Tax Headlines

1827

CCH Weekly Report from Washington, D.C.

During the week of March 12, the Senate passed a $109-billion transportation funding measure. The legislation contains a number of tax-related provisions. In remarks to the Economic Club of New York, Treasury Secretary Geithner pointed out the need for tax reform. The IRS, in the meantime, released several pieces of guidance, including an Audit Techniques Guide that addresses Interest Charge Domestic International Sales Corporations, an LB&I directive indicating it will cease audits of repair versus capitalization issues for tax years beginning before January 1, 2012, and certain return preparer test results.

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Applicable Federal Rates for April 2012 Released (Rev. Rul. 2012-11)

Various prescribed rates for federal income tax purposes for April 2012 have been provided by the IRS. The annual short-term, mid-term, and long-term applicable federal interest rates (AFRs) are 0.25 percent, 1.15 percent and 2.72 percent, respectively. The semiannual short-term, mid-term, and long-term AFRs are 0.25 percent, 1.15 percent and 2.70 percent, respectively.

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Texas ~ Multiple Taxes: Fresh Start Amnesty Announced

The Texas Comptroller of Public Accounts has issued a notice to taxpayers announcing the Fresh Start tax amnesty, which applies to businesses that owe sales tax, franchise tax, or other state and local taxes and fees administered by the comptroller. During the amnesty period of June 12 through August 17, 2012, taxpayers can avoid penalties and interest by filing or amending reports and paying any overdue taxes. The amnesty does not cover amounts originally due after April 1, 2012, underpaid tax returns (i.e., previously reported tax that was not paid), or taxes owed for filing periods that businesses have in audit.

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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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