Tax Headlines


CCH Weekly Report from Washington, D.C.

Senate Finance Committee Chairman Max Baucus, D-Mont., generally outlined his goals for tax reform during the week of June 11 as the Senate Appropriations Committee approved the fiscal year (FY) 2013 Financial Services and General Government Appropriations Bill, which includes a $702-million increase for the IRS.

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Connecticut ~ Corporate, Personal Income Taxes: Taxation of Manufacturing Reinvestment Accounts, Job Expansion Credit Modified

Connecticut Gov. Dannel Malloy has signed legislation affecting the corporate business and personal income tax provisions for calculating tax liability for manufacturing reinvestment account deposits and distributions and expanding application of the job expansion tax credit. Provisions of the legislation affecting sales and use taxes (TAXDAY, 2012/06/19, S.7), insurance assessments (TAXDAY, 2012/06/19, S.11), and other taxes (TAXDAY, 2012/06/19, S.6) are covered separately.

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California ~ Unclaimed Property: Eleventh Amendment Barred Federal Claims

In a not-for-publication memorandum, it was held that a federal §1983 claim that the California Controller disobeyed the state unclaimed property law was barred by the Eleventh Amendment because the claim was premised solely on compliance with state law. Summary judgment on that claim and a variety of other claims by nine individuals was affirmed. The other unclaimed property claims involved mail notice procedure in the law; the state’s use of auditors; retroactive interest and restitution; whether the Controller wrongfully withheld property; and whether one individual’s ancestors were entitled to more than they received from the Controller.

Suever v. Connell, U.S. Court of Appeals, Ninth Circuit, No. 10-17127, June 15, 2012, ¶405-683

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Appraisal of Historic Façade Easement Was Qualified Appraisal; Cash Contribution Not Quid Pro Quo (Scheidelman, CA-2)

The Tax Court incorrectly disallowed charitable contribution deductions for an individual’s donation of a historic façade easement for failure to provide a qualified appraisal and for her cash contribution to the same organization as a quid pro quo donation. The appraisal was a qualified appraisal under Reg. §1.170A-13(c)(2)(J) and (K) because it sufficiently explained the basis and method the appraiser used to determine the fair market value of the easement. The before-and-after method used by the appraiser was nearly identical to that approved by the Tax Court in D.J. Simmons, 98 TCM 211, Dec. 57,934(M), TC Memo 2009-208, aff’d CA-DC, 2011-2 USTC ¶50,469. Moreover, the appraisal considered the IRS’s past treatment of façade conservation easements and adequately explained the application of a percentage to the fair market value before conveyance of the façade easement. Therefore, the appraisal provided the IRS with sufficient information to evaluate the claimed deduction. Further, the two Forms 8283, Noncash Charitable Contributions, submitted by the individual together contained all of the required information and signatures and, therefore, constituted substantial compliance with the regulations.

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Applicable Federal Rates for July 2012 Released (Rev. Rul. 2012-20)

Various prescribed rates for federal income tax purposes for July 2012 have been provided by the IRS. The annual short-term, mid-term, and long-term applicable federal interest rates (AFRs) are 0.24 percent, 0.92 percent and 2.30 percent, respectively. The semiannual short-term, mid-term, and long-term AFRs are 0.24 percent, 0.92 percent and 2.29 percent, respectively. Quarterly short-term, mid-term and long-term AFRs are 0.24 percent, 0.92 percent and 2.28 percent, respectively. Finally, the monthly short-term, mid-term and long-term rates are 0.24 percent, 0.92 percent and 2.28 percent, respectively.

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Illinois ~ Tobacco Tax: Rates Increased; New Cigarette Machine Tax Enacted

Enacted Illinois legislation increases the cigarette and tobacco products tax rates, creates a new cigarette tax, and redefines the terms “cigarettes” and “contraband cigarettes.” Sales and use tax (TAXDAY, 2012/06/18, S.8), income tax (TAXDAY, 2012/06/18, S.6), and property tax and hospital assessment TAXDAY, 2012/06/18, S.7) provisions are discussed in separate stories.

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New Hampshire ~ Property Tax: Arbitrator Did Not Exceed Authority in Tax Dispute

The New Hampshire Supreme Court reversed a Superior Court decision vacating an arbitrator’s decision that a taxpayer was not required to pay property taxes under a lease agreement with the city of Lebanon. The Supreme Court held that the arbitrator did not exceed the scope of his authority when he ultimately decided that the facts supported reformation of the lease in light of a mutual mistake.

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All States ~ Sales and Use Tax: CRIC Finds Utah in Compliance With SST Agreement, Discusses Ohio’s Compliance

During a conference call held on June 14, 2012, the Streamlined Sales Tax (SST) Compliance Review and Interpretations Committee (CRIC) voted 7-0 in favor of finding Utah “not out of compliance” with the SST Agreement. The CRIC also discussed Ohio’s compliance issues but did not vote on Ohio because the state has not yet petitioned for full membership.

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