Leverage | SALT

"Boxes" and "Client Change"

2012-01-30T10:17:00.001-05:00

Life is full of man-made rules, regulations, boundaries or what I like to call "boxes." Sometimes these boxes are helpful, in that they keep things together and keep external forces from contaminating what is inside the box, keeping people safe, organized and on-track. In other cases, the boxes serve as limiting factors, keeping things and people from reaching new bounds, creating and achieving success.

I would argue the accounting industry is trapped in some “boxes” or old ways of doing things simply because that is the way it has always been done, it has been successful, and if they were to change, they aren’t quite sure how to change or what to change to.

Simply put, it’s about clients and viewing the world from their perspective. It’s about abandoning unnecessary “boxes,” and taking advantage of technological advances. It’s also about not being afraid of change, but also not changing for change sake. It’s about finding and implementing the best, best practices for your firm or company.

Seth Godin stated in his book (Tribes), “change almost never fails because it's too early. It almost always fails because it's too late." He also stated, "organizations that require success before commitment, will have neither."

Get out of your box and stop "client change."

What do you think should change in our profession?

What should NOT change?

States Change Audit Positions Without Authority: WHAT??

2012-01-25T13:29:00.000-05:00

Throughout my career I have faced several instances where states have made audit assessments or taken positions under audit that contradict the position the state has taken in the past when it has audited the company. This change in position by the state has occurred even when there has been NO CHANGE in the state's statutes, rulings and court cases since the last audit.

Should the state be able to change their position without any change in authority? In most cases I would say no. Unfortunately, when you challenge the position within the audit, you may not get anywhere. You may have to go to appeals or even court to resolve. My experience is that resolution is highly likely at the appeals level (this obviously depends on the facts of each case).

With that said, getting back to my original question, should a state be able to change its position without any change in authority? Allowing states to do so causes a taxpayer to incur time and money to challenge the change in position, when there is no reasonable basis for the change.

Why would a state make an assessment when there is no change or basis for the assessment? Well, the answer may be that the state has changed its policy or interpretation of a statute or regulation. The state may believe that this change in interpretation is enough. It may or may not be, depending on the facts of the case.

Overall, if you run into this situation don't just accept it. Question it. Challenge it. Just remember, you may have to go to appeals to resolve the matter.

DISCLAIMER: Each case is different and states may have justification for their change in position. This is a reminder to not just accept the change, but to seek to clearly understand the state's position so you can determine if you should challenge it.

NEW Leverage | SALT LinkedIn Group!!!

2012-01-23T10:59:00.000-05:00

I decided today to finally start a Leverage | SALT LinkedIn group. I know several of you subscribe via e-mail to this blog, but I thought it would be even better if you had a group within LinkedIn to share your comments, and connect with not only with me, but each other.

Please go to LinkedIn and join the Leverage | SALT LinkedIn group today.

I look forward to hearing from you!!

State Tax Provision Time - Who Cares?

2012-01-22T18:15:00.000-05:00

It's that time of year again - Tax Provision Time. Yeah!!!

Is your company currently calculating it's 2011 tax provision? If so, how is your state income tax provision going? Did you calculate your effective state tax rate? Did you take into account your company's significant state tax addback and deductions? How about changes in apportionment? Law changes? Rate changes?

How about everyone's favorite - state uncertain tax positions or UTPs. Is your company taking those into consideration correctly? Is your reserve growing year after year? Did your company conduct the appropriate level of analysis (a thorough one) to determine what, if any reserve needs to be recorded for FIN 48 purposes?

What items could you possibly need to set-up a reserve for?

Nexus
Intercompany transactions
Combined reporting vs. Separate company return filing
Apportionment factor issues (measurement and sourcing)
Restructuring challenges (forced combination, etc.)
Business vs. Nonbusiness income characterization

Questions??

How Multistate Taxes Affect Businesses of ALL Sizes

2012-01-13T13:02:00.000-05:00

Are you a start-up business? A mid-sized business? Or a Fortune 500 company? No matter the size of company, it doesn't really matter when it comes to state and local taxes. If your company is doing business across state lines, your business is impacted by multistate taxes.

Common questions and issues:

Is my company required to register to file returns and pay income taxes?
Is my company required to register to collect and remit sales and use taxes?
Property taxes?
What credits and incentives is my company eligible to obtain?
My business operates as an affiliated group of multiple entities. Does the state require us to file separate returns or one combined return?
How are intercompany transactions treated? Do we have to addback intercompany expense deductions?
Is my affiliated group of entities unitary?
Does my affiliated group of entities need a transfer pricing study?
Are sales of services sourced differently than sales of tangible personal property?
What types of sales are included in the apportionment factor?
How are sales determined? Gross sales or net sales?
Our company sales a service and a product. Are we required to collect sales tax? If so, on the whole charge or part of it?
Our company has foreign (non-U.S.) operations. How does that impact our state returns?
Our company is a foreign based company (non-U.S.) with operations in the U.S. If we don't have a permanent establishment in the U.S., are we still required to file state income tax returns?
How will changing the ownership and/or organization structure of our affiliated group of companies impact our state tax filing requirements?
Do we owe sales tax on the purchase of a company's business assets? Is there a bulk sale notification requirement?
If our company buys the assets of another company, are there any real estate transfer taxes due?
When can our company remove our FIN 48 reserve for uncertain state tax positions?
If our company owns an interest in a partnership, does that ownership interest give our company a taxable presence in the states in which the partnership operates?
If our company sells assets or liquidates a division of our company, is that treated as business or nonbusiness income?

Virginia Governor Releases Legislative Agenda: "The Greatest Opportunity"

2012-01-05T10:16:00.000-05:00

According to a press release on the Governor's website, Governor Bob McDonnell, joined by Lieutenant Governor and Chief Jobs Creation Officer Bill Bolling and numerous legislators, announced yesterday his "The Greatest Opportunity: Jobs and Economic Development Legislative Agenda" for the 2012 General Assembly session during a morning press conference in Richmond.

This year's agenda builds on the aggressive job creation and economic development measures that passed the General Assembly with strong bipartisan support during the 2010 and 2011 sessions. In line with the budget priorities outlined in his address to the Joint Money Committees in December, Governor McDonnell has asked for increased support of job creating funds and initiatives as part of his introduced 2013/2014 biennial budget. He also will advance legislation to increase access to capital for business and implement greater coordination among economic development entities, along with budget items increasing the support of job creation funds and initiatives.

The legislative agenda includes several tax credits:

Small business investor tax credit(Merricks/McDougle)

This bill would allow an individual income tax credit for qualified investments made to qualified small businesses and are held for two years, beginning on or after January 1, 2013, but before January 1, 2015.

The tax credit would be equal to 10% of the amount of the qualified investment. Qualified small businesses would be required to be designated as a qualified small business with the Department of Taxation before any tax credits are issued to eligible investors.

Extend the Acceleration of the Major Business Facility Jobs Tax Credit(Kilgore/Reeves)

Extends the time during which the major business facility job tax credit may be taken over a two-year period from taxable years beginning January 1, 2009 through December 31, 2012, to taxable years beginning January 1, 2009 through December 31, 2014.

Extend the sunset date for investments that qualify for the capital gains income tax subtraction

Extends 2010 legislation that grants an income tax deduction for any income taxed as a long-term capital gain for federal income tax purposes or any income taxed as investment services partnership interest income, on or after January 1, 2011, that is related to a qualified investment in a technology and science start-up business having a principal office or facility in the Commonwealth and less than $3 million in annual revenues in the fiscal year prior to the investment.

The deduction originally related to investments made between July 1, 2010, and June 30, 2013 this bill would extend the sunset date to June 30, 2015.

To view the full press release, go to Virginia Governor: The Greatest Opportunity.

Eliminate the Gap Between Knowing and Doing!

2012-01-01T11:15:00.000-05:00

Happy New Year everyone! I hope you had a safe and happy celebration as we enter 2012.

At this time of year, most people make resolutions or set new goals for themselves. But after the dust settles, and the hype is over, what will you actually do? What will you actually accomplish?

I can't remember who said it, but "the greatest gap in the world is between knowing and doing." That statement is so true (as I am sure you have experienced firsthand yourself). People will read books and books, and make plans, strategize, etc., but the "proof is in the pudding." In other words, just do it.

The action and execution mindset requires taking one day at a time, discipline, and real personal, self motivation. If you don't have those qualities, then you probably better find a coach or someone else who will "make you do it." Based on my experience, if you don't have those qualities when trying to achieve your goal, then you won't achieve your goal unless someone makes you do it, and keeps you accountable.

As I set goals for 2012, I think of two types of goals:

Destination Goals
Journey Goals

Destination goals are goals that we normally think of, like: "I want to get in shape. I want to lose 10 lbs. I want to increase sales by 20%."

Journey goals are the plan and strategy - the daily execution that will lead you to your destination goals. Journey goals might be: "I will run 2 miles a day. I will not eat sugar 6 days a week. I will make # sales calls per day."

What are your destination goals? What are your journey goals?

Will you eliminate the gap between "knowing and doing" and accomplish your goals in 2012?

Take it one day at time. Be you. Expect success.

Full speed ahead!

REWIND: The Top 18 State Tax Blog Posts of 2011! (I Think)

2011-12-22T07:00:00.000-05:00

As the end of 2011 approaches, I thought it might be fun to provide you with my list of favorite posts from 2011. Here are my Top 18 with links for your convenience. Take a look and let me know what your favorites are.

I hope each of you have a Merry Christmas and Happy New Year!

May your time spent with family be blessed and may God give you a vision for 2012!!

State and Local Tax Year-End Planning????

2011-12-21T07:00:00.001-05:00

As your company or clients discuss year-end planning, I want to remind you that this is a good time to address state and local tax issues and opportunities.

The following is a brief list of some ideas that might apply:

Nexus and FIN 48: At this time of year, it is a good time for companies to address their nexus position in advance of their FIN 48 analysis. Operations may also be able to be restructured. If your company or client utilizes telecommuting employees or independent contractors and hasn’t addressed their nexus position in a while, this may be a good time. Also, more states have adopted economic nexus standards and “bright line” nexus standards that may come into play.

Sales and Use Tax: It is also a good time to conduct a reverse sales tax audit to identify sales and use tax refund opportunities and potential exposure. If your company or client has started to sale items over the Internet, we should talk. If your client has purchased any software, SaaS or cloud computing recently, they may want to confirm there is no sales or use tax exposure.

Income Tax: For C corporations, a reverse income tax audit could identify state income/franchise and gross receipts tax refund opportunities and potential exposure. Combined reporting and apportionment issues or opportunities may exist.

Income Tax: For flow-through entities, a reverse income tax audit may be helpful on major states such as Texas, Michigan, Washington, Pennsylvania, etc.

Credits and Incentives: If your company or clients are entering into new states, hiring new employees, building new facilities, retaining employees, "going green," involved with renewable energy, etc. this is a good time to identify and capture credit and incentive opportunities.

Transaction Due Diligence: If your company or clients are entering into any acquisitions of other companies or assets, state and local tax issues should be reviewed to determine exposure, successor liability, and nexus impact.

Residency Issues: For individual tax clients that have changed their residency to another state or are considering such a change, guidance should be provided in regards to what records they need to maintain, etc.to support their residency or domicile.

Employee Misclassification: If your company or client utilizes a high volume of independent contractors, contracts should be reviewed to mitigate exposure of those independent contractors being reclassified as employees.

Michigan and Disregarded Entities - The Wait is Over!!!

2011-12-20T11:33:00.000-05:00

Disregarded entities can stop waiting, and can now officially NOT FILE separate MBT returns in Michigan.

As I stated in an earlier post in November, Michigan had delayed the deadline once again in the hopes that legislation would be passed to resolve and remove this filing requirement. Well, Michigan has done it and passed SB 369 on December 14, 2011.

According to SB 369, a person that is a disregarded entity for federal income tax purposes under the Internal Revenue Code that prior to January 1, 2012 in an originally filed return was treated as a person separate from its owner or prior to December 1, 2011 in an amended return was treated as a person separate from its owner under this Act for a tax year that begins after December 31, 2007, is not required to file an amended return with its owner as a disregarded entity.

A person that is a disregarded entity for federal income tax purposes under the Internal Revenue Code that prior to January 1, 2012 in an originally filed return was treated as a person separate from its owner or prior to December 1, 2011 in an amended return was treated as a person separate from its owner under this Act for its first tax year that begins after December 31, 2009, may be treated as a person separate from its owner under this Act for its tax year that begins after December 31, 2010 and ends before January 1, 2012.

Click on SB 369 for the details.

State and Local Tax Due Diligence: Don't Restructure Without It!

2011-12-19T10:29:00.000-05:00

Is your company considering restructuring its business? Perhaps creating new legal entities or re-aligning its lines of business into different entities? Changing the ownership structure of the legal entities within the commonly controlled affiliated group? Or maybe it is considering acquiring or merging with a new business (unrelated third-party)?

Regardless of your company's situation, in each of the above mentioned scenarios, your company must perform its due diligence prior to completing any transaction or restructuring. That due diligence should take into consideration the impact the restructuring or transaction will have on the business operations, legal obligations, insurance, finance, and tax, etc.

In regards to the tax implications, there can be significant tax ramifications on the transaction or restructuring itself. In addition to the federal tax impact, the state and local tax impact can be material and varied. Some of the potential state and local taxes to take into consideration are: income tax, gross receipts taxes, franchise taxes, sales and use taxes, property taxes and transfer taxes.

Usually the biggest concern in regards to the transaction from a state and local tax perspective are:

Is there any sales tax on the sale or transfer of assets or change in ownership?
Is there any transfer tax on the transfer of assets or change in ownership?

The answers to these questions depends on the state or states involved.

In addition to the above, the impact that the restructuring will have on the business' state tax nexus (taxable presence) position across the country should be reviewed and considered before making any changes.

So What?

If your company is currently considering any restructuring or acquisition, don't forget about performing state and local tax due diligence. If the transaction ends up costing the company a significant amount of state tax dollars now or in the future, you may be asked if these issues were considered or reviewed prior to completing the transaction.

Thinking of Appealing a Virginia Tax Assessment?

2011-12-09T07:00:00.000-05:00

According to the Virginia Tax Commissioner, the Virginia appeals division received over 500 cases each year over the last 4 years.

Over the last 12 months, the appeals division has reduced their inventory by 34%.

During 2011, appeals has closed 478 cases, and as of November 1, 2011, appeals had an inventory of 387 cases.

The main reason for the large inventory and delay in resolution of cases is disputed or incomplete facts. Incomplete facts cause the need to obtain additional information and slows down the process.

If you are thinking of appealing a Virginia Tax Assessment, a proper strategy and approach may not only ensure a more favorable and fair result, but may also decrease the delay in obtaining a resolution.

Will the Virginia Research and Development Credit Impact Your Company?

2011-12-07T07:00:00.001-05:00

During the 2011 Session, the Virginia General Assembly passed legislation that created a refundable income tax credit for qualified research and development expenses paid or incurred during the taxable year. The credit amount is equal to

15 percent of the first $167,000 in Virginia qualified research and development expenses; or
20 percent of the first $175,000 in Virginia qualified research and development expenses if the research was conducted in conjunction with a Virginia public college or university.

The total amount tax credits allowed is $5 million. If the total amount of tax credits is less than the $5 million limit, TAX will allocate the remaining amount to the taxpayers already approved for the tax credits.

The Department of Taxation (“TAX”) is developing guidelines to carry out the provisions of this credit, including rules regarding the location where the research and development is performed, the residence or business location of the taxpayer or taxpayers conducting the research and development and the location where supplies used in the research and development are consumed.

Virginia's research and development credit draft guidelines were released 11/21/11.

The final guidelines are expected to be released 1/31/2012.

To access the guidelines and learn if your company can take advantage of the credit, go to VA R&D CREDIT.

Internet Retailers and Sales Tax: What's Next?

2011-12-06T11:42:00.000-05:00

The sale tax on Internet retailers discussion continues.

It is a growing issue not only for the BIG names in Internet retailing like Amazon, Overstock.com, etc., but the legislation and discussions being conducted may have a material impact on smaller businesses as well (depending on how the legislation defines "small business.")

If you are an Internet retailer OR a manufacturer, wholesaler, brick and mortar retailer, service provider, etc. who is thinking of selling over the Internet, the legislation discussion currently going on may have an impact on your business.

For more info on current developments regarding this issue, read AccountingToday's article.

Does Your Company Have a "State and Local Tax Plan"?

2011-11-30T20:42:00.000-05:00

Do you have a "plan"? A plan for personal life or business? A plan for this week, this month, this year, etc.?

Do you have a "strategic plan" for your business? Do you have a growth plan?

It is often said, that if you don't have a plan, you will achieve nothing. Before you plan, you have to have a vision or goal of what you want to accomplish. Then you build your plan. I know, there are mountains and mountains of books on building plans and strategic plans, etc. So my goal is not to go into that here. What I want to know is - does your business have a "state and local tax plan" or is your company just "winging it"?

What is a "state and local tax plan"?

It is a strategy or focus detailing how the company should manage its state and local tax positions, exposure, liabilities, audits, estimated payments, provision (FAS 109 / FIN 48), etc. as it relates to the company's business. As the business changes, the company can have a plan in place for how the state and local tax impact will be handled or resolved. Obviously, this plan, just like a business plan, should be flexible and adaptable as facts change. However, this plan can help a company address all of its state and local tax concerns.

Does your company know how it will handle the state tax impact of acquiring a company? What about the post-integration issues? Outstanding liabilities?

Does your company know how it will handle outstanding nexus issues if a state sends a notice or nexus questionnaire? Has the company taken a proactive or reactive approach to resolving state and local tax exposure?

Is the company documenting its intercompany transactions appropriately to avoid state tax addback provisions or forced combination?

And the list goes on, and on, and on.

Does your company have a state and local tax plan?

North Carolina and Virginia Provide Guidance and Opportunity?

2011-11-23T17:09:00.000-05:00

Before you head-off to enjoy Thanksgiving, I thought I would pass along a couple of developments that may impact your company.

North Carolina Development

North Carolina issued Directive CD-11-01 regarding the Secretary's Authority to Adjust the Net Income of a Corporation or to Require a Corporation to File a Combined Return.

The Directive is in relation to the new legislation that takes effect January 1, 2012. It provides guidance regarding how North Carolina will address tax years beginning before and after January 1, 2012.

Virginia Development

In a recent Virginia Ruling (P.D. 11-181), a taxpayer that filed a consolidated corporate income tax return for federal tax purposes, but filed a separate return in Virginia, was allowed to take its proportional share of the Federal 199 Deduction (or domestic production activities deduction permitted under Internal Revenue Code Section 199) for Virginia income tax purposes.

If you have any questions or need assistance in applying either of these developments to your corporation's facts, please contact me.

Have a Great Thanksgiving with family, friends, turkey and football!!

Michigan and Disregarded Entities - Just Keep Waiting!

2011-11-16T16:54:00.000-05:00

The Michigan Department of Treasury has extended the deadline for disregarded entities to file a separate Michigan Business Tax (MBT) Return or as part of a unitary group MBT return until July 1, 2012. The last extended due date was December 31, 2011 (see previous post).

Apparently, the Department is waiting for a legislative fix that will remove this filing requirement for disregarded entities. The legislative delay appears to have motivated the Department to simply keep moving the deadline. The first deadline was June 30, 2011. It was then extended to October 31, 2011, and then December 31, 2011.

THE NOTICE AND FILING REQUIREMENT

According to the NOTICE, a person that is a disregarded entity for federal tax purposes, including a single member limited liability company or QSub, must file a separate return under the MBT or file as a member of a unitary business group if the requirements of MCL 208.1117(6) are satisfied. This requirement applies to all open tax periods under the MBT. A person disregarded for federal tax purposes that filed as a sole proprietor, branch, or division of its owner for MBT purposes (a "previously disregarded entity") is considered a non-filer for statute of limitations purposes under MCL 205.27a.

A person that previously filed an MBT return that included one or more previously disregarded entities, including a unitary business group, must amend its returns for all open periods, even if the amended returns do not result in a different tax liability.

A person required to file a return, or amend a return for a prior period, under this Notice must do so by July 1, 2012.

So What?

If your company has disregarded entities that are subject to this requirement - you may not have to file anything if you keep waiting.

Under Audit in North Carolina? Is a Forced Combination Assessment Coming?

2011-11-14T20:12:00.001-05:00

In a previous post, I mentioned North Carolina's new law that provides statutory guidance on when and how North Carolina may require a group of corporations to file a combined return. The new law applies to tax years beginning on or after January 1, 2012.

The new law does NOT apply to tax years beginning prior to January 1, 2012; therefore, I thought I would provide some additional clarification for companies who are currently under audit and do NOT have an agreement with North Carolina regarding whether they should file a separate or combined return.

According to North Carolina's notice, a corporation that has intercompany transactions in tax years for which a corporate income and franchise tax return has already been filed and is currently under audit may initiate a review of the transactions by the Department by informing the examining auditor of the intercompany transactions and that the corporation is interested in reaching an agreement regarding the tax treatment of the intercompany transactions, including determining tax liability for tax years that have been filed and establishing a methodology for filing future tax returns. The agreement will require the corporation to inform the Department of any future material changes to its structure or operations.

If your company is currently under audit, what should you do? Should you wait for the auditor to raise the issue or issue an assessment? Or should you initiate a review to reach an agreement?

The answers to these questions are unique to each corporation's situation. Therefore, if a separate return was filed for a corporation that is a member of a controlled group or affiliated group of corporations, and material intercompany transactions exist, an analysis should be completed to determine the proper strategy or action to take.

Are You A Victim of "Crunch Time"?

2011-11-08T09:12:00.000-05:00

State income tax compliance always seems to come in "crunch time." "Crunch time" meaning, state income tax compliance seems to get squeezed between the federal return being finished late, and state return due dates. Therefore, most companies and tax practitioners are rushing to get the state returns done in a small amount of time - "crunch time."

So what does that mean?

Well, it more likely than not means that issues and opportunities are being missed on originally filed state income tax returns.

What can you do about it?

If you can't change the timing of the federal return being completed, and you can't change the state return due dates, then you have a few options:

Do as much prep work that you can before the federal return is done
Review your past state audit files to ensure items won't be missed on this year's return
Stay up to date on law changes and court case developments

Another option is to complete a "lookback review" after the returns are filed. What is a "lookback review"?

A "lookback review" or LBR, is a detailed, thorough review of a company's state income tax returns to determine what issues and opportunities exist. Once these issues and opportunities are identified, a company may choose to file amended returns to obtain refunds or simply change their positions prospectively. A proper LBR should involve more than just reviewing the state income tax returns, but also the federal return, trial balance, etc. In most cases, information other than the state returns lead to identification of refund opportunities.

In addition to the compliance time crunch, lookback reviews should be completed when a federal income tax audit is in-process or wrapping-up, and/or when a state income tax audit is in-process. Identification of taxpayer favorable positions or changes may reduce audit assessments and tax that may be due on state RAR amended returns.

Businesses of all sizes can benefit from a LBR. A LBR is scalable and can be limited to a few states that are generating the most tax.

What Are Your State and Local Tax "Blind Spots"?

2011-10-31T13:31:00.002-04:00

WHAT IS A BLIND SPOT?

According to Wikipedia, a blind spot, also known as a scotoma, is an obscuration of the visual field. A particular blind spot known as the blindspot, or physiological blind spot, or punctum caecum in medical literature, is the place in the visual field that corresponds to the lack of light-detecting photoreceptor cells on the optic disc of the retina where the optic nerve passes through it.[1] Since there are no cells to detect light on the optic disc, a part of the field of vision is not perceived. The brain fills in with surrounding detail and with information from the other eye, so the blind spot is not normally perceived.

Now, that wasn't exactly what I think of when I think of a blind spot. I usually think of a blind spot when I am driving my car.

In that context, Wikipedia says a blind spot in a vehicle is an area around the vehicle that cannot be directly observed by the driver while at the controls, under existing circumstances.[1] Blind spots exist in a wide range of vehicles: cars, trucks, motorboats and aircraft.

As one is driving an automobile, blind spots are the areas of the road that cannot be seen while looking forward or through either the rear-view or side mirrors. The most common are the rear quarter blind spots, areas towards the rear of the vehicle on both sides. Vehicles in the adjacent lanes of the road that fall into these blind spots may not be visible using only the car's mirrors. Rear quarter blind spots can be:

checked by turning one's head briefly (risking rear-end collisions),
eliminated by reducing overlap between side and rear-view mirrors, or
reduced by installing mirrors with larger fields-of-view.

STATE AND LOCAL TAX BLIND SPOTS

Now, what does this have to do with state and local taxes?

Well, I believe most, if not all, businesses have state and local tax blind spots. These blind spots may include:

nexus (taxable presence) in states in which the business is not filing income tax returns or collecting sales tax
using the incorrect apportionment formula, including the wrong items or amounts in apportionment factors or using the wrong method to apportion different types of income (tangible, intangible, service, etc.)
including the wrong entities in a combined or consolidated state income tax return due to incorrect unitary group analysis
classifying business income as nonbusiness income (or vice versa)
misapplying P.L. 86-272 protection (i.e., business is not operating within limits of protection or business is applying P.L. 86-272 protection to the wrong type of tax)
misapplying sales and use tax exemptions
not self-assessing and remitting use tax on purchases of taxable items
assuming the business is selling is a nontaxable service, when it is actually selling tangible property
assuming the business is selling intangible property, when it is actually selling tangible property
not adding back related-party expenses on the business' state income tax return when required
adding back related-party expenses on the business' state income tax return when NOT required
when acquiring or merging entities, failing to perform state and local tax due diligence to uncover liabilities and determine a tax-efficient way to combine the entities (before and after the acquisition/merger)
failing to comply with state bulk-sale notification requirements
filing a separate return when a combined group return should be filed
allowing a FIN 48 reserve for state uncertain tax positions to grow year after year without attempting to reduce uncertainty

And the list goes on and on and on.

YOUR BUSINESS / YOUR STATE AND LOCAL TAX BLIND SPOTS

In regards to YOUR business' state and local tax "blind spots," it usually depends on the stage your business is in and the size of your business.

As your business grows and changes, it is vital that your business examines its state and local tax "blind spots" before a "wreck" (audit assessment, nexus questionnaire, etc.) occurs.

Do you know what your state and local tax "blind spots" are?

Michigan Extends Deadline for Disregarded Entities!! (again)

2011-10-27T19:16:00.000-04:00

On Oct. 3, 2011, the Department of Treasury (Department) issued a revised notice regarding the Michigan Business Tax (MBT) filing obligations of business entities that are treated as disregarded entities for federal income tax purposes as a result of the decision in Kmart Michigan Property Services.

According to the notice, business entities that are disregarded for federal income tax purposes (such as single member limited liability companies (SMLLCs) and qualified Subchapter S subsidiaries (QSubs), among others), must now either file a separate MBT return or file as part of a unitary business group, if the unitary requirements are met. This requirement applies to all open tax years under the MBT, which took effect Jan. 1, 2008.

New Deadline - December 31, 2011 (NOT October 31, 2011)

The revised notice extends the due date for filing delinquent and amended returns pursuant to this notice to Dec. 31, 2011 (formerly Oct. 31, 2011).

Sales Tax Compliance Outsourcing: Does Anyone Get it Right??

2011-10-21T07:00:00.000-04:00

Over the past several years, based on my experience, more and more companies seem to be in need of hiring a firm to provide sales tax compliance outsourcing services. However, I have also heard more and more companies complain about their sales tax compliance outsourcing service provider. Does anyone get it right?

If you are currently using someone to provide sales tax compliance outsourcing services to your company, what does your provider do right?

What does your provider do wrong?

What do you think can be done to correct the situation?

What are you looking for in your sales tax compliance outsourcing provider?

Virginia Employers with Teleworkers: Action Required by October 31st!

2011-10-20T07:00:00.001-04:00

If your company plans on launching or expanding a telecommuting program in 2012 in Virginia, then your company needs to file an application with Virginia by October 31st. The form due by October 31st, is only an estimate of telework expenses expected to be incurred in 2012.

The credit applies to C corporations and pass-through entities. A formal telework agreement with the employee must be signed after July 1, 2012.

Overview
In 2011, Governor Bob McDonnell and the Virginia General Assembly approved new tax credit legislation aimed at encouraging private sector telework. Telework, defined as a work arrangement where an employee is allowed to perform normal work duties at a location other than their central work location, is an effective congestion management strategy to remove cars from the highways and has been shown to improve employee productivity, retention and satisfaction.

Virginia employers hoping to claim tax credits for the costs of launching or expanding employee telecommuting programs in 2012 need to file estimates of those expenses with the Virginia Department of Taxation by Oct. 31.

Under Telework!VA, a new income tax credit is available to Virginia companies starting up or expanding employee telecommuting programs in 2012 and 2013. The Telework Expenses Tax Credit allows eligible firms to recover expenses of up to $1,200 per employee and up to a $50,000 per-company cap for telework expenses incurred during taxable years 2012 and 2013 for items such as computers, modems, high-speed internet connections, telecommunications, and more.

For more info, go to Telework!VA

Misclassified Employees in Minnesota?? Act NOW!

2011-10-19T13:43:00.000-04:00

Employers who have discovered improper classification of one or more employees as independent contractors now have a limited-time opportunity to correct the misclassification with reduced consequences for Minnesota withholding tax.

The Minnesota Department of Revenue’s pilot program will closely follow the qualification and application process of the Voluntary Classification Settlement Program recently announced by the Internal Revenue Service. The Minnesota Department of Revenue’s worker classification voluntary compliance initiative will be available through December 16, 2011.

For all of the information, go to Minnesota Worker Classification Initiative.

North Carolina Releases Two Notices Regarding Combined Reporting Legislation

2011-10-14T07:00:00.002-04:00

North Carolina has released two notices to provide guidance regarding the new combined filing legislation taking effect January 1, 2012 and how it impacts taxpayers with existing agreements with North Carolina and the procedures for corporations without an existing agreement to request a review of their intercompany transactions.

Notice # 1

Session Law 2011-411, effective for tax years beginning on or after January 1, 2012, provides that, if the Secretary has reason to believe that a corporation’s State net income is not accurately reported on a separate return filed by the corporation because of intercompany transactions, the Secretary and the corporation may mutually agree to an alternative filing methodology that accurately reports the corporation’s State net income under a voluntary redetermination.

The Department has received inquiries from corporations with existing agreements as to how the legislation affects their existing agreements and the procedures to obtain a voluntary redetermination. The Department has also received inquiries from corporations and tax professionals as to how a corporation that did not participate in the Resolution Initiative can determine whether its intercompany transactions will be adjusted or whether the corporation will be required to file a combined income tax return with its affiliates.

The Notice sets out the effect of the legislation on existing agreements and the procedures for a corporation that does not have an agreement to initiate a review of its intercompany transactions by the Department.

Notice # 2

On June 30, 2011, Governor Perdue signed into law Session Law 2011-390 (House Bill 619) passed by the General Assembly. This law repeals the Secretary’s existing statutory authority in G.S. 105-130.6, 105-130.15 and 105-130.16 to adjust a corporation’s net income or require a combined return. As originally enacted, the repeal of existing statutory authority was effective January 1, 2012. On September 15, 2011, Governor Perdue signed into law Session Law 2011-411 (Senate Bill 580) passed by the General Assembly. This law revises the effective date of the repeal of the Secretary’s existing statutory authority to now be effective for tax years beginning on or after January 1, 2012.

The repealed statutory provisions have been replaced with a new statute, G.S. 105-130.5A, which authorizes the Secretary to adjust the net income of a corporation or to require a corporation to file a combined return. The new statute remains effective for tax years beginning on or after January 1, 2012.

See the Notice for more info.