In its usual last-minute frenzy, the Iowa General Assembly passed a bill (HF 625) to extend the popular School Tuition Organization credit. The credit is 65% of the amount contributed to organizations that subsidize private elementary and secondary tuition. When combined with the federal tax deduction for the donation, there is very little out-of-pocket cost for the donations. The amount of the credit is limited, so it has been oversubscribed in recent years. the bill increases the cap starting in 2013.
The bill has a surprising amendment that passed yesterday: it now creates “affiliate nexus” in Iowa (my emphasis):
(1) A retailer shall be presumed to be maintaining a place of business in this state, as defined in paragraph “a”, if any person that has substantial nexus in this state, other than a person acting in its capacity as a common carrier, does any of the following:
(a) Sells a similar line of products as the retailer and does so under the same or similar business name.
(b) Maintains an office, distribution facility, warehouse, storage place, or similar place of business in this state to facilitate the delivery of property or services sold by the retailer to the retailer’s customers.
(c) Uses trademarks, service marks, or trade names in this state that are the same or substantially similar to those used by the retailer.
(d) Delivers, installs, assembles, or performs maintenance services for the retailer’s customers.
(e) Facilitates the retailer’s delivery of property to customers in this state by allowing the retailer’s customers to take delivery of property sold by the retailer at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in this state.
(f) Conducts any other activities in this state that are significantly associated with the retailer’s ability to establish and maintain a market in this state for the retailer’s sales.
(2) The presumption established in this paragraph may be rebutted by a showing of proof that the person’s activities in this state are not significantly associated with the retailer’s ability to establish or maintain a market in this state for the retailer’s sales.
This ratifies the aggressive approach of the Iowa Department of Revenue on intangible nexus, and will likely trigger more audits of out of state companies. The Supreme Court and Congress really need to either reaffirm the Quill decision or set new rules.
Tax Justice Blog, Tax Credit for Working Poor Survives Iowa Tax Compromise. Remember, it’s also a thief subsidy. Just because it’s supposed to go to the “working poor” doesn’t mean it does.
Christopher Bergin, The IRS Is Broken, But That’s the Symptom (Tax.com):
The IRS is broken, that’s for sure. But the IRS is a symptom. The “disease” is the tax code. I think that’s absolutely right. And for me, this latest “scandal” concerning the IRS is going to make it impossible to reform our tax code anytime soon.
More difficult, but more necessary.
TaxProf, The IRS Scandal, Day 15
Linda Beale, Does Apple’s Cook Cook the (U.S. tax) Books?
Jack Townsend, IRS Reminders for Foreign Income Reporting
Robert D Flach is Buzzing!
The Critical Question: Could State Taxes Cause Dwight Howard To Flee L.A. For Houston? (Anthony Nitti)
Breaking news from my neighborhood: Woman Allegedly Brandishing Knife ‘Welcomes’ New Neighbor. How my neighbors are living out the pages of The Onion.
News you can use: Apparently It Doesn’t Take Much for an Accountant to Get Kidnapped and Beaten These Days… (Going Concern)
Always trust tax advice from rappers. Fat Joe Blames His Tax Evasion Problems On ‘Fancy Guys In Bow Ties’