Tax Appeals Tribunal Throws a Curveball in Empire Zone Case

Late last week the Tax Appeals Tribunal issued a decision (in Matter of Purcell) reversing several prior Administrative Law Judge determinations on a technical issue related to the calculation of the tax reduction credit that was available in the old Empire Zone Program.  I actually covered this issue several years ago in a Noonan's Notes article.  And though that alone doesn’t make this very exciting, the case is noteworthy given that the tax department had lost as many as 4 cases at the Administrative Law Judge level over the past several years on this issue, and undoubtedly has probably settled several others favorably for taxpayers.  The Purcell case goes in the exact opposite direction as all these prior cases, and holds that the tax department’s methodology for computing this “tax reduction credit” was reasonable.

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Report from the First Annual New York State Tax Summit

Last week we had the opportunity to attend the first annual New York State Tax Summit, a daylong seminar put on by the New York State Department of Taxation and Finance at their offices in Brooklyn.  It was a fantastic event, with senior Department officials presenting a wide variety of topics and issues for discussion.  There were close to 200 attendees present. And the Agenda was impressive. Here are some of the highlights of the day:   

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Breaking Up Is Hard to Do: New York Report on High-Income Nonresidents in the New York Economy

Breaking up is hard to do. Or so the old Neil Sedaka song goes. And a new report from the New York City Comptroller’s Office suggests that when it comes to the love affair between New York City and the country’s highest-income earners, the song rings true.

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Potential Tax Breaks for Web Designers and Software Developers

The New York State Department of Taxation and Finance issued a press release on September 26, reminding website designers and software developers of a sales tax exemption and warning them not to “miss out.”  According to the press release, no state or local sales tax will be charged on the purchase of computer system hardware when it’s used more than 50% of the time to:

• Design and develop computer software for sale;
• Provide website design and development services for sale; or
• Provide a combination of the two uses described above.

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More Sales Tax News in the FCA Area: IL Whistleblower Finds Success in NY

Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”).  Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.  

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The Importance of Procedure at the Division of Tax Appeals

If you are a regular reader of Administrative Law Judge (“ALJ”) Determinations and Orders issued at New York’s Division of Tax Appeals (“DTA”), you have probably observed the frequency with which ALJ’s dismiss petitions filed by taxpayers based on timeliness issues.  For the uninitiated, the DTA’s rules of practice and procedure, which are part New York State’s regulations governing taxation and finance, generally require that taxpayers file a petition appealing an audit determination or conciliation order within 90 days of its issuance.  Frequently, taxpayers fail to properly file their petition within this 90-day window.  And, absent very unusual circumstances, ALJs who review this issue dismiss those petitions based on these procedural failures.  Indeed, dozens of taxpayers have their petitions dismissed by ALJs each year for this very reason. 

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A Closer Look at New York's Nonresident Allocation Guidelines: Audits of Flow-Through Entities and Their Owners

As practitioners who deal with New York income tax audits on a day-to-day basis, we often have a front row seat to new audit techniques and new areas of focus.  And in recent years, we have noticed a lot more audit activity in the partnership or flow-through entity area.  Most of this has centered around nonresident owners of flow-through entities, and more specifically the methodology in which these entities allocate income in and out of New York. As I have outlined before in some other articles (click here and here), often we can gain insight on trends like this by studying the audit guidelines that the Tax Department issues to its auditors.  The Tax Department’s Nonresident Audit Guidelines are more widely-known, and available on the Tax Department's website., Over the years, however, the Tax Department has also issued different iterations of its Nonresident Allocation Guidelines, with the most recent version being issued in June 2013.  But after about 17 focused minutes of Google searching (which is the maximum amount of time one should spend Googling something), I have not been able to find those guidelines anywhere on the Tax Department’s website, or on the Internet generally.  That is, of course, until now.

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2016-17 New York State Budget

https://www.hodgsonruss.com/practices-1667.htmlhttps://www.hodgsonruss.com/practices-State_Local_Tax.htmlOn April 13, 2016, Governor Andrew M. Cuomo signed the 2016-17 New York State Budget into law. We summarize the highlights of the revenue provisions below.

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Economic Nexus Extended Too Far – Hodgson Russ LLP v. Minnesota Department of Revenue

During the spring of 2014, Hodgson Russ LLP (“Hodgson”) received a letter from the Minnesota Department of Revenue (“Minnesota Revenue”) that attempted to establish a new low in the states’ “race to the bottom” to establish the most minimal constitutional standard required to satisfy substantial nexus with an out-of-state taxpayer.  Minnesota Revenue asserted that under suspect provisions of the Minnesota tax code, Hodgson had nexus with the state of Minnesota based upon a single, un-audited fact: between the 2004 and 2012 tax years, Hodgson received federal Forms 1099 from payors using a Minnesota mailing address.  On account of this single fact – with no revenue floor or other safeguards – Minnesota Revenue asserted that Hodgson had nexus with Minnesota, and was therefore required to file Minnesota franchise tax returns and apportion its business income to the state.

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Did the Tribunal Expand the Jurisdiction of the Division of Tax Appeals?

In Matter of Grand Central JT VT (March 10, 2016), the Tax Appeals Tribunal decided a fairly routine tax case as to whether the taxpayer maintained adequate books and records in a sales tax audit and whether the Audit Division’s indirect methodology to estimate sales was reasonable.

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