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Louisiana: Step right up and tell the state what back taxes you owe, no really – amnesty program begins soon

Louisiana Governor Bobby Jindal recently signed into law the Louisiana Tax Delinquency Amnesty Act of 2013 (the Act), which requires the Louisiana Department of Revenue to establish the tax delinquency amnesty program. The current year’s amnesty program runs from September 23, 2013 through November 22, 2013. Louisiana’s amnesty program is more expansive in terms of scope than various amnesty programs conducted in other states. For instance, it is far easier and more concise to describe the types of taxes excluded from the amnesty program – motor fuel taxes and penalties for failure to submit information reports that are not based on an underpayment of tax – than those that are included.

Below is a list of the classes of taxes included under the Act:

  • Taxes due prior to January 1, 2013, for which the department has issued an individual or a business proposed assessment, notice of assessment, bill, notice, or demand for payment not later than May 31, 2013
  • Taxes for taxable periods that began before January 1, 2013
  • Taxes for which the taxpayer and the department have entered into an agreement to interrupt the running of prescription (i.e., the civil law equivalent of interrupting the running of the statute of limitations) pursuant to Louisiana Revised Statutes § 47:1580 and said agreement suspends the running of prescription until December 31, 2013

There are three periods during which the tax amnesty program will occur, September 23, 2013 through November 22, 2013 and two yet to be determined periods, one in 2014 and another in 2015. For taxpayers who would benefit from this amnesty program, this year’s program is by far the most beneficial as one-half of the interest and all of the penalties associated with the tax periods for which amnesty is applied for and approved are waived. The 2014 and 2015 amnesty programs will provide substantially less relief than that obtainable in 2013. In 2014, the benefit decreases to a waiver of 15 percent of all of the penalties associated with the tax periods for which amnesty is applied for and approved, but no interest will be waived. In 2015, the benefit further decreases to a waiver of 10 percent of all of the penalties associated with the tax periods for which amnesty is applied for and approved, but no interest will be waived.

The table below illustrates the relief available under the Act:

Amnesty Program Window

 Percent of Penalties Waived 

 Percent of Interest Waived 

September 23, 2013 through November 22, 2013 

100%

50%

2014 (dates to be determined)

15%

0%

2015 (dates to be determined)

10%

0%

Before applying for amnesty, taxpayers should consider the benefits and consequences of the program, as well as whether they qualify before submitting an application. Please contact us and we can discuss whether this program is right for you or your business.

Click here to read the full text of the Louisiana Tax Delinquency Amnesty Act of 2013.

Massachusetts: Department of Revenue publishes updated regulation on pass-through entity withholding requirements

On August 2, 2013, the Massachusetts Department of Revenue issued an update to its regulation on pass-through entity withholding requirements. The changes overall are minor but the following updates are worth noting:

  • The addition of two categories of pass-through entities that are not required to participate in pass-through entity withholding: (a) publicly traded partnerships, and (b) entities prohibited under federal or state law from withholding tax from distributions to members as otherwise required under the regulation.
  • The addition of two categories of members exempt from withholding: (a) nonresident limited partners of qualified securities partnerships, and (b) other exempt entities that the Commissioner may identify on the pass-through entity exemption certificate. A qualified securities partnership is a limited partnership that is engaged exclusively in buying, selling, dealing in or holding securities on its own behalf, and not as a broker, as described under the relevant laws and regulations of Massachusetts.
  • The addition of an exception for joint and several liability for taxes, interest and penalties that a pass-through entity incurs for a failure to withhold a member’s taxes. The exception occurs where a pass-through entity “that reasonably relies, in good faith, on an exemption certificate presented by a member...[.]” However, notwithstanding the exception, joint liability “will exist in any instance in which the member [to whom liability inures] directly or indirectly owns more than a 50 percent interest in the pass-through entity.”

Click here to read the entire text of the proposed regulation.

Arizona: Expected judgment proceeds are characterized as business income

In a recent letter ruling, the Arizona Department of Revenue (the Department) ruled that a taxpayer’s expected judgment proceeds from a patent infringement lawsuit are business income for corporate income tax purposes.

As part of their regular trade or business, the taxpayer and its affiliated group hold patents they developed or acquired for their own manufacturing processes and earn royalties from the license of their patents to third parties. The taxpayer filed a lawsuit against a competing manufacturer alleging infringement on a patent the taxpayer had acquired from a third party.

Under Arizona law, business income means “income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations.” In addition, under Arizona’s administrative code, patent royalties are business income if the patent generating the royalty was created in or arises out of the taxpayer’s regular trade or business or if the purpose for acquiring and holding the patent is related to the taxpayer’s trade or business.

The Department stated that the taxpayer’s patent royalties constitute business income because the patents generating such royalties were either created or acquired in the taxpayer’s regular trade or business. The Department determined the expected judgment proceeds should also constitute business income because such proceeds were awarded to compensate the taxpayer for the loss of business or royalties resulting from the infringement of a patent that was used in the taxpayer’s regular trade or business.

Click here to read the full text of the ruling.

For additional information regarding these subjects or any other multistate tax issues, please contact:

David M. Kall
216.348.5812
dkall@mcdonaldhopkins.com

Susan Millradt McGlone
216.430.2022
smcglone@mcdonaldhopkins.com

Jeremy J. Schirra
216.348.5444
jschirra@mcdonaldhopkins.com

Multistate Tax Services

Businesses must be vigilant and careful in managing their state and local tax liabilities and exposures. We understand this can be a daunting task. McDonald Hopkins Multistate Tax Services provides a broad range of state and local tax services including tax controversy, tax evaluation, tax planning, and tax policy. With professionals who have worked both inside and outside government agencies, our multistate tax team leverages its knowledge and experience to help clients control their complex multistate taxes.

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