Tax Headlines

1827

California ~ Corporate Income Tax: Regulation on Sourcing of Sales of Other Than Tangible Property Adopted

A California corporation franchise and income tax regulation has been adopted that addresses the market-based sourcing rules for sales of other than tangible personal property when taxpayers elect for taxable years beginning after 2010 to use the single sales factor formula to apportion their business income. These sales are considered to be in the state if the taxpayer’s market for the sales is in the state. Sales from services are assigned to California to the extent the purchaser of the service receives the benefit of the service in California. Sales from intangible property are assigned to California to the extent the property is used in California.

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New Mexico ~ Corporate Income Tax: Governor Vetoes Combined Reporting, Rate Reduction Bill

New Mexico Gov. Susana Martinez has vetoed a bill that would have reduced the highest corporate income tax rate and required combined reporting for certain unitary retail businesses. If enacted, the bill would have reduced the corporate income tax rate for taxpayers with net income over $1 million from 7.6% to 7.5%. In addition, unitary corporations with more than 30,000 square feet of retail space under one roof in New Mexico (i.e., “big box” retailers) would have been required to file a combined return (combined reporting is currently optional for all unitary corporations). The changes would have applied to taxable years beginning in 2013 and thereafter.

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Filing, Payment Deadlines Extended for Tornado, Storm and Flooding Victims in Kentucky (KY-2012-08)

The IRS has extended return-filing and payment deadlines for victims of tornadoes, storms and flooding that started on February 29, 2012, in parts of Kentucky and resulting in the counties of Johnson, Kenton, Laurel, Lawrence, Menifee, Morgan and Pendelton being declared a federal disaster area. Certain deadlines falling on or after February 29, 2012, and on or before May 31, 2012, have been postponed to May 31, 2012.

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New York ~ Sales and Use Tax: Exemption for Clothing and Footwear Costing Less Than $110 Restored

The New York Department of Taxation and Finance has issued a memorandum reminding taxpayers that beginning April 1, 2012, clothing, footwear, and items used to make or repair exempt clothing sold for less than $110 (per item of clothing or per pair of footwear) will be exempt from the state’s 4% sales and use tax. The exemption will also apply to the 3/8% state sales tax in those localities in the Metropolitan Commuter Transportation District (MCTD) that provide for the exemption from their local sales tax.

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Couple Not Entitled to Foreign Tax Credit for Social Security Taxes Paid for Periods of Coverage Consistent with Totalization Agreement (Erlich, FedCl)

A married couple were not allowed foreign tax credits under Code Sec. 901(b)(1) for Social Security taxes paid to France for periods covered by the totalization agreement between the United States and France. Section 317(b)(4) of the Social Security Amendments of 1977 precludes taxpayers from basing foreign tax credits on Social Security payments made to a foreign country under a totalization agreement.

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Treasury Security Rate Set for Computing Current Plan Liability for March 2012 (Notice 2012-24)

For pension plan years beginning in March 2012, the IRS has released the corporate bond weighted average interest rate, the permissible range of interest rates used to calculate current plan liability and to determine the required contribution under Code Sec. 412(l) for plan years through 2012, and the current corporate bond yield curve and related segment rates for the purpose of establishing a plan’s funding target under Code Sec. 430(h)(2).

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Highway Bill Stalls in Senate

The Senate on March 6, 2012, failed to advance the Highway Investment, Job Creation and Economic Growth Bill of 2012 (Sen 1813), which incorporates revisions from relevant committees, including a tax title approved by the Senate Finance Committee. The measure fell on a procedural vote to take up the bill by a margin of 52 to 44; the threshold to approve the motion requires 60 votes.

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