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California Bill Would Make Taxpayer Information Available to the Public (Seriously!)

A concerning bill is pending in the California Senate. SB-972 would require the California State Controller’s Office (the Controller) to make taxpayer information publicly available. The bill would require that the Controller post on its website a list of all taxpayers subject to the California corporation tax with gross receipts of $5 billion or more and information about each taxpayer, including the tax liability of taxpayer and the amount of tax credits claimed by the taxpayer in the previous calendar year. We are hearing that the California Senate is likely to pass the bill. If the bill does pass in the Senate, it will head to the Assembly. This bill is surprising (and alarming) because the usual policy of states and tax departments is to protect the confidentiality of taxpayer information. In fact, most states have statutory provisions ensuring that taxpayer information obtained through tax filings and audits is kept confidential, and disclosure is...

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Taxes, Like Temperatures, Going Up: California COVID-19 Budget “Revenue Solutions”

Yesterday Governor Gavin Newsom turned to a familiar gambit from California’s playbook to help tackle the budgetary hole wrought by COVID-19. In January, the Governor proposed his budget for the 2020-2021 fiscal year, which projected a $5.6 billion surplus. Indeed, revenues through March are reported as having run $1.35 billion above projections. But, as the Governor says in his May Revision to his January Budget, “[t]he COVID-19 pandemic and the resulting recession has changed the fiscal landscape significantly.” Without the various changes proposed by the May Revision, which includes the “revenue solutions” described below, the Governor’s Budget projects a $54 billion deficit. The May Revision proposes two significant changes to business taxation. The Governor proposes suspending net operating losses for 2020, 2021, and 2022 for medium and large businesses. The Governor also proposes limiting business incentive tax credits from offsetting more than $5...

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DC and New Jersey Join Mississippi in Disregarding Coronavirus-Caused Remote Work for Tax Purposes

As part of our open letter to state tax administrators urging relief of undue tax administration burdens in light of COVID-19, we urged the disregarding of remote work for tax purposes. The public health necessity for businesses to close central operations and direct employees to work from home should not be used as an “opportunity” to create nexus for affected businesses. Mississippi’s Department of Revenue responded to us very quickly, agreeing with us on that point: “Mississippi will not use any changes in the employees temporary work locations due to the pandemic to impose nexus or alter apportionment of income for any business while temporary telework requirements are in place.” New Jersey’s Division of Taxation also quickly issued a similar statement: “In the event that employees are working from home solely as a result of closures due to the coronavirus outbreak and/or the employer’s social distancing policy, no threshold will be considered to have...

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Illinois Amnesty Programs Now Underway

As previously announced, the Illinois Department of Revenue has begun a new amnesty program, running October 1 through November 15, 2019. All taxes paid to the Illinois Department of Revenue for taxable periods ending after June 30, 2011, and prior to July 1, 2018, are eligible for amnesty with relief from penalties and interest. Unlike prior Illinois programs, taxpayers who do not participate in amnesty will not be subject to double interest or penalty charges on subsequent audit assessments for taxes that were eligible for amnesty. A link to the Illinois Department of Revenue forms for its amnesty program is attached here. The Illinois Secretary of State also offers an amnesty program running from October 1 through November 15, 2019, for corporate franchise taxes related to periods ending after March 15, 2008, and on or before June 30, 2019. In light of the phase-out of the corporate franchise tax by January 1, 2024 (enacted by Public Act 101-9),...

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Illinois Fiscal Year 2020 Income and Franchise Tax Changes

The Illinois General Assembly enacted a number of new tax measures in a flurry of activity at the end of its legislative session. Some of the changes are taxpayer friendly and others are not. Unlike the no-deal chaos of past years, all of the measures have been or are expected to be signed by the state’s new Democratic governor, J.B. Pritzker. This blog post summarizes the income-tax and franchise tax-related changes approved by the General Assembly. Subsequent posts will address sales/use, property and other tax changes. Graduated Income Tax The General Assembly approved, by a three-fifths vote in each Chamber, a referendum to appear on the November 2020 ballot in which Illinois taxpayers will be asked whether the Illinois Constitution should be amended to permit the imposition of a graduated income tax. Article IX, Section 3 of the current Constitution provides that any tax on or measured by income “shall be at a non-graduated rate,” and that only one such...

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District of Columbia Takes First Step to Decouple from Federal Tax Reform

On December 19, 2017, DC Councilmember Mary Cheh introduced the District Tax Independence Act of 2017 (Act), which would require the Chief Financial Officer (CFO) to submit a report outlining the steps and amendments necessary to decouple the District’s tax deduction laws from federal law. As introduced, the Act would require this report by no later than April 30, 2018. The Act was referred to the Committee on Finance and Revenue the same day it was introduced and has not been taken up by the committee, which has been dormant since and is not currently scheduled to meet again until the Council returns in late January. The legislation is co-sponsored by Councilmembers Allen, Evans, McDuffie, Bonds, Gray, Nadeau, R. White, Grosso, Silverman, T. White, and Chairman Mendelson. Notably, all members of the Committee on Finance and Revenue—including Chairman Evans—are co-sponsors. Practice Note The introduction of the Act signals the Council’s overwhelming...

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Illinois Franchise Tax Relief on the Horizon

For Illinois corporate clients who pay significant Illinois corporate franchise tax, relief may be on the way. Illinois is on the verge of joining Delaware and many other jurisdictions that permit simple conversions from corporate to limited liability company (LLC) form, by enacting the “Entity Omnibus Act” as part of House Bill 2963, passed by the Illinois General Assembly and sent to the governor’s office last week. Assuming the governor signs the Bill, the effective date of the new law would be July 1, 2018. Corporations formed under the Illinois Business Corporation Act often face impediments to conversion to an LLC to be free of the franchise tax. The new Act should make planning and execution considerably easier.

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