Arkansas Denies Credit for Taxes Paid to Another State

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.

Indiana Department of Revenue Assesses Additional Income Tax on Gambling Couple

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.

For more information on this and other income taxation rules, contact your state and local tax professional.

Tax Trends Webinar Series 2018

It’s back! The Tax Trends Webinar Series is designed to offer free education and provide information on innovative strategies to save you time and money. Our webinars this year include topics such as state income tax compliance, sales tax considerations, economic nexus, and more. Click here to view all of our Tax Trends sessions and to register.

Does Seattle have an income tax?

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.

OH School District Income Tax: Failure to File Notices

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.

If you receive(d) a notice and need assistance, please contact a member of our State and Local Tax Team.

 

Significant Changes in Louisiana for Income/Franchise & Sales/Use Tax

As a result of a $900 million budget shortfall, Louisiana lawmakers have passed the following tax measures aimed at bridging the revenue gap.  Some of the more important changes are as follows:

Income/Franchise Tax Changes (effective 1/1/2017):

  1. Expansion of franchise tax:
    1. “Domestic Corporation” now includes partnerships, joint ventures, and LLCs electing to be taxed as C Corporations for federal income tax purposes.
    2. Expansion of franchise tax nexus for out of state taxpayers – nexus for corporations that own interest in partnerships with Louisiana operations.
  2. Net Operating Loss (NOL) Reduction – NOL deduction cannot exceed 72% of Louisiana taxable income.
  3. 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.
  4. Modification of corporation income tax rate to flat rate of 6.5% (contingent).
  5. Addback of intercompany interest, intangible expenses and management fees unless certain exceptions are met.
  6. Modification of federal income tax deduction (contingent).

Sale/Use Tax Changes:

  1. 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”).
  2. 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.
  3. Affiliate Nexus provisions – the legislations drastically expands the definition of a “dealer.”

For additional background regarding the legislation, please visit the tax foundation website.