The Arkansas Department of Finance and Administration recently assessed additional income tax on an individual as a result of a denied credit of taxes paid to another state. The taxpayer paid property taxes to another state and claimed them on Form AR1000TC which is used to report income tax paid to another state. The purpose of the form is to avoid double taxing the same income. An administrative court determined that property tax is not an income based tax, so the credit was properly disallowed.
For more information on income tax credits, contact your state and local tax professional.
An Indiana married couple was recently assessed additional tax when the Indiana Department of Revenue determined that they did not qualify as professional gamblers. The State’s assessment is a result of a Federal adjustment. Professional gamblers report their winnings, losses, and expenses on Schedule C, which typically results in a lower income tax liability. The IRS’s denial of the taxpayer’s protest of their categorization as casual gamblers was adopted by the State without further analysis.
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The Seattle city council has enacted an individual income tax on Seattle “residents.” Residents is defined as someone with a “permanent place of abode” who spends 183 days or more there, or who “domicile” there. Whether anyone will have to pay the income tax is uncertain.
The 2.25% tax would apply on Gross income over $250,000 for single filers and $500,000 for married filers starting in 2018, with collection beginning in 2019.
Washington has no state income tax. It seeks to become the first municipality to impose an income tax in a state without one. The Tax Foundation says the Seattle tax faces an “uphill legal battle” because of doubts over its constitutionality and the authority of Seattle to pass such a tax.
The Seattle mayor is reported to be “eager” to be sued over the issue.
Given the likely legal challenges to a Seattle income tax, it may be premature to start planning for it. Still, it remains an issue to be watched closely by Seattle residents.
The House of Representatives has passed the Mobile Workforce State Income Tax Simplification Act (HR 1393). The bill would prohibit states from assessing income taxes on employees spending fewer than 30 days in a state during a tax year. A new Eide Bailly Insight has more.
The Ohio Department of Taxation began sending Failure to File notices by regular mail on June 5, 2017 to taxpayers who:
Have not filed an Ohio School District Income Tax Return Form SD 100 for 2013, 2014 and/or 2015; and
Appear to have lived in a taxing school district based on the school district number and/or mailing address reported on the taxpayer’s Ohio Individual Income Tax Return (Ohio Form IT-1040) filed for 2013, 2014, and/or 2015.
To learn more about the Ohio School District Income Tax, read their Guide.
“Domestic Corporation” now includes partnerships, joint ventures, and LLCs electing to be taxed as C Corporations for federal income tax purposes.
Expansion of franchise tax nexus for out of state taxpayers – nexus for corporations that own interest in partnerships with Louisiana operations.
Net Operating Loss (NOL) Reduction – NOL deduction cannot exceed 72% of Louisiana taxable income.
NOL Carryover ordering – must use loss carryovers starting with the loss for the most recent taxable year. Older NOLs may expire since taxpayers would have to first use newer NOLs.
Modification of corporation income tax rate to flat rate of 6.5% (contingent).
Addback of intercompany interest, intangible expenses and management fees unless certain exceptions are met.
Modification of federal income tax deduction (contingent).
Sale/Use Tax Changes:
Effective 4/1/16 through 6/30/2018, the legislation increases the sales tax rate by 1% (bringing the rate to 5%). Referred to as the “Clean Penny” Legislation, the legislation includes its own set of exclusions and exemptions apart from the exclusions and exemptions that apply to the original 4% sales tax rate (referred to as “Old Penny”).
Old Pennies (the original 4% sales tax) – law modifies the list of exclusions and exemptions, specifically as they relate to the 2% basic rate (sub component of the 4% tax). It is important to note the inconsistencies between the exclusions and exemptions offered under the Clean Penny and Old Penny laws.
Affiliate Nexus provisions – the legislations drastically expands the definition of a “dealer.”