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As CCH’s Sandy Weiner recently reported, the North Carolina Department of Revenue (DOR) has revised its interpretation of how the corporate income tax net economic loss deduction is computed (see Important Notice: Computation of Net Economic Loss). Under North Carolina law, the net economic loss for any year is the amount by which allowable deductions for the year other than prior year losses exceed income from all sources in the year including any income not subject to North Carolina corporate income tax. The DOR is now interpreting this provision to mean that, although deductions are not taxable, income deducted may not reduce a loss in the year the loss is created. Previously, the DOR had taken the position that items not taxable included income that was deducted under N.C. Gen. Stat. §105-130.5, such as U.S. bond interest and dividends, and consequently, decreased the amount of the loss that could be claimed by the amount so deducted. Although these deductions may not decrease the amount of loss in the year that the loss is created, the DOR is not revising its previous position that such deductions do offset the amount of net economic loss carried over from previous years. Examples of how the original loss is computed and how carryovers are applied are provided in the DOR’s notice.

 

Taxpayers are also reminded that the DOR or the taxpayer may redetermine an item originating in a taxable year that is closed under the statute of limitations for the purpose of determining the amount of a net economic loss carryover that may be claimed in a taxable year that remains open under the applicable statute of limitations.

David Caplan of CCH notes that an Alaska initiative to increase residential property tax exemptions will appear on the August 28, 2012 primary election ballot. Initiative 09RPEA (Ballot Measure No. 1) would allow local governments, with voter approval at a local election, to subtract up to $50,000 from a home's assessed value before calculating property taxes. State law currently limits the exemption to $20,000. The initiative also provides that the exemption amount may be adjusted for inflation.

 

Alaska Lt. Gov. Mead Treadwell determined that the initiative was properly filed and notified the Legislature in a letter on December 20, 2010. The ballot measures pamphlet can be found at http://www.elections.alaska.gov/doc/bmp/2012/2012_prim_bmp_english.pdf.

Despite a technical error in an application for an initiative serial number, Arizona voters will be able to decide in November whether to permanently extend a 1% transaction privilege (sales) tax increase. The tax increase was initially approved as a temporary measure by Arizona voters and became effective on June 1, 2010. If voters decide not to extend the tax increase, the rate will drop from 6.6% to 5.6% on June 1, 2013. 

 

A three-justice panel of the Arizona Supreme Court issued an order in the case of Pedersen v. Bennett, No. CV-12-0260-AP/EL, on August 14, 2012, holding that supporters of Proposition 204, the initiative to extend the tax increase to fund education and infrastructure improvements, have substantially complied with the requirement that an application for an initiative serial number must set forth the text of the proposed law. The court's order noted that Proposition 204 supporters mistakenly submitted two different versions of the proposed law to the Secretary of State: the paper application was missing 15 lines of text on the 12th of 15 pages, while the application submitted on a compact disc had the complete text of the proposed law. The order also indicated that the court will issue an opinion explaining the order.

 

Although Arizona Gov. Jan Brewer supported a temporary sales tax increase in 2010, she promised in her 2012 State of the State address  that the one-cent tax increase will end in 2013.

As CCH’s Tim Bjur has reported, Delaware Gov. Jack Markell has signed legislation (H.B. 275, Laws 2012) creating a refundable credit that may be claimed against corporate income tax, bank franchise tax, insurance gross premiums, and personal income tax liability by employers located in Delaware that hire eligible veterans on or after January 1, 2012, and before January 1, 2016. Eligible veterans include Delaware residents or nonresident members of the Delaware National Guard who have received a medal for military service in Afghanistan, Iraq, or the global war on terrorism. In addition, the veteran must provide the employer with documentation showing that he or she was honorably discharged or is a current member of a National Guard or reserve unit.

 

The veterans’ opportunity credit is equal to 10% of the gross wages paid to an eligible veteran in the course of that veteran's sustained employment during the taxable year up to a maximum of $1,500. The credit may be claimed during the year in which the veteran is hired and for the two subsequent taxable years. Veterans counted for purposes of the credit may not be included in the calculation of employment for purposes of claiming other Delaware tax credits.

The Wisconsin Department of Revenue has decided not to tax so-called "Deal of the Day" vouchers at the time the voucher is sold. Instead, Wisconsin sales and use tax applies when the voucher is redeemed by the merchant providing the goods or services. The department reasoned that the sale of a voucher is a nontaxable sale of an intangible right. The department applied the same reasoning to discounted certificates.

 

The department guidance on discounted certificates and product vouchers, issued in a set of tax releases with its quarterly Tax Bulletin, comes as a workgroup for the Streamlined Sales Tax Governing Board, Inc., is still undecided on how to treat the daily deal voucher transactions. Craig Johnson, the department's representative on the workgroup, had said during a recent workgroup meeting that Wisconsin was prepared to issue guidance that basically followed the Tennessee proposal, which was favored by members of the business community at a recent SST Governing Board meeting.

 

Under a typical scenario involving  "Deal of the Day" vouchers such as those sold by Groupon and LivingSocial, a merchant enters into an agreement with a deal company to have the deal company sell vouchers that may be redeemed for a particular good or service that is furnished by the merchant to the holder of the voucher. The retailer can identify the amount for which the certificate or voucher was sold to the customer.

 

For Wisconsin tax purposes, when the customer redeems the voucher for particular goods or services, a sale of those goods or services has occurred and the tax will apply to the sales price of the voucher if the goods or services being sold are taxable. The merchant who accepts the voucher is the retailer of the goods or services because the merchant is the person actually transferring the goods or services to the purchaser.

 

The merchant is liable for tax on the basis of the sales price of the voucher, provided the good or service represented by the voucher is taxable. The merchant's sales price of the goods or services sold using the voucher includes all consideration received by the merchant for the sale, without deduction for any expenses incurred by the merchant and paid to the deal company for its services of advertising and selling the vouchers.

 

The department also noted that this determination does not apply to sales of digital codes; admissions to time-sensitive events such as sporting events, concerts, and other events; or gift certificates sold directly by the retailer.

 

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