LexisNexis® Legal Newsroom
    Bridging the Gap: Illinois Provides Guidance on Videoconferencing Broker and Bridging Services

    By Mike Kerman and Timothy Gustafson

    The Illinois Department of Revenue issued a General Information Letter explaining how it will apply retailers’ occupation tax (ROT) and telecommunications excise tax (TET) to videoconferencing services. The taxpayer that sought the letter acts as a broker to match customers that need videoconferencing services with affiliates that operate videoconferencing facilities. The taxpayer also provides “bridging” services, by connecting the customer’s videoconferencing device to an affiliate’s videoconferencing device through an IP address and monitoring the connection during the conference, and may also provide Internet service to the customer through an Integrated Services for Digital Network connection. The Department explained that a customer’s rental of an affiliate’s videoconferencing facility is not subject to ROT as long as no tangible personal property is transferred to the customer. Additionally, the Department noted that “telecommunications” subject to TET do not include value-added services in which computer processing applications are used to act on the form or content of information for purposes other than transmission. Thus, these services are not subject to TET as long as they are separated from taxable telecommunications charges in the company’s books and records. If the nontaxable service charges are not separated, the entire charge is taxable as a sale of telecommunications. Ill. Dept. of Rev., General Information Letter ST-15-0028-GIL (May 14, 2015)

    IRS Tweaks Rules To Curb Retroactive Partnership Benefits

    The IRS released final rules Friday on the determination of a partner’s distributive share of a partnership’s gain and loss when an interest varies during the year, and concurrently proposed regulations on allocable cash basis items and tiered ...read more

    CSX Urges 11th Circ. To Reverse Ala. Fuel Tax Ruling

    CSX Transportation Inc. on Thursday took aim at the Alabama Department of Revenue’s alleged attempts to justify the ”discriminatory practice” of exempting the railroad’s competitors from a sales tax on diesel fuel, calling on the ...read more

    Gilbert Hyatt's Epic Tax Battle Is Far From Over

    Inventor Gilbert Hyatt has been embattled with the California Franchise Tax Board over residency status and the conduct of FTB auditors for over 20 years. While Hyatt will make a second trip to the U.S. Supreme Court, the court's review will be limited ...read more

    Senate Sends Obama 3-Month Highway Bill, Passes Multiyear Bill

    President Obama is expected to sign a three-month Highway Trust Fund reauthorization into law after the Senate approved the House-passed measure July 30 on a 91-4 vote; it also adopted a multiyear extension on a 65-34 vote. Both bills contain compliance and other tax changes.
    Highway funding had been expected to run low around the July 31 expiration of the trust fund's spending authority.

    View the entire article on LexisNexis® Tax Center

    MTC to Hold Hearing on Draft Sales Tax Nexus Model Statute

    The Multistate Tax Commission's Executive Committee July 30 voted to send to a public hearing a draft sales and use tax nexus model statute containing both click-through nexus language and provisions establishing when a retailer is engaged in business in a state.
    The draft, years in the making, is the third version of the model to be considered by the Executive Committee but the first to be forwarded to the next stage of the MTC's adoption process.

    View the entire article on LexisNexis Tax Center

    U.S. Congress to Blame for Tax-Driven Offshoring Pressures, PSI Says

    In a reversal of traditional roles, members of the U.S. Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations (PSI) pointed fingers at themselves July 30 while all but apologizing to executives from five companies for the pressures that America's corporate tax code places on their businesses.
    "Blaming companies for doing the math that our tax code represents is a waste of time," said PSI ranking minority member Claire McCaskill, D-Mo. "What Congress needs to do instead is hold the mirror up to ourselves, because it is our inability to come together and compromise in a comprehensive way that is holding us back from reforming our tax code in a way that levels the playing field for our businesses not just on the global marketplace, but right here in the United States of America."

    View the entire article on LexisNexis Tax Center

    Out of Steam: Nuclear Power Company Loses Bid for New York Manufacturing Tax Credits

    By Chris Mehrmann and Open Weaver Banks

    A New York appellate court denied a nuclear power company’s bid for manufacturing tax credits, finding that equipment used at two power plants to produce steam and water during the electricity generation process was not used for manufacturing. The taxpayer argued that the process of creating steam and water – both qualifying “goods” for purposes of the credit – should be viewed separately from the process of generating electricity, which is excluded from the credit. In rejecting the taxpayer’s claim, the court explained that the power plants were engaged in the “unitary process” of generating electricity, and that it was inappropriate to “artificially divide” the production of water and steam from the production of electricity for tax purposes. Even after analyzing the claimed equipment in isolation, the court found that it was not used for manufacturing: “Here, the water that is converted to steam by petitioner’s assets is then converted back to its original form as water and then to steam again in an ongoing, continuous cycle that makes no permanent change in the water and yields no final product. This is more akin to recycling than to manufacturing.” Constellation Nuclear Power Plants LLC v. Tax Appeals Tribunal, 2015 NY Slip Op. 06183 (N.Y. App. Div. July 16, 2015).

    Not So Fast: ALAS Fails to Attain Sufficient State Support

    At the Multistate Tax Commission (MTC) Executive Committee Meeting in Spokane, Washington, the Arm’s-Length Adjustment Service (ALAS) Advisory Group provided an update on its transfer pricing effort. On May 7, 2015, the Executive Committee approved the Final Program Design for the transfer pricing program (the Program). After receiving approval from the MTC’s Executive Committee, ALAS sought to attain critical mass of states needed to launch the program.

    ALAS began its efforts in June 2014. It spent approximately a year designing the Program in order to garner the support – including financial support - of at least seven states. When the Final Program Design was approved, only six states had agreed to participate: Alabama, Iowa, Kentucky, New Jersey, North Carolina and Pennsylvania. With interest lower than anticipated, ALAS continued to solicit state participation over the past three months, but to no avail.

    At today’s meeting, incoming Executive MTC Director Greg Matson indicated that no additional states have joined the Program. Two additional states expressed interest, but have yet to formally join. In the coming months, the MTC will meet with four additional states to solicit participation.

    3-Year Limit Applies To 3rd-Party Tax Fraud: Fed. Circ.

    The Federal Circuit affirmed Wednesday that the Internal Revenue Service does not have unlimited time to collect taxes on a $6.5 million fraudulent return when the fraud was committed by the taxpayer’s lawyer. ...read more

    NJ Appeals Court Favors Kinko's In Tax Refund Row

    A New Jersey appellate court on Thursday ruled that the director of the state’s Division of Taxation erred when denying Kinko’s Network Inc.’s refund request in connection to a 2006 deficiency assessment, saying the refund was well within ...read more

    Senate Passes Highway Funding Bills

    The U.S. Senate on Thursday passed a long-term highway funding bill, alongside a three-month patch also including emergency veterans’ health care funding, buying time to negotiate a bicameral compromise bill that could be funded through proposed ...read more

    Craft Beer's Growth Is Causing Congress To Brew Reforms

    In response to the craft beer industry's explosive growth, national policy surrounding alcohol regulatory reform has been one of modernization, not the elimination of three-tier distribution systems and state franchise laws. However, while some states ...read more

    NY Law License Doesn't Allow NY To Tax Atty's Fla. Work

    An attorney licensed in New York but allowed to represent a client in a case in Florida does not have to pay income tax in New York solely because he has a professional license there, according to a ruling from a New York Division of Tax Appeals judge ...read more

    AbbVie Says Chancery Rightly Axed Suit Over Failed Inversion

    AbbVie Inc. told the Delaware Supreme Court late Wednesday that the Chancery Court was right to toss shareholders' records demands investigating the failed $55 billion merger with Shire PLC, which fell apart amid an Obama administration crackdown ...read more

    Tax Court Says Farm Can Deduct Materials In Year Purchased

    The U.S. Tax Court in a published opinion Thursday said a farm could deduct the cost of materials in the year it purchases them and does not have to defer the deductions until it uses them, an issue it said had never been decided by any court. ...read more

    IRS Offers Safe Harbor For Routine Services Contracts

    The Internal Revenue Service said Thursday that janitors, landscape workers and other accrual method taxpayers can expense the cost of their routine services under certain work contracts, detailing a safe harbor provided under a new revenue procedure ...read more

    Multistate Tax Commission Amends the Equitable Apportionment Provision of the Compact and Apportionment Rules for Financial Institutions

    Yesterday, the Multistate Tax Commission held its annual meeting in Spokane, Washington. The meeting is the annual event where full MTC member states approve model laws in their final version. The approved versions are then ready for the member states to adopt if they so choose. This year the MTC approved changes to the equitable apportionment provision of the MTC Compact; language edits to use “apportionable” rather than “business” income; edits to the financial institution apportionment regulations; and procedural changes to the MTC bylaws.

    View the full Legal Alert.

    Corporate Tax Code Needs Reform, Senate Panel Hears

    A host of business leaders on Thursday lobbied a U.S. Senate committee for relief from high corporate tax rates, saying the current system pressures them to relocate overseas and makes their companies vulnerable to buyouts by foreign rivals. ...read more

    UPS Asks Judge To Put Out $180M Untaxed Cigarette Suit

    UPS Inc. on Thursday sought to dismiss a $180 million suit by New York City and state authorities accusing it of illegally shipping more than 136 million untaxed cigarettes over a four-year period, but a federal judge said she was unconvinced by some ...read more

    Travel Sites Say Towns Didn't Fix Class Cert. Bid In Tax Row

    Expedia Inc. and other travel websites asked a federal judge Wednesday to reject a second bid for class certification by 14 Illinois municipalities that accused the sites of failing to pay municipal hotel taxes, saying the towns are merely reshuffling ...read more

    How Ill. Retailers Can Avoid Online Sales Tax FCA Suits

    Two recent rulings in Illinois suggest that a retailers’ proactive investigation into and compliance with tax obligations can help avoid, or at least quickly resolve, Illinois False Claims Act lawsuits alleging the retailer did not pay online sales tax ...read more

    GOP Sen. Hits Out At IRS Over Targeting Scandal

    Sen. Ted Cruz, R-Texas, took aim at the IRS and Commissioner John Koskinen on Wednesday, invoking the specter of former President Richard Nixon in a hearing focused on allegations that the agency targeted conservative advocacy groups. ...read more

    Convicted Bookie Can't Avoid $37M Tax Debt, 8th Circ. Says

    The Eighth Circuit on Wednesday affirmed a U.S. Tax Court's decision ordering the IRS to collect almost $37 million in back taxes from the former owner of one of the world's largest foreign online sports betting companies, in a decision filed ...read more

    Texas Franchise Tax Ruling Won’t Stop National Fight

    A Texas appellate court’s narrow interpretation of the state’s business tax means dozens of out-of-state companies hoping for a lower Texas tax bill likely won’t get refunds, but doesn’t affect the national fight over whether the ...read more