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COVID-19 State Tax Relief for Illinois | Quarterly Estimated State Income Tax Payments Still Due 4/15/20

Illinois has announced the following tax-related relief measures related to COVID-19. Taxpayers who file quarterly estimated returns should note that unlike the federal government, Illinois has not extended the April 15, 2020 due date for first quarter estimated tax payments. I. Extension of Filing and Payment Deadlines for Illinois Income Tax Returns The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Illinois income taxes on April 15, 2020, have been automatically extended until July 15, 2020. This relief applies to all individual returns, trusts and corporations. The relief is automatic; taxpayers do not need to file any additional forms or call the Illinois Department of Revenue (IDOR) to qualify. For additional details, click here for the guidance issued by IDOR on March 25, 2020. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. Even though the deadline has been...

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Victory? Delaware Suggests an End to Contingency Compensation for Unclaimed Property Contract Auditors

For years, Delaware has used contract audit firms to enforce their unclaimed property laws and paid them based, at least partially, on the amount recovered. Motivated by this financial reward and empowered as an agent of the state, the contract-auditing firms with the State’s complicity harass holders, inflate liabilities by deploying aggressive estimation techniques and engage in other questionable practices to maximize their bounty. Maybe not anymore. In a federal court filing on January 10, Delaware’s brief appended as an exhibit its most recent contract signed December 31, 2019, with Kelmar, one of the more notorious unclaimed property contract audit firms. The new contract states that Kelmar will be paid at set hourly rates for general ledger work, instead of their prior compensation, which was largely seen to be contingent upon recovery. (Securities-related work remains contingency-based.) It will be welcome news if this heralds an end to the madness of...

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An Uneven Playing Field: Judicial Deference to State Tax Administrator Interpretations

Judicial deference to state tax agencies puts taxpayers at a steep disadvantage and wastes time and resources on costly tax disputes. A united advocacy effort can help promote passage of state-level legislation that takes the tax administrator’s thumb off the scales of justice in administrative and judicial review of tax determinations. Access the full article. Learn more here about the Deference Coalition and how McDermott can help.

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Finishing SALT: May Wrap-Up and June Highlights

Top Hits You May Have Missed New Mexico Administrative Hearings Office Issues Timely Opinion Regarding State Taxation of Subpart F Income and Dividends from Foreign Affiliates Oregon Bars Use of Three Factor Apportionment Formula McDermott Defeats New York False Claims Act Case Alleging Starbucks Failed to Collect and Remit Sales Tax Looking Forward to June June 1, 2018: Stephen Kranz presented “Diverse Routes to Resolving SALT Audit Issues” at the Georgetown Law Advanced State and Local Tax Institute in Washington, DC.  Stephen discussed numerous complex audit issues facing tax administrators and taxpayers alike, including avenues for equitable resolution of complex audit issues and evaluation of when litigation is the best means of resolution. June 5, 2018: Alysse McLoughlin is presenting “Partnership Audit Regulations: The Great Unknown” at the Federation of Tax Administrators Annual Meeting in Nashville, TN. June 21, 2018: Britt Haxton, Kristen Hazel,...

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McDermott Defeats New York False Claims Act Case Alleging Starbucks Failed to Collect and Remit Sales Tax

On April 9, 2018, the New York State Supreme Court granted Starbucks’ motion to dismiss claims that it had failed to collect more than $10 million of sales tax at its New York stores. Lawyers from McDermott’s State and Local Tax (SALT) group and its White Collar and Securities Defense team handled the matter. A unique feature of New York law is that the attorney general and private qui tam plaintiffs are permitted to bring New York False Claims Act (NYFCA) actions under New York Financial Law for “claims, records, or statements made under the tax law.” Fin. L. 198(4)(a)(i)-(iii). Under federal law and the law of most states, there is no False Claims Act liability for tax issues. But in New York, the attorney general and private plaintiffs can pursue False Claims Act cases for failure to comply with tax law. There have been numerous large settlements and judgments issued against major companies under the NYFCA, including one settlement for $40 million. See...

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Finishing SALT: Inside SALT’s Monthly Recap

Wrapping Up January – and Looking Forward to February You can view all of the topics we discussed over the last month here. Our lawyers will present at the following state and local tax event in February: February 27, 2018: Diann Smith will be presenting “What’s Trending in State Sales Tax Audit Perspectives: Issues and Trends and Their Proper Reflection” at the 2018 Sales Tax Conference and Audit Session in New Orleans, LA.

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Litigation Alert | Third Circuit Reaffirms Scope of Federal Priority Rules

On December 4, 2017, the US Court of Appeals for the Third Circuit issued its much-anticipated precedential opinion in Marathon Petroleum Corp. et al., v. Secretary of Finance et al., No. 16-4011. The opinion affirms the Third Circuit’s existing view (described in its 2012 New Jersey Retailers Association decision) that US Supreme Court precedent permits a private cause of action to enforce the federal priority rules, overruling the federal district court’s conclusion (in this case and Temple-Inland) that the priority rules only apply to disputes between states. The plaintiffs in this case ultimately lost (i.e., Delaware’s motion to dismiss was upheld) on ripeness grounds because the state had not yet taken formal steps to compel cooperation with the third-party auditor’s document request (i.e., Delaware had not yet issued a subpoena, but had only threatened it). The Third Circuit also rejected to the plaintiff’s argument that Delaware is barred from auditing...

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Get Ready for the Countdown: Final Delaware Unclaimed Property Regulations Published

On October 1, 2017, the Delaware Department of Finance published final regulations in the Register of Regulations repealing its former unclaimed property regulations and promulgating a new reporting and examination manual.  See 21 DE Reg 336 (Oct. 1, 2017).  The final reporting and examination regulation contains no substantive changes from the revised version that was re-proposed on August 1, 2017.  As published, the regulations are set to be adopted and take effect on October 11, 2017. This development is significant for holders that are currently under audit and considering enrolling in the Secretary of State’s Voluntary Disclosure Agreement Program (VDA Program) or converting the audit to an “expedited audit” because October 11 marks the start of the 60-day period allotted for holders to notify the Secretary of State and/or State Escheator of their intention.  See 12 Del. Code § 1172(b)-(c).  At the conclusion of this 60-day period, any holder that has...

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Holders Beware: Delaware Department of State Notices to be Mailed in Two Weeks!

In two weeks, the Delaware Secretary of State (SOS) will begin mailing notices to holders who have been identified as likely being out of compliance with Delaware unclaimed property law. Holders that do not enroll in the SOS Voluntary Disclosure Agreement Program (VDA Program) within 60 days of the mailing of this notice will be referred to the State Escheator for examination. Once an audit notice is issued, the SOS will have no legal ability to accept a holder into its VDA Program. The VDA Program was put in place to respond to concerns about Delaware’s audit program and allow holders to come into compliance through a “self-audit” that is administered by the holder, as opposed to the State Escheator. The audit is overseen by a third-party provider that must approve the steps taken by the holder, but allows more flexibility in terms of the details and deadlines than a traditional audit. Delaware law requires that every company be provided with an opportunity...

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Delaware (Re)Proposes Unclaimed Property Reporting and Examination Manual Regulation

On August 1, the Delaware Department of Finance (DOF) published a revised version of its proposed reporting and examination manual regulation addressing audit procedures and method of estimation.  See 21 DE Reg 123 (Aug. 1, 2017). The revised proposed regulation is substantially similar to the first draft proposed earlier this year, but contains a dozen or so notable differences (described in more detail below). Because the former draft of the regulation was never finalized, the 60-day time period for eligible holders to convert to the Voluntary Disclosure Agreement (VDA) Program (administered by the Secretary of State) or an expedited audit has not started to run, and will not commence until the final DOF regulation is published in the monthly Register of Regulations. Based on the fact that the DOF is accepted comments through August 31, 2017 (and likely needs at least a month to take them into consideration), the final regulation is not expected to be...

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