Tax Headlines


Georgia ~ Sales and Use Tax: Bank Financing Private Label Credit Cards Not Entitled to Bad Debt Deduction

The Georgia Court of Appeals has held that a bank providing financing for private label credit cards was not entitled to a refund of sales tax paid on bad debt. The bank provided financing for private label credit cards through which shoppers financed purchases from retailers. The bank paid the retailers the amounts due on the credit card accounts, and the retailers disclaimed ownership of the accounts. When customers defaulted on the credit cards, part of the uncollected debt included amounts used to pay Georgia sales tax. The bank claimed the uncollected accounts as a bad debt deduction for purposes of federal income tax and sought a refund from the state of the part of the bad debt that represented the payment of the state’s sales tax. The state denied the refund, as did the trial court.

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Tax Court Could Review Interest Abatement Issues, but Not Collection Actions: More Information Needed on Innocent Spouse Issues (Gray, TC)

The Tax Court, addressing an IRS motion to dismiss an individual’s petition for lack of jurisdiction, held that it lacked jurisdiction to review an IRS determination as to collection actions, but had jurisdiction to hear an interest abatement issue, and needed more information to determine if it had jurisdiction to hear an innocent spouse issue. The taxpayer was subject to collection actions by the IRS, and was denied relief by the IRS on the three issues addressed at her Collection Due Process (CDP) hearing under Code Sec. 6330.

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Tennessee ~ Sales and Use Tax: Governor Signs Bill to Implement Amazon Agreement

Tennessee Gov. Bill Haslam has signed legislation that codifies the terms of an agreement between the state and Amazon, under which the company agreed to collect Tennessee sales and use tax beginning in 2014. The bill provides that the activities of distribution facilities operated by a company’s affiliates in Tennessee are not considered in determining whether the company has a physical presence in the state sufficient to establish nexus for sales and use tax purposes. The company is required to provide notice of use tax liability to Tennessee purchasers.

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California ~ Personal Income Tax: Taxpayer’s IRC 83(b) Election Was Valid Election

The California State Board of Equalization (BOE) rejected a taxpayer’s attempt to recharacterize his IRC §83(b) election to recognize the income on the transfer of his incentive stock options as invalid in an attempt to reduce the amount of his California personal income alternative minimum tax (AMT) liability for the tax year at issue. The taxpayer had unsuccessfully argued before the Ninth Circuit Court of Appeals that his IRC §83(b) election was invalid because his acquisition of nonvested shares was not a transfer of “property” under the governing statutory or regulatory law.

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Tax Court’s Refusal to Consider Individual’s Refund Claim Erroneous (Wright, CA-2)

The Tax Court’s failure to consider an individual’s argument that he did not receive refund for a tax year at issue was erroneous and, therefore, the case was remanded. The Tax Court was required to determine whether the individual was entitled to and received the refund or whether the refund was used to offset his prior year tax liabilities and, accordingly, credit the individual’s liability, abate the interest and order the IRS to issue the refund.

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IRS Chief Counsel Calls for Certainty for Tax Extenders

IRS Chief Counsel William J. Wilkins called the fate of the tax extenders critical for tax administration after 2012. Many popular but temporary tax incentives expired at the end of 2011 and it is unclear if they will be renewed. Wilkins, who spoke at the Tax Executives Institute, Inc. (TEI) 62nd Mid-Year Conference in Washington, D.C., on March 27, also said it is premature to predict when the Service may finalize guidance on capitalization of costs relating to tangible property.

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