State Tax Headlines

1789

California ~ Personal Income Tax: Taxpayer’s IRC 83(b) Election Was Valid Election

The California State Board of Equalization (BOE) rejected a taxpayer’s attempt to recharacterize his IRC §83(b) election to recognize the income on the transfer of his incentive stock options as invalid in an attempt to reduce the amount of his California personal income alternative minimum tax (AMT) liability for the tax year at issue. The taxpayer had unsuccessfully argued before the Ninth Circuit Court of Appeals that his IRC §83(b) election was invalid because his acquisition of nonvested shares was not a transfer of “property” under the governing statutory or regulatory law.

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New Hampshire ~ Miscellaneous Tax: Transfer of Ownership Interest to Single-Purpose Entity Not Taxable

The New Hampshire Supreme Court ruled that the transfer of an ownership interest in a real estate holding company to a single-purpose bankruptcy remote entity for the purpose of obtaining a mortgage loan was not subject to real estate transfer tax because it was not a contractual transfer within the meaning of the applicable statute. A contractual transfer is a bargained-for exchange of all transfers of real estate or an interest therein.

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South Carolina ~ Sales and Use Tax: Software Delivered Electronically at Customer’s Location Not Taxable

The South Carolina Department of Revenue has issued a sales and use tax ruling clarifying that the sale of software delivered electronically via the Internet or wireless network from a connection between the seller’s laptop and the buyer’s computer at the buyer’s location is not taxable so long as no part of the software, such as back-up tapes, diskettes, or flash drives, is delivered by tangible means. Software delivered electronically does not fall within the definition of tangible personal property or within the scope of the statutory provisions taxing communications services. However, the department advises that charges by an application service provider (ASP) to a customer for access to software on its website are taxable.

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Mississippi ~ Miscellaneous Tax: Waste Management Assessment Upheld

A contractor was correctly assessed a Mississippi commercial nonhazardous solid waste management fee of $1.00 per ton because (1) the contractor’s work sites met the statutory definition of commercial nonhazardous solid waste management facilities; (2) the Mississippi Department of Revenue’s (formerly, the Mississippi State Tax Commission) treatment of similarly-situated waste management facilities was not unequal, and, therefore, the contractor’s constitutional rights were not violated; and (3) the evidence demonstrated that the contractor was the operator of the work sites and was liable for the entire assessment.

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Michigan ~ Corporate Income Tax: Taxpayer Not Unitary, Gain Excluded From SBT Base

Affirming the lower court, the Court of Appeals held that a taxpayer was not a unitary business with a joint venture that was sold; therefore, the capital gain on the sale was properly excluded from the taxpayer’s tax base under the former Michigan single business tax (SBT). The court noted that the unitary business principles applied to the former SBT because, like income taxes, the value added under a value-added tax (such as the SBT) often cannot be assigned to a single source. The court examined whether the taxpayer, through its ownership of the subsidiary, operated a unitary business with the subsidiary’s joint venture.

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Michigan ~ Corporate Income Tax: Company Failed to Appeal Contested Assessment Within 90-Day Time Period

A court of claims lacked subject matter jurisdiction to grant a Michigan corporate income tax refund because notices regarding offsets constituted a “decision” or “assessment” within the meaning of the applicable statutory provision pertaining to an appeal of a contested assessment and the limited liability company (LLC) failed to appeal the offsets within the 90-day statutory period. The LLC, which was a financial services company, filed its complaint more than three years after the notices were sent.

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