Articles Posted in States

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On June 3, 2014, in a published decision, the California Court of Appeal for the Second Appellate District affirmed the Superior Court ruling in Ocean Avenue LLC v. County of Los Angeles, holding that even though 100 percent of an entity was sold, a reassessable change in ownership of the entity’s real property did not occur because no one person obtained more than 50 percent of the entity. Assembly Bill 2372 would change that result by requiring reassessment of an entity’s realty if 90 percent or more of its ownership interests were sold within a three year period, even if no one owner acquired more than 50 percent.

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A New York state corporate franchise tax audit is almost as frustrating as participating in a coin toss with a one-sided coin. It seems like taxpayers cannot win. New York state auditors forcibly combine taxpayers that have filed separate returns and decombine taxpayers that have filed combined returns. Auditors also seem to use the commissioner’s discretionary authority to adjust a taxpayer’s income or expense arbitrarily, in place of a combination adjustment, when it leads to greater tax liability. In this A Pinch of SALT, we assert that the New York State Department of Taxation and Finance applies to its combined reporting and discretionary authority provisions arbitrarily to maximize its tax assessments.

The remainder of this article can be accessed in the May 19, 2014 edition of State Tax Notes.

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The amount of non-taxable embedded software being taxed in California is a staggering number. While companies own assets with millions of dollars of embedded software, few companies are maximizing their property tax savings through the embedded software exemption. The good news is that it is not too late to dig in and maximize your potential tax savings. Most businesses have until May 7, 20141 to file their annual Business Property Tax Statements (Form 571-L) with California counties.

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Taxpayers involved in state tax controversy matters often request information and documentation from state tax authorities to analyze audit adjustments. Some of those requests are thwarted by state tax authorities’ assertions of the deliberative process privilege to prevent the disclosure of information or documentation that may compromise the state tax authorities’ legal position.

The remainder of this article can be accessed in the December 10, 2012 edition of State Tax Notes.

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With the significant rise of third-party enforcement actions—especially consumer class actions and qui tam actions involving state tax questions—corporate taxpayers are being forced to assess a significant set of risks in connection with their compliance obligations.

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The California Franchise Tax Board has issued a chief counsel ruling stating that a registered broker-dealer must include the entire sales price received from the sale of securities—including the return of capital—in the sales apportionment factor. Interestingly, the chief counsel determined that California’s alternative apportionment provisions do not apply to the combined group’s intrastate apportionment result.

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On May 30, 2012, the State Board of Equalization (SBE), approved pro-posed amendments to the California Code of Regulations, Title 18, section 1684. The Proposed Regulation attempts to provide guidance as to the meaning of the broadened statutory definition of “retailers engaged in business in this state.” The statutory definition now includes retailers who are members of “commonly controlled groups,” as well as retailers who enter into agreements with “a person or persons in this state” who meet certain minimum thresholds.

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Introduction
As a result of discussions between Gov. Arnold Schwarzenegger and the California Legislature as part of the funding of the fiscal 2005 Budget Act, language to implement a tax amnesty program was included in Senate Bill (SB) 1100, which was written by the Senate Budget and Fiscal Committee. Amnesty bills have been pending in the California Legislature for the last several sessions, but none had been enacted until SB 1100. On August 2, 2004, the Legislature passed SB 100, which was signed by the Governor on August 16, 2004, as Stats. 2004, Chapter 226. The bill was classified as an “urgency statute,” which went into immediate effect when signed by the Governor. According to SB 1100, “tax amnesty is an innovative and responsible way to increase state revenue to preserve vital state programs without proposing new tax burdens on business and working families, as well as to expose tax evaders operating in the underground economy.”

(The remainder of this article can be accessed in the Nov.-Dec. 2004 edition of The Tax Executive.)

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California generally conforms to the federal provisions regarding net operating loss (NOL) deductions. However, California’s seemingly endless battle with budget deficits has resulted in periodic suspensions of California taxpayers’ ability—both personal and corporate—to take NOL deductions. For example, California suspended NOL deductions for the 2002 and 2003 taxable years. More recently, California generally suspended NOL deductions for the 2008 through 2011 taxable years.

Read the remainder of this alert here.

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Beginning August 1, California income taxpayers that used a tax shelter or that have unreported income from the use of an offshore financial arrangement for tax years beginning before January 1, 2011, will have the opportunity to pay tax and interest on income related to those transactions and avoid a barrage of penalties under California’s new voluntary compliance initiative (VCI 2). According to the California Franchise Tax Board, VCI 2 is aimed at “tax schemes that serve no significant purpose other than reducing tax.” Taxpayers may recall California’s first voluntary compliance initiative (VCI 1), which was enacted in 2003 as part of the state’s initial deluge of antitax shelter legislation and in response to what the FTB claimed to be a steady loss of revenue because of tax shelter transactions. Although VCI 2 mirrors its predecessor in many ways, as explained in greater detail below, there are significant differences worth consideration. Moreover, VCI 2 follows closely on the heels of the latest round of FTB notices aimed at identifying some transactions as abusive tax avoidance transactions for purposes of California’s widening penalty provisions. Clearly, a storm is on the horizon; however, refuge under cover of voluntary compliance should be taken only after careful consideration of the pros and cons associated with participating in VCI 2.

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