in error and that they should not be held liable for accuracy-related penalties, was dismissed after the couple: (1) failed to respond to any letters or exchange any documents with the IRS; (2) did not file any documents requested by the court; (3) did not appear at any of the pretrial conferences; and (4) did not appear for the trial. The couple was liable for the…

Unreported Income Taxable, Deductions Disallowed Due to Inadequate Substantiation, and Penalties Applicable (Onyekwena, TCS) (Apr. 27, 2012)
An individual received unreported income based on a reconstruction by the IRS, was denied claimed deductions, and was liable for penalties. The IRS used the bank deposits analysis method to reconstruct income unreported by the taxpayer. The taxpayer’s claim that the deposits reflected loans and transfers was rejected because he was not specific and expected the court to perform another bank deposits analysis without further aid or explanation from him. The IRS’s disallowance of a number of…

Tax Court’s Computation of Tax Liabilities and Penalties Upheld; Taxpayer Failed to Rebut IRS’s Computations (Jordan, CA-6) (Apr. 27, 2012)
The Tax Court did not err in its computation of an individual’s tax liabilities and penalties for several tax years. The IRS’s calculations were supported by a minimal evidentiary foundation and, therefore, the presumption of correctness attached to them. The taxpayer then had the burden of proving that he did not earn the income attributed to him but he was unable to satisfy that burden. The taxpayer’s argument that he was entitled to a credit against his 1991 liability because he repaid…

Summons Ordered Enforced; Prima Facie Case for Summons Enforcement Not Rebutted (Bladow, DC Calif.) (Apr. 27, 2012)
An IRS summons directing an individual to appear, testify and produce documents relating to an investigation into her corporate tax liabilities was ordered enforced. The government established its prima facie case for enforcement under Powell , which the individual failed to meet rebut. She also failed to show that enforcement was an abuse of the court’s process or that the IRS acted in bad faith. B. Bladow, DC Calif., 2012-1 ustc ¶50,318 Other References: Code Sec. 7602 CCH Reference -…

Ford Lacked Proof of Export HMT Payments (Ford Motor Company, CA-FC) (Apr. 27, 2012)
The Court of Appeals for the Federal Circuit has ruled that the U.S. Court of International Trade properly granted summary judgment against Ford Motor Company (Ford ) regarding its claim for refund of the Code Sec. 4461 Harbor Maintenance Tax (HMT). Ford had made claims for refunds of HMT that it allegedly paid on exports both before and after July 1, 1990. The appellate court agreed with the lower court that Ford did not submit the proof of payment of export taxes required by applicable…

Bill Text Released Relating to EIC Filing Requirements and Requiring Coverage of Routine HIV Screening (Apr. 27, 2012)
Easy Earned Income Tax Credit Act of 2012. HR 4421 Routine HIV Screening Coverage Act of 2012. HR 4470

State Tax News

Alabama—Sales and Use Tax: Campgrounds Excluded From Authorization for Talladega County to Impose Lodgings Tax (Apr. 27, 2012)
Legislation has been enacted that excludes campgrounds from the previously enacted authorization for Talladega County, Alabama, to impose a 2% privilege or license tax upon every person, firm, or corporation engaging in the business of renting or furnishing rooms, lodging or accommodations to transients in any hotel, motel, inn, tourist camp, or tourist cabin on the charge for the room, including the charge for use or rental of personal property or services furnished in the room. Act 233 (S.B.…

Arkansas—Franchise Tax: Filing Deadline Approaching (Apr. 27, 2012)
Arkansas taxpayers are reminded that franchise taxes must be filed no later than May 1 or the business will go into delinquency. Taxes may be filed online and paid by credit card or electronic check. Taxes may also be mailed to P.O. Box 8014, Little Rock, AR 72203-8014, or paid in person in the Victory Building, 1401 W. Capitol, Suite 250, in Little Rock. Businesses that have closed or ceased conducting business must formally dissolve and pay final taxes; franchise taxes will continue to…

California—Corporate Income Tax: FTB Not Required to Accept Certification as Proof for Enterprise Zone Hiring Credit (Apr. 27, 2012)
The California Supreme Court has concluded that the California Franchise Tax Board (FTB) may conduct an audit to determine whether a taxpayer is entitled to an enterprise zone hiring credit for corporation franchise and income tax purposes, and during such audit may require the taxpayer to establish that the employee is a qualified employee. The FTB is not required to accept a certification or voucher from a local agency as conclusive or prima facie proof that an employee is a qualified…

Colorado—Personal Income Tax: Taxpayers Can Check Refund Status, More With Revenue Online (Apr. 27, 2012)
The Colorado Department of Revenue has issued an announcement reminding taxpayers and tax professionals that they can access state personal income tax returns, payment history, refund status and other information through the department’s Revenue Online service. Taxpayers may also add a power of attorney; make an address change; amend a return (2009 and forward only); make a balance inquiry; file a protest; file a return (2009 and forward only); make a payment; print returns; see Where’s my…

Florida—Corporate Income Tax: Correction: 2013 Estimated Tax Deadline Changed (Apr. 27, 2012)
Currently, Florida corporate estimated income tax payments are due the last day of the applicable month, but if that day falls on a Saturday, Sunday, or legal holiday, the payments will not be due until the next business day. However, new legislation provides that estimated corporate tax payments that are due by June 30, 2013, will be due by June 28, 2013. The Department of Revenue must provide adequate notice to taxpayers of the earlier due date. (A previous story incorrectly stated that the…

Hawaii—Transportation Tax: Tax Lien and Encumbrance Record Provisions Modified (Apr. 27, 2012)
The provisions governing the Hawaii motor vehicle tax lien and encumbrance record are amended to (1) clarify that judgments are also valid claims for purposes of encumbrances recorded in the tax lien and encumbrance record, (2) allow a taxpayer to enter into a payment agreement with the Department of Taxation to avoid a lien and encumbrance recordation, and (3) clarify that state and county agencies are not required to pay a fee for the recording of an entry in the tax lien and encumbrance…

Illinois—Sales and Use Tax: Guidance on Use Tax for Individuals Updated (Apr. 27, 2012)
The Illinois Department of Revenue has updated guidance on the Illinois use tax for individual taxpayers, noting that use tax is owed on purchases from an Internet site that does not charge sales tax. The department also states that it is aggressively focusing on the collection of use tax using various methods. Motor vehicles, watercraft and aircraft are no longer covered in the guidance. The guidance includes notes on an individual’s liability for cigarette use tax on cigarettes purchased…

Maine—Corporate, Personal Income Taxes: Information Return Requirement for Pass-Through Entities Repealed (Apr. 27, 2012)

Maine Gov. Paul LePage has signed legislation repealing the requirement that every partnership and S corporation with a resident partner or shareholder, or with Maine-sourced income, file an income tax information return. The legislation also amends the definition of taxpayer to include pass-through entities doing business in Maine or having a Maine resident owner in order to provide the State Tax Assessor the ability to audit a pass-through entity even if the entity does not have a Maine…

Maine—Property Tax: Phased-In Changes Enacted for Distributions From Disproportional Tax Burden Fund (Apr. 27, 2012)
Phased-in changes to the distribution of revenue-sharing funds from the Disproportionate Tax Burden Fund, a fund based on Maine property tax burdens, are enacted. Under current law, only municipalities with a property tax burden greater than 10 mills share in the distribution of these funds. Beginning on July 1, 2013, and each following July 1, if the total revenue-sharing distribution as calculated is distributed to the municipalities without transfer or reduction, the reduction factor must…

Maine—Sales and Use Tax: Exemption for Positive Airway Pressure Equipment Enacted (Apr. 27, 2012)
On April 24, 2012, Maine Governor Paul LePage signed a supplemental budget bill that creates a sales and use tax exemption for positive airway pressure equipment and supplies sold or leased for personal use. Positive airway pressure equipment and supplies means continuous positive air pressure and bilevel positive air pressure equipment and supplies, and repair and replacement parts for such equipment, used in respiratory ventilation. The exemption applies retroactively to January 1, 2012.…

Michigan—Property Tax: Taxpayers Failed to Support Their Property Value Contentions (Apr. 27, 2012)
In an appeal of an assessment of residential property for local property tax purposes, the Michigan Court of Appeals determined that the Tax Tribunal correctly found that the taxpayers failed to provide evidence in support of their property value contentions because the exhibit evidence the taxpayers presented, which consisted of a list of 15 sales of other properties in the city, was excluded by the hearing referee and the taxpayers did not present any other evidence in support of their…

Michigan—Property Tax: Companies Allowed to Amend Complaint Alleging Fraudulent Tax Foreclosure Proceedings (Apr. 27, 2012)
Limited liability companies should be permitted to amend their complaint in a case where the companies alleged that the county treasurer’s conduct wrongfully or fraudulently deprived the companies of their ability to participate in a public auction to sell off various properties for unpaid local Michigan property taxes. The companies had a legitimate expectancy that they would be able to bid at the auction and that their bid would be evaluated fairly and openly. In this case, the companies…

Michigan—Miscellaneous Tax: Residential Building Company’s Real Estate Transfers Taxable (Apr. 27, 2012)
The real estate transfers of a residential building company that constructed and sold new homes to predetermined buyers were not exempt from the Michigan real estate transfer tax because the buyers’ quitclaim deeds could not be construed as only equitable mortgages and the company’s quitclaim deeds as only their discharge. Although all the buyers’ quitclaim deeds provided strong security to the building company regarding its construction contracts, they also transferred all of the buyers’…

New York—Multiple Taxes: Effect of Independent System Operator’s New Structure Discussed (Apr. 27, 2012)
The New York Department of Taxation and Finance has issued an advisory opinion discussing the corporate franchise tax, Article 9 corporation tax, and sales and use tax implications of a central counterparty structure established by a not-for-profit independent system operator (ISO), under which the ISO will become a party to all transactions consummated through the electricity markets administered by the ISO, in accordance with orders of the Federal Energy Regulatory Commission. Even assuming…

New York—Sales and Use Tax: FFL Who Transfers Gun Bought From Out-of-State Seller Not Required to Collect Tax (Apr. 27, 2012)
The New York Department of Taxation and Finance has ruled that for purposes of a gun purchased out-of-state under the facts provided, a New York Federal Firearms Licensee (FFL) is not required to collect New York state sales tax on the sale of a gun to a buyer by a third party. A New York resident purchases a gun from an out-of-state FFL and pays the seller directly for the sales price of the gun. Since the federal Gun Control Act prohibits transporting a gun across state lines, any gun…

North Carolina—Multiple Taxes: Governor Announces Budget Proposal With Tax Provisions (Apr. 27, 2012)
North Carolina Gov. Bev Perdue announced that her budget proposal will include, for corporation franchise, corporate income, personal income, insurance gross premium, and sales and use tax purposes, tax relief, tax credits, and support specifically aimed at small businesses. The jobs and manufacturing initiatives include the extension of certain tax credits that support job creation and investments in manufacturing, Article 3J tax credits for expanding businesses, and a sales tax refund on…

Oklahoma—Corporate, Personal Income Taxes: Rate Decrease and Credit, Deduction, Exclusion, and Exemption Repeals Passed by Senate (Apr. 27, 2012)
The Oklahoma Senate has passed legislation, known as the Oklahoma Tax Reduction and Simplification Act, that would decrease the top personal income tax rates. If enacted, for the 2013 and 2014 tax years the top personal income tax rate would be reduced from 5.25% to 3.5%. For the tax years beginning after 2014, the personal income tax rates could be decreased in increments of twenty-five hundredths (0.25) per tax year, contingent upon revenue growth until the tax was eliminated. In addition,…

Pennsylvania—Property Tax: Judicial Test for “Purely Public Charity” Still Viable (Apr. 27, 2012)
A divided Pennsylvania Supreme Court has determined that, in order to receive a Pennsylvania property tax exemption as a purely public charity without violating the state constitution, a party must first meet the judicially created test (HUP test) of a purely public charity. If it did meet that test’s requirements, it could qualify for the exemption if it also met the statutory test for a purely public charity. Because the issue in this case was limited to the continuing viability of the…

Pennsylvania—Property Tax: Leasehold Interests Taxable, Must Be Included in Valuation (Apr. 27, 2012)
Shopping center buildings, parking lots, and other improvements to the underlying leased land constituted real estate subject to Pennsylvania property tax even though they were owned by the lessee, according to the Supreme Court of Pennsylvania. Further, in determining the actual or market value of that property, there was no error of law for in aggregating the value of the leased fee interest in the land and the value of the lessee’s leasehold interests. The mere fact that the buildings and…

South Dakota—Tobacco Tax: Regulatory and Tax Forms Revised to Encompass New Roll-Your-Own Cigarette Businesses (Apr. 27, 2012)
Effective as of July 1, 2012, recently enacted South Dakota legislation (H.B. 1138) provides that a person that maintains or provides a roll-your-own cigarette machine at a retail establishment is deemed to be a cigarette manufacturer and is thus subject to the state’s applicable regulatory and tax provisions. For these purposes, a roll-your-own cigarette machine is a machine that enables a retail consumer to process tobacco, or any product that is made or derived from tobacco, into a roll or…

Texas—Sales and Use Tax: Aircraft Purchase Qualified for Resale Exemption (Apr. 27, 2012)
An aircraft purchase was qualified for a resale exemption from Texas sales and use tax because the taxpayer purchased the aircraft for the sole purpose of leasing it to unrelated lessees and the aircraft was flown and maintained by the lessees for charter services pursuant to those leases. The lessees were certified air carriers, and the taxpayer received significant revenues from the leases. The fact that the taxpayer received charter services from the lessees did not bar a resale exemption…

Virginia—Sales and Use, Miscellaneous Taxes: Town Entitled to Refund for Payments Made to Communications Services Provider (Apr. 27, 2012)
A Virginia town was entitled to a communications sales and use tax refund for payments made to a communications services provider for a period of two years prior to the date of its refund request because the town, as a political subdivision of the commonwealth, was not subject to the tax and it presented an exemption certificate to the service provider. Likewise, the town was entitled to a refund of the E-911 tax paid for the period of two years prior to the date of its refund request because…

Washington—Property Tax: Guidance Issued on Personal Property Tax Penalty Waiver (Apr. 27, 2012)
The Washington Department of Revenue has issued guidance on recent legislation that authorizes counties to offer a one-time waiver of penalties and interest for businesses and individuals who have never filed their personal property list with their county assessor. (Ch. 59 (H.B. 2149), Laws 2012) The waiver applies to previous assessment years, beginning with 2011, and may be available in participating counties where the county legislative authority has decided to implement the amnesty. Usual…

Washington—Business and Occupation Tax: Wireless Company’s Billing of B&O Surcharge Impermissible (Apr. 27, 2012)
In a case involving the conditions under which a business may collect business and occupation (B&O) tax from consumers, the Washington Supreme Court ruled that a seller of wireless telephone services may not recoup its B&O taxes where, prior to the sale of a monthly service contract, the seller discloses that in addition to its monthly service fee, it collects a surcharge to cover gross receipts taxes. Regardless of disclosure, the wireless company’s practice of adding a surcharge on to its…

Wisconsin—Corporate, Personal Income Taxes: Fact Sheet Issued on Veteran Employment Credit (Apr. 27, 2012)
The Wisconsin Department of Revenue has issued a personal income and corporation franchise and income tax fact sheet discussing the veteran employment credit, which was recently enacted (TAXDAY, 2012/04/09, S.28 ) and can be claimed in taxable years beginning on or after January 1, 2012. The fact sheet discusses eligibility requirements, calculation of the credit, and the process for claiming the credit. Subscribers can view the fact sheet. Fact Sheet, Wisconsin Department of Revenue, April…

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