January 2017 SALT Shaker
Amended Returns and Abatements
Massachusetts has recently changed the way they handle abatements and amended returns. Prior to November 1, 2016, amended returns could be filed using the Massachusetts Form CA-6 to show the type of tax that was being adjusted, whether it be individual or corporate, the reason for the amended return, the line items that changed on the return and the change in the tax. As of November 1 Form CA-6 will no longer be accepted by the Department of Revenue for amended returns. Use of this form will delay your request. Going forward, to amend a return with the Department of Revenue, you merely need to file a new tax return. For abatements Form ABT is now required to be filed instead Form CA-6.
Last year Massachusetts Department of Revenue closed down WebFile for Business and started requiring use of MassTaxConnect for Businesses to pay income taxes, file sales tax returns and pay other tax bills. The new system also allowed businesses to file amended returns and abatement requests. As of December 2016 Massachusetts Department of Revenue updated MassTaxConnect to allow individual taxpayers to file estimated tax payments and extension payments as well as receive secure email communications, review notices and allow account access for their tax professionals MassTaxConnect will also be updated to allow for additional types of taxes, such as fiduciary and estate, to be filed and payed electronically. However, it will not include filing of personal income tax returns.
Taxation of a Corporate Trustee
New guidelines have been issued by the Massachusetts Department of Revenue to determine if corporate trustee will be subjected to fiduciary income tax. The determining factor will be based on whether or not the activity performed by the corporate trustee is considered “material”. The guidelines issued by the state have two criteria in determining if a corporate trustee is an inhabitant of the state: “(1) maintains an established presence or place of business in Massachusetts for more than 183 days in the taxable year at issue; and (2) engages in material trust activities in Massachusetts related specifically to the trust or trusts whose tax liability is at issue.” For more specific examples of material trust activities refer to the Massachusetts Technical Information Release, No. 16-14 11/29/2016.
Simplified Extension Process
Massachusetts returns that are due on or after December 5, 2016 will now be subjected to a simplified extension process. The new simplified process will apply to all individual, fiduciary and partnership tax returns. The old process required the filing of form M4768 to request an extension of time to file. The simplified process now allows an automatic extension as long as the taxpayer has paid in at least 80% of the total amount of tax due. As always this is only an extension of the time to file and not to pay and any taxpayer failing to meet the 80% requirement will be subjected to penalties and interests.
Practitioner Penalties Upheld
The Tax Appeals Tribunal has upheld an administrative law judge’s determination that the Division of Taxation properly imposed the maximum penalties against a tax preparer. The administrative law judge found that the petitioner prepared returns that contained improper personal property rental expense deductions for hundreds of clients. She did not argue these findings and claimed that is was a misinterpretation of the tax law but requested that maximum penalties are not assessed. When the request was denied, the practitioner filed an exception arguing that because the statute imposing the penalties was repealed while her case was pending before the Division of Tax Appeals, the statute cannot be applied to her case. This argument was rejected by the Tribunal as well, because the acts for which the practitioner was penalized occurred while the statute was in effect.
Changes to MFI for Corporations
Recent changes to the New York Tax Law affect mandatory first installment (MFI) for C corporations subject to tax under Article 9-A, certain sections of Article 9, and Article 33. The changes apply to the payments due on or after March 15, 2017. Form CT-300 was introduced in 2016 to calculate the need to pay a MFI. The determination is now based on the second preceding year’s franchise, excise, or gross receipts tax. A corporation must pay in 25% of that tax if it’s between $1,000 and $100,000 and 40% if it exceeds $100,000. Another change to the payment in tax year 2016 is that payments can no longer be remitted along with the return or the extension as prior years. Taxpayers must use the new form CT-300 to calculate and report any amount due.
New Year, New Due Dates
Keeping consistent with the changes to federal return due dates, New York City returns have updated their due dates. Forms NYC-204 and NYC-204EZ moved up from April 15 to March 15 for calendar year filers. All New York City business corporation returns (forms NYC-2, NYC-2A, NYC-2S) are now due on April 15 for calendar year filers. Finally, form IT-204-LL’s due date is now in line with other state and city partnership returns – March 15 for calendar year filers.
Enforcement of the “new” gross-receipt tax
Although often overlooked, Tennessee will start enforcing their gross-receipt tax starting January 1, 2016. Tennessee has now made it clear that if a company satisfies the requirements to have economic nexus in the state, it is subject to the “business tax”. This is not a new tax and, in fact, has been around for over 40 years, but it is not until now that Tennessee will actually start requiring companies to pay the tax. The tax affects a vast majority of businesses that deliver goods or services to customers located in the state.
Texas Tax Publication 94-108
In Texas, the Comptroller of Public Accounts recently released a publication that has been revised to highlight and clarify existing and new sales and use tax nexus policies. It also contains additional information in the wake of recent disasters. If you come to Texas as an out of state seller during a disaster response period, merely to fix, repair or restore critical infrastructure that was damaged during such emergency, you will NOT be considered to be doing business in the state of Texas.
Additional highlights include specific activities that alert a company whether they are or are not doing business in Texas. For example, companies that have a temporary or permanent location, perform services using company employees or form, organize or incorporate their business in Texas are engaged in business in Texas. Out of state sellers that do not have a physical presence in Texas, conduct business only by telephone or internet and deliver items only by common carrier are not engaged in business in Texas.
DMA nexus case update
The ongoing battle to overturn the Quill case decision has hit a snag last month as the Supreme Court decided not to grant certiorari to the DMA case. At the root of the problem of the case was the requirement to have physical presence to establish nexus. This resulted in an unfair treatment of businesses that were located in Colorado collecting and remitting sales/use tax versus an online retailer with no physical presence in the state not required to do the same. Many states had hoped that this would be the case that presented a chance to finally overturn the Quill decision. However, there is a push towards other nexus standards to combat state’s inability to collect sales/use tax (A more detailed discussion on nexus can be found in the NJ CPA Journal.
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