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The North Carolina Department of Revenue and the North Carolina Small Business Commissioners Office have announced the launch of the Small Business Taxpayer Recovery Program, a joint initiative which will offer penalty and fee waivers in addition to payment plans to companies that have fallen behind on sales, personal income withholding, and other trust taxes as a result of the current economic downturn. "Trust taxes" are those paid by a customer or withheld from an employee and held in trust by the business until they are filed and paid, and include motor vehicle lease and rental, sales and use, scrap tire disposal, solid waste disposal, white goods disposal, and withholding. Additionally, franchise tax is included in the program although it is not considered a trust tax. The program is currently available and is scheduled to run through June 2013.



 


The goal of the program is to reduce the number of non-compliant taxpayers, but also to help businesses get back on their feet. Secretary of Revenue David Hoyle stated, “Small and local businesses are critical to the continued success of North Carolina. We want to give them a chance to get back on track and move forward as the economy recovers.”


 


In order to qualify for the program, businesses must have 200 or fewer employees and must agree to use the counseling services of the Small Business and Technology Development Center (SBTDC) or the North Carolina Small Business Center Network (SBCN). Small businesses that complete the required counseling and that file and pay all outstanding taxes are eligible for longer-term repayment plans than normal. Another benefit to participating in the program is the waiver of all penalties and collection fees; however, these fees and penalties may be reinstated if program participants fail to file or pay future taxes on time. Also, liens will not be issued for delinquent trust taxes included in the program. Failure to comply with the terms of the agreement will automatically disqualify a small business from the program, and will result in the immediate reinstatement of all penalties and fees and may subject the small business to a tax lien.


 


 


 

 

The weeks old government shutdown in Minnesota ended when Gov. Mark Dayton signed a series of budget bills on Wednesday. One of those bills – Ch. 7 (H.F. 20), Laws 2011 (1st Special Session) – contains 127 pages of tax law changes, including (among other things) provisions that update the state's IRC conformity date, modify several income tax deductions and credits, create new sales and use tax exemptions, and adjust the property tax refund for renters.

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Income Tax Changes
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Minnesota's IRC conformity date is extended from December 31, 2010, to April 14, 2011, for tax years beginning after 2009 (references to the federal rules on foreign-source income are tied to the IRC as amended through March 18, 2010). Due to this change, Minnesota adopts most of the 2010 federal tax law changes; however, income tax addition and subtraction adjustments continue to apply to: 



· IRC §168(k) bonus depreciation, including 100% bonus depreciation for property placed in service after September 8, 2010, and before January 1, 2012; and


· IRC §179 enhanced expense deduction and investment phaseout threshold limits.


The legislation also affects a number of add-backs, deductions, and exemptions. For example: 


·

Charitable contributions and donations.—The corporation franchise tax add-back for the enhanced federal deduction for the donation of computer equipment is restricted to taxable years beginning before 2010.


·

Retiree drug benefits.—The add-back relating to the federal exclusion under IRC §139A for subsidies received by employers that provide retiree drug benefits is limited to tax years before 2013.


·

Itemized deductions and personal exemptions.—Beginning with the 2011 tax year, an add-back is required for itemized deductions and personal exemptions by certain higher-income individuals whose AGI exceeds a threshold level (the threshold amount before adjustment for inflation is $150,000 for a surviving spouse and joint filers, $125,000 for a head of household, $100,000 for a single taxpayer, and $75,000 for a married taxpayer filing a separate return).


·

Standard deduction.—For the 2011 and 2012 tax years, married taxpayers are required to add back the amount of the enhanced federal standard deduction that is allowed for those years.


·

Teacher expenses and higher education tuition.—The add-back relating to the federal deductions for certain classroom expenses of K-12 teachers and for higher education tuition are limited to tax years before 2010.


·

Political contribution refund.—Individual taxpayers may not claim a refund for political contributions made after June 30, 2009, and before July 1, 2013.


·

Mining exemption.—The corporation franchise tax exemption for certain mining operations subject to the Minnesota occupation tax is extended to include mining, producing, or refining of nonferrous ores, metals, and minerals.


 A number of income tax credits are affected as well. For example: 


·

Nonresident entertainer tax and credit.—For compensation received after 2011, withholding for the 2% tax on compensation paid to a nonresident entertainer is not required if the compensation is less than $600. In addition, the tax does not apply to nonresident entertainers, including nonresident speakers, unless the total compensation received in the tax year exceeds the individual income tax filing threshold for a nonresident individual. The $120 annual credit against the nonresident entertainer tax is also repealed.


·

Health insurance premiums credit.—The credit for 20% of health insurance premiums paid to an employer-provided IRC §125 health care plan is repealed for tax years after 2011.


·

Working family credit.—For the 2011 tax year, the earned income phaseout thresholds for joint filers that claim the working family credit is increased by $5,000, as indexed for inflation from 2008 to 2011.


·

Marriage penalty credit.—The marriage penalty credit is reduced by 50% of the amount of the addition to taxable income that is required for the enhanced federal standard deduction.


 


In addition, the Minnesota Commissioner of Revenue is directed to initiate negotiations with Wisconsin for purposes of entering into a new reciprocity agreement that would be effective in 2012.


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Sales and Use Taxes Changes
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The new legislation imposes or expands sales taxes on certain transactions. For example, "accommodations intermediary services" provided in connection with lodging and related services provided by a hotel, rooming house, resort, campground, motel, or trailer camp are now subject to tax. In addition, ticket resellers will soon be required to charge sales tax on the total amount for which a ticket is resold (effective for sales and purchases made after September 30, 2011). The imposition or expansion of local sales taxes are also authorized Cloquet, Fergus Falls, Hermantown, Hutchinson, Lanesboro, Marshall, Medford, and Rochester.



Several sales tax exemptions are also added or expanded. For example:


 


·

Qualified data centers.—Purchases of enterprise information technology equipment and computer software for use in a qualified data center are exempt (effective for sales and purchases made after June 30, 2012, and before July 1, 2042).

 


·

Sales to towns.—Sales to towns are exempt (effective for sales and purchases made after September 30, 2011). The exemption does not apply to goods or services purchased by a town that are generally provided by a private business, provided that the purchases would be taxable if made by a private business engaged in the same activity.

 


·

Emergency response vehicles.—The lease by a licensed ambulance service of a motor vehicle that is equipped and specifically intended for emergency response or for providing ambulance services is exempt from sales and use tax (effective for sales and purchases made after September 30, 2011). Previously, this exemption applied only to the lease of a motor vehicle used as an ambulance.

 


·

Water used for fire protection.—Water used directly in providing public safety services by an organized fire department, fire protection district, or fire company providing fire protection services to the state or a political subdivision is exempt (effective retroactively for sales and purchases made after June 30, 2007). However, no refunds may be made for amounts already paid on water purchased between June 30, 2007, and January 30, 2010.

 


·

Minnesota State High School League events.—The exemption for tickets or admissions to regular season school games, events, and activities, and to games, events, and activities sponsored by the Minnesota State High School League is extended to July 1, 2015 (effective retroactively for sales and purchases made after June 30, 2011). The exemption had expired on July 1, 2011.

 


·

Ring tones.—Ring tones are exempt (effective for sales and purchases made after September 30, 2011).

 


·

Ore, metal, and mineral production materials.—Mill liners, grinding rods, and grinding balls that are substantially consumed in the production of taconite or other ores, metals, or minerals are exempt when sold to or stored, used, or consumed by persons taxed under the in-lieu or net proceeds provisions of Ch. 298 (effective for sales and purchases made after September 30, 2011). Previously, this exemption was available only for taconite production materials.


 


In addition, the sourcing rules for florist sales are revised for sales and purchases made after September 30, 2011.

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Property Tax Changes
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For property tax purposes, the legislation reduces the percent of rent constituting property taxes used in calculating the property tax refund for renters from 19% to 17% (effective for claims based on rent paid in 2011 and following years). It also provides the same reduction for property on which a manufactured home or park trailer taxed as a manufactured home is located. The maximum refund, income qualification range, and inflation adjustment were also modified.



The eligibility requirements for the market value exclusion for disabled veteran homesteads were also changes by:

 


· Expanding the period for which a surviving spouse of a disabled veteran is allowed to continue to receive the benefit from two to five years after a disabled veteran’s death (effective for taxes payable in 2012; 2011 application deadline extended from July 1 to August 15);


 


· Allowing the surviving spouse of a servicemember who dies of service-connected causes while serving honorably in active military service to receive the exclusion for the same five-year period (effective for taxes payable in 2012 and thereafter); and


 


· Expanding the exclusion to cover a disabled veteran’s primary family caregiver if the veteran has no homestead (effective for taxes payable in 2012 and thereafter).


 


In addition, the legislation provides that the notice of property valuation sent to taxpayers must contain a specific notification when a property's classification has changed from the previous year (effective for notifications for assessment year 2012, taxes payable in 2013, and thereafter).


 


A reduced property tax classification (4c) is added for commercial properties consisting of not more than 20 residential units that are used for fewer than 250 days a year and that are located in a city or town with a population under 2,500 located outside the metropolitan area, provided that a state trail passes through the city or town. The reduced classification allows taxpayers to pay the state seasonal recreational tax rate rather than the state commercial-industrial tax rate.


 


Anoka and Hennepin Counties are also authorized to grant abatements for property taxes payable in 2011 to homes damaged by the May 22 tornadoes. The new abatements only apply to homes that sustained losses of less than 50% of a building's value because current law offers abatements to certain properties sustaining losses greater than 50% of value. Taxpayers receiving the new abatements forfeit their eligibility for a disaster credit for taxes payable in 2012 based on the tornado damage.


 


Finally, the legislation changes the calculation of payments under the Sustainable Forest Investment Act (SFIA) program from a formula based on assessed value and average township tax rates to a flat $7 per acre with a $100,000 annual cap per enrollee (effective for payments in calendar year 2011 and thereafter). Taxpayers subject to the $100,000 cap are allowed to opt out of the program and apply for class 2(c) treatment by August 31, 2011. 

 

 

After vetoing a similar provision on May 31, Texas Gov. Rick Perry, on July 19, signed a law that says a retailer is doing business in the state if it has affiliates engaged in certain activities in <!<st1:State>><!<st1:place>>Texas<!</st1:place>><!</st1:State>>, such as maintaining a distribution center or a warehouse. According to reports in the general press, Amazon has been threatening to close a distribution center in the state if the law passes.


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Meanwhile, on July 18, the California Attorney General gave the green light to an effort backed by Amazon to gather signatures to put to the state’s voters a repeal of the sales tax nexus law  signed by Gov. Brown a few weeks ago. </font></p>

 

David Caplan of CCH has reported that recently enacted New Hampshire legislation allows local governments to adopt a tax cap to limit increases to the amount to be raised by taxes in the annual budget. (Ch. 234 (S.B. 2), Laws 2011, effective July 5, 2011)


In localities adopting a tax cap, the estimated amount of taxes to be raised for the fiscal year may not exceed the taxes raised for the prior year by either a percentage or a fixed amount. The legislation provides for override of tax cap provisions by a supermajority vote of the local governing body.


 

The Legislature took action in response to a 2010 New Hampshire Supreme Court decision which held that a proposed amendment to the city of Manchester’s charter limiting taxes and spending was invalid on the basis that it conflicted with state law governing the municipal budget process. (City of Manchester v. Secretary of State, New Hampshire Supreme Court, No. 2009-791, November 10, 2010) The amendment limited annual budget increases to the change in the National Consumer Price Index - Urban for the calendar year immediately preceding the year of the budget adoption.


According to the Associated Press, a total of seven New Hampshire communities, including Manchester, have approved tax and spending caps. S.B. 2 validates existing caps by declaring as follows: “…and all actions properly taken related to the tax or spending cap in such charters are hereby endorsed, ratified, validated, and legalized and are fully enforceable, without regard to whether such entities or actions were authorized by law at the time they were established or taken.”


 

 

Several states and Puerto Rico will be holding back-to-school sales tax holidays in late July and August this year. Items that will be exempt from sales tax during the holidays vary from clothing and school supplies to computers and related equipment.


Louisiana's tax holiday appears to be one of the most generous, exempting the first $2,500 of the sales price of noncommercial purchases. South Carolina will exempt numerous items with no price limit. Missouri and North Carolina will exempt computers with a sales price of up to $3,500; Tennessee will exempt computers with a sales price of up to $1,500; and New Mexico will exempt computers with a sales price of up to $1,000. 


Here are the details for the states that are holding a back-to-school holiday this year. 


 


    • Alabama, August 5-7: The holiday exemption applies to clothing (not accessories or protective or recreational equipment) with sales price of $100 or less per item; single purchases, with a sales price of $750 or less, of computers, computer software, school computer equipment; noncommercial purchases of school supplies, school art supplies, and school instructional materials with a sales price of $50 or less per item; and noncommercial book purchases with a sales price of $30 of less per book.


 



    1. Arkansas, August 6-7: The holiday exemption applies to sales of clothing item under $100; clothing accessories or equipment under $50; school art supplies; school instructional material, and school supplies.


 



    1. Connecticut, August 21-27: The holiday exemption applies to clothing and footwear (not accessories or athletic or protective wear) costing less than $300 per item.


 



    1. Florida, August 12-14: The holiday exemption applies to clothing with a sales price of $75 or less per item and school supplies with a sales price of $15 or less per item. Certain restrictions apply.


 



    1. Iowa, August 5-6: The holiday exemption applies to clothing and footwear (not accessories, rentals, athletic or protective wear) with a sales price of less than $100 per item.


 



    1. Louisiana, August 5-6: The holiday exemption applies to the first $2,500 of the sales price of noncommercial purchases (not leases) of items of tangible personal property (not including vehicles or meals). The holiday does not apply to local taxes but may be allowed in St. Charles Parish.




    2. Maryland, Aug. 14-20: The holiday exemption applies to items of clothing (not accessories) and footwear with a taxable price of $100 or less.


 



    1. Mississippi, July 29-30: The holiday exemption applies to clothing or footwear (not accessories, rentals, or skis, swim fins, or skates) with a sales price under $100 per item.


 



    1. Missouri, August 5-7: The holiday exemption applies to noncommercial purchases of clothing (not accessories) with a taxable value of $100 or less per item; school supplies up to $50 per purchase; computer software with taxable value of $350 or less; and computers and computer peripherals up to $3,500. Localities may opt out. If less than 2% of retailer's merchandise qualifies, the retailer must offer a tax refund in lieu of a tax holiday.




    2. New Mexico, August 5-7: The holiday exemption applies to footwear and clothing (but not accessories or athletic or protective clothing) with a sales price of less than $100 per item; school supplies; computers with a sales price of $1,000 or less per item; and computer peripherals with sales price of $500 or less per item. Retailers are not required to participate.


 



    1. North Carolina, August 5-7: The holiday applies to clothing (not accessories or protective equipment) and school supplies with a sales price of $100 or less per item; school instructional materials with a sales price of $300 of less per item; sports and recreational equipment with a sales price of $50 or less per item; computers with a sales price of $3,500 or less; and computer supplies with a sales price of $250 or less per item.


 



    1. Oklahoma, August 5-7: The holiday exemption applies to items of clothing and footwear (not accessories, rentals, athletic, or protective wear) with a sales price of less than $100.


 



    1. Puerto Rico, July 15-17: According to a [Tax Alert | http://www.kevane.com/files/publications/professional/Back%20to%20School%20Tax%20Free%20Holiday%20II.pdf] issued by Kevane Grant Thornton, the holiday exemption applies to articles of clothing and footwear with a sales price of $75 or less; computers with a sales price of $750 or less; software and computer school materials with a sales price of $200 or less; and school supplies, school art materials, school music materials, and school instructional materials with a sales price of $50 or less.


 



    1. South Carolina, August 5-7: The holiday exemption applies to clothing (not rentals), clothing accessories, footwear, school supplies, computers, printers, printer supplies, computer software, bath wash clothes, bed linens, pillows, bath towels, shower curtains, and bath rugs.


 



    1. Tennessee, August 5-7: The holiday exemption applies to clothing (not accessories), school supplies, and school art supplies with a sales price of $100 or less per item, and computers with a sales price of $1,500 or less per item.


 



 



    1. Virginia, August 5-7: The holiday exemption applies to clothing and footwear with a selling price of $100 or less per item, and school supplies with a selling price of $20 or less per item.





 Happy Shopping!


 

Despite the government shutdown in Minnesota, tax payments to the state still must be submitted by their normal due date (and penalties and interest will continue to accrue on debts). However, it is not a two-way street...refunds are not being processed during the shutdown. And if you have a question or a problem, don't bother calling the Department of Revenue, because they won't be answering the phones.


 


The shutdown will affect taxpayers in other ways as well. For instance:



· Audits will not be conducted during the shutdown (although the audit appeal period on a Tax Order remains in effect, so taxpayers should pay the amount due or appeal an assessment within the timeline laid out in the Tax Order).


· Electronic services will continue to operate during the shutdown, so taxpayers will be able to pay taxes, file returns, and check the status refunds.


· Information received electronically or on paper will be recorded as of the date received.


· Sales tax revocation reinstatements will not be processed during the shutdown.


· County assessors and auditors will still be available to handle property tax issues as normal.


· Liens cannot be released during the shutdown.


 

 

For additional information, please see the Department of Revenue's State Shutdown FAQs .</p>

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