Here’s the latest State and Local (SALT) tax news from several states, including: tax amnesty programs in Arizona and Massachusetts, Ohio Domicile ruling and taxing New York tax credits.
As part of its 2015/2016 budget bill Arizona has enacted a “Tax Recovery Program” (amnesty) for taxpayers with an outstanding liability. The logistics of the amnesty program stills needs to be addressed but as of right now, tax recovery is scheduled to take place from 9/1/2015 through 10/31/2015. Currently, as it stands, Arizona will waive penalties and interest under the tax recovery program. As the state of Arizona provides additional information on the amnesty provisions, Skoda Minotti will disseminate the information.
Massachusetts’ tax amnesty runs from 3/16/2015 through 5/15/2015. Amnesty will apply to tax years or periods to which a Notice of Assessment was received before 1/1/2015. The state of Massachusetts will notify taxpayers who are eligible to participate in amnesty. This amnesty program is geared toward the taxpayer who has already received an assessment from Massachusetts has not been paid it. If taxpayers participate in this amnesty program they will not be able to participate in another Massachusetts amnesty program for 10 years. Some of the taxes covered by the amnesty program are: corporate excise, estate taxes, fiduciary income taxes and individual use tax on the purchase of automobiles. This program is not designed for taxpayers that have undiscovered tax liabilities with the state. This link will take you to the state’s website where you can secure more information on the amnesty program.
The Ohio Supreme Court is addressing the issue of Ohio Domicile in a case recently heard by the court. The case in question involves Kent and Sue Cunningham and whether or not they were domiciled in Ohio for the tax year in question (See Cunningham case). The Cunninghams did have another abode outside of Ohio for the year in question and Mr. Cunningham filed the required non-resident affidavit, but Mrs. Cunningham did not. The Tax Commissioner determined both parties were domiciled in Ohio and treated them as residents of Ohio. The Board of Tax Appeals disagreed and said Mr. Cunningham had fulfilled his obligations to be entitled to the presumption that he wasn’t domiciled in Ohio since he had filed the required affidavit, but Mrs. Cunningham was not entitled to the same presumption.
The issue in the case is domicile, which is the key in determining Ohio residency. Is it the place where a person has a fixed and permanent home that continues to their home until it is either abandoned or the person intends to abandon it? It is not known when the Ohio Supreme Court will render its decision but Skoda Minotti will continue to monitor the case until a decision is rendered.
New York Credits with Federal Tax Ramifications
The U.S. Tax Court recently ruled that a portion of any New York tax credits that were refundable to the taxpayer were taxable income and includable in federal adjusted gross income. At issue were New York EZ Investment Credits, EZ Wage Credits and QEZE Real Property Tax Credits. The state classified the credits as overpayment of state taxes but the Tax Court did not agree with that classification. The QEZE Real Property Tax credit was limited to the amount of past real property tax actually paid so the IRS did not treat these credits as taxable income. The EZ Investment credit and the EZ wage credit were not limited to past tax payments made. The credits reduced the taxpayers state income tax liability and any excess credits were refunded. The IRS contended that unless the credits were based on previous tax liabilities, the refundable portion of the credit must be classified as taxable income. Will this decision impact other states with refundable tax credits? Only time will tell.