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New Rules Make Indiana Composite Filing Mandatory
Partnerships, limited liability companies, and S corporations doing business in Indiana will be required to file composite returns on behalf of all nonresident individuals who are partners or S corporation shareholders for tax years beginning after Dec. 31, 2007.
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U.S. Supreme Court Affirms Favorable Treatment for Home-state Municipal Bonds
The U.S. Supreme Count reversed a decision of the Kentucky Supreme Court holding that the state can exempt home-state municipal bond interest from taxation while taxing out-of-state municipal bond interest. The opinion, issued on May 19, was in the case Department of Revenue of Kentucky v. Davis, No. 06–666.
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California Appeals Court Affirms That LLC Fee Is Unconstitutional
A California appellate court upholds the trial court’s decision that the fee imposed on limited liability companies (LLCs) in tax years prior to 2007 was unconstitutional.
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Illinois Legislation Establishes Amnesty Program, Affects Income and Sales/Use Taxes
Senate Bill 783, signed into law by Illinois Gov. Rod Blagojevich on Jan. 11, 2008, makes technical corrections and changes to prior legislation. The previous legislation, FY 2008 Budget Implementation (Revenue) Act, was signed into law on Aug. 16, 2007, and had made significant changes to Illinois income and sales/use taxes, as outlined in Crowe’s SALT Update of Sept. 6, 2007 (http://www.crowechizek.com/Crowe/Publications/detail.cfm?id=1027).
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Time-sensitive Opportunity to Appeal Higher 2007 Indiana Property Tax Assessments
Over the next few months, revised 2007 real estate tax “trending” assessments for residential, commercial, and industrial companies will be mailed in Indiana. These assessments may be substantially higher than in the past and may result in increased tax bills. Appeals of these assessments must be filed within 45 days of receiving the tax bill or after a Notice of Assessment of Land and Structures (Form 11) is mailed.
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MBT Surcharge Replaces Use Tax on Services; Provides Some Tax Relief
The Michigan Legislature, on Dec. 1, 2007, added a surcharge component to the Michigan Business Tax (MBT) to replace the use tax on services. The surcharge applies to the MBT that takes effect on Jan. 1, 2008. The legislation also provided relief from the MBT for individuals, trusts, and family limited partnerships.
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Tax Credit Available for Indiana Residents Investing in 529 Plans
Indiana residents may claim a refundable 20 percent tax credit for contributions made to a CollegeChoice 529 Investment Plan® account on or after Jan. 1, 2007. Taxpayers are limited to an annual tax credit of $1,000.
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Kentucky Limited Liability Entity Tax Not Entitled to 86-272 Protection
The Kentucky Department of Revenue has taken the position that, beginning in 2007, taxpayers are not allowed the protections of Public Law 86-272 with respect to the limited liability entity tax.
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Michigan Treasury Department Clarifies Definitions for Use Tax on Services
Michigan has passed legislation that imposes the Michigan use tax on a number of services. Although scheduled to take effect on Dec. 1, 2007, the Michigan Senate has passed legislation delaying the effective date until Dec. 20. Michigan has defined taxable services by designating activities that fall under a number of NAICS (North American Industry Classification System) codes as taxable.
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Additional Tax Changes in Michigan Affect Business, Individual Taxpayers
In this SALT Update: Recent changes expand the Michigan use tax to many additional services, give some relief for transition items related to the Michigan single business tax, and increase the individual income tax rate.
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Illinois Revises Income/Franchise Tax Provisions
The Illinois revenue act signed by Gov. Rod Blagojevich reduces or eliminates the benefits of planning strategies employed by many Illinois taxpayers.
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Gov. Granholm Signs Bill Enacting Michigan Business Tax
On July 12, Gov. Jennifer Granholm signed the Michigan business tax into law. This will replace the Michigan single business tax on Dec. 31, 2007.
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Favorable Michigan Supreme Court Ruling on Demonstrator Vehicles
A recent Michigan Supreme Court ruling on May 25, 2007, restored the full exemption for automobile and truck dealerships’ demonstration vehicles. This overturns a previously held Michigan Court of Appeals decision to apply a reduced use tax rate on an automobile dealership’s demonstration vehicles in excess of the exempt 25 vehicles.The Supreme Court’s interpretation explains that the resale exemption includes all vehicles used as demonstrator vehicles while being held in inventory for resale without a reduced rate exception, as previously interpreted by the Michigan Department of Treasury.
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Significant Michigan Tax Changes Anticipated
The Michigan single business tax (SBT) expires on Dec. 31, 2007. The Michigan legislature has agreed on a new tax system that will replace the SBT. The bill, which Sen. Jennifer Granholm is expected to sign, imposes an income tax at 4.95 percent and a modified gross receipts tax at .8 percent. Businesses will be subject to both taxes.
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Indiana Taxpayers Receive Extension to Protest 2006 Real Property Tax Assessments
Indiana has changed the frequency of assessing the value of real property used in determining Indiana real property taxes. This likely means property tax bills will increase for most taxpayers. The Indiana legislature, however, has expanded the time period in which taxpayers can protest 2006 real property assessments.
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Indiana Changes Position on Sales Taxation of Warranties, Maintenance Agreements
Indiana has revised Sales Tax Information Bulletin #2, released in December 2006, which discusses the department’s positions on the sales taxability of extended warranties and maintenance agreements. The changes relate to the department’s interpretation of existing law and represent an expansion of transactions that are subject to sales tax.
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Texas Franchise Tax-planning Opportunity Requires Immediate Action
In May, the Texas legislature passed a bill creating new transition rules that affect newly taxable entities, specifically limited partnerships (LPs) subject to the Texas franchise tax. If an LP is not doing business in Texas on Jan. 1, 2008, but conducted business in Texas at any time after June 30, 2007, the LP must pay a special franchise tax covering the period beginning on Jan. 1, 2007.
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Expanded Opportunities to Qualify for Michigan MEGA Credit
Recent changes under Michigan House Bill 6118 may create additional opportunities for companies located in Michigan to qualify for a tax credit though Dec. 31, 2007, under the Michigan Economic Growth Authority Act.
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Tennessee Excise Tax Refund Opportunity for LLCs and Limited Partnerships
Refund opportunities may exist based on a recent court case involving the computation of the tax basis of depreciable or amortizable property sold by a limited liability company (LLC) or limited partnership subject to the Tennessee franchise and excise tax.
Taxpayers with refund opportunities should file claims as soon as possible because the Tennessee Department of Revenue may act to eliminate this opportunity through legal or legislative measures.
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New York, West Virginia Adopt Mandatory Combined Filing
Corporate taxpayers in New York and West Virginia will need to evaluate the impact of recently adopted statutes requiring combined reporting.
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Business Income Tax Refund Opportunities in Texas, New Jersey
Refund opportunities may exist based on recent court cases involving Texas' throwback provision and New Jersey's throwout rules.
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Illinois Department of Revenue Issues Draft of Gross Receipts Tax Legislation
An amendment to Illinois Senate Bill 1 establishing the Illinois Gross Receipts Tax Act, which proposes to enact a gross receipts tax (GRT), was introduced into the legislature on March 30, 2007. From the onset, opponents felt the proposal radically changed how tax is imposed on companies doing business in Illinois. It appears that the GRT may affect certain companies more than others based on their industry, the type of revenue earned, and the form of entity doing business in Illinois.
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Update on Unconstitutionality of California’s LLC Fee
The San Francisco Superior Court has held that California’s levy on limited liability companies (LLCs) is unconstitutional.
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Ohio Training Tax Credit Extended for Another Year
Ohio’s training tax credit (OTTC) program has been extended for another year under House Bill (HB) 699. Taxpayers will be eligible to apply for training tax credits for training incurred during 2007.
Act Now to Claim Michigan SBT Credit for Industrial Personal Property Taxes
Michigan single business tax (SBT) taxpayers can claim a refundable 15 percent tax credit for property taxes paid on industrial personal property in Michigan for a four-year period from 2006 to 2009. (Note: The SBT is repealed effective Dec. 31, 2007.)
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Ohio Training Tax Credit Extended for Another Year
Ohio’s training tax credit (OTTC) program has been extended for another year under House Bill (HB) 699. Taxpayers will be eligible to apply for training tax credits for training incurred during 2007.
Act Now to Claim Michigan SBT Credit for Industrial Personal Property Taxes
Michigan single business tax (SBT) taxpayers can claim a refundable 15 percent tax credit for property taxes paid on industrial personal property in Michigan for a four-year period from 2006 to 2009. (Note: The SBT is repealed effective Dec. 31, 2007.)
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Indiana Market-based Property Tax Assessment Raises Concerns
Indiana is updating the valuation date for real estate assessments from Jan. 1, 1999, to Jan. 1, 2005, for the March 1, 2006, assessment date. Because there is a lot of uncertainty and confusion among Indiana assessors on how to accomplish this update, the resulting new assessed value could be significantly different than the actual market value of land and buildings.
Repeal of Michigan Single Business Tax Raises Questions
The Michigan legislature has approved initiative legislation that repeals the state’s single business tax (SBT), effective Dec. 31, 2007. The repeal of the law raises several issues and questions for Michigan taxpayers.
Texas Tax System Undergoes Dramatic Changes
The governor of Texas has signed sweeping legislation that changes the overall tax system in Texas. For years, the state imposed a franchise tax on taxpayers that contained a very large exemption for limited partnerships. This new legislation eliminates that tax system entirely and creates a new, broad-based tax on entities doing business in the state.
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Kentucky Makes Changes to 2005 Tax Modernization
Taxpayers will once again face significant changes to Kentucky's tax system in 2007.
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Tax Reduction Opportunities in Michigan, Indiana, and Pennsylvania
How an elimination of certain sales from the Michigan sales factor may reduce the Michigan single business tax;
How sourcing of sales outside the state may reduce Indiana income tax liability for companies within Indiana; and
How sourcing of sales outside the state may reduce capital stock tax and net income tax for companies within Pennsylvania.
Repeal of the Intangibles Tax in Florida Expected
House Bill 209, which repeals Florida’s annual intangible personal property tax effective Jan. 1, 2007, was passed by the legislature and is expected to be signed into law.
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Florida Legislature Expands Manufacturing, Research and Development Exemptions
House Bill 69, which increases the sales tax exemption for manufacturers purchasing machinery and equipment used in manufacturing, was passed by the Florida legislature and is expected to be signed into law. The exemption applies to qualifying purchases after July 1, 2006.
The Florida legislature also passed House Bill 415, which exempts companies from paying sales tax on equipment to be used for research and development purposes. The exemption applies to qualifying purchases after July 1, 2006.
