Efforts are already underway to reduce the slap many Californians are feeling from the $10,000 limit on federal deductions for state property or income taxes paid. Senators De Leon, Allen, and Hill have introduced SB 227, the "Protect California Taxpayers Act," which would effectively eliminate the cap on these federal deductions by providing a dollar-for-dollar tax credit against the state income tax liabilities of taxpayers who make a charitable donation to the California Excellence Fund. Donations would be used to fund California government programs typically funded through state tax revenues. Any credit that exceeds the taxpayer's income tax liability would be carried over to the next year, and would not be refundable.
The California Franchise Tax Board (FTB) issued Chief Counsel Ruling 2017-01 on August 2, 2017, regarding market-based sourcing rules for performance of "non-marketing" services. Where a subcontractor performed administrative or non-marketing business services for a health plan client, the members or sponsors of the health plan are not considered the direct customers of that subcontractor, but rather only the health plan entity.
The Board of Equalization is attempting to respond to the California Legislature's mandate to turn over most of its authority to two newly created agencies, the California Department of Tax and Fee Administration, and a Department of Administrative Tax Appeals. It's obvious that the short time frame and political climate have the Board of Equalization members and management scrambling to meet the July 1, 2017 deadline for most of the changes to occur. The Governor is expected to sign the Taxpayer Transparency and Fairness Act of 2017 into law any day now.
The temporary statewide sales and use tax increase approved through California's Proposition 30 expires on December 31, 2016. Effective January 1, 2017, the state sales and use tax rate in California will decrease by 0.25% to the new rate of 7.25%. The California State Board of Equalization notes, however, that in many cities and counties the total tax rate will be higher due to local voter-approved district taxes.
Next year, the due dates for various federal tax returns will change based upon the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41). California Assembly Bill 1775 was passed to conform the due dates of related state tax returns to the federal dates. In 2017, the following changes will take place:
Recently, Forbes magazine named South Dakota as one of the top 10 states for business, particularly since it ranked number one in the cost of doing business. A new state law will likely keep South Dakota in first place for in-state business statistics, to the detriment of out-of-state sellers. Last month, South Dakota Governor Dennis Daugaard signed into law a bill that requires many out-of-state sellers to register with the state and begin collecting sales tax. All sellers conducting more than 200 transactions with South Dakota purchasers, or making more than $100,000 in gross sales to South Dakota, must register with the state.
In many of the cases we handle, our tax attorneys are able to reach a settlement through negotiations with the other side. However, this isn't always possible, especially if the parties simply do not agree on an issue, or the issue involves an area of law that is unresolved.
In the November election, California voters passed Proposition 30, and as a result the statewide sales and use tax rate will increase one quarter of one percent (0.25%) beginning on January 1, 2013. The higher tax rate will apply for four years; January 1, 2013 through December 31, 2016. Revenue generated by the rate increase will fund K-12 schools, community colleges, and public safety services.
On November 20, 2012, a Michigan Court of Appeals ruled that the Multistate Tax Compact (MTC) election is not available for Michigan taxpayers. The Court of Appeals affirmed the lower court's decision that IBM could not elect to apportion its income according to the three-factor MTC formula. The Court held that under apportionment, the Michigan Business Tax (MBT) is mandatory and "the possibility of electing a different apportionment formula as a matter of right is simply not permitted." The court held that the mandatory language of the later enacted MBT repealed the MTC election by implication.