Tax Headlines

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All States ~ Corporate Income Tax: CCH Webinar: Handling Net Operating Losses in the Multistate Environment Scheduled for March 27

CCH Tax and Accounting is hosting a live two-hour Webinar, Handling Net Operating Losses in the Multistate Environment, on Tuesday, March 27, 2012, at 1 p.m. Eastern; noon Central; 11 a.m. Mountain; 10 a.m. Pacific. This two-hour CCH Webinar, presented by highly regarded instructor, presenter and practitioner Kathleen K. Wright, CPA, J.D., LL.M., M.B.A., will examine federal guidelines on how to compute the NOL, briefly review the federal limitations encountered in utilizing the NOL carryforward, discuss state modifications to the computation of the federal NOL and address states that have suspended utilization of the NOL and other unusual provisions applicable in 2011 and 2012.

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Losses Disallowed to and Penalties Imposed on Individuals (Barnes, TCM)

A married couple was liable for deficiencies due to readjustment of loss items and basis over several years, and were subject to an accuracy-related penalty. The taxpayers ran several businesses, including an S corporation. Over nine years, the S corporation sustained losses eight times and produced gain once, in the sixth year. On the return for the second year, the taxpayers mistakenly reported a gain instead of deducting a much larger loss, and in the third year, the taxpayers did not reduce their basis by the amount of the loss, which they did not, but were required to, deduct. This affected application of the limit on pass-through losses from an S corporation, which is equal to the shareholder’s basis in the S corporation’s stock under Code Sec. 1366(d)(1)(A), and the error was perpetuated over the following years.

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Cantor Introduces Small Business Tax Bill; Sets Vote on Transportation Measure

House Majority Leader Eric Cantor, R-Va., unveiled legislation on March 21 that would grant a 20-percent tax cut to small businesses with under 500 employees as a way to spur job creation. The $45.9-billion measure would be paid by reduced federal spending included in the recently proposed fiscal year 2013 GOP budget proposal, Cantor told reporters. He said the House will likely vote on the tax bill by April 15. “Current marginal tax rates mean that small businesses are faced with enormous burdens that are sapping capital, resources and time,” Cantor stated.

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Nebraska ~ Property Tax: Claim of Unconstitutionality Not Allowed Under Illegal Tax Statute

A taxpayer who paid Nebraska property taxes levied by a learning community could not recover on a claim that the tax was unconstitutional and therefore illegal, the Nebraska Supreme Court has held. The taxpayer brought suit under the statute that allows taxpayers to recover for an illegal tax. However, even though that statute allows for an illegal tax recovery, it does not provide a remedy for recovering on an unconstitutionality claim.

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Indiana ~ Utilities, Miscellaneous Taxes: Comprehensive Changes to 911 Service Fees Enacted

Indiana has repealed existing provisions relating to funding enhanced 911 services and in its place enacted a monthly statewide 911 fee on each user of communications service in Indiana. Specifically, the statutes concerning the emergency telephone system fee, the enhanced wireless emergency telephone service, and the emergency telephone notification systems are repealed, effective July 1, 2012.

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Installment Interest Paid by State Under Condemnation Agreement Exempt; Settlement Interest Taxable (DeNaples, CA-3)

The Tax Court erred when it held that two married couples should have included in their gross income installment payment interest paid by a state (Pennsylvania) under a condemnation agreement. The state and the taxpayers negotiated a complete arm’s-length settlement of the state’s claims to the taxpayers’ property and because the taxpayers agreed to a lower variable interest rate for the purpose of extending credit to the state, the state’s obligation arose by voluntary bargaining. Since the state’s obligation to pay interest to the taxpayers arose out of voluntary bargaining, the state’s borrowing authority was implicated and, therefore, the interest was excludable under Code Sec. 103

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Senate Takes Aim Again at Big Oil

Senate Majority Leader Harry Reid, D-Nev., plans to take up another bill aimed at taxing big oil in order to pay for renewable energy tax credits that are set to expire. The Senate on March 19 began the legislative process for the Repeal Big Oil Tax Subsidies Bill (Sen 2204), offered by Sen. Robert Menendez, D-N.J., which would repeal five tax subsidies for the five largest integrated oil and gas companies and use the revenue to extend expired and expiring renewable energy tax incentives.

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House GOP Unveils Fiscal Year 2013 Budget Blueprint

House Budget Committee Chairman Paul Ryan, R-Wis., released the GOP budget for fiscal year 2013, largely a political document intended to show Republican priorities during the current election year. Called “The Path to Prosperity. A Blueprint for American Renewal,” the GOP budget is intended to be in contrast to Democratic spending and tax proposals that were outlined in President Obama’s budget proposal in February (TAXDAY, 2012/02/14, W.1). The GOP budget would reform the tax code and eliminate special interest loopholes, while simultaneously lowering tax rates and extending the Bush-era tax cuts. According to Ryan, his budget would promote job creation and end tax breaks that mainly benefit the politically well-connected.

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Indiana ~ Sales and Use Tax: Online Service Providers’ Promotional Materials Were Taxable

An out-of-state online service provider was liable for Indiana use tax on promotional materials sent to Indiana residents from out-of-state producers because the service provider purchased the production and mailing of the promotional materials in retail transactions. Relying on statutory law, the Indiana Supreme Court reasoned that a sale is a taxable retail sale whether or not the property transferred was in the same form as it was when acquired.

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