AL Loses in Bid to Classify Sale of Land/Plant as Nonbusiness Income

In a recent case decided by the AL Supreme Court, Kimberly Clark won its appeal.

Kimberly Clark had classified the income from the sale of timberland and a paper processing plant as business income. AL is a UDITPA state and as such follows the transactional test when it comes to classifying income. If the transaction can be said to occur in the normal course of business of the taxpayer, then it is business income. States are notorious for taking positions that are in their favor of course. Taxpayers are also wise to take positions in their own favor. In this case, the property sold was located in AL. Therefore, its no surprise that AL is going to take the position that the income from the sale is nonbusiness. Nonbusiness income is allocable as opposed to apportionable. Inasmuch as the property is located in AL, the income would be all allocable to AL, if AL could win their argument. AL argued that Kimberly Clark was not in the business of selling timberland and processing plants. In fact, Kimberly Clark had classified the sale as "extraordinary" in its own financial statements.

MA Says 80 New Auditors Will Bring In $60Million

I saw this headline and it piqued my interest. I wondered how this would be. That would mean each auditor would find over $700,000 in assessments each year. That seems a little overstated. Further reading of the article in the Worcester Telegram and Gazette revealed that the estimates are pretty loose indeed.

Newspaper Calls Wal-Mart State Tax Planning "Corporate Tax Shenanigans"

I find it interesting how the newpapers and other media report about corporate tax matters. Sometimes it's quite the eye-opener. Take this editorial article in the Carrboro (NC) Citizen which is written by Elaine Mejia who is referred to as the director of the N.C. Budget and Tax Center. In this article she describes a tax planning technique (which I'm sure was done for other than tax-reduction purposes) that was used by Wal-Mart that had the effect of dramatically reducing state income taxes in NC. NC is a separate return state. Following is her description of what Wal-Mart did and take note of the inflammatory adjectives she throws in there. She makes a call for combined reporting -- the bain of state income tax consultants.

ALABAMA Income Tax Law Survives Challenge

The Alabama Court of Civil Appeals on Friday overturned a lower court decision in a corporate tax case that might have resulted in a a multimillion-dollar revenue loss to the state. The vote wasn't close. The 5-0 order by the appeals court reversed Circuit Judge Tracy McCooey of Montgomery, who had ruled that VFJ Ventures' (Vanity Fair) deductions were not unreasonable as that term was defined in the law. What was the definition of "unreasonable" in the law. That was the key to the lower court's ruling -- it was not defined.

Tax Court Coming to Georgia?

The Daily Report Online had an interesting article about a possible development in GA that most tax advisors would welcome -- a dedicated Tax Court. This court would handle mostly income tax cases, but it would also take some complex sales tax cases. It goes (almost) without saying, that a dedicated court makes good sense to specialized state tax attorneys also. Here's a quote from the article:

Win this $100 Raffle and You Could Owe $150K in Income Taxes

The Herald-Mail newspaper had a story about a house being raffled off for charity purposes. The house was appraised for $390,000. The newspaper asked a CPA to figure out what taxes the winner would owe. In this case, a $100 purchase would net you a tax bill of $150K.

Even General Partnerships Subject to Franchise Tax in Texas

Wait a minute! I thought general partnerships were not subject to the new franchise tax? 

I guess in Texas, you're presumed taxable until proven nontaxable. Even though general partnerships made up of only natural persons as general partners are not subject to the revised Texas franchise tax, to preserve that non-taxable status, the comptroller requires the partnership to report certain information. Last June the comptroller published a form for such partnerships to file to preserve their non-taxable status, stating: "If the form is not returned, the partnership will be presumed to be subject to the revised franchise tax and will have an annual report due on May 15, 2008."

Again I ask this question: Why are Texas legislators trying to turn Texas into California?