You might be surprised just how easy it can be to get sucked into tax in another state. Cara Griffith explains how easy it is to get California to come after you for their $800 minimum return fee in Doing Business in California (Tax Analysts Blog):
The California Franchise Tax Board recently issued Legal Ruling 2014-01, which addresses when a business entity with a membership interest in a limited liability company is required to file a California return and pay applicable taxes. The ruling comes while a case is pending on that very issue.
The case is Swart Enterprises Inc. v. California Franchise Tax Bd. (Fresno County Superior Court, Case No. 13 CE CG 02171 (July 9, 2013)). Swart operates a farm in Kansas and provides farm labor contractors. The company is incorporated in Iowa, has estimated annual revenues of $280,000, and has three employees.
Swart has no physical presence in California. It doesn’t have employees in California and it doesn’t own real or personal property there. Swart did, however, own a 0.02 percent interest in a California limited liability company that invested and traded in capital equipment. Swart was not the manager of the fund and was not involved in the management or operation of the fund. Yet its status as a member is enough for the FTB to allege that Swart is doing business in California.
The post explains that California would have let Swart off the hook if they owned in interest in a limited partnership, rather than an LLC. So if your business sneezes in the general direction of California, make sure you stick an old-fashioned limited partnership in the ownership chain somewhere, or California will shake you down for $800, or maybe a lot more.
This should especially make businesses wary about buying interests in publicly-traded or broker marketed LLCs. Most of these have at least a little bit of California income, and they might just make a California filer out of your LLC or corporation. And it’s not just California — wherever the LLC might be, so might you be also. It can mean increased state taxes, not to mention increased tax return prep fees.
Howard Gleckman, Does Congress Really Care About the Deficit? Not When It Comes to Vets and Highways (TaxVox). The answer would have been correct if it stopped after the first two letters.
Annette Nellen, Push for state film credits from Congress. They don’t care about state solvency either.
Peter Reilly, FAIR Tax Abolishes IRS – Then What?
When valuing a conservation easement, you must determine the value of the property before the easement and the value after the easement. The difference in value becomes the charitable deduction amount. In the case of the Schmidt’s, their apprisal determined the before easement value was $1.6 million and the after easement value was $400,000 for a net contribution deduction of $1.2 million…
The IRS appraiser valued the property at $750,000 for the before easement value and $270,000 for the after easement value for a net deduction of $480,000.
The deduction came down a little, but the IRS lost its bid for penalties.
Me, Obamacare mandates: What’s a taxpayer to do? (IowaBiz.com, where I discuss what the Halbig decision on tax credits for policies purchased on federal exchanges means now for taxpayers subject to the individual and employer mandates.
TaxProf, The IRS Scandal, Day 455
There’s a new Cavalcade of Risk. This edition of the venerable roundup of insurance and risk-management posts is up at The Population Health Blog. Among the worthy posts is Hank Stern’s Rideshare Tricks – An Update, on the insurance implications of participating in ride-share services like Uber.
But Mr. President, imitation is the sincerest form of flattery! Accounting Today reports on yesterday’s presidential press conference in Obama Blames Accountants for Inversion Trend:
During a press conference Wednesday following a summit with African leaders, Obama said, “You have accountants going to some big corporations—multinational corporations but that are clearly U.S.-based and have the bulk of their operations in the United States—and these accountants are saying, you know what, we found a great loophole—if you just flip your citizenship to another country, even though it’s just a paper transaction, we think we can get you out of paying a whole bunch of taxes.”
Wherever would anyone get the idea to do such a thing? Well, Accounting Today points to a suspect: Obama Aides Let Delphi Avoid Taxes with Tactic President Assails:
President Barack Obama says U.S. corporations that adopt foreign addresses to avoid taxes are unpatriotic. His own administration helped one $20 billion American company do just that.
As part of the bailout of the auto industry in 2009, Obama’s Treasury Department authorized spending $1.7 billion of government funds to get a bankrupt Michigan parts-maker back on its feet—as a British company. While executives continue to run Delphi Automotive Plc from a Detroit suburb, the paper headquarters in England potentially reduces the company’s U.S. tax bill by as much as $110 million a year.
One might almost get the impression that this whole inversion panic isn’t really a serious policy effort, but instead a desperate diversion by a foundering politician and his partisans.
The problem might be the tax system, not wobbly patriotism. Record Numbers of Americans Are Renouncing Their U.S. Citizenship (TaxProf). Paul Caron links to Andrew Mitchel’s report on the latest quarterly numbers of published expatriates, which includes this chart:
Our worldwide tax system makes it difficult, dangerous and expensive to be a U.S. taxpayer abroad. Rather than impugning their patriotism, the President ought to try to make it affordable.
Bob McIntyre of the Tax Justice Blog makes perhaps the worst appeal to authority ever seen in the tax literature: Woody Guthrie on Corporate Tax Inversions. Woody Guthrie’s economic gurus weren’t exactly cutting-edge .
The Iowa State Fair Starts today!
If you show up on Saturday, look for me at the Sertoma booth at the Varied Industries Building from 1-5; I will be distributing educational hearing safety info and ear plugs, and you may even be able to get a free hearing screening from a trained audiologist. And you might want some music to fire you up for a really big show!