State Tax Assessment
Friday, February 27, 2004
Corporate Income Tax Rates & Apportionment
By Ronald K. Bodtcher, State Tax Central
The Federation of Tax Administrators (FTA) recently updated the following all-state tax tables for tax year 2004:
State Corporate Income Tax Rates Table
State Apportionment of Corporate Income
COMMENT:
These tables come in handy for quick computations of audit accruals, estimated taxes, etc. Of course, if you need more accurate calculations, see a qualified tax professional (assuming you're not one yourself).
These tables can be a little misleading. For example, Texas is omitted from the Corporate Income Tax Rate Table. Everyone knows that Texas has no income tax, right? Well, sort of. One component of the Texas Franchise Tax is a levy on "earned surplus", which is essentially income. So be careful when using these tables if you're not familiar with the state.
Thursday, February 26, 2004
Revamped law to boost county tax rolls in Texas
By Matt Schwartz
The Houston Chronicle
"State law has long required businesses to provide renditions [listings of personal property] to local appraisal districts. [Harris County Assessment District] Chief Appraiser Jim Robinson said that of about 200,000 businesses in Harris County, only 20 percent to 40 percent have traditionally complied with the law.
That left the appraisal district trying to guess how much personal property businesses actually had and gave those businesses an opportunity to challenge the estimates.
The revamped law is expected to end, or at least sharply curb, a longstanding practice in which many businesses avoid paying their full share of property taxes by failing to give appraisal districts lists of taxable personal property that is used to generate income."
COMMENT:
Previously, there were no penalties for failing to provide a rendition; hence the low rate of compliance. Also, many taxpayers viewed filing a rendition as optional.
The new law imposes a 10 percent penalty for failure to file a timely rendition, and a 50 percent penalty for filing a fraudulent rendition.
Wednesday, February 25, 2004
West Virginia Tax Amnesty Program of 2004
By Ronald K. Bodtcher, State Tax Central
Since 1/14/2004, the West Virginia Legislature's Committee on Finance has been working on a bill that will create a tax amnesty program for a two-month period during calendar year 2004.
The new law would waive criminal and civil penalties and 1/2 of the interest on back taxes. For the full text of the House and Senate versions of the law, click on the links below:
Senate Bill No. 148
House Bill No. 4015
COMMENT:
I've heard wisperings that the bill is about to emerge from Committee and soon become law, perhaps some time this week. Note that the law does not specify the exact date of the amnesty; only that it is for a two-month period sometime in 2004. The tax commissioner will decide the dates.
We'll keep you posted as this amnesty program takes shape, as two months is not a lot of time to prepare applicable returns and submit them before the amnesty deadline.
Tuesday, February 24, 2004
U.S. governors press for limits on Internet tax ban
By Andy Sullivan, Reuters
"Several U.S. governors said Monday they would seek to scale back a congressional effort to ban taxes on Internet access, saying it would cost them billions of dollars in annual revenue.
At a conference in Washington, three U.S. governors said their budgets could be devastated by a bill that would prevent them from taxing the monthly fees that Internet providers like EarthLink charge customers.
The bill amounts to 'putting a federal stop sign onto a state road,' said Arkansas Gov. Mike Huckabee, a Republican."
COMMENT:
Only a few states now tax Internet access, so the proposed bill will not devastate anyone's budget, nor will it cost the states billions of dollars.
Saying that the bill amounts to "putting a federal stop sign onto a state road" indicates a misunderstanding of the Internet and how it should be regulated by the states.
A more appropriate analogy is this: Taxing Internet access is like putting state toll booths along interstate highways. It might be a great source of revenue, but...wait a minute...why don't the states do that very thing?
The Internet is a federal interstate information highway. The states have no right to tax access to or use of the Internet. It's that simple!
Monday, February 23, 2004
March 1, 2004 Deadline for Maryland Income Tax Amnesty
By Jamie Smith Hopkins, Baltimore Sun
"Maryland has collected more than $10 million from companies that used Delaware shelters to avoid paying corporate income tax here, plus an undisclosed sum from a company that had battled with the state for seven years - all the way to the U.S. Supreme Court.
In December [Maryland Comptroller] Schaefer offered a deal to 70 other holding companies he said owed at least $78 million to Maryland: Pay by the end of January and be hit with a 2 percent penalty instead of 25 percent.
Since that offer, 10 holding companies have forked over more than $10.5 million, while 20 others are still negotiating with the state."
COMMENT:
The Delaware shelter works like this: a Maryland corporation forms a Delaware investment holding company (DIHC) and transfers intangible property such as trademarks to the holding company. Then it pays substantial royalties to the DIHC for the right to use the trademarks. The royalty expense reduces taxable income for the Maryland corporation. The Delaware corporation pays no tax to either Maryland (because it has no physical presence there) or to Delaware (because the state doesn't tax income from intangibles).
There's just one problem: if a company's trademarks are being used to exploit a market in Maryland, that company has sufficient nexus and is subject to Maryland tax--even though it has no physical presence in the state.
So what is an honest, tax-avoiding company to do? Well, any holding companies that were not contacted by Maryland already can get the 2 percent penalty deal if they come forward and pay by March 1, 2004.
The Maryland Comptroller has targeted 240 companies for audit after that date, and the Attorney General claims to have 112 lawyers ready to litigate. Now may be a good time to cut a deal.
