Tax Headlines


Kansas ~ Sales and Use Tax: Assessment Based on Sampling Methodology Upheld

The Kansas Court of Appeals upheld a retailers’ sales tax assessment against a Kansas company that sells goods and services to in-state and out-of-state customers to repair and restore property damaged in disasters. A Kansas Department of Revenue auditor had used a sampling method due to the taxpayer’s voluminous, inconsistent, and incomplete records.

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CCH Weekly Report from Washington, D.C.

The Senate on September 19 failed to advance the veterans’ jobs bill that called for establishing a federal jobs corps to employ 20,000 veterans to work in conservation efforts and as first responders while the House passed a measure to allow taxpayers to reduce the federal budget deficit by donating money through addition of a check-box on their federal income tax forms. The House also passed legislation that would prohibit the discharged student loan debt of deceased veterans from being included in gross income.

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Changes to Rules for Making Good Faith Determinations on Foreign Organizations Proposed (NPRM REG-134974-12)

The IRS has proposed amendments to the rules for making a good faith determination that a foreign organization is a charitable organization, grants to which may be qualifying distributions and not taxable expenditures. These proposals affect private foundations making good faith determinations. A private foundation may rely on these proposed regulations for grants made on or after September 24, 2012.

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Kentucky ~ Multiple Taxes: Amnesty Program to Begin October 1

The Kentucky Finance and Administration Cabinet has announced that the tax amnesty program authorized by the General Assembly in the 2012 legislative session (TAXDAY, 2012/04/13, S.21 ) will be held between October 1 and November 30, 2012. The amnesty program will allow people or businesses owing back taxes to pay without fees or penalties. Also, the threat of prosecution will be waived, and only half the interest owed will be due. The program applies to taxes owed to the Kentucky Department of Revenue for eligible tax periods ending after December 1, 2001, and prior to October 1, 2011.

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Agreements Related to Corporate Reorganization Characterized as Equity Rather than Debt (Pepsico Puerto Rico, Inc., TCM)

Advance agreements among various related corporate entities that arose out of a corporate reorganization constituted equity, not debt. The taxpayers include a parent corporation and numerous affiliated corporations, including several finance and holding companies organized in the Netherlands Antilles (NA) and treated as controlled foreign corporations for U.S. tax purposes, as well a certain foreign partnerships. Changes in international treaties resulted in loss of favorable treatment in the NA, as a result of which the taxpayers transferred ownership of various foreign partnerships from NA holding companies to Netherlands holding companies.

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F. Senate Committee Seeks Reforms to Curb Offshore Tax Schemes

Sen. Carl Levin, D-Mich, chairman of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, told members on September 20 that U.S. multinational corporations currently house, through the use of “gimmicks and charades,” a total of $1.7 trillion offshore. Between 2009 and 2011, Google deferred over $24.2 billion in offshore passive income covered by Subpart F; Microsoft held back $21 billion; and Apple was able to defer taxes on over $35.4 billion.

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