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New York Legislation Proposes to Retroactively Remove FCA Culpability Standard for Tax Law Claims

With Halloween just a few weeks away, a scary proposal is brewing in the New York State Legislature that should give taxpayers chills. Companion bills Assembly Bill 11066 and Senate Bill 8872 were recently introduced by committee chairs (Assembly Ways and Means Chairwoman Helene Weinstein and Senate Committee on Judiciary Chairman Brad Hoylman). This legislation would substantially expand the scope of the New York False Claims Act (FCA) for claims under the New York State Tax Law by retroactively creating a new tax-specific cause of action that would award single (as opposed to treble) damages, including consequential damages when the taxpayer makes a false statement or record material to their obligation to pay money to state or local governments under the tax law by mistake or mere negligence. Specifically, the bill would not modify the existing "knowing" causes of action in NY State Fin. Law § 189(1) that, if proven, result in civil penalties, treble...

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Finishing SALT: June Wrap-Up & Looking at July

Top June Hits You May Have Missed BREAKING NEWS: US Supreme Court Overrules Quill Illinois Budget Bill Makes Few Tax Changes except the Adoption of an Economic Nexus Standard Circuit Court of Cook County Upholds City of Chicago’s Imposition of Amusement Tax on Internet-Based Streaming Services Looking Forward to July July 16, 2018: Alysse McLoughlin is presenting “Federal Tax Changes & Implications to States” at the Southeastern Association of Tax Administrators Conference in Nashville, TN. July 18, 2018: Alysse McLoughlin is presenting on state and local tax considerations for the Tax Executives Webinar “Practical Tax Reform Implementation – What Corporate Tax Professionals Need to Know Now”. July 23, 2018: Alysse McLoughlin is speaking on a state panel about the “State Reactions to Tax Reform” for the Tax Reform portion of the New York University Summer Institute in Taxation in New York, NY.  July 28, 2018:  Stephen Kranz is speaking at the National...

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News of Wayfair Decision Breaks during Tax in the City® New York

The first New York meeting of McDermott’s Tax in the City® initiative in 2018 coincided with the June 21 issuance of the US Supreme Court’s (SCOTUS) highly anticipated Wayfair decision. Just before our meeting, SCOTUS issued its opinion determining that remote sellers that do not have a physical presence in a state can be required to collect sales tax on sales to customers in that state. McDermott SALT partner Diann Smith relayed the decision and its impact on online retailers to a captivated audience. Click here to read McDermott’s insight about the decision. The event also featured a CLE/CPE presentation on the ethical considerations relative to tax reform by Kristen Hazel, Jane May and Maureen O’Brien, followed by a roundtable discussion on recent tax reform insights led by Britt Haxton, Sandra McGill, Kathleen Quinn and Diann Smith. Below are a few takeaways from last week’s Tax in the City® New York: Supreme Court Update: Wayfair – Jurisdiction to Tax –...

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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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Illinois Responds to Federal Tax Reform Bill by Proposing Legislation to Decouple from the FDII Deduction

The 2017 federal tax reform bill, known as the Tax Cuts and Jobs Act (Act), made a number of significant changes to the law, particularly to the international tax provisions of the Internal Revenue Code (IRC). Last month, Illinois joined the growing number of states responding to the Act by proposing legislation purporting to add-back the new federal deduction for foreign-derived intangible income (FDII). The FDII deduction, enacted in sub-part (a)(1)(A) of new IRC section 250, allows US corporate taxpayers a deduction in the amount of 37.5 percent of income earned from the sale of property to a person outside of the US for use outside of the US or the provision of services to a person outside of the US or with respect to property not located in the US. (For tax years beginning 2026, the deduction is reduced to 21.875 percent.) Senate Bill (SB) 3152 (linked here) proposes an amendment to Section 203(b)(2) of the Illinois Income Tax Act (IITA) that would add...

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Taxpayers May Not Prepay Income Tax to Avoid Cap on SALT Deduction

The federal tax reform package recently approved by Congress (the Bill) contains a cap on the state and local tax deduction that may be claimed by individuals on their federal income tax returns. The Bill provides that an individual may claim up to $10,000 of state and local property taxes and either income or sales taxes. The cap expires on January 1, 2026. Individual taxpayers who have been considering prepaying their 2018 (or later) taxes in 2017 should be aware that the final version of the Bill contains a provision that prohibits individuals from prepaying their income tax for future years in 2017. As a result, any guidance issued by state revenue departments (for example, in Illinois) regarding the prepayment of 2018 income tax is no longer applicable. In certain jurisdictions, individuals may still have an opportunity to prepay their property tax assessments. For additional details, please contact your tax preparer.

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Finishing SALT: Inside SALT’s Monthly Recap

Wrapping Up November – and Looking Forward to December You can view all of the topics we discussed over the last month here. Our lawyers appear at the following State and Local Tax events in December: December 4–5, 2017: Peter Faber, Arthur Rosen and Diann Smith spoke at the 36th Annual NYU Institute on State and Local Taxation. December 14, 2017: Catherine Battin, Mary Kay Martire and Jane May are presenting about the SALT aspects of Tax Reform at the Tax in the City® - Year in Review, which will focus on tax reform.

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New SALT Implications in Proposed House and Senate Tax Reform Bills

The federal tax reform legislation is a work in progress, and its final form will undoubtedly be affected by political considerations and lobbying by interested parties. Both the House and Senate bills deserve careful study by taxpayers and their representatives, as many of the provisions will have an effect on state and local taxes. Continue Reading.

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SALT Implications of the House and Senate Tax Reform Bill

Many provisions of the House and Senate tax reform proposals would affect state and local tax regimes. SALT practitioners should monitor the progress of this legislation and consider contacting their state tax administrators and legislative bodies to voice their opinions. Continue Reading.

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State and Local Tax Aspects of Republican Tax Reform Framework

The White House and Republican congressional leadership released an outline this week to guide forthcoming legislation on federal tax reform. The states conform to the federal tax laws to varying degrees and the extent to which they will adopt any federal changes is uncertain. This memorandum outlines some of the key areas—individual taxation, general business taxation and international taxation— with which the states will be concerned as details continue to unfold. Continue reading.

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