Tax Headlines

1827

Senate Clears Highway Bill

The Senate on March 14 approved by a 74-to-22 margin,a $109-billion transportation authorization measure, the Moving Ahead for Progress in the 21st Century (MAP-21) (Sen 1813), leaving it up to the House to advance the bill to President Obama’s desk for his signature. House Speaker John Boehner, R-Ohio, said he will bring the bill, or something similar, to the floor but passage is far from assured as GOP leadership struggles to rein in its members.

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South Carolina ~ Corporate Income Tax: Department Had Burden of Proving Alternative Apportionment Formula Was Appropriate

The South Carolina Court of Appeals has determined that a party seeking to override the legislatively determined apportionment method must bear the burden of proving that the method is not appropriate and that an alternative method more accurately reflects the taxpayer’s business activity within South Carolina for corporate income tax purposes.

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Minnesota ~ Sales and Use Tax: Tax Court Lacked Jurisdiction to Hear Contractor’s Appeal

The Minnesota Tax Court lacked jurisdiction to hear an appeal of a sales tax assessment by a home repair and remodeling contractor because there was no appealable order. In addition, the contractor’s claim was barred by the doctrine of res judicata because the contractor had already appealed the assessment and the case was fully litigated. Furthermore, the contractor was not entitled to a refund because he had not paid sales tax to the state.

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Helicopter Tour Company Was Liable for Air Transportation Tax (Sundance Helicopters, Inc., FedCl)

A company that provided helicopter sightseeing tours (prior to the exemption for sightseeing tours added to Code Sec. 4281 starting in October 2005) was subject to the air transportation excise tax imposed by Code Sec. 4261 because it operated on an established line. The noncharter tours satisfied the three elements of operating on an established line under Reg. §49.4263-5(c): (1) by “operat[ing] with some degree of regularity,” (2) the regularity of operation was “between definite points,” and (3) the flight operator maintained control over “the direction, route, time, number of passengers carried, etc.” Therefore, the Code Sec. 4281 exemption for small aircraft operated on a nonestablished line did not apply.

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Oregon ~ Corporate Income Tax: Case Addressing Application of Business Energy Tax Credit Appealed to State Supreme Court

The Department of Revenue (DOR) has advised that it has appealed to the Oregon Supreme Court in the case of Con-Way, Inc. v. Department of Revenue, which held that a corporation was allowed to apply its business energy tax credit (BETC) against its Oregon corporation excise (income) minimum tax. According to the DOR, the previously reported Oregon Tax Court decision (TAXDAY, 2012/01/04, S.16) suggests that all corporate tax credits, unless specifically prohibited by statute, may be applied against the corporate minimum tax. The DOR stated that the Tax Court’s decision contradicts the DOR’s long-standing position that credits cannot reduce corporation excise tax below the minimum tax.

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California ~ Corporate Income Tax: Enterprise Zone Sales and Use Tax Credit Not Allowed for Current Expense Assets

The California corporation franchise and income tax credit for sales and use tax paid or incurred in connection with the purchase of qualified property placed in service in an enterprise zone was not available for a taxpayer’s purchase of current expense assets. Construing Rev. & Tax. Code Sec. 23612.2 narrowly against the taxpayer, the court held the credit was available only for the purchase of capital assets.

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Individual Not Entitled to Credit for Nonexistent Third-Party Tax Payment (McLaine, TC)

An individual who claimed that a third party had paid his tax liability was not entitled to a credit under Code Sec. 31 because there was no evidence that such a payment was made. The taxpayer exercised nonqualified stock options given him by his former employer, sold the stock immediately and declared the tax liability on his return, but did not include payment of his entire tax liability. He paid approximately half of the liability a few months later. His employer, who sold the stock and remitted the option proceeds to the taxpayer, did not withhold any taxes from those proceeds.

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Couple Could Not Exclude Foster Care Payments; They Did Not Live in Home Provided for Developmentally Disabled Adults; Accuracy Penalty Not Imposed Due to Reasonable Cause for Reporting Position (Stromme, TC)

A couple could not exclude foster care payments paid by a county government because they did not live in the house in which they provided for the care of developmentally disabled adults. The couple owned two homes; they resided in one home, and the second home was used to care for and as lodging for their clients. Code Sec. 131 allows the payments to be tax free if the payments are paid by the State’s foster care program or by a political subdivision thereof, or qualified agency to a foster care provider for the care of a qualified foster individual in the foster care provider’s home.

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