Category Archives: Uncategorized

New York Looks to Further Restrict Gift Card Practices

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In December, we wrote about a new gift card law in New York that took effect on Christmas day (http://www.alston.com/advisories/ny-gift-card-legislation/), which was enacted by Senate Bill S. 4771-E. Under that now-effective law: Gift card issuers are prohibited from charging a service fee before the twenty-fifth month of dormancy, and any service fees that are applied after this time must be waived and put back on the card if the card is used within three years of the issue date. No gift card may have an expiration date of earlier than five years from the date the card was issued or the [...]Read more

Another Wynne for Taxpayers: Unconstitutional Limitations on Credits for Taxes Paid to Other States

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Clark Calhoun explores the implications of a decision from the U.S. Supreme Court in an article published in IPT Insider. (See p. 10 of the linked document.) In Comptroller of the Treasury of Maryland v. Wynne, the U.S. Supreme Court declared Maryland’s income tax credit scheme unconstitutional, holding that the state’s failure to provide a full credit for the state and local taxes paid to other states was internally inconsistent and, therefore, violated the dormant Commerce Clause. Calhoun's article focuses on a similar tax credit issue, the constitutionality of which seems highly suspect [...]Read more

When Taxpayers Should Not Bear the Burden of Proof

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The impact of the burden of proof on state tax appeals cannot be overstated.  Taxpayers often lose tax appeals on the basis that they failed to satisfy the seemingly elusive burden of proof. Apart from limited instances in the arena of alternative apportionment, taxpayers bear the burden of proof in nearly every state tax appeal.  As the reasoning goes, taxpayers should bear the burden of proof because it is the taxpayers that possess the necessary information and, thus, are in the best position to establish the proper amount of state tax liability.  But should this always be the case? In [...]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

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

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

South Dakota Takes NCSL Challenge, Enacts Sales Tax Nexus Law

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In February, we discussed how the National Conference of State Legislatures (NCSL) circulated a letter to all the states encouraging them to enact laws to challenge the physical-presence standard for sales tax nexus articulated in Quill v. North Dakota. On March 22, South Dakota heeded the NCLS's call when Gov. Dennis Daugaard signed SB 106. SB 106 imposes a sales tax collection obligation on out-of-state sellers "as if the seller had physical presence in the state," provided that the seller meets one of two conditions: (1) the seller's gross revenue from taxable products or services delivered [...]Read more

Tenth Circuit Questions Quill’s Endurance

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Last month, we discussed states’ efforts underway to attack Quill Corp. v. North Dakota, which provides a bright-line safe-harbor from sales and use tax collection for taxpayers without physical presence in a state. We discussed Alabama’s regulation requiring out-of-state sellers with sufficient sales to collect sales tax regardless of physical presence, as well as draft legislation circulated to the states by the National Conference of State Legislatures (NCSL). Since then, a federal appellate court decision has given the states new ammunition. On February 22, the U.S. Court of Appeals [...]Read more

Corporate Letter Rulings Cut Back

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Rev. Proc. 2013-32, issued on June 25, 2013, substantially restricts the scope of letter rulings that taxpayers can obtain from chief counsel (corporate) on the core subchapter C nonrecognition transactions covered by sections 332, 351, 355 and 368, as well as related issues under sections 354, 356, 358 and 361. Comfort Rulings. There has been in place a ban on various “comfort rulings” and limitations on certain factual issues in section 355 rulings. There has been a way around some of these limitations. If the taxpayer could ask for a ruling on a “significant issue,” then the IRS might [...]Read more