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Welcome and Introductions. Presenters David Kupiec, Partner ? Kupiec
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KUPIEC & MARTIN STATE AND LOCAL TAX WEBINAR
(As much as we can say in 60 minutes!)
November 16, 2010
David J. Kupiec Natalie M. Martin
Kupiec & Martin, LLC Kupiec & Martin, LLC
dkupiec@kupiecandmartin.com nmartin@kupiecandmartin.com
2. Welcome and Introductions Presenters
David Kupiec, Partner Kupiec & Martin
Natalie Martin, Partner Kupiec & Martin
Administrative details website and telephone
Participation welcome!
Lets get started
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3. Webinar Overview Our purpose (and hopefully yours)
4 recent presentations
Illinois election results what does it mean?
Whats next?
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4. 4 Recent Presentations Is this Bad Sourcing and Allocation or Just Inconsistency? (Taxpayers Federation of Illinois Annual State and Local Tax Conference, September 23, 2010)
Recent Developments in State and Local Tax 2010: Legislative Developments (Illinois Bar Association State Tax & Local Tax Section Annual Fall Seminar, September 30, 2010)
Current Issues and Opportunities in State Tax Controversy (Chicago Tax Club, October 27, 2010)
Where Do We Go From Here? Differing Perspectives on How the Economy Affects State and Local Tax Issues (Chicago Bar Association, November 4, 2010)
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5. Sales Factor
Starting Point 3 factor
National shift to single sales factor
All sales or gross receipts
Traditional sourcing
TPP
Services/intangible cost of performance
throwback 5
6. Sales Factor- Emerging Trends
Market approach
MTC
Gross v. Net Receipts
Throwout
Impact of inconsistency among states 6
7. Sales Factor Illinois New Focus
Audits/Auditor Interpretation and Discretion
Statutory Changes
Regulatory Changes
Case Law
Alternative Apportionment 7
8. Sales Factor Recent Changes in Other States
Texas and Michigan MTC
Wisconsin cost of performance
Oklahoma market sourcing
Washington market sourcing
New Jersey throwout
Maine throwout
California - numerous
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9. Illinois 2010 Legislative Recap
More than 10,000 Bills Introduced During the 2010 Legislative Session
Illinois General Assembly Session Ended May 31, 2010 Without Passing a Balanced Budget
Estimated Budget Shortfall Approx. $14 plus Billion (Deficit for Fiscal Years 2011 & 2012)
Governor Proposed Income Tax Rate Increase & Business Items to Address Budget Shortfall
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10. 2009 Proposed Senate Bill 2252 Not Passed 2 Year Temporary Income Tax Rate Increase (2010 and 2011)
Individual Income Tax Rate Would Increase From 3% to 4.5% and Earned Income Tax Credit Would Increase from 5% to 10% of the Federal Tax Credit
Corporate Income Tax Rate Would Increase From 4.8% to 7.2% (Personal Property Tax Replacement Tax Combined Rate of 9.7%)
Status Illinois House Voted Against (May 31, 2009)
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11. 2009 Proposed House Bill 0174 (750) Not Passed Individual Income Tax Rate Would Increase From 3% to 5% on July 1, 2009
Corporate Income Tax Rate Would Increase From 4.8% to 5% (Personal Property Tax Replacement Tax Combined Rate of 7.5%)
Increase Property Tax Credit on Income Taxes From 5% to 10% and Earned Income Tax Credit From 5% to 15% of the Federal tax credit
Expand Sales Tax Base - 39 Additional Services
Status Illinois Senate Passed 31-27 (May 30, 2009) 11
12. Proposed Expanded Sales Tax Base(39 Potential Services)
Other warehousing and storage
Travel agent services
Carpet and upholstery cleaning services
Dating services
Dry cleaning and laundry (except coin operated)
Consumer goods rental
Health clubs, tanning parlors, reducing salons
Linen supply
Interior design services
Other business services, including copy shops
Bowling Centers
Coin operated video games and pinball machines
Membership fees in private clubs
Admission to spectator sports (excluding horse tracks)
Admission to cultural events
Billiard Parlors
Scenic and sightseeing transportation
Taxi and Limousine services
Unscheduled chartered passenger air transportation
Motion pictures theaters, except drive-in theaters
Pet grooming
Landscaping services (including lawn care)
Income from intrastate transportation of persons
Mini-storage
Household goods storage
Cold storage
Marina Service (docking, storage, cleaning, repair)
Marina towing service (including tugboats)
Gift and package wrapping service
Laundry and dry cleaning services, coin operated
Other services to buildings and dwellings
Water softening and conditioning
Internet Service Providers
Short term auto rental
Information Service
Amusement park admission and rides
Circuses and fairs admission and games
Cable and other program distribution
Rental of video tapes for home viewing 12
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PA 96-1012 (SB3658) - Back to School State Sales Tax Holiday
PA 96-0888 (SB1578) Small Business Job Creation Tax Credit Act
PA 96 1435 (SB0377)- Tax Amnesty Program
PA 96-1388 (SB0459) Use Tax Reporting/Amnesty
PA 96-0905 (SB3089) EDGE Credit Automotive Manufacturers
PA 96- 0937 (SB3655) R&D Credit Extension
13 Some 2010 IL TAX BILLS ENACTED
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PA 96-0959 (SB3662 ) Budget Implementation
PA 96-96-1429 (HB5230) Consolidated DCEO Reporting
PA 96-0935 (SB3646) Publicly-Traded Partnerships
PA 96-1383 (HB5781) Reciprocal Collection Act
PA 96-1027 (HB5833) Payments By Electronic Funds Transfer
PA 96-1276 (HB6038) Low-Income Housing Credit Extension
14 Some 2010 IL TAX BILLS ENACTED
15. State Tax Controversy The Current Economy Taxpayer Issues:
Tax Returns and Related Issues
Tax Planning
Tax Departments/Changes
Changes in business and operations
Dispute Resolutions various methods
Disclosure and Reporting Requirements 15
16. State Tax Controversy The Current Economy State and Local Governments:
Its about the money!
Current auditors hiring and retiring
Less resources in other areas
Complex audit issues
Legislative changes to enhance revenues 16
17. State Tax Controversy The Current Economy 17 Legislation:
It works!
Technical in nature
Expanding and extending tax benefits
Lobbying
Be proactive!
18. State Tax Controversy The Current Economy 18 Refunds/Offsets:
Currently, no refunds/offsets in Illinois
Less money in refund fund (statutory change)
States fiscal condition
Options going forward
19. State Tax Controversy The Current Economy 19 Outlook for the future:
Net loss carryforwards
Unitary groupings
Audit cycles
Litigation
Next loophole closures
Improving economy!
20. Transactions
Dispositions
Acquisitions
Restructurings
Mergers
Bankruptcy
20 The Future Upcoming Activities
21. The Future How to React Know your business and how it might change
Amend or Enact Laws
Promulgate Regulations
Alternative Apportionment
Settlements
Letter Rulings
General Information Letters
Private Letter Rulings
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22. Recent Illinois Elections Governor Quinn re-elected
Mandate to increase income taxes
House Speaker retains control
How does this play out?
How does this impact you?
Fall veto session activity?
2011 legislative activity? 22
23. Whats Next? Potential Illinois Income Tax rate increase
How much
Who it impacts
Opportunities
Expanded credits
Potential Illinois Sales Tax Base Expansion
How much
Who it impacts
Opportunities
Expanded credits/exemptions
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24. Conclusion
4 recent presentations Take Aways
Illinois election results what does it mean?
Whats next?
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25. Questions?Contact Us David J. Kupiec(312) 632-1022dkupiec@kupiecandmartin.com
Natalie M. Martin(312) 632-1023nmartin@kupiecandmartin.com
www.kupiecandmartin.com
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26. Circular 230 Disclosure CIRCULAR 230 DISCLOSURE - To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (2) promoting, marketing or recommending to another party any transaction, arrangement or other matter. 26