So how creative is YOUR state?

[FEDUKE404]

Looking at the tax changes for the upcoming filing season, my state (NC) has really sweetened the pot to squeeze ever more money from the taxpayer.

Examples:

1 - Ever-increasing "additions to income" (federal taxable) because NC has not for some years followed the annual increases in federal personal exemptions and/or standard deductions.

2 - An income tax surcharge of 2% or 3% that kicks in at NC taxable incomes (see #1) of $60k for singles and $100k for MFJ.

3 - If a NC taxpayer benefits from an increased federal standard deduction because of allowable real property taxes and/or automobile sales tax, such additions are also not recognized by the NCDOR.

So, for entertainment purposes and/or holiday venting, let us all know how creative your own state has become to resolve its financial woes via the back of the taxpayer with the tax return preparers getting caught in the swinging doors too!

FE

[veritas]

How about

a tax on sales for C Corps? minimum $150 up to $100,000 even if the corporation loses money.

retroactive to 1-1-09

[Jiggers]

Texas Taxus!

We have no state income tax on individuals.

However, Corporations are screwed.

They have to pay a "Franchise Tax".

Up to two years ago it was basically an income tax on corporations. With some adjustments. For instance, the net income was based on the 1996 Internal Revenue Code and there were several adjustments such as the Section 179 deduction over $25,000 wasn't allowed, the 179 on computer software wasn't allowed, the 30%/50% bonus depreciation wasn't allowed. These had to be recalculated as being depreciated. Required two sets of books.

Then our legislature changed this to gross receipts less certain deductions such as cost of goods or compensation. However, COGS and Compensation was defined differently than what the IRS calls COGS and Comp. This also requires two sets of books and hope your interpretation of COGS and Compensation is the same as the states.

I have one client who normally paid less than $1,000 per year in franchise tax, due to the corporations NOL with the depreciation adjustments mentioned above, giving the corporation a small profit.

Now the Franchise Tax is running about $5,000 per year. And the corporation is showing a loss each year.

[ChEAr$]

Speaking of state income taxes, I'd be interested to hear here the first instance anybody
sees of state guidance relating to taxation of income earned by a non resident military spouse given the new federal tax law. (See latest Taxbook update, second page, lower
right)

[JohnH]

Jiggers: NC tapped that source of revenue long ago as well. In this state, the Franshise Tax is baed on the greater of: 1) Capital Stock Plus surplus & undivided profits, 2) Net Invesment in NC Tangible Property, or 3) Appraised Value of NC Tangible Property. (#2 and #3 are subject to some adjustments for debt, depreciation, and/or local valuations).

The bottom line is that all NC corporations get hit with significant Franchise Tax unless they have little or no retained earnings, no net hard assets, or no significant assets that the local tax assessor has placed a value on and already taxed under the property tax provisions. It's "heads the state wins, tails you lose" for NC corporations. I expect it's like that in most other states to some degree or another.

At one time individuals also had to pay tax on intangibles (stocks, mutual funds, notes receivable, etc), regardless of whether their value went up or down each year, until the politicians realized the stench from that system was just getting to bad. (and I think a few court cases helped them make up their minds). But I wouldn't be surprised to see something like that come back into vogue as the try to figure out how to soak the "evil rich".

[BOB W]

Speaking of state income taxes, I'd be interested to hear here the first instance anybody
sees of state guidance relating to taxation of income earned by a non resident military spouse given the new federal tax law. (See latest Taxbook update, second page, lower
right)

NYS PUB 361, which is not published yet, will cover NYS's position on this issue.

[DaveO]

Nebraska recognizes none of the federal additions to the standard deduction. They have also not allowed any of the enhanced depreciation or Section 179 deductions. My least favorite thing is they use a different calculations for the AMT so if you have Federal AMT you get to do it over by hand for Nebraska since Drake can't refigure the form and of course new rules are issued every year. There is also a seperate method of calculating a NOL carryback or carryforward.

[Snaggletoof]

Feel sorry for NC

Looking at the tax changes for the upcoming filing season, my state (NC) has really sweetened the pot to squeeze ever more money from the taxpayer.

Yes, NC has really gone broke and has therefore gone after its taxpayers with a vengeance with these complicated adjustments and surtax items.

But somehow, their coffers were abundant enough to institute an Earned Income Credit at the state level. And for the current year, the percentage has increased. Not only that but the percentage is based on the federal EIC, which is going up AND adding a third dependent!!!

You NC people who are having to pay for all FEDUKEs abovementioned creativity should barnstorm your capitol with a rather obvious idea as to how to save taxpayer dollars...

Politicians, fear not. Northeast and Far West Liberalism is surprisingly alive and well in the red states.

[Black Bart]

Can't complain.

Our state (Arkansas) has pretty much stayed the same for the past few years. Our politicians are peacefully slumbering alongside the status quo and I hope no fresh-faced, eager-beaver reformer wakes 'em up.

They let us take S179 -- unsure about bonus since the program adjusts fed for it and I don't keep track anymore. Exempted is unemployment, SS, first $6K-retirement pensions, first $9K-military pay.

Corp franchise tax went from $50 to $150 two or three years ago (go ahead and laugh, but I'm quite put out about it).

Other than that, the only complaint I've got is they keep expanding the "low income" tax tables and tossing folks off the tax rolls -- what IS it about the pols and their overdone concern for the "noble poor"? Heck, I think everybody oughta pay some tax even if it's just ten or twenty bucks -- it would maybe give 'em a sense of self-worth as sure-enough contributing citizens rather than "victims" who can't cut it and need "special" treatment.

[JohnH]

Ron & Bart: Do you think maybe the politicians have run the numbers and now they just keep fine-tuning them?
There's a magic spot where it's sensible give money to people as long as they will vote for you while taking from those whom you're pretty sure won't vote for you no matter what you do. As you approach that threshhold, incumbency is secured. (Insolvency may be not too far behind, but somebody else will need to worry about that years from now).

[AJsTax]

Ohio has pulled

a fast one. There was a tax reduction for individuals that was to take place over several years (5, I think without having to look it up.) The reduction for this year was to be about 4.5 % below last years rate. Of course the withholding tables were set at the beginning of the year for this change. Now at the end of December we pass a law to delay that phase in until 2011 and tax everyone at 2008 rates. So with the fact that the tables are very tight for Ohio and many end up paying or refunding a very little bit, we will have to explain why so many more will have to Pay the state this year along with the screw up in the federal withholding tables for over half our clients. Will NOT be fun.

[FEDUKE404]

Some history of NC intangibles/Bailey ruling

(snipped)
At one time individuals also had to pay tax on intangibles (stocks, mutual funds, notes receivable, etc), regardless of whether their value went up or down each year, until the politicians realized the stench from that system was just getting to bad. (and I think a few court cases helped them make up their minds). But I wouldn't be surprised to see something like that come back into vogue as the try to figure out how to soak the "evil rich".

JohnH - Interestingly enough, the North Carolina imposition of the intangibles tax (just think of it as an ad valorem tax on the value of your investments and bank accounts every December 31st) went all the way to the federal supreme court as did the attempt at removal of long-standing special exemptions for government retirees in NC (as well as other states - I think MI started that ball rolling).

Both of those lower courts rulings were fought tooth and nail by then NC Attorney General Mike Easley, later to become Governor Mike Easley. Once the SCOTUS rulings came down, the State of NC was forced to repay huge amounts of money, as well as institute/continue the special treatment of retirement funds to those who were grandfathered by the old rules (the infamous Bailey exemption on NC "deductions from income"). In simple terms, a government retiree in NC (state/military/federal) who meets the specific guidelines of the Bailey ruling does not pay NC income tax on ANY of those retirement funds. The same ruling can apply to withdrawals from 401(k) type funds IF they were in place by the proper time, plus a few other restrictive rules.

Interestingly enough, Gov Easley and his wife are currently subject to all kinds of federal and state investigations for corruption and finance issues. It is highly likely he/they will be indicted and face some serious federal charges. Something about that word "karma," don't you think??

But on the brighter side, I had many billable hours created going back through several years of tax returns finding out how to file amended returns based upon the intangibles non-deductions for the years involved, and then helping folks fill out the terribly complicated worksheets that accompanied the Bailey Emory Settlement.

FE

[JohnH]

Good history. I also remember filing NC return for several years with the notation "Under Protest" because NC (under Atty General SlEasley) maintained that the taxpayer could be held to a 30-day refund claim period if the state chose to invoke that provision and that the 3-year SOL for amended returns was simply an administrative provision to be allowed or withdrawn at the state's convenience. I can't remember if that bit of nonsense was struck down or if it still exists, although I know the state does generally allow amended returns for 3 years.

[RLymanC]

CA child exemption

CA has reduced the child exemption by $210 dollars per child. This is a huge tax increase that hardly any taxpayers are aware of.

[Y2KEA]

California is targeting service businesses in its latest bid to collect more of the estimated $1.1 billion in taxes that go unpaid each year on out-of-state purchases.

Under a law passed over the summer, the state Board of Equalization will send 184,000 letters by the end of the year to service businesses such as law firms, child care companies and Lasik eye surgery centers that have more than $100,000 a year in revenue.

The notices order the companies to register with the tax board and, by April 15, report and pay tax owed for the last three years or prove why they are exempt.

Here is the article: http://www.latimes.com/business/la-f...,1648792.story