Pennsylvania Amends IRA Provisions of Unclaimed Property Law and Adds Due Diligence Requirements

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The Pennsylvania General Assembly passed HB 1605 on July 13, 2016, and it was approved by Governor Tom Wolf on the same day.  Contained within this omnibus finance bill are two sections that significantly amend Pennsylvania's unclaimed property law: section 4, which revises the dormancy standard applicable to IRAs; and section 5, which imposes formal due diligence requirements on holders. In particular, section 4 of HB 1605 revises section 1301.8 of Pennsylvania's unclaimed property law to provide that the dormancy period for a retirement account is triggered when the holder “has lost [...]Read more

North Carolina Appellate Court Affirms that Taxation of Trust’s Income is Unconstitutional

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On July 5, 2016, the Court of Appeals of North Carolina affirmed the 2015 decision by the superior court in The Kimberley Rice Kaestner 1992 Family Trust v. N.C. Dep't of Revenue, which held that North Carolina was constitutionally prohibited from taxing the income of the plaintiff trust.  Essentially, the state asserted jurisdiction to tax the trust's income based solely on the fact that the beneficiaries of the trust were North Carolina residents (the trust had no other connection with the state).  The superior court rejected this assertion, concluding that the state could not impose the tax [...]Read more

The Treasury Department and the IRS Surprise Taxpayers with Proposed § 385 Debt-Equity Regulations

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For decades, the determination of whether debt issued between related parties should properly be characterized as equity has provided grounds for frequent disputes between taxpayers and the Treasury Department and the IRS (together, “the government”). Congress attempted to address this issue through the enactment of IRC § 385(a) (as part of the Tax Reform Act of 1969), which authorizes the Treasury Department to prescribe regulations as necessary or appropriate to determine whether an interest in a corporation should be treated as debt or equity. However, the government had not done so – [...]Read more

What Makes a Loophole? Prop 13 and Change in Ownership

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Few laws, if any, have had a bigger impact on a state’s taxing authority than California’s Proposition 13 (Prop 13). Famously passed in 1978 amidst a housing market boom, Prop 13 was intended to protect taxpayers from dramatic rises in their annual property tax bills by limiting the ad valorem taxes on real property to 1 percent of the full cash value of the property at acquisition, with a 2 percent annual cap on assessment increases. Perhaps the most friction-laden aspect of Prop 13 is the ‘‘change in ownership’’ requirement.  Prop 13 permits local assessors to reassess tax based [...]Read more

Sales Tax Nexus Roundup – Introducing Louisiana and Tennessee

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We have been closely following the rapid rise of state laws and regulations imposing sales tax nexus or reporting requirements on out-of-state sellers with no physical presence in the state. In the wake of decisions by the U.S. Supreme Court and the U.S. Court of Appeals for the Tenth Circuit in cases brought by the Direct Marketing Association (see prior coverage), states have felt emboldened to enact provisions that challenge the Supreme Court's holding in Quill v. North Dakota, which demands that a seller have physical presence in a state before the state can require the seller to collect [...]Read more

Retailers, Take Note: Connecticut Adds New Gift Card Cash-Back Requirements

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On June 9, Connecticut Governor Dan Malloy signed into law HB 5564, which adds Connecticut to the growing list of states that require gift card sellers or issuers to provide cash back to consumers in certain partial redemption situations.  In particular, HB 5564 (enacted as Public Act No. 16-140) requires a seller or issuer of a gift card to provide the purchaser with either a proof of purchase receipt or a gift receipt for the purchase of such card.  Once the card has been redeemed for goods or services and the remaining balance is less than $3.00, the redeeming seller or issuer must pay the [...]Read more

State-vs.-State Unclaimed Property Dispute May be Heading to the Supreme Court

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In March, we issued an advisory highlighting a lawsuit filed by the Pennsylvania Treasury Department against the State of Delaware in federal district court seeking to recover uncashed official checks escheated to Delaware by MoneyGram.  (http://www.alston.com/advisories/money-gram/).  Essentially, the dispute centers upon whether MoneyGram's official checks were subject to the Federal Disposition Act, in which case they would have been reportable to the state(s) in which they were issued rather than Delaware, the state of MoneyGram's domicile.  In our prior advisory, we pointed out that [...]Read more

Sprint Communications Inc. Asks the U.S. Supreme Court to Hear Bundling Issue

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On February 18, 2016, Sprint Communications Inc. filed a petition for a writ of certiorari asking the United States Supreme Court to review the New York Court of Appeals’ denial of Sprint’s attempt to dismiss the approximately $400 million sales tax case brought against it under New York’s False Claims Act (“FCA”). In its October 20, 2015, denial, the Court of Appeals held that: (1) the attorney general’s complaint sufficiently pleaded a cause of action under the state FCA that Sprint knowingly filed false tax records with the state, (2) New York tax law unambiguously imposes sales [...]Read more

The Panama Papers: Taking a New Look at an Old Problem

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On April 3, 2016, the International Consortium of Investigative Journalists (“ICIJ”) published more than 11.5 million documents connected to Mossack Fonseca, a Panama law firm that helped establish offshore financial operations for some of the world’s wealthiest power players. The implicated offshore operations allegedly failed to adhere to transparency and beneficial ownership reporting requirements thereby permitting some corporations to operate behind a veil of secrecy and avoid taxing authorities around the world. The release of the Panama Papers has prompted a new firestorm of international [...]Read more

Vermont Proposes Colorado-style Use Tax Reporting Law

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As we discussed in February, the Tenth Circuit upheld the constitutionality of Colorado’s use tax notification law with its decision in Direct Marketing Association v. Brohl (DMA II). In his concurrence to the decision, Judge Gorsuch predicted that “many (all?) states can be expected to follow Colorado’s lead and enact statutes like the one now before us.” (See Gorsuch, J., concurring, at 9). It appears that Vermont may be the first Colorado follower. Vermont is a seasoned player in the game of sales and use tax nexus and collection. In 2011, the state began requiring retailers who make [...]Read more