Tax Report - Institute for Professionals in Taxation

Tax Report

Institute for Professionals in Taxation®

Excellence Through Tax Education

October 2014

Income Tax Symposium

Property Tax Symposium

Program Registration Hotel Reservation

Program Registration Hotel Reservation

November 9 - 12, 2014 Marriott Harbor Beach Resort Fort Lauderdale, FL

Income Tax IPT’s Amicus Brief to the Tennessee Supreme Court Supporting the Application for Permission to Appeal in Vodafone Americas Holdings, Inc. v. Roberts On September 9, 2014, IPT filed a brief in the Tennessee Supreme Court as amicus curiae in support of the taxpayers’ Application for Permission to Appeal in Vodafone Americas Holdings, Inc. v. Roberts. In Vodafone, the Tennessee Court of Appeals, in a 2-1 decision, upheld the Revenue Commissioner’s issuance of a variance under Tennessee’s codification of UDITPA Section 18 to require the taxpayer to apportion its income using market-based sourcing in lieu of the statutorily-prescribed cost of performance method. The brief was authored and IPT is represented in the case by Carolyn Schott of Sherrard & Roe, PLC. Reprinted as an article in this issue are the substantive portions of the brief, which argues that the Court should grant review in Vodafone because, if the Court of Appeals decision is allowed to stand, taxpayers will be unable to rely on the Tennessee statutes as written and because any change in the state’s apportionment policy should be made by the state legislature after careful consideration rather than by the tax administrator or the courts. Carolyn W. Schott, Esq. Sherrard & Roe, PLC Nashville, TN Phone: (615) 742-4589 E-mail: [email protected] Article begins on page 4

November 9 - 12, 2014 Marriott Harbor Beach Resort Fort Lauderdale, FL

Credits and Incentives

Sales Tax Lemon Law Sales Tax Refunds —the Bitter and the Sweet

Class 7c: The Newest Property Tax Incentive in Cook County

Although the provisions of state lemon laws differ from state to state, they generally require the manufacturer of a car that does not meet the warranty requirements to furnish a comparable replacement or to refund the purchase price, which in many states includes refunding sales tax paid by the customer. This article examines the refund policies in twenty-one states and shows that, although the purpose of lemon laws is to protect consumers rather than to enrich state coffers, sales tax refunds are unavailable to manufacturers in a number of states.

In a rare move, the Cook County, Illinois, government recently added a new, streamlined and less restrictive property tax incentive intended to encourage development and revitalization of properties before blight occurs. This article discusses the key provisions of the new “Class 7c” incentive and highlights how it differs from and improves upon the existing property tax incentives available in the county.

J. Elaine Bialczak, Esq. Compton & Associates, LLP Marietta, GA Phone: (770) 988-9059 E-mail: [email protected]

Minah C. Hall, Esq. True Partners Consulting LLC Chicago, IL Phone: (312) 235-3316 E-Mail: [email protected] Jennifer Carroll, Esq. True Partners Consulting LLC Dallas, TX Phone: (469) 212-2690 E-Mail: [email protected]

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In this Issue President's Corner . . . . . . . . . . . . . . . . . . . . . . . . . 3 Counsel's Corner . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Property Tax Symposium . . . . . . . . . . . . . . . . . . . 19 Income Tax Symposium . . . . . . . . . . . . . . . . . . . 20 Pharma/Biotech/Life Science Regional Seminar . 21 TTARA Annual Meeting . . . . . . . . . . . . . . . . . . . . 22

Property Tax Calendar . . . . . . . . . . . . . . . . . . . . . State Business Income Taxation Book . . . . . . . . CMI Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CMI Candidate Connection . . . . . . . . . . . . . . . . . Career Opportunities . . . . . . . . . . . . . . . . . . . . . . Calendar of Events . . . . . . . . . . . . . . . . . . . . . . .

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IPT OFFICERS President Arthur E. Bennett, CMI Property Tax Assistance Co., Inc. First Vice President Margaret C. Wilson, CMI, Esq. Wilson Agosto LLP Second Vice President Chris G. Muntifering, CMI General Mills, Inc. BOARD OF GOVERNORS Immediate Past President Arlene M. Klika, CMI Schneider Carolyn L. Carpenter, CMI, CPA Leslie S. Fisher, CMI E. I. Du Pont de Nemours and Company Garfield A. Grant, CMI, CPA DuCharme, McMillen & Associates, Inc. Rick H. Izumi, CMI ITA, LLC Kenneth R. Marsh, CMI TransCanada Pipelines Limited Faranak Naghavi, CPA Ernst & Young LLP Carolyn M. Shantz, CMI, CPA Superior Energy Services Andrew P. Wagner, CMI, JD, LLM FedEx Corporation Allan J. Wells, CMI ABB Inc. CORPORATE COUNSEL Lee A. Zoeller, CMI, Esq. Reed Smith LLP EXECUTIVE DIRECTOR Cass D. Vickers

Tax Administration The Sun Shines Bright(er) In My Old Kentucky Home: Circuit Court Orders Disclosure of Final Agency Decisions and Awards Attorney Fees Readers may recall the author’s article last October reporting on an appeal by veteran state tax practitioner Mark F. Sommer under the Kentucky Open Records Act to obtain copies of final agency decisions from the Kentucky Department of Revenue. The current article, after discussing the applicable law and reviewing the arguments advanced by the parties, focuses on the decision recently handed down by the Franklin Circuit Court in the case. In that decision, the court not only ruled favorably on Sommer’s request, but awarded attorney fees with respect to part of the claim. The author also provides an update regarding the Department of Revenue’s response to the decision. Jennifer Y. Barber, Esq. Frost Brown Todd LLC Louisville, KY Phone: (502) 779-8154 E-mail: [email protected]

Property Tax Tech One, Marple and School District Reverse Tax Appeals Based on a 1992 Pennsylvania Supreme Court decision, it had been well settled that real estate is valued on a capitalization of lease income basis for ad valorem tax purposes in that state. This article discusses how recent cases, beginning with a 2012 state supreme court decision, have begun to erode that principle, holding that improvements made by and owned by tenants must be considered part of the property’s unified value. The author also explains how some school districts and their contingency fee consultants are seizing on these developments to increase the assessment of properties perceived to be undervalued. Bruce J. Stavitsky, Esq. Stavitsky & Associates LLC Fairfield, NJ Phone: (973) 227-1912 E-mail: [email protected] Article begins on page 17

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ASSISTANT EXECUTIVE DIRECTORS: Brenda A. Pittler Charles Lane O’Connor GENERAL COUNSEL Keith G. Landry This publication is designed to provide accurate information for IPT members and other tax professionals. However, the Institute is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Reprint permission for articles must be granted by authors and the Institute. Send address changes and inquiries to Institute for Professionals in Taxation®, 1200 Abernathy Road, NE, Building 600 Suite L-2, Atlanta, Georgia 30328 Telephone (404) 240-2300/Fax (404) 240-2315.

IPT October 2014 Tax Report 2

President’s Corner

is looking to expand these types of interactive sessions in the future. Committee Chair, Marcus Panasewicz and Committee Co-Vice-Chairs, Jennifer Thompson, CPA and Steve Carter, CPA, along with their active committee of nineteen members, put together a very successful program. I had a great time and enjoyed meeting many new members in both fields. I also enjoyed seeing good friends that I have made through this organization over the past twenty some years. All IPT programs provide the opportunity to meet others in your field and develop lifelong professional friendships. Preceding these two Symposia was the Institute’s 5th VAT Symposium which included excellent speakers not only from the U. S., but also from Europe and Canada. I would like to congratulate the Co-Chairs Faranak Naghavi, CPA, and Harley Duncan for another very informative program.

Arthur E. Bennett, CMI President June 2014-2015

T

he Institute remains focused on its prime directives; quality education, professional development, networking, and professional certification in the state and local tax fields. “Education” includes our basic schools, which impart knowledge at the baseline level; our intermediate/advanced level schools, which provide the opportunity to significantly build on those skills; various symposia and seminars as well as the Annual Conference, which deal with current, cutting-edge topics for the experienced tax professional; and now also distance learning webinars and courses. I would like to encourage you, the membership, to participate in the development and execution of these educational offerings, and to communicate your ideas and educational needs to the Committee Chairs, Executive Officers, and Board of Governors. In September, I attended the Institute’s Sales & Use Tax Symposium held in Washington, DC. Close to 600 individuals attended this outstanding program developed by Committee Chair, Doug Sigel, Esq., and Vice-Chair, Jan Nash, with the active contributions of their sixteen committee members. The Symposium offered something for everyone involved in sales and use taxation. Running concurrently with the Sales Tax Program, was the 4th annual Credits and Incentives Symposium where we were most fortunate to have the Governor of Virginia as the Keynote Speaker. Industry sessions were included for the first time, and, based on the responses, the committee

In late September, IPT’s Executive Director, Cass Vickers, and I attended the Canadian Property Tax Association's National Workshop in Winnipeg, Manitoba. We missed the Pre-Workshop Curling Mini-Bonspiel on Sunday, but were able to attend the reception that evening. This workshop offers a full complement of educational sessions, and I encourage anyone who is involved in Canadian property taxes to learn more about this organization. IPT and the CPTA are cooperating in the preparation of a webinar on Canadian Property Taxes. More details will be sent to members as we get closer to the presentation date. The Personal Property Tax School is now at full enrollment. Chair Kellianne M. Nagy CMI, CAE, and Vice Chair, Diane D. Brown, CMI, along with their instructors, completely updated the course material, including the case study for presentation as a four-day school. Registrations continue for this year’s remaining IPT programs. The Institute’s Income Tax and Property Tax Symposia are being held concurrently in Ft. Lauderdale, Florida. Property Tax Chair Nick Furia, Esq. and ViceChair, Dan Carroll, CMI, and Income Tax Co-Chairs, Jordan Goodman, Esq. and April Nevarez, CMI, along with their respective committees, have put together wellrounded, topical programs designed for experienced tax professionals. The Symposia will have one joint session on Ethics. I encourage you to review the information and make plans to attend. Also scheduled in November, IPT is offering its first Industry/Regional Workshop, the Pharmaceutical/Life Science Regional State and Local Tax Seminar in Iselin, New Jersey. Chair Gary C. Bingel, CMI, CPA, Esq., volunteered to spearhead this program for IPT and has put together a comprehensive offering for Sales and (Continued on page 4) IPT October 2014 Tax Report 3

Income Tax professionals in the Bio-Tech/Life Science/ Pharmaceutical area. If you know of anyone involved in this area, please forward the information on to them.

Counsel’s Corner

IPT continues to hold webinars on topics from Intangibles to Unclaimed Property as well as updates in state and local income tax cases. These are designed to augment the face-to-face offerings of symposia, seminars, conferences and schools. Email announcements of upcoming offerings are sent to all IPT members. The written and oral exams for the CMI Sales Tax Designation were administered by the Professional Designation–Sales Tax Committee, chaired by Vicki C. Harris, CMI, in Washington, DC, prior to the Sales Tax Symposium. Please join me in congratulating those listed in the upcoming issue of the IPT Member News who achieved certification in September. Let me express our appreciation to the Sales Tax Professional Designation Committee for all of their efforts in promoting certification and administering the program. Last year, the Board of Governors adopted the requirements comparable to all other IPT designations with respect to both education and experience necessary to earn the CCIP—Certified Credits and Incentives Professional Designation. The first CCIP certification written and oral exams were given prior to the Credits and Incentives Symposium in September. I would especially like to express my sincere appreciation to Jerry Lynch, CMI, CCIP, and his CCIP Designation Committee for their commitment of time and diligence developing and administering the certification program. These new designation holders will also be recognized in the upcoming issue of the Member News. Plans for the 2015 Annual Conference are underway. The Annual Conference Committee convened by conference call in mid-September for its first planning session. The Committee is currently seeking speakers and topics for the sessions, so if you have any suggestions or comments please contact the discipline chairs: Ed Ben, CPA (Sales Tax); Don Lippert, CMI (Property Tax); April Nevarez, CMI (Income Tax); or Marcus Panasewicz (Credits and Incentives). If you have heard a good keynote speaker that you believe our members would enjoy, please pass that name along to the Overall Chair, Terry Palmer, or contact me directly. I know you will find this Conference an informative, top-level educational forum as well as a most enjoyable event in San Diego, California next summer. Arthur E. Bennett, CMI President

INCOME TAX

IPT’s Amicus Brief to the Tennessee Supreme Court Supporting the Application for Permission to Appeal in Vodafone Americas Holdings, Inc. v. Roberts Carolyn W. Schott, Esq. Sherrard & Roe, PLC Nashville, TN Phone: (615) 742-4589 E-mail: [email protected]

Introduction Vodafone is a UDITPA Section 18 alternative apportionment case in which the Tennessee Commissioner of Revenue issued a variance requiring a service provider to apportion its income using a marketbased sourcing method despite the fact that Tennessee statutes prescribe the cost of performance method. The Court of Appeals majority opinion sets forth the facts and posture of the case as follows: At issue in this case is the methodology by which multi-state taxpayers are to compute their liability for franchise and excise taxes to Tennessee and, specifically, the authority of the Commissioner of Revenue to require the taxpayers to use an apportionment methodology other than the standard cost of performance methodology codified in Tenn. Code Ann. §§ 67-4-2012 and 674-2110. Plaintiffs, taxpayers that provide wireless communication and data services within and without Tennessee, contend they are entitled to apportion their receipts (income) based upon Tennessee’s standard apportionment (Continued on page 5) IPT October 2014 Tax Report 4

formulas because the majority of their “earnings producing activities” occurred in a state other than Tennessee. The Commissioner of Revenue disagreed, insisting that Plaintiffs’ approach, even if statistically correct and derived from the language of Tenn. Code Ann. § 67-42012(i)(2), fails to meet the higher goal of fairly representing the business Plaintiffs derive from Tennessee. For this reason the Commissioner, acting pursuant to Tenn. Code Ann. § 67-4-2014(a), varied the standard formula requiring Plaintiffs to include “as Tennessee sales” its receipts from service provided to customers with Tennessee billing addresses. The trial court affirmed the decision. In this appeal, Plaintiffs contend the Commissioner does not have authority to impose a variance unless “unusual fact situations,” which are unique to the particular taxpayers, produce “incongruous results” unintended by Tenn. Code Ann. § 67-4-2012; they also insist that no unusual fact situations exist and that no incongruous results occurred when the statutorily-mandated cost of performance methodology was applied. We have determined that the Commissioner acted within the scope of the discretion granted to him by the statutes and rules. Therefore, we affirm the trial court’s decision.1 The taxpayers are seeking the Tennessee Supreme Court’s discretionary review of this decision, and IPT’s brief advances the following arguments in support of granting that review.

Reasons Supporting Review Review by the Tennessee Supreme Court is particularly warranted in this case because of the potentially widespread impact the Court of Appeals’ decision could have on the consistency and reliability of Tennessee’s administration of its corporate income tax laws. The importance of this case goes far beyond the application of a rarely-invoked statutory exception to a single interstate taxpayer. The latitude that the Court of Appeals granted the Commissioner to deviate from the standard statutory

1

Vodafone Americas Holdings, Inc. v. Roberts, 2014 Tenn. App. Lexis 362 (Tenn. Ct. App. June 23, 2014).

apportionment formulae will have a significant impact on virtually all taxpayers doing business in Tennessee. Of equal, if not greater, importance is the fact that the action of Tennessee’s Commissioner of Revenue threatens the consistency and uniformity that the Tennessee General Assembly has sought to achieve in the area of state taxation of interstate commerce. Vodafone has proficiently described in its Rule 11 Application to this Court how Tennessee apportions income for purposes of imposing tax on multistate businesses; thus, this brief will focus instead on two key adverse consequences of the decision below, both of which underscore the need for review by this Court in order to secure uniformity, fairness, and consistency in the interpretation and application of Tennessee law to multistate taxpayers. A. If the Decision of the Court of Appeals is Allowed to Stand, Taxpayers are Denied the Opportunity to Rely on the Statutes as Written. Tennessee adopted a modified version of UDITPA in 1976.2 The UDITPA apportionment provisions at issue here are currently codified at Tenn. Code Ann. § 674-2010 et seq. Additionally, Tennessee has adopted a modified version of the Multistate Tax Commission (MTC) regulations on allocation and apportionment. Tenn. Comp. R. & Regs., Rules 1320-6-1-.23 to 13206-1-.35.3 Combined, the statute and regulations require 2

UDITPA was adopted in 1957 by the National Conference of Commissioners on Uniform State Laws (now the Uniform Law Commission) and was subsequently approved by the House of Delegates of the American Bar Association and recommended to the states. The majority of states imposing a corporate income tax, including Tennessee, have adopted UDITPA or a version of it, including rules similar to those of UDITPA on allocation and apportionment of income. UDITPA is also an integral part of the Multistate Tax Compact (the “Compact”), being incorporated as Article IV of the Compact. The Compact, which became effective in 1967 when enacted by seven states, lists as one of its four specific purposes to “[p]romote uniformity or compatibility in significant components of tax systems.” Compact Art I.2. (available at http://www.mtc.gov/uploadedFiles/Multistate_ Tax_Commission/About_MTC/MTC_Compact/COMPACT(1). pdf). The Compact now includes 16 states and the District of Columbia as full members, with Tennessee participating as an associate member. See http://www.mtc.gov/The-Commission/ Member-States; Tenn. Rev. Ruls. 95-05 and 04-12. 3

The MTC is an intergovernmental state tax agency established by the Compact, which, among other things, develops recommended uniform state tax laws and policies. Through committees, legal research, drafting and deliberation, the MTC also adopts and promulgates uniform rules and regulations. The

(Continued on page 6) IPT October 2014 Tax Report 5

that corporate taxpayers apply a standard statutory apportionment formula in determining their excise and franchise taxes due in Tennessee. The goal of UDITPA and of the Tennessee statutes modeled on UDITPA is to ensure that each state taxes only an appropriate portion of a corporation’s income in order to avoid double taxation and to provide consistency and uniformity across the nation. Taxpayers rely on these statutes and regulations and the plain language in which they are written to report income to Tennessee. In this case, the Commissioner took the extreme step to deviate from the standard rules and to apply an alternative apportionment methodology to the taxpayer where the facts did not warrant deviation.4 The Commissioner impermissibly broadened the intended use of the alternative provision instead of restricting its use to the very narrowly delimited circumstances for which it is intended. The Court of Appeals Majority has endorsed this ad hoc deviation by the Commissioner and threatened the predictable and uniform application of tax laws in Tennessee. Taxpayers and the tax professionals that assist them study state tax laws and endeavor to vigilantly adhere to the laws and rules that detail tax reporting methods. When the State of Tennessee gives the Commissioner the power to deviate from the statutory method on a whim and without articulating a legitimate rationale for that deviation, taxpayers are faced with instability and uncertainty, irrespective of how conscientious they are with their reporting. The circumstances and facts of the case at hand did not warrant the use of an alternative apportionment method. Allowing the Commissioner to so easily deviate from the standard rules undermines the desired uniformity and equates to instable and capricious taxation in Tennessee and threatens Tennessee’s business-friendly climate. Allowing the Commissioner to arbitrarily substitute an apportionment method of choice in place of the statutory cost of performance method of apportionment for any and every taxpayer whose costs of performance are incurred outside Tennessee effectively eviscerates the MTC regulation for alternative apportionment limits the use of equitable apportionment powers to: “limited and specific cases . . . where unusual factual situations (which ordinarily will be unique and non-recurring) produce incongruous results . . . .” 4

UDITPA permits limited deviations from the standard formulae, but only in highly unusual situations where there are unique and nonrecurring fact patterns. This alternative apportionment provision is codified at Tenn. Code Ann. §67-4-2014 and Tenn. Comp. R. & Regs., Rule 1320-6-1-.35. This provision is also sometimes referred to as “Section 18” in recognition of the section of UDITPA where alternative apportionment is found.

cost of performance statute and is at odds with the spirit of UDITPA. By permitting the Commissioner to impose a variance in an ad hoc fashion, the Court of Appeals in this case has opened the door for different administrators in Tennessee and in different states to choose different methods for individual taxpayers whenever the standard apportionment formula yields a result that is unfavorable to the taxing authority. Such a pick-and-choose approach is the antithesis of UDITPA’s purpose – the promotion of uniformity in state tax laws for multistate businesses. In other words, regardless of how conscientious and fullycompliant with the plain language of Tennessee’s laws taxpayers are with their tax reporting, those taxpayers face uncertainty and unfairness in states like Tennessee where the Commissioner has unchecked authority to deviate from standard apportionment, even without statutory justification. The practical effect of the Majority decision in this case is that the Commissioner’s alternative apportionment becomes the “rule” instead of the exception. This case is different from the previous most recent appellate case involving cost of performance apportionment, BellSouth Advertising & Publishing Corporation v. Chumley, 308 S.W.3d 350 (Tenn. Ct. App. 2009) (“BAPCO”), in a way that particularly highlights why Vodafone’s Application for Permission to Appeal must be granted: BAPCO’s situation was indeed an unusual fact situation in multiple respects. First, although BAPCO provided a service (advertising), it was a service manifested in the delivery of tangible personal property (telephone books), the sales of which indisputably would have been sourced to the state of delivery, i.e., Tennessee. BAPCO at 367. See Ameritech Publ’g, Inc. v. Wis. Dep’t of Revenue, 788 N.W.2d 383 (Wis. Ct. App. 2010). In addition, a significant portion of BAPCO’s expenses consisted of payments to independent contractors, which would have been excluded under Tennessee’s cost of performance method. BAPCO at 353 and 355. Finally, the drafters of UDITPA had specifically referred to the sale of advertising as one of the unusual situations in which a variance might be justified. Id. at 355-356. These facts were identified as particular to the taxpayer and to justify the alternative apportionment. Moreover, the BAPCO decision and the Commissioner’s use of the alternative apportionment provision for BAPCO did not necessarily implicate a huge industry or have the potential to implicate such an overwhelmingly large portion of the services-providing sector that exists in today’s digital economy, in the same way that alternative apportionment for Vodafone implicates. The implications of the Majority’s decision extend further by jeopardizing equal treatment among competitors: (Continued on page 7) IPT October 2014 Tax Report 6

armed with the Majority decision sanctioning his alternative apportionment for Vodafone, now the Commissioner could choose to treat two otherwise identical service providers differently just because one is based in Tennessee and the other is not. As pointed out by Vodafone in its Application (See Vodafone App. 37-38), the group affected by the Majority’s decision is broad and includes all service providers who provide services across jurisdictional tax boundaries—a group that is growing not only as a result of the growing service economy but also as a result of a growing digital economy. The Commissioner’s use of alternative apportionment on an out-of-state taxpayer without any justification and without the use of alternative apportionment for an identical service-providing in-state taxpayer, places the out-of-state taxpayer at a competitive disadvantage. Moreover, the broad authority sanctioned by the Majority decision for the Commissioner to depart from the statutory methodology on an ad hoc basis has a collateral negative impact for taxpayers endeavoring to provide accurate and transparent financial disclosures. In the last several years, new financial disclosure rules were implemented, directed at uniformity and transparency in companies’ measuring and reporting of contingent tax liabilities. In 2006, the Financial Accounting Standards Board (FASB), adopted new rules on accounting for uncertain income tax positions. FASB Increases Relevance and Comparability of Financial Reporting of Income Taxes: Final Interpretation Reduces Widespread Diversity in Practice, News Release (FASB), July 13, 2006 (“FIN 48”). FIN 48 provides uniform criteria for the preparation of financial statements and expands the disclosure required regarding uncertainty in income taxes. FIN 48 mandates a “reserve” for 100% of tax items unless it is “more likely than not” that the company will prevail in litigation on those items. This reserve is of indefinite duration, with interest and penalties accruing annually. The Commissioner’s disregard of a statutory apportionment method creates havoc for the financial statements of private and public companies using GAAP, all of which are subject to FIN 48. Under FIN 48, a company providing services in Tennessee will be required to decide whether it is “more likely than not” that it will be deemed, after the fact, to not be allowed to use the statutory apportionment method. The ambiguous and fluid nature of the concept of “fairly represent” that is sanctioned by the Court of Appeals Majority Opinion makes it extremely difficult for a taxpayer to decide, to a 51% certainty, that the Commissioner will not deviate from the statutory method. It is not in the interests of the State of Tennessee to allow the ad hoc approach that the Court of Appeals has

endorsed in this case. Predictable and uniform – not ad hoc – application of tax laws is vital in making Tennessee a state that fosters a business-friendly climate, one that businesses see as hospitable and attractive. The decision below robs taxpayers of their most reliable resource to predict and calculate their tax liability in Tennessee— Tennessee’s written statutes. If the Commissioner has alternative apportionment available simply because the taxpayer is an out of state service provider, then, regardless of whether taxpayers follow Tennessee’s apportionment laws as they are plainly written, those taxpayers face uncertainty, unfairness and competitive disadvantage, and are handicapped in their ability to provide appropriate and meaningful information to their investors. To avoid these rogue actions by the Commissioner, IPT urges this Court to grant Vodafone’s Rule 11 Application to review the Court of Appeals decision. B. If the State of Tennessee is Going to Effect a Change in Apportionment, the Debate over that Policy Belongs in the General Assembly, not in the hands of the Commissioner of Revenue and the Court of Appeals. The standard, applicable formula based on cost of performance operated in this case precisely as it was intended to by the drafters of UDITPA and – more to the point – by the Tennessee General Assembly. The standard formula was rejected by the Commissioner for only one reason: he was not satisfied with the tax revenue result. Such subjective dissatisfaction does not remotely justify ignoring the fact that UDITPA is fundamentally a statute adopted by the Tennessee General Assembly. Tennessee’s standard statutory and regulatory apportionment rules, like those in other states, are designed to uniformly address virtually every factual situation. In sanctioning the baseless variance imposed by the Commissioner, the Court of Appeals and the Commissioner are rewriting law – an act that is the province of the Tennessee General Assembly, where full and complete policy debates occur. The alternative apportionment provision allows for deviations from the standard formulae only in very limited circumstances involving unusual cases. See Tenn. Code Ann. §67-4-2014; Tenn. Comp. R. and Regs., Rule 13206-1-.35. The drafters of UDITPA made it clear that the alternative apportionment provision was “designed to permit the use of methods different from those prescribed in the Act only in unusual cases and in cases where the application of the specifically prescribed methods might be held unconstitutional.” Keesling and Warren, California’s Uniform Division of Income for Tax Purposes Act, 15 U.C.L.A. L.Rev. 156, 171 (1967) (emphasis (Continued on page 8) IPT October 2014 Tax Report 7

added). Tennessee, too, recognizes that, in order to carry out the purpose of uniform apportionment, the variance provision is to be applied only in extraordinary and limited circumstances. The variance provision applies only in unusual and limited circumstances and is to be interpreted narrowly in order to carry out the purpose of uniform apportionment under the act. … Courts of other states have given this provision a narrow interpretation in order not to defeat the purpose of the Uniform Act. … Other states which have adopted UDITPA have concluded that the relief provision is intended to provide relief in exceptional circumstances which produced unconstitutional apportionment. American Telephone and Telegraph Company v. Huddleston, 880 S.W.2d 682, at 691-92 (Tenn. Ct. App. 1994) (internal citations omitted, emphasis added). Other states that have invoked the alternative apportionment methodology have done so under much different circumstances from those at issue here. The use of alternative apportionment either by taxpayers or administrators in other states has typically been limited to very narrow circumstances, as intended by UDITPA. Some early equitable apportionment cases arose out of attempts by taxpayers or tax administrators to utilize alternative apportionment based solely on large disparities between tax liability under separate accounting and apportionment. See, e.g., Donald M. Drake v. Department of Revenue, 263 Or. 26, 500 P.2d 1041 (Or. 1972) (rejecting administrator’s attempt to impose separate accounting on in-state portion of unitary business based on profits); Amoco Production Co. v. Arnold, 213 Kan. 636, 518 P.2d 453 (Kan. 1974). Alternative apportionment has also been invoked, unsuccessfully, to exclude gains from an out-of-state capital gain, an issue which would have been more appropriately addressed based on unitary business principles. Stan Musial & Biggies, Inc. v. State, 363 So. 2d 375 (Fla. Dist. Ct. App. 1978); Roger Dean Enterprises Inc. v. State, 387 So.2d 358, 363 (Fla. 1980) (holding that there “is a very strong presumption . . . against the applicability of the relief provisions” and that alternative apportionment was inapplicable to exclude gain). Courts have hesitated to allow either taxpayers or administrators to invoke alternative apportionment whenever economists might disagree on the appropriateness of the standard apportionment formula. See, e.g., Colgate-Palmolive Company, Inc. v. Bower, Ill. Cir. Ct. No. 01 L 50195, 2002 WL 31628400 (2002) (denying Section 18 claim that a

fourth factor representing contribution of international trademarks should be added to formula); Pacific CocaCola Bottling Co. v. Department of Revenue, 307 Or. 667, 773 P.2d 1290 (Or. 1989) (denying factor adjustment for value of trade names, finding that value already reflected in costs of tangibles); NCR Corporation v. Comptroller of the Treasury, 313 Md. 118, 544 A.2d 764, 781 (1988) (denying factor relief claim for foreign-source income in the absence of a “disproportionality of constitutional proportions”). The courts recognize that without any limitations based on exceptionality, relief petitions and litigation would certainly increase in frequency. IPT believes that it is also important to view the Commissioner’s actions from a national perspective as well. As Vodafone has explained in greater detail (See Vodafone App. at 23), the Commissioner, by invoking his limited authority under Section 18, is attempting to require Vodafone to apportion its income by employing what is known as “market-based sourcing” in lieu of the statutory cost of performance sourcing method generally applicable to service providers such as Vodafone. Significant policy debates have been ongoing for many years with respect to amendments to UDITPA and the model regulations in recognition of the fact that some UDITPA provisions may be outdated as a natural side effect of the passage of time. In particular, there has been a great deal of debate over the cost of performance sourcing method, and some states have amended their laws to change the apportionment method for service providers from cost of performance to market-based sourcing. See Richard Pomp, Multistate Tax Commission, Report of the Hearing Officer: Multistate Tax Compact Article IV [UDITPA] Proposed Amendments, p. 95 (Oct. 25, 2013), http://www.mtc.gov/uploadedFiles/ Multistate_Tax_Commission/Pomp%20final%20final3. pdf. The MTC recently adopted a set of recommended amendments to UDITPA, including a change from cost of performance to market-based sourcing for sales of services and intangibles. Notably, these recommended changes came more than two years after the MTC’s Uniformity Committee first submitted recommendations. Those recommendations were accompanied by a detailed report, and subsequently a public hearing was conducted by an independent hearing officer appointed by the MTC, which resulted in a comprehensive report by the Hearing Officer.5 It is important to note that, while some states 5

The hearing officer described the changes to UDITPA Section 17 (i.e., the change from cost of performance to market-based sourcing for services and intangibles) as “the most sweeping of all the amendments [and] generated most of the discussion at the Hearing.” Richard Pomp, Multistate Tax Commission, Report of the Hearing Officer: Multistate Tax


have adopted market-based sourcing, the legislatures of a number of other states have considered such legislation and have declined to enact it. See C. Battin, M. Eberle, and L. LaCava, “Demystifying the Sales Factor: MarketBased Sourcing.” State Tax Notes, May 19, 2014, p. 403. Similarly, the Hearing Officer appointed by the MTC raised cautions about the inherent drawbacks of marketbased sourcing and expressed doubts as to the value of abandoning the cost of performance method. Report of Hearing Officer, p. 84-89. The common thread is that decisions to make or not to make changes regarding a state’s apportionment policy have been made by legislatures after significant debate and deliberation, as exemplified by the MTC’s process of considering amendments to UDITPA. Thus, other states, as well as the MTC, have recognized that any decision to change the method of sourcing sales is a policy choice to be made by a legislative body and not by either a state tax administrator on an ad hoc basis or by the courts. In essence, changes to UDITPA, to the extent that they have occurred, are the result of extensive debate and process. Similarly, the only place for changes to Tennessee’s statutes should be in the General Assembly, not in the hands of the Commissioner of Revenue. The Commissioner argues that requiring marketbased sourcing for Vodafone in this case will have no implications for any other taxpayer. The justifications advanced for the variance, however, belie that argument. Given the Commissioner’s admitted focus on Vodafone’s Tennessee market for its services in determining whether the statutory cost of performance method fairly reflects its Tennessee business activities, there can be no doubt that, if armed with the Majority Decision of the Court of Appeals, the Commissioner will invoke Section 18 to require market-based sourcing of other similarly situated out-of-state service providers because doing so will increase tax revenues. The best indication of that likelihood is the Commissioner’s misplaced reliance on the BAPCO decision to support his issuance of a variance in this case. (See Brief of Defendant/Appellee in Ct. of App., 20-25). As the dissent below recognized, while the General Assembly is free to make that policy choice with respect to both in-state and out-of-state service providers, it is not a choice that can be left in the hands of the tax administrator to make an ad hoc basis. (See Dissenting Op. 4).

In short, there are simply no circumstances that justify the use of alternative apportionment in this case. It does not follow that, simply because Tennessee has an alternative apportionment provision, the Commissioner can use it without regard to the regulation that articulates the limits of use of that alternative apportionment provision. The rationale for employment of alternative apportionment with respect to a services-providing taxpayer is clearly only when costs of performance do not fairly represent a taxpayer’s business activity in Tennessee and is clearly limited by regulation to specific cases with unusual fact situations. The Commissioner’s use of alternative apportionment in this case, without regard to the limitations of the applicable regulation, rises to the level of a change in policy to use alternative apportionment for a broad segment of taxpayers: those service providers whose costs of performance are outside Tennessee.6 The potential rationales for invoking alternative apportionment in this case simply are not present. Vodafone’s application of the cost-of-performance formula would not have been unconstitutional. Neither was there any substantive showing that the standard formula failed to fairly represent the extent of Vodafone’s activities in Tennessee because of some unusual circumstances. No unusual circumstances existed. There were no unorthodox or improper business or accounting practices on Vodafone’s part which would have made application of the standard formula inappropriate in this case. The Commissioner’s desires for tax revenues is not a permissible substitute for the intent of the General Assembly in adopting statutes for use in limited circumstances with unusual fact situations.

CONCLUSION IPT respectfully urges this Court to grant Vodafone’s Rule 11 Application so that it can review the decision of the Court of Appeals. Review is appropriate for all the reasons detailed by Vodafone in its Rule 11 Application. In addition, for the reasons explained in this amicus brief, review is especially appropriate because the decision of the Court of Appeals, if allowed to stand, will jeopardize and undermine the stability and reliability of uniform, fair, and consistent state taxation that UDITPA was designed to offer to multistate taxpayers. 6

Compact Article IV [UDITPA] Proposed Amendments, p. 57 (Oc. 25, 2013), http://www.mtc.gov/uploadedFiles/Multistate_Tax_ Commission/Pomp%20final%20final3.pdf

Such a policy change that results in such broad and general applicability is effectively a regulation itself, implemented without proper rule-making proceedings. See Metromedia, Inc. v. Director, Division of Taxation, 478 A.2d 742 (N.J. 1984) (holding that a tax administrator with statutory discretion to use alternative apportionment must also abide by the standards of rule– making and adjudication).


SALES TAX Lemon Law Sales Tax Refunds—the Bitter and the Sweet J. Elaine Bialczak, Esq. Compton & Associates, LLP Marietta, GA Phone: (770) 988-9059 E-mail: [email protected]

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tate “lemon laws” protect consumers from the financial distress caused by a new car that does not meet the manufacturer’s warranty. The laws require the manufacturer to either furnish a comparable replacement car or refund the purchase price with an adjustment for the customer’s use before the first repair attempt. Many states also require the manufacturer to refund any sales tax the customer paid on the car’s purchase. When manufacturers have tried to obtain a refund of the tax from the states, the responses have ranged from favorable to nearly hostile. Some states allow the refund, others treat manufacturers like finance companies, and others disallow the refund as a punitive measure. This article examines refund policies in twenty-one states.1

The Sweet Eleven states fall to the sweet side of the refund issue. In six of these states, the statutes or regulations provide for refunds to manufacturers. The Arizona code permits manufacturers to apply to the department of revenue for refund of sales taxes the manufacturer “properly refunds to the consumer.”2 The California Civil Code requires the State Board of Equalization to reimburse the manufacturer for the sales or use tax that a manufacturer “pays to or for the buyer…when providing a replacement vehicle” pursuant to the state lemon law.3 The Michigan returned goods statute and regulation allow refunds of tax for motor vehicles returned to a manufacturer.4 In Minnesota, the manufacturer may apply for a refund within one year 1

Alabama, Arizona, California, Colorado, Connecticut, Georgia, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New York, Ohio, Pennsylvania, Rhode Island, Texas, Vermont, and Wisconsin.

from the return of the automobile; if the manufacturer fails to file, then the department of public safety may refund the tax to the consumer.5 The Texas Administrative Code provides that a manufacturer or distributor who has repurchased a vehicle pursuant to the state lemon law and has refunded the tax to the purchaser may request a tax refund.6 The Wisconsin statutes require the department of revenue to refund to the manufacturer any sales tax that the manufacturer has refunded to the consumer. The manufacturer must submit a written request for a refund.7 Illinois, New York, and Vermont do not require the manufacturer to refund the sales tax to the consumer. In Illinois, the retailer who sold the vehicle may file a claim for credit for taxes paid and remitted on the purchase of the automobile.8 New York requires the manufacturer to provide the consumer with an application for credit or refund of the sales tax with a notice that the sales tax will be refunded by the department of taxation and finance.9 Vermont provides that the consumer is entitled to a refund of a proportionate amount of sales tax when the manufacturer refunds either the entire purchase price or a portion of it.10 The consumer must file for the refund. Louisiana appears to allow refunds to the manufacturer. The Daimler Chrysler Corporation requested a refund of Louisiana sales taxes originally paid on purchases of motor vehicles that DaimlerChrysler was required to repurchase pursuant to Louisiana’s lemon law. The Secretary of Revenue denied this request, which DaimlerChrysler appealed to the Louisiana Board of Tax Appeals. The board denied the refund for two of the repurchases because the refund requests were filed beyond the three-year statute of limitations. Concerning the remaining three claims, the board ordered the secretary to refund the taxes when DaimlerChrysler presented the required affidavits assigning the right to refund to DaimlerChrysler.11 In Louisiana, then, the manufacturer apparently may obtain a refund of sales tax if the manufacturer obtains an assignment of the right to a claim for refund from the customer and files the claim within three years from December 31st of the year the tax was due. 5

Minn. Stat. §325F.665, Subd. 3(a) (2014).

6

34 Tex. Admin. Code §3.75 (b) (6) (2014).

7

Wis. Stat. §218.0171 (3) (e) (2014).

8

815 Ill. Comp. Stat. Ann. 380/3 (Sec. 3) (2014).

9

2

Ariz. Rev. Stats. §44-1263(D) (2014).

10

3

Ca. Civ. Code §1793.25(a) (2014).

11

4

Mich. Admin. Code R 205.16(6) (2014).

NY CLS Gen. Bus. §198-a(c)(2) (2014). 9 Vt. Stat. Ann. §4172(e) (2013).

Daimler Chrysler Corp. v. Sec., 2007 La. Tax LEXIS 345 (La. Bd. of Tax App. Oct. 16, 2007).


Like Louisiana, Pennsylvania appears to allow refunds to manufacturers. The Pennsylvania Tax Reform Code of 1971 requires the Pennsylvania Department Revenue to refund taxes to “assigns.”12 The Pennsylvania Supreme Court seems to have accepted DaimlerChrysler’s standing as an assignee of its customers when it claimed a refund of sales taxes it had refunded to customers pursuant to the state lemon law.13 DaimlerChrysler lost because its claims for refund were outside the three-year statute of limitations, which ran from the original purchase dates. Presumably, if the claim had been within the statute, the court would have granted the refunds.

the full purchase price because it was permitted to offset the refund by a percentage based on the customer’s use of the vehicle before it was reported as nonconforming.15

The Bitter

In Massachusetts, DaimlerChrysler argued that it was entitled to an abatement of the tax because it qualified as an “aggrieved party.”18 DaimlerChrysler predictably argued that it was aggrieved because it made the customer whole while shouldering the sales tax burden itself. The board concluded that DaimlerChrysler could not be aggrieved by a tax assessment unless it was the one assessed, and it was not. Despite DaimlerChrysler’s having borne the legal incidence of the tax, it lost its bid for an abatement. Similarly in Nevada, the supreme court determined that the Chrysler Group LLC lacked standing to claim a refund because it did not remit the tax to the state. Chrysler’s statutory obligation to reimburse the tax pursuant to the lemon law, according to the court, was separate from a taxpayer’s rights under the sales and use tax law.19

Nine states do not allow the manufacturer to receive a refund. Several reasons substantiate the denial: the manufacturer was not the “taxpayer,” the tax was not erroneously paid, the manufacturer did not acquire the dealer’s rights as a vendor, or simply that the state statutes did not provide for the refund. Frequently, these reasons overlap. Examples of states that have denied the refund because the manufacturer was not the taxpayer are Alabama, Connecticut, Massachusetts, and Nevada. In these situations, the manufacturer is situated similarly to finance companies who seek a refund of sales tax on defaulted consumer loans. When DaimlerChrysler applied for a refund in Alabama, the department of revenue observed that the right to a refund is “a matter of legislative grace.”14 DaimlerChrysler asserted both that it was the taxpayer and that the tax was erroneously paid because the lemon law statute rescinded the sale. The administrative law judge agreed with the department’s reasons for denying the refund. First, DaimlerChrysler was not a taxpayer because it was not required to file a tax return and remit the tax to the department; the dealers had these responsibilities. Second, requiring the manufacturer to refund the purchase price to the customer did not rescind the original sale. Third, the tax was not erroneously paid because the purchases of the automobiles from the dealers were taxable as retail sales according to Alabama law. Fourth, DaimlerChrysler was not entitled to a refund because, although the sale proceeds of returned items are not included in taxable gross proceeds, qualifying under this provision requires that the full purchase price be refunded to the customer. DaimlerChrysler did not refund

Like the Alabama Department of Revenue, the Connecticut Supreme Court concluded that DaimlerChrysler did not qualify as a taxpayer.16 According to the court, DaimlerChrysler failed to qualify as a taxpayer under the Sales and Use Tax Act, which is imposed on taxpayers for sale of goods and services, because DaimlerChrysler did not sell the car. Nor did DaimlerChrysler qualify as a taxpayer as the term is normally understood because it was not liable for the tax when the car was purchased.17

Other states, like Colorado and Rhode Island, deny manufacturers refunds because the tax was not erroneously paid at the time of purchase. A Colorado Revenue Bulletin states that a manufacturer is not entitled to the refund because the tax was not “paid in error” for Colorado sales tax purposes. The bulletin further states that because the manufacturer was not the vendor, the returned merchandise provisions do not apply.20 Apparently accepting the manufacturer’s status as a taxpayer, the Rhode Island Division of Taxation in an administrative hearing decision observed that a tax refund is an equitable remedy applicable only when taxes have been paid in error. Taxes 15

Id., *9.

16

DaimlerChrysler Corp. v. Law; 937 A.2d 675 (Conn. Sup. Ct. 2007). 17

Id., 684-685.

18

13

DaimlerChrysler v. Comm’r, Docket No. C275784, 2007 Mass. Tax LEXIS 19 (Mass. App. Tax Bd. April 12, 2007).

14

Nevada Dep’t of Taxation v. Chrysler Group LLC, 300 P.3d 713, 715 (Nev. Sup. Ct. 2013).

12

72 P.S. 7252 (2014).

DaimlerChrysler Corp. v. Commonwealth, 927 A.2d 201 (Pa. Sup. Ct. 2007). Docket No. S 04-668, 2007 Ala. Tax LEXIS 71 (Ala. Dep’t of Rev. Aug 13, 2007).

19 20

Rev. Bull. No. 90-2, 1990 Colo. Tax LEXIS 2 (Colo. Dep’t of Rev. July 1990).

(Continued on page 12)


refunded pursuant to the lemon law, on the other hand, were legally paid when due. The hearing officer also affirmed the department’s policy allowing refunds only to those who actually paid the tax.21 Unlike most of the states in this review, Nebraska has not engaged in a detailed analysis of its lemon law and sales tax refund provisions. The Nebraska Department of Revenue, instead, has issued a blunt regulation. The regulation provides that an amount a purchaser receives pursuant to a settlement under the lemon law includes all refundable sales and use tax. The regulation then states: “No additional refunds will be paid by the Department of Revenue.”22 Georgia has no provision in its lemon law for refunding the tax to the manufacturer.23 Consequently, strictly interpreting its laws, the state will not refund sales taxes to automobile manufacturers.24 Indiana rejected DaimlerChrysler’s argument that it was entitled to a refund because it “stepped into the shoes” of dealers, and therefore, became a retail merchant.25 DaimlerChrysler had a basis for this argument because the Indiana Tax Court had held in 2002 that Chrysler Financial Company was entitled to take the sales tax bad debt deduction as the assignee of several automobile dealers.26 The court distinguished this case from its earlier decision by stating that no actual assignment from the dealers had occurred. Further, the court commented that the dealers could have assigned a right to a refund only if the sales tax had been collected erroneously or illegally, and at the time of sale, the tax was properly due. The court further commented that the manufacturers’ financial discomfort was intended as an incentive for the manufacturers to improve their products.27

The Confused Ohio is confused about its treatment of manufacturers. The department of taxation’s website states that manufacturers may obtain a refund of sales taxes they have refunded to customers. Unfortunately, the Ohio statutes and regulations provide no basis or mechanism for allowing this refund.

The Bittersweet Conclusion State lemon laws sweeten the negative impact on the consumer of a seriously defective motor vehicle. When the manufacturer is required to reimburse the sales tax on the customer’s purchase, some states grant the manufacturer a refund of the sales tax. On the other hand, other states leave manufacturers with the bitterness of a denied refund. An underlying consideration is whether the lemon laws are designed to help the consumer or penalize the manufacturer. In either case, whether the state should benefit from the customer’s misfortune and the manufacturer’s error might be debatable.

21

In Re:***Use Tax Period June 12, 1995 through June 1, 2003, No. 2006-20, 2006 R.I. Tax LEXIS 57 (R. I. Div. of Tax. Nov. 3, 2006). 22

Reg.-1-020.10, Title 316, Chapter 1, Neb. Dep’t of Rev. (Jan. 24, 1993). 23

O.C. G.A. §10-1-784 (2014).

24

Based on a conversation with a department of revenue representative, Aug. 5, 2014. 25

DaimlerChrysler Corp. v. Dep’t of State Rev., 2004 In. Tax LEXIS 105 (Nov. 10, 2004). 26

Chrysler Financial Co., LLC v. Dep’t of State Rev., 761 N.E.2d 909 (Ind. Tax Ct. 2002). 27

Id., *13-*15.


CREDITS AND INCENTIVES

Class 7c: The Newest Property Tax Incentive in Cook County Minah C. Hall, Esq. True Partners Consulting LLC Chicago, IL Phone: (312) 235-3316 E-Mail: [email protected] Jennifer Carroll, Esq. True Partners Consulting LLC Dallas, TX Phone: (469) 212-2690 E-Mail: [email protected]

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roperty tax incentives are rarely created in Cook County (the most populous county in Illinois, with Chicago as its county seat). In June 2014, however, the Cook County Board of Commissioners established a new property tax assessment class, Class 7c, to incentivize properties in need of development, redevelopment or rehabilitation. This new incentive can reduce Cook County property tax liability by approximately 55% during the life of the incentive.

Existing Incentives Portfolio in Cook County Cook County already offers a portfolio of property tax incentive classes which provide for a reduced assessment ratio. These incentive classes focus on properties or areas in need of redevelopment—the Class 6b incentive for industrial properties and the Class 7 incentives for commercial properties are the two programs most commonly used. The Class 6b1 incentive is open to industrial projects. The incentive reduces the assessment ratio on the property from 25% to 10% for Years 1-10, 15% for Year 11 and 20% for year 12; and the incentive can be renewed. The Class 7a2 & 7b3 incentives may be applied to eligible commercial projects. The reduced assessments match the Class 6b incentive, but Class 7 projects may not apply for a renewal. Class 7a is only applicable to projects invest1

Cook County Code § 74-63(7)

2


3


ing less than $2 million, and therefore is rarely used as the cost of the application process largely outweighs the benefit. The review process for the Class 6b and Class 7 incentives can get bogged down with red tape. Overall, the Class 6b approval process is rather efficient, with the Assessor’s office approving or denying most applications. The process may become delayed, however, if approval from the County is required, either because the property sits in unincorporated Cook County, or the project is requesting a “special circumstance” approval. There is no time frame within which the Cook County Board must hear and return findings under these circumstances. The Class 7a approval process allows a project to receive certification within 60 days from application receipt assuming the criteria are met. The Class 7b approval process, however, greatly suffers from bureaucratic red tape. Upon submission of the Class 7b application to the Assessor’s Office, the application is forwarded to the Cook County Economic Development Advisory Committee, which may take up to 60 days to provide their findings. Then the Assessor’s office has an additional 30 days to review and to approve or deny the application. These incentives offer substantial tax savings; however the eligibility criteria for these incentives require properties to stay vacant for years, driving down surrounding property values. In addition, the approval process left applicants frustrated and, at times, unwilling to proceed with the project. Furthermore, few construction or redevelopment projects can allow a 90-day delay to determine if incentives are awarded, and many potential applicants pass on the eligible property for a more turn-key alternative. To address the issue with regards to commercial properties, the County created the Class 7c incentive.

The New Class 7c Incentive To trim the eligibility criteria, and shorten the review process in hopes of encouraging additional economic development, the Cook County Board created the Class 7c4 incentive. The new Class 7c, while similar to the existing Class 7 incentive, is streamlined and less restrictive than its counterparts, but correspondingly offers a shorter benefit period. The Class 7c designation is available to commercial properties vacant for at least 12 months. The Class 7c incentive provides a benefit period of 5 years, reducing the assessment ratio from 25% to 10% for years 1-3, 15% for year 4, and 20% for year 5. Like the Class 6b, this incentive may be renewed once, extending the 4



life of the benefit to 8 years. The Class 7c designation requires applicants to show that the property’s assessed value or real estate taxes have declined or stagnated in three of the last six years. Furthermore, the applicant must also demonstrate that the project is fiscally viable, will go forward if granted the incentive classification, and will result in the economic enhancement of the area. The applicant must demonstrate the necessity of the assistance, and project the beneficial impacts of the project on the area’s property taxes and employment. Like the Class 6 and Class 7 designations, the Applicant must also obtain a resolution from the local jurisdiction (or county, if the property is in an unincorporated area) supporting the Application. Unlike the Class 7a and 7b incentives, the applicant will not need to show the area in which the property lies is designated as being in need of redevelopment. Additionally, the review process for the Class 7c designation is streamlined. Upon submission of the application to the Cook County Assessor’s office and the Economic Development Advisory Council (“EDAC”), the EDAC will have 30 days to review and make their finding as to whether the designation criteria have been satisfied. Upon the Assessor’s approval, the designation will be granted. In the event that the EDAC does not return its findings within 30 days, the Assessor’s office will make the designation determination on its own. The Class 7c incentive fills the large gap left by the Class 7a and 7b programs. This new program incentivizes redevelopment of properties before blight occurs, while still ensuring that the property is in actual need of assistance. The shortened review process may also encourage developers and tenant companies to avail themselves of the program, and take on properties that need rehabilitation.

TAX ADMINISTRATION

The Sun Shines Bright(er) In My Old Kentucky Home: Circuit Court Orders Disclosure of Final Agency Decisions and Awards Attorney Fees Jennifer Y. Barber, Esq. Frost Brown Todd LLC Louisville, KY Phone: (502) 779-8154 E-mail: [email protected]

I

n Mark F. Sommer and Tax Analysts v. Finance and Administration Cabinet, Civil Action No. 13-CI-29 (Franklin Cir. Ct., Div. I, Aug. 24, 2014), state tax practitioner Mark F. Sommer for the first time in his 27 years of practice, becomes the named party to a state and local tax lawsuit.*1 On February 23, 2012, Sommer sought certain final administrative decisions (referred to as “Final Rulings” in Kentucky) in fully redacted format from the Kentucky Department of Revenue (“Revenue”) via Open Records request. In particular, Sommer requested copies of Final Rulings issued by the Department of Revenue from January 1, 2004 (around which tax modernization occurred and Final Rulings became sequentially numbered) through February 23, 2012 (the date of Sommer’s request). Sommer specifically asked that Revenue redact any identifying and/or confidential information to preserve taxpayer confidentiality. Revenue identified approximately 700 requested documents within its custody and control, but denied in full Sommer’s request on the bases of: (1) taxpayer confidentiality, and (2) the requests were too burdensome. Specifically, Revenue cited to KRS 131.190(1)(a) which states, in relevant part: No present or former commissioner or employee of the Department of Revenue…present or former secretary or ∗

The author serves as Counsel to Appellant, Mark F. Sommer, in this matter, and is a member of the American Bar Association’s SALT Executive Committee and Transparency Task Force, as is Sommer.


employee of Finance and Administration Cabinet, former secretary or employee of the Revenue Cabinet or any other person, shall intentionally and without authorization inspect or divulge any information acquired by him of the affairs of any persons, or information regarding the tax schedules, returns, or reports required to be filed with the department or other proper officer, or any information produced by a hearing or investigation, insofar as the information may have to do with the affairs of the person’s business. KRS 131.190(1)(a). The Department, however, did not cite to any of the exemptions provided under the Open Records Act. Sommer then appealed Revenue’s denial to the Office of the Attorney General. The Office of the Attorney General affirmed Revenue’s denial, citing to the harsh consequences that exist for a Department of Revenue official who violates taxpayer confidentiality as its rationale for siding with Revenue’s failure to disclose information. Sommer appealed the Attorney General’s Order to the Franklin Circuit Court. Subsequent to Sommer filing his appeal, Tax Analysts moved to intervene as a party to the action. After fighting this issue at the federal level for 40+ years in defense of disclosure and tax transparency – countless lawsuits making law which resulted in public access to Internal Revenue Service private letter rulings and technical memoranda – this is Tax Analysts’ first fight in the courts for state tax transparency. The Franklin Circuit Court granted the motion on July 24, 2013, in the face of Revenue opposing their joining the action. In a brief filed on September 3, 2013, Sommer and Tax Analysts (“collectively, Appellants”) argued that: (1) Revenue bears the burden of proof under Kentucky law; (2) any material not specifically exempted from the Open Records Act’s fourteen (14) statutory exemptions must be produced for inspection; and (3) exemptions from disclosure must be narrowly construed to protect the public interest. The Appellants posited that “[t]he Open Records Act’s presumption of openness is grounded in the notion that inspection of public records reveals whether a public agency is serving the public, and also provides impetus for agencies steadfastly to pursue the public good.” A comparison was made by the Appellants that the Kentucky Open Records Act is structured along the lines of the federal Freedom of Information Act (“FOIA”), which

provides a right of access to records of federal agencies, and which further provides that records may be withheld only to the extent that one of nine enumerated exemptions apply. The burden is also on the agency seeking to protect records, and the exemptions from disclosure are to be narrowly construed. See 5. U.S.C. 552. In construing the FOIA in the context of tax matters, courts have noted that a key statutory purpose is preventing agencies from developing bodies of “secret law” that may have an effect on the rights of the public, but are not publicly disclosed.” See Tax Analysts & Advocates v. IRS, 505 F.2d 350, 353 (D.C. Cir. 1974). The concern about “secret law” is particularly salient in the field of taxation, given that tax codes tend to be complicated, and there is a strong need for guidance to taxpayers and tax professionals on how a taxing authority views various compliance and legal issues. The Internal Revenue Service (“IRS”) makes public a large amount of guidance in the form of final and official statements of IRS policy, as well as more informal statements of how the staff construes the Internal Revenue Code on specific points. In making these records public, the IRS first redacts information that would identify individual taxpayers, given Congress’ restrictions on the disclosure of tax return information and significant criminal penalties for violating that requirement – penalties much more severe than those at any state level. Specifically, the Appellants pointed out that the IRS can annually redact and publish some thousands of private letter rulings and technical memoranda in the face of even harsher civil and criminal sanctions, such as a fine of up to $5,000 and/or a sentence of up to five years in prison, for improper disclosure of taxpayer return information. So, taxpayer confidentiality can be balanced with the need for taxpayer transparency. As to Revenue’s position that redaction would be too burdensome, the Appellants responded with examples from other states where it can, and has been, done. In Kentucky’s neighboring state of Indiana, for instance, final rulings are made available to the public in redacted format on the Internet via a search engine format, with no need for request ever to be made. Clearly, a taxpayer’s need for transparency in Kentucky or any state that lacks transparency is no different from the need of taxpayers at the federal level or in states such as Indiana where disclosure is provided. Oral argument was heard on December 16, 2013. On August 24, 2014, the Court issued a fifteen (15) page Opinion and Order holding in favor of the Appellants and ordering Revenue to produce the requested documents. The (Continued on page 16) IPT October 2014 Tax Report 15

Court divided the Appellants’ request into two categories: (1) Final Rulings that had been appealed to the Kentucky Board of Tax Appeals; and (2) Final Rulings which had not been appealed. As to the appealed Final Rulings, the Court ordered that they be produced without redaction. The Court determined that “[t]here is no question that final rulings of the Department of Revenue that have been appealed to the Board of Tax Appeals are public record” and that “[t]he Department of Revenue has attempted to avoid its duty to produce these records by claiming that it does not ‘keep track of’ the final rulings that have been appealed. This assertion, cannot withstand the most minimal scrutiny.” Judge Shepherd reasoned: The Department is a party to all such appeals….It is beyond incredible that the lawyers representing the Department of Revenue would not be fully aware of all appeals in which they are counsel of record, and it is equally incredible that the General Counsel would not maintain the most basic case management tools to readily identify the cases [that] have been appealed to the Board of Tax Appeals. If such minimal records are not maintained by the General Counsel of the Department, this Open Records Request will provide a much needed, and apparently long overdue, incentive for the Department’s management to identify, and keep track of, the cases [that] have been appealed.

The Court further held that Revenue’s unlawful withholding of the appealed Final Rulings was a willful violation of Kentucky’s Open Records Act, and awarded attorney fees (in an amount to be determined) to the Appellants. Kentucky’s Open Records Act provides for a statutory penalty of up to $25 per day that a requesting party was unlawfully denied inspection of a public record; whether a statutory penalty will be imposed is currently pending before the Court. On September 8, 2014, Revenue provided the Appellants with hard copies of the requested Final Rulings that had been appealed to the Kentucky Board of Tax Appeals. Revenue was silent as to the unappealed Final Rulings. This is a step in the right direction for Kentucky, and all other states that do not disclose final agency decisions. Taxpayers desire certainty – what the law is, how to follow it, an understanding of how those laws will be enforced and a comfort that they will be enforced consistently. Sunshine helps foster that type of tax system.

With respect to the Final Rulings that were not appealed, the Court held that Revenue also has a duty to disclose – but with the appropriate redaction to protect taxpayer confidentiality. The Court reviewed the sample Final Rulings submitted under seal by the Department and found no legitimate basis to keep the vast majority of the information confidential. Judge Shepherd recognized the importance of taxpayer confidentiality laws, but correctly held that a taxpayer’s right to privacy is not so absolute as to shield Revenue from its duties under the Open Records Act. The Court stated, “[w]ithout public disclosure of the final rulings, there is no way for the public to know whether the Department has been fair and consistent or whether it has displayed political favoritism to some taxpayers over others. These considerations outweigh any privacy interest that may exist for taxpayers, especially when the names and identifying indicators have been redacted.”


PROPERTY TAX

Tech One, Marple and School District Reverse Tax Appeals Bruce J. Stavitsky, Esq. Stavitsky & Associates LLC Fairfield, NJ Phone: (973) 227-1912 E-mail: [email protected]

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ince 1992, it has been well-settled law in Pennsylvania that real estate is valued for ad valorem tax purposes on a capitalization of lease income basis. Contract rent, whether it is at, below or above market, is the way tax assessors assess real property. The interest appraised is the leased fee, which the The Appraisal of Real Estate 72 (14th Ed. 2013) defines as the landlord’s interest, which includes “the right of use and occupancy conveyed by lease to others.” The Pennsylvania Supreme Court in Appeal of Marple Springfield Center, 607 A.2d 708 (1992) said the “statutory foundation” for Pennsylvania tax assessments is fair market value which means “actual value,” which did not mean valuing property in its “unencumbered form.” Encumbrances include such burdens as leases, contracts, and mortgages. The landlord-lessor in Marple appealed its tax assessment. The Lessor entered into a long-term twenty-five-year lease with its tenant with options for another fifty years. The lease start rental was $1.47 per square foot. Over the years, the tenant sub-leased space to sub-tenants for more than $3.00 per square foot. The higher sub-lease rent was not relevant for the purpose of the tax appeal. The Court held that “long-term leases are an accepted aspect of commercial real estate transactions and their effects have a decisive impact on the price a buyer would pay for the affected property.” This decision did not discuss the difference between capitalization of ground rent only and capitalization of ground and building rent together. Marple did not say that building improvements should not be assessed where they are not owned by the Lessor and are instead owned by the Lessee. Practitioners understood that leased fee was the standard to follow in appraising for tax assessment purposes. This was interpreted by some taxpayers to mean that it was sufficient to capitalize ground rent into an income stream to arrive at market value although the building improvements were not generating rental income.

Twenty years later the Pennsylvania Supreme Court re-visited the capitalization of contract rent in Tech One Associates v. Board of Property Assessment Appeals and Review of Allegheny County, 53 A.3d 685 (Pa. 2012). The tax appeal filed by the land owner/Lessor involved the valuation of a shopping center’s 47.5 acres of land and a 415,000 square foot building where the land and $26 million worth of building were owned by separate business entities. The land was subject to a long-term lease at $665,000 per year and the building was owned by the Lessee of the land and not encumbered by a lease. Tech One’s appraiser decided the improvements had no value because the property owner didn’t receive any economic benefits such as rental income from the buildings. The appraiser strictly interpreted the “economic realities” cited in Marple to mean that it was acceptable to assign a value to the land and not the building because the sale price paid by a hypothetical buyer for real property would not be impacted where no rent was paid. The Judge in the lower court’s Tech One decision was concerned about tax avoidance because the Lessor’s argument was there “could only be a single tax assessment to it as the owner and lessor of the property” and that the building improvements were not taxable to Lessee. The Lessor said the leasehold interest in the property was limited by the fixed rent received pursuant to the lease. The dissenting Judge at the trial court level agreed with the taxpayer’s appraiser in recognizing that the “economic reality” of a long-term lease with fixed rent was such that the Lessor was limited to that rent even if the land was improved with significant buildings such as the Taj Mahal or Empire State Building. The Supreme Court in Tech One held that Marple did not stand for the proposition that valuation of the buildings wasn’t necessary because improvements were made and owned by tenants. Tax assessment practice would not allow buildings to be ignored. Properties could not be valued “as is” where the only measure of value is the income yielded to a hypothetical buyer. To do so would attribute no value to the building improvements on the land owned by the tenant. With this decision, it may be said that Pennsylvania is inching toward a fee simple standard of valuation and away from leased fee. The Dictionary of Appraisal (Appraisal Institute) defines fee simple as “Absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power and taxation” (emphasis added). The expectation now is that the property is valued as a whole whether or not there is a lease affecting building (Continued on page 18) IPT October 2014 Tax Report 17

improvements or the land. This expectation creates an opportunity for tenant-taxpayers to distance themselves from higher rents by arguing their leasehold interests are not reflective of the market when compared to leases that are at market levels. What are the value solutions for unencumbered real estate? They include utilizing a cost approach to estimate the depreciated value of building improvements. They also include consideration of leases of land and building which terms may approximate the terms of ground leases only. A recent decision of the Pennsylvania Commonwealth Court examined Tech One. In Douglass Village Residents Group v. Berks County Board of Assessment Appeals, 84 A.3d 4017 (2014), residents of a mobile home community leased pad sites from the landowner. The mobile homes were owned by the homeowners. The issue was the taxability of improvements appurtenant to the mobile homes. Garages were required to be constructed pursuant to the terms of the pad site lease. The garage was paid for by the mobile homeowner. Some mobile homeowners also built decks. Citing Tech One, the Commonwealth Court held that leasehold improvements made by a lessee are taxable to the landowner.

resulted in increased annual tax revenue of $53,000. The Court agreed with the school district that there was a “rational basis” for the appeal, although this was the only apartment complex targeted because it was not marginally under-assessed. The Court said that “[j]udicious use of resources to legally increase revenue is a legitimate governmental purpose.” The taxpayer advanced an equal protection and discrimination argument in asserting they were singled out. This argument did not gain much traction because the taxpayer was unable to prove that any other property within the jurisdiction was underassessed. Moreover, the taxpayer did not dispute that its own property was under-assessed, nor did it challenge the assessed value assigned to it by the school district’s appraiser.

Some Pennsylvania school districts have accepted Tech One as an invitation for reverse appeals. They have focused on a review of properties considered to be underassessed and have targeted them for tax appeals seeking to increase assessed values. For example, a long-term lease entered into in 1967 at 50 cents per square foot for retail space to include land and building improvements is challenged by a school district as incapable of being a lease of unified property. The school district appraised the property based on capitalization of the lease, which they identified as a ground lease and then attributed value to the improvements based on unified land and building leases of similar retail space. These school districts rely upon consultants who identify potentially under-assessed property, recommend appeals to their clients by school district attorneys, and receive contingency fees based on assessed value and property tax increases that are achieved. The constitutionality of the statutory authority, 53 Pa. C.S. Sec. 8855, giving the right to taxing districts of reverse appeals has been challenged in Pennsylvania and the decision of the Commonwealth Court in Weissenberger v. Chester County Board of Assessment, 62 A.3d 501 (2013) gives taxpayers in Pennsylvania with under-assessed property no solace. In Weissenberger, the school district’s targeting of an under-assessed apartment complex


2014 Property Tax Symposium Preliminary Program At-A-Glance November 9-12, 2014 ~ Fort Lauderdale Marriott Harbor Beach Resort ~ Fort Lauderdale, FL

Program

Registration

SUNDAY, NOVEMBER 9, 2014 4:00-7:30pm

Registration Charging Station Sponsor: Pullman & Comley, LLC

5:30-6:00pm

New Member/First-Time Attendee Orientation

6:00-7:30pm

Welcome/Networking Social Hour Sponsored by: Duff & Phelps

Hotel Reservations TUESDAY, NOVEMBER 11, 2014, CONTINUED Concurrent Breakout Sessions (Select 1 of 3) Tuesday 9:30-10:30am

MONDAY, NOVEMBER 10, 2014 6:45-8:00am

Continental Breakfast Sponsored by: Herman Katz Cangemi & Clyne, LLP

8:15-8:30am

Opening of Symposium

8:30-9:45am 10:00-11:00am

GENERAL SESSION: Integrity: Good People, Bad Choices, and Life Lessons from the White House GENERAL SESSION: A Civil Debate on the Principles and Methodologies of Allocating Hotel Assets for Property Tax Valuation

11:15am-12:15pm GENERAL SESSION: How to Prevent Appeal Disasters

12:15-1:15pm

Monday 1:15-2:15pm

• Reforming & Improving Property Taxes: How to Develop a Legislative Program • Key Trends in Retail Real Estate • Public Utility Valuation • Personal Property Roundtable

Concurrent Breakout Sessions (Select 1 of 3) Monday 2:30-3:30pm (Repeated at 3:45pm)

• Here, There, or Everywhere? The Challenge of Tangible Personal Property with a Changing Situs • Economic Obsolescence: Beyond Inutility • Data Centers – Identifying and Minimizing Common Property Taxation Issues of an Evolving Property Type (All 3 sessions repeated at 3:45pm)

Concurrent Breakout Sessions (Select 1 of 4)

Monday 3:45-4:45pm

• Here, There, or Everywhere? The Challenge of Tangible Personal Property with a Changing Situs (Repeated from 2:30pm) • Economic Obsolescence: Beyond Inutility (Repeated from 2:30pm) • Data Centers – Identifying and Minimizing Common Property Taxation Issues of an Evolving Property Type (Repeated from 2:30pm) • Real Property Roundtable Networking Social Hour Sponsored by: Law Offices of Nicholas A. Furia, PLLC and Grant Thornton LLP

6:00-7:30pm

Concurrent Breakout Sessions (Select 1 of 3) Tuesday 10:45-11:45am 11:45am-12Noon

6:45-8:00am

Lunch • • • • • •

12 Noon1:00pm

Apartments Energy Golf/Recreational Healthcare Hotel Industrial

• • • • • •

Leasing Manufacturing Office Oil/Gas Retail Telecom/High-tech

Concurrent Breakout Sessions (Select 1 of 3) Tuesday 1:15-2:15pm

• Protecting Fee Simple Value from a Leased Fee Analysis – Why Your Property May Be Next • Transfer Taxes – Minimizing the Property Taxes Paid at Closing • Property Tax Licensing – State/County Requirements and Ramifications

Concurrent Breakout Sessions (Select 1 of 3) Tuesday 2:30-3:30pm

6:00-7:30pm

• Globalization of Property Tax • The Negative Impact of Environmental Contamination and Its Residual Impact on Real Property Market Value Subsequent to Remediation • The Double Taxation of Personal Property Related to Oil & Gas Assessment

Networking Social Hour Sponsored by: American Appraisal

WEDNESDAY, NOVEMBER 12, 2014 6:45-8:00am

Continental Breakfast (For guests of hotel residing under IPT’s group rate)

8:15-9:15am

GENERAL SESSION: So You Filed a Property Tax Lawsuit, What Happens Next? Managing Your Litigation and When or When Not to Hire that Expert Appraiser

TUESDAY, NOVEMBER 11, 2014 Continental Breakfast (For guests of hotel residing under IPT’s group rate)

• Property Tax: Use the IRS Repair Regs to Reduce Assessments • Do We Have a Case? The Burden of Proof and Its Implications on Property Tax Appeals (Repeated from 9:30am) • Inutility Calculations – Utilize Them Properly

Industry Roundtable Discussion Sessions

Lunch

Concurrent Breakout Sessions (Select 1 of 4)

• Asset Management & Classification • Do We Have a Case? The Burden of Proof & Its Implications on Property Tax Appeals (Repeated at 10:45am) • Possessory Interest – The What, When, How and Where (Repeated from 8:15am)

Concurrent Breakout Sessions (Select 1 of 3) Tuesday 8:15-9:15am

GENERAL SESSION: 9:30-10:30am How Do You Measure Success in Property Taxes? • The Exemption of Intangibles in Oklahoma • Assisted Living Facility Valuation for GENERAL SESSION: 10:45-11:45am Real Estate Tax Protest Purposes Joint Ethics Session with Income Tax Symposium • Possessory Interest – The What, When, How and Where ADJOURN 11:45am (Repeated at 9:30am) Charging Station Sponsor: Pullman & Comley, LLC IPT October 2014 Tax Report 19

2014 Income Tax Symposium

November 9 – 12, 2014 ~ Marriott Harbor Beach Resort & Spa ~ Fort Lauderdale, Florida

Program

Registration

•

What’s the Connection Between Income and Property Taxes?

•

Effective Use of Technology in the Tax Department, Part I and Part II

•

Hotel Reservations

•

Taxing Foreign Income

•

State Tax Trends - A Look Ahead - A Look at the Current and Potential Future Income Tax Trends from Around the Country

Tax Department Management

•

State and Local Tax Advocacy: Creating ROI

•

Is the Resurgence of the Due Process Clause Fact or Fiction?

•

One-Off Business Taxes – Texas, Ohio, Washington, Kentucky

•

Nonbusiness Zen: To Achieve Nonbusiness, You Must First Know Your Business

•

Start Spreading the News: New York Tax Reform

•

My Apportionment Ratio No Longer Has Anything to do with my Activity in the State

•

Southeast State Tax Administrators Panel

•

Ethics for Tax Professionals

2014 Income Tax Symposium Event Sponsors

2014 Property Tax Symposium Event Sponsors

Sunday Reception Sponsor McDermott Will & Emery LLP

Sunday Reception Sponsor Duff & Phelps

Monday Reception Sponsor Morrison & Foerster LLP

Monday Breakfast Sponsor Herman Katz Cangemi & Clyne, LLP

Tuesday Reception Sponsor Baker & McKenzie LLP

Monday Reception Co-Sponsors Law Offices of Nicholas A. Furia, PLLC and Grant Thornton LLP Tuesday Reception Sponsor American Appraisal Charging Station Sponsor Pullman & Comley, LLC


Pharma/Life Science Regional SALT Seminar November 20-21, 2014 ~ Woodbridge Hotel at Metro Park ~ Iselin, NJ

Program

Registration

Thursday, November 20, 2014

Friday, November 21, 2014

8:00-8:45am

Pre-Session Coffee and Danish

7:30-8:30am

Pre-Session Coffee and Danish

8:45-9:15am

Opening of Seminar

9:1510:45am

Nexus Issues & Developments for Pharmaceutical/ Biotechnology Companies

8:3010:00am

Wait, Tax Doesn’t Do That – Unclaimed Property Issues in the Pharma/Biotech Industry

11:00am – 12:30pm

Advanced Audit Defense: Strategy, Using FOIA, Defending MTC Audits, Transfer Pricing, & What to Sign

10:1511:45am

Developments in Negotiated and Statutory Credits and Incentives for the Pharma/Biotech Industry

12:301:00pm

Lunch

Lunch

11:45am1:00pm

1:00-2:00pm

Ask the Experts/State Commissioners Roundtable

Concurrent Breakout Sessions (choose one of two) 2:05-3:05 pm

Concurrent Breakout Sessions (choose one of two) Sales Tax Best Practices 1:00-2:15pm

Sales and Use Tax Opportunities Income Tax - Foreign Frustrations

Concurrent Breakout Sessions (choose one of two)

Concurrent Breakout Sessions (choose one of two) 3:20-4:20 pm

Common Sales & Use Tax Pitfalls & How to Avoid Them

2:30-4:00pm

Income Tax - Alternative Apportionment Concurrent Breakout Sessions (choose one of two) 4:25-5:25 pm

PTE’s: Joint Ventures and Other Passthrough Issues for Biotech and Pharmaceuticals

4:00pm

Statistical Sampling Strategies for the Tax Professional Accounting for Income Taxes – Ramifications of Major Legislation on the Industry Program Concludes

State & Local Gross Receipts Taxes from a Pharmaceutical Company’s Perspective SALT Case Update

5:45-7:00 pm

Reception Sponsored by:

Eisner Amper LLP


TTARA Texas Taxpayers and Research Association

Annual Membership Meeting October 22 - 23, 2014 Sheraton Austin at the Capitol Austin, TX

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hank you to IPT members who have already joined the IPT LinkedIn group as we now have over 3100 members. We encourage you to join the IPT LinkedIn Discussion group and share the group with other tax professionals in your network. Follow IPT on Facebook and Twitter and like our Facebook page for updates on IPT event registration, photos, and other IPT news. If you have not already done so, please join these groups today by clicking on the icons below. Thank you for your continued support of IPT!

This two-day meeting offers insightful public policy discussions as well as time to visit with old friends. You can view the agenda and register for the meeting by CLICKING HERE.

CODE OF ETHICS: CANON 7 Property Tax Calendar ~ November 2014 This information is provided by International Appraisal Company (IAC) and is provided for quick reference/ reminder purposes only. IPT and IAC make no guarantee to completeness or accuracy and are not responsible for errors or omissions or for any results from the use of this information. We strongly suggest confirmation of all information with local taxing jurisdictions.

IT IS UNETHICAL to offer or give anything of material value to an individual in an employment, advisory or representative relationship with a business to induce that individual to recommend the purchase of goods or services by the business, and IT IS UNETHICAL for such individuals to receive such value.

Appeals Due: MA*

RI*

VA*

WI*

CA 11/30** - Counties that do not mail assessment notices by 8/1

State Business Income Taxation Book

NY

State Business Income Taxation includes contributions from some of the nation’s preeminent state business income tax practitioners, a virtual Who’s Who of SALT professionals. This treatise, derived from the authors’ many years of expertise in state business income taxation, is a vital reference tool. Let the leading state and local income tax experts provide you with the answers you need by purchasing this book and accompanying CD today!

Yonkers 11/1** - 11/15**

ND 11/1** of the year after the year in which taxes are due (Abatement request)

Personal Property Filing Dates: CT 11/1 Assessment Dates: None * Dates vary, check jurisdiction ** Date falls on a weekend, should be next business day. Confirm all information with local taxing jurisdictions.

Click here to order this vital resource.


STITUTE FO R • IN

S OFES IONALS PR

CE

CMI RTIF IED MEM

CMI Corner

ATION ® • TAX IN

CMI

C andidate C onnection

R BE

TOP TEN REASONS TO BE A CMI A CMI is a Certified Member of the Institute for Professionals in Taxation. Certification is offered in three separate and distinct categories: State Income Tax, Property Tax, and Sales and Use Tax. Below are ten great reasons to become a CMI.

1. Credibility. Business units within a company, outside

clients, and taxing authorities interacting with a CMI can have confidence that the CMI is knowledgeable, experienced, subscribes to ethical standards, and maintains a high level of expertise through required continuing education.

2. Professional credentials. Attaining the CMI

designation may satisfy governmental regulatory requirements. For example, in some states, the designation exempts property tax professionals from licensing examination requirements. The designation may also qualify a CMI to testify as an expert witness.

3. Recognition of achievement and stature. The

designation is a formal recognition by the CMI’s peers that the holder of the designation has achieved a high level of expertise and proficiency as a tax professional. By satisfying rigorous experience, educational and testing requirements, the CMI has earned increased stature within his profession.

4. IPT Code of Ethics. The Code of Ethics strengthens the integrity of the designation, by providing that CMIs are not only bound by the Code, but are also obligated to help enforce it.

5. Promotion of the profession. By exemplifying

high standards of excellence in the field, CMIs enhance the image of the profession inside and outside industry.

6. Uniqueness. The CMI is the only designation

available for State Income Tax, Property Tax and Sales Tax professionals.

7. Career opportunities and employment security. A CMI has an advantage generally in

the marketplace, and specifically when seeking a promotion, increased compensation, or additional responsibility. Certification establishes the willingness of a CMI to invest in his or her own professional

development, and identifies the CMI as an individual who can adapt to changes in technology and business practices.

8. Self-esteem. The CMI defines himself or herself

beyond a job description or academic degree. As a certified professional, the CMI can control his or her own professional destiny and derive a deep sense of personal satisfaction from it.

9. Commitment to the profession.

Achieving the designation demonstrates to the CMI’s peers, colleagues, and superiors that he or she is committed to the tax profession and is capable of performing at or above established standards. University degrees no longer represent the full measure of professional knowledge and competence in the market, and certification sets the CMI apart as a leader in the field of state and local taxation.

10. Leadership

and

teaching

opportunities.

Because CMIs have demonstrated expertise in the field, the profession naturally looks to them to provide ideas and strategies for the continued enhancement of their discipline. Similarly, they are the most qualified individuals to help with the education and training of others who are new to the field.

The major requirements for the CMI Professional Designation include membership in the Institute, at least five years of relevant tax experience, completion of prescribed educational requirements, and successful completion of both comprehensive written and oral examinations. For more information on the CMI Professional Designation, please visit our website, www.ipt.org, and follow the links under “Professional Designations.” If you have questions about the CMI Professional Designation that are not answered on our website, please contact Emily Archer, Certification Officer, at earcher@ipt. org.


s r e Care

Please visit the Career Opportunities page on the IPT website for complete position descriptions and requirements.

Positions Available: Consultant, Property Tax (Phoenix, Arizona) –

Altus Group. Enthusiastic individuals interested in applying for this position are encouraged to submit their resume and cover letter to [email protected] quoting “CONSULTANT, PROPERTY TAX, PHOENIX” in the subject line of the email. Please note that only those applicants selected for an interview will be contacted. Date Posted: 9/16/2014 (IPT1485)

Senior Manager/Director Business Incentives (Costa Mesa, California) – To apply for this position, email your Resume to: [email protected]. Date Posted: 9/15/2014 (IPT1484)

Senior Tax Accountant Transaction Tax (Orlando, Florida) – Starwood Hotels and Resorts, SVO. Please apply at: http://sta.rw/1mDBsJc. Date Posted: 9/9/2014 (IPT1483)

Tax Director (Orlando, Florida) – Starwood Hotels and Resorts, SVO. Please apply at: http://sta.rw/1okbAiu. Date Posted: 9/9/2014 (IPT1482)

Analyst Sales & Property Tax (Atlanta, Georgia) –

If you're ready to make the move to a great, new career opportunity, visit www.ihg.com/jobs. IHG is an equal opportunity employer: Minorities/Females/Disabled/ Veterans. Date Posted: 9/8/2014 (IPT1481)

Sales Tax Accountant (Miami, Florida) – Mastec North America. Interested persons should e-mail [email protected]. Date Posted: 9/8/2014 (IPT1480)

AVP, State Income Tax (Livingston, New Jersey) – Send resume to [email protected]. Date Posted: 8/26/2014 (IPT1479)


IPT 2014 CALENDAR OF EVENTS

IPT 2015 CALENDAR OF EVENTS

Personal Property Tax School Georgia Tech Hotel & Conference Center Atlanta, GA October 12 - 16, 2014

Sales Tax School I Georgia Tech Hotel & Conference Center Atlanta, GA February 22 - 27, 2015

CMI Income Tax Exams Marriott Harbor Beach Resort Fort Lauderdale, FL November 8 - 9, 2014

ABA-IPT Advanced Income Tax Seminar The Ritz Carlton Hotel New Orleans, LA March 16 - 17, 2015

CMI Property Tax Exams Marriott Harbor Beach Resort Fort Lauderdale, FL November 8 - 9, 2014 Income Tax Symposium Marriott Harbor Beach Resort Fort Lauderdale, FL November 9 - 12, 2014 Property Tax Symposium Marriott Harbor Beach Resort Fort Lauderdale, FL November 9 - 12, 2014 Pharmaceutical/Biotech Regional SALT Seminar Hotel Woodbridge at Metropark Iselin, NJ November 20 - 21, 2014

ABA-IPT Advanced Sales/Use Tax Seminar The Ritz Carlton Hotel New Orleans, LA March 17 - 18, 2015 ABA-IPT Advanced Property Tax Seminar The Ritz Carlton Hotel New Orleans, LA March 19 - 20, 2015 Sales Tax School II Marriott Kingsgate Conference Center Cincinnati, OH April 26 - May 1, 2015 Basic State Income Tax School The Cliff Lodge Salt Lake City, UT May 31 - June 5, 2015 Advanced State Income Tax School The Cliff Lodge Salt Lake City, UT May 31 - June 5, 2015

IPT Annual Conference Hilton San Diego Bayfront San Diego, CA June 28 - July 1, 2015 Property Tax School Georgia Tech Hotel & Conference Center Atlanta, GA August 9 - 13, 2015 Sales Tax Symposium Renaissance Esmeralda Resort Indian Wells, CA October 4 - 7, 2015 Personal Property Tax School Georgia Tech Hotel & Conference Center Atlanta, GA October 11 - 15, 2015 Income Tax Symposium JW Marriott Austin Austin, TX November 1 - 4, 2015 Property Tax Symposium JW Marriott Austin Austin, TX November 1 - 4, 2015 Credits & Incentives Symposium JW Marriott Austin Austin, TX November 4 - 6, 2015

Other Meeting of Interest Texas Taxpayers and Research Association (TTARA) Annual Membership Meeting

Sheraton Austin at the Capitol Austin, TX October 22 - 23, 2014

Please check IPT’s online Calendar of Events for additional programs that may be added.
