State Tax Updates 10/30/06

October 30, 2006 by Ray Perez.

Hawaii County offers earthquake real property tax relief.
The County of Hawaii is offering real property tax relief for taxpayers affected by the October 15, 2006 earthquake. Eligible taxpayers must complete and file RP Form 19-36, Application for Disaster Remission of Taxes, by June 30, 2007 in order to receive a remission in their real property taxes. The application is only for real property taxes paid or due. In all cases, the amount of remission will not reduce the total annual taxes to less than the minimum tax for the parcel. Therefore, a taxpayer who is currently paying the minimum tax cannot complete and file the form since no remission will be calculated. The remission calculation is based on the balance of the tax year, October 15, 2006 to June 30, 2007. As a reminder, this is a remission on real property taxes and the Real Property Tax Office does not assess or tax improvements to property such as retaining walls, fences, landscaping, and driveways since damage of this type would not result in any remission of taxes. Instructions for the Application for Disaster Remission of Taxes: Earthquake on October 15, 2006, County of Hawaii, Department of Finance, Real Property Tax Division, 10/26/2006

Kansas announces local sales and use tax rate changes.
The Kansas Department of Revenue has announced that the combined state and local sales and use tax rate in several cities and counties will change effective January 1, 2007. Press Release, Kansas Department of Revenue, 10/01/2006

More State Tax News

California — Corporate Income Tax — Petitions for rehearing—corporate treasury function cases.
On October 25, 2006, the California Supreme Court denied petitions for rehearing by the Franchise Tax Board (FTB) in two cases that queried how proceeds from corporate treasury departments should be apportioned to California and how gross receipts are defined. The Court had ruled in favor of the FTB in both cases, entitled Microsoft Corp. v. California Franchise Tax Board, Cal. S. Ct., Dkt. No. S133343, 08/17/2006 and General Motors Corp. v. California Franchise Tax Board, Cal. S. Ct., Dkt. No. S127086, 08/17/2006 . In its petition, the FTB sought clarification of the use of technical terms and requested modification of the Court’s opinion regarding burden of proof when the FTB seeks to apply an alternative apportionment formula than that set forth by the taxpayer.

California — Corporate Income Tax — Administrative appeals—1-year timeline.
The Franchise Tax Board (FTB) has announced a pilot program under which taxpayers can request a 1-year timeline for their protests from deficiency assessments, effective for protests filed on or after October 27, 2006. Final resolution of such protests within one year is the FTB’s goal but is not guaranteed. Protests must involve settled legal issues in order to be eligible for this program, with the FTB’s position being established by a prior administrative notice or ruling, or by a decision of the State Board of Equalization or a court. Taxpayers must agree not to add new issues to protests once filed, to respond promptly to any information requests, and not to seek postponements of any hearings. If a protests cannot be resolved within one year, it will be processed in the normal manner and no inferences will be drawn from the inability to adhere to the 1-year timeline. ( California Franchise Tax Board Notice 2006-5, 10/27/2006 .)

California — Corporate Income Tax — Administrative appeals.
The Franchise Tax Board (FTB) categorizes protests into one of three time frames based on issues and complexity. A protest is put in the 12-month category if the FTB’s litigating position has been established by a prior administrative notice or ruling, or by a decision of the State Board of Equalization or a court, and any required factual development is specific and limited in scope. The 18-month category applies to protests involving a limited number of issues, if some factual development is required or the FTB’s litigating position on any issue has not been established. Finally, a protest is put in the 24-month category if it involves more than a and if limited number of issues or issues of particular complexity, and if factual development is required or the FTB’s litigating position on any issue has not been established. The FTB attempts to work out case development plans for protests in the 18-month and 24-month categories, with the goal of completing processing within the appropriate time frame. ( California Franchise Tax Board Notice 2006-6, 10/27/2006 .)

California — Personal Income Tax — Administrative appeals—1-year timeline.
The Franchise Tax Board (FTB) has announced a pilot program under which taxpayers can request a 1-year timeline for their protests from deficiency assessments, effective for protests filed on or after October 27, 2006. Final resolution of such protests within one year is the FTB’s goal but is not guaranteed. Protests must involve settled legal issues in order to be eligible for this program, with the FTB’s position being established by a prior administrative notice or ruling, or by a decision of the State Board of Equalization or a court. Taxpayers must agree not to add new issues to protests once filed, to respond promptly to any information requests, and not to seek postponements of any hearings. If a protests cannot be resolved within one year, it will be processed in the normal manner and no inferences will be drawn from the inability to adhere to the 1-year timeline. ( California Franchise Tax Board Notice 2006-5, 10/27/2006 .)

California — Personal Income Tax — Administrative appeals.
The Franchise Tax Board (FTB) categorizes protests into one of three time frames based on issues and complexity. A protest is put in the 12-month category if the FTB’s litigating position has been established by a prior administrative notice or ruling, or by a decision of the State Board of Equalization or a court, and any required factual development is specific and limited in scope. The 18-month category applies to protests involving a limited number of issues, if some factual development is required or the FTB’s litigating position on any issue has not been established. Finally, a protest is put in the 24-month category if it involves more than a and if limited number of issues or issues of particular complexity, and if factual development is required or the FTB’s litigating position on any issue has not been established. The FTB attempts to work out case development plans for protests in the 18-month and 24-month categories, with the goal of completing processing within the appropriate time frame. ( California Franchise Tax Board Notice 2006-6, 10/27/2006 .)

Florida — General Administrative Provisions — Rules amended.
Several Florida rules have been amended effective October 30, 2006. The amendments to Fla. Admin. Code Ann. §12-18.003, concerning “Amount and Payment of Compensation,” provide that compensation for tax information will be paid at a flat rate of 10%, 5%, or 1% of the tax, penalty, and interest collected, based on the criteria currently established; and establish the criteria for when the Director will pay an amount of compensation greater than these amounts. The amendments to Fla. Admin. Code Ann. §12-18.004, concerning “Submission of Information and Claims for Compensation,” update information on how to obtain a copy of Form DR-55, Application for Compensation for Tax Information, from the Department. The amendments to Fla. Admin. Code Ann. §§12C-2.0115 and 12C-3.008, concerning “Public Use Forms,” adopt, by reference, changes to the forms used by the Department in the administration of tax, and update information on how to obtain forms from the Department. Finally, the amendments to Fla. Admin. Code Ann. §12B-7.0225, concerning “Computation of Phosphate Rock Tax Rate” adopt, by reference, the Producer Price Index for the purpose of calculating the annual base rate adjustment to the phosphate rock tax rate beginning with the year 2007 and annually thereafter; and provides the method that the Department will use to compute the phosphate rock tax rate for the year 2006.

Illinois — Corporate Income Tax — River Edge Redevelopment Zones.
The Illinois Department of Commerce and Economic Opportunity adopted emergency regulations (14 Ill. Admin. Code §524.10 through §524.650, eff. 10/23/2006) relating to the River Edge Redevelopment Zone program. River Edge Redevelopment Zones are intended to stimulate the safe and cost-effective re-use of environmentally challenged properties adjacent to or surrounding rivers by means of tax incentives and grants. The regulations discuss various aspects of the program and lists the many tax incentives available to eligible taxpayers.

Illinois — Personal Income Tax — River Edge Redevelopment Zones.
The Illinois Department of Commerce and Economic Opportunity adopted emergency regulations (14 Ill. Admin. Code §524.10 through §524.650, eff. 10/23/2006) relating to the River Edge Redevelopment Zone program. River Edge Redevelopment Zones are intended to stimulate the safe and cost-effective re-use of environmentally challenged properties adjacent to or surrounding rivers by means of tax incentives and grants. The regulations discuss various aspects of the program and lists the many tax incentives available to eligible taxpayers.

Illinois — Sales And Use Tax — River Edge Redevelopment Zones.
The Illinois Department of Commerce and Economic Opportunity adopted emergency regulations (14 Ill. Admin. Code §524.10 through §524.650, eff. 10/23/2006) relating to the River Edge Redevelopment Zone program. River Edge Redevelopment Zones are intended to stimulate the safe and cost-effective re-use of environmentally challenged properties adjacent to or surrounding rivers by means of tax incentives and grants. The regulations discuss various aspects of the program and lists the many tax incentives available to eligible taxpayers.

Maine — Personal Income Tax — Domicile.
In response to a recent Maine Supreme Court Judicial Court decision, two individual taxpayers have filed a petition for a writ of certiorari with the U.S. Supreme Court ( Falcone and Janetti v. Maine, U.S. S. Ct., Dkt. No. 06-573, 10/26/2006). In Maine v. Falcone and Jannetti , Me. Sup. Jud. Ct., Dkt. Nos. Cum-05-394;Yor-05-431, 07/27/2006 , the Maine Judicial Supreme Court vacated a Superior Court judgment that had dismissed indictments against two individuals for income tax evasion and failure to make and file Maine income tax returns. Maine’s highest court reinstated the indictments, finding that the lower court erred when it ruled Me. Rev. Stat. Ann. § 5102(5)(A) was unconstitutionally vague.

New York — Real Property — Overassessment due to bribery.
The taxpayers’ claims were properly dismissed for lack of standing, insofar as they were based on fraud, negligence and other common law theories, where the taxpayers failed to show special damage to themselves while alleging that, as a result of a systemic bribery scheme involving New York City tax assessors, properties belonging to bribe-paying taxpayers were under-assessed, and properties belonging to the taxpayers and other property owners were over-assessed. The Appellate Division, First Department, determined that the taxpayers neglected to show that the corruption caused them special damage different in kind and degree from that suffered by the community generally. All taxpayers in the city, according to the court, suffered in the same manner as the instant taxpayers, by having to pay an incrementally higher tax than they would otherwise. The court also held that the plaintiffs failed to mount proper due process and equal protection claims under 42 USC §1983, because a local government cannot be sued under that section for a constitutional injury inflicted by employees or agents not acting pursuant to official municipal policy or custom. (315-321 Realty Co. Assoc. v. City of New York, N.Y. S. Ct., App. Div., 1st Dept., Dkt. No. 07622, 11/24/2006 .)

South Carolina — Fuels And Minerals — Incentive payments for ethanol and biodiesel fuels.
Retailers or wholesalers acting as the ultimate vendor making the sale of fuel directly to the end user are eligible for incentive payments of 5¢ per gallon for E85 fuel (a blend of 85% fuel grade ethanol with 15% gasoline), B20 fuel (a blend of 20% biodiesel and 80% clear petroleum diesel), and D20 fuel (a blend of 20% biodiesel and 80% dyed petroleum diesel). The qualifying fuel must have a selling price of at least 5¢ per gallon below the lowest comparable 100% petroleum product offered by the retailer or wholesaler at the same retail location. Incentive payments will be made to the retailer or wholesaler by the Department of Revenue in the same manner as motor fuel refunds, and applications should be submitted quarterly, beginning with the quarter ending September 2006 (covering the months of July, August, and September). ( SC Department of Revenue Notice, 10/27/2006 .)

Texas — Real Property — Appointment of agents.
The Texas Comptroller of Public Accounts has adopted amendments to rule Tex. Admin. Code 34 § 9.3044 , concerning appointment of agents for property taxes, effective October 31, 2006. The amendments clarify that in the event of duplicative designations of agents resulting from additions or deletions of accounts on Form 50-163, Form 50-162-1 controls the appropriate agent designation. The amendments also clarify that registered property tax consultants may not sign Forms 50-162-1 and 50-241-1 on behalf of property owners. The amendments include deletion of provisions concerning the filing of agent appointment forms before the effective date of the rule.

Texas — Sales And Use Tax — Pipeline services.
The remedial installations of cathodic protection devices by a pipeline owners and operators were taxable repair and remodeling services rather than nontaxable new construction since, although they added new usable square footage, they did not add new usable square footage “to an existing structure,” as required by Tex. Admin. Code 34 § 3.357(a)(8) . The remedial installations of cathodic protection devices did not expand the capacity of the existing pipeline but rather simply prevented the existing pipeline from corroding. Additionally, excavation and backfilling services purchased in conjunction with taxable repair services were taxable services. Although excavation and backfilling services might otherwise be provided on a stand-alone basis, that did not happen in this case: the pipeline owners did not contract solely for excavation and backfilling services but rather for those services in addition to taxable repair and recoating services. The excavation and backfilling services were required to perform the repair and recoating of the pipelines and the services were not distinct and identifiable and, therefore, did not constitute an “unrelated service” within the meaning of Tex. Admin. Code 34 § 3.357(a)(15) . (Chevron Pipeline Co., et al. v. Strayhorn, Tex. App., 3rd Dist., at Austin, Dkt. No. 03-05-00449-CV, 10/26/2006 .)

Washington — Business And Occupations — Property management services.
Washington law provides an exemption for amounts which a property management company receives from a property owner for compensation paid to on-site personnel who perform maintenance work and other property-related functions. As the exemption statute does not require the on-site personnel to work at a single site the exemption still applies if they perform their duties at multiple properties owned by the same owner. The statute does require, however, that they perform their duties for a single owner. The Department of Revenue has interpreted this to mean that if the on-site personnel perform duties for two or more property owners, the management company can use the exemption only if the personnel perform more than 50% of their services for a single owner. In that instance, the management company’s exemption is limited to the payments from that single owner for the on-site personnel’s compensation. ( Washington Excise Tax Advisory 2033.04, 10/16/2006 .)

Wisconsin — General Administrative Provisions — Taxpayer Bill of Rights.
The Department of Revenue has updated its Taxpayer Bill of Rights publication. Among other things, it deals with taxpayers’ rights to courteous and fair treatment, privacy of tax information, and prompt refund of overpayments. It has not been substantially changed since the last revision. ( Wisconsin Dept. Rev. Tax Publication 114, 10/01/2006 .)

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