From our offices in Boston, Portland, and Portsmouth, Pierce Atwood’s State and Local Tax Group provides litigation, planning, transaction, regulatory, and legislative services to business, associations, and individuals on all Massachusetts, Maine, and New Hampshire tax issues and development incentives.
State and local tax laws are continually changing, either through legislative action, administrative interpretation, or judicial decisions. Pierce Atwood’s SALT Group carefully monitors these changes. We also like to periodically provide Alerts, such as this one, to inform our clients and friends about the changes that may be most relevant to them.
Amazon to Open Office in Massachusetts. Amazon has reported that it is opening an office in Cambridge and that it plans to acquire Massachusetts-based materials handling company Kiva Systems. Amazon’s move into Massachusetts has focused the efforts of groups like the Massachusetts Main Street Fairness Coalition to call on the DOR to require the online retailer to collect sales taxes on Massachusetts residents. Governor Deval Patrick says that he has “reached out to Amazon knowing that they are coming here… the first thing to do is welcome them warmly here…. But the concerns of brick and mortar retailers are real. And it’s not just Amazon, it’s the whole online economy, which is an important part of the economy and it needs to do their fair share.”
Guidance on Security Corporation Status. On May 24, the DOR issued Directive 12-2, which provides guidance on the conditions under which a financial institution may be classified as a “security corporation” and may lose that classification. The directive provides, among other things, that the pledge by a shareholder of stock of the corporation as security for a loan to the shareholder, in and of itself, will not preclude classification as a security corporation. The Directive also addressed the issue of the extent to which a security corporation may acquire appreciated securities from an affiliate and then subsequently sell such securities to a third party. Security corporation classification is not intended to be a means for an owner of appreciated security to shelter gain from the sale of that security by transferring it to an affiliated security corporation. Accordingly, the taxpayer must meet the requirements of G.L. c. 63, §38B, and demonstrate that the acquisition of the securities was for investment purposes, comports with all other requirements of security corporation classification, and is not part of a plan to minimize taxes on built-in-gain. The Commissioner retains wide latitude to recharacterize such transactions if they do not meet the applicable standards.
Various Pieces of New Tax Legislation. The Maine Legislature’s “short session” officially ended on May 31 this year, and included a substantial amount of tax legislation. Legislation from earlier in the session was addressed here. The end of the session included a flurry of important tax legislation, including:
- The creation of the Maine Board of Tax Appeals, covered in detail here.
- The potential reduction in individual income tax rates, covered in detail here.
- The creation of a “use tax amnesty program,” covered in detail here.
- Amendments to the Maine New Markets Capital Investment Program, including raising the cap on a particular project to $40,000,000 if certain job creation/retention targets are met, and allowing projects in a greater number of municipalities to qualify for state new markets financing. The six community development entities tasked with finding eligible projects and allocating tax credits are actively seeking projects. Please contact us for more information on whether your company would benefit from new markets financing.
Taxpayer Victory in Aircraft Use Tax Case. Aircraft owners continue to find success challenging Maine Revenue Service’s imposition of use tax on private aircraft that landed in Maine. In Mile High Air v. State Tax Assessor, the aircraft was outside of Maine entirely for 278 days. The Maine Business Court concluded that the use of the aircraft in Maine was “insufficient to justify use taxation.” Pierce Atwood represented Mile High Air in this case. Read more about the case here and about prior victories on this issue here.
NOL Carryforward Limit Increased. The Legislature increased the maximum NOL carryforward for purposes of the business profits tax. Under prior law, NOL carryforwards could not exceed $1,000,000. This legislation increases the maximum amount to $10,000,000 effective January 1, 2013. L. 2012, H242 (c. 71).
Refunds for Victims of Investment Fraud. The Legislature made it easier for taxpayers who were victims of fraudulent investment schemes, such as Ponzi schemes to petition for a refund of overpayment of taxes resulting from the fraudulent scheme. Where the taxpayer has filed an amended federal income tax return claiming a theft loss under § 165, I.R.C., the taxpayer can petition for a refund of New Hampshire taxes within 180 days of the federal amended return. L. 2012, S307 (c. 154).
Constitutional Amendment to Be Voted on in November. Concurrent Resolution, CACR 13, adopted by the Legislature, proposes a constitutional amendment prohibiting a tax on income earned by a natural person other than taxes in effect on January 1, 2012 or adjustment to the rate of such tax. The proposed amendment will submitted to voters in November. The amendment must be approved by a two thirds votes, and if approved, becomes effective when the governor proclaims its adoption.
Business Enterprise Tax Return Thresholds Increased. For taxable periods on or after December 31, 2013, every business enterprise with gross receipts in excess of $200,000 (previously, $150,000) during the taxable period or an enterprise value tax base that is greater than $100,000 (previously, $75,000), must file an enterprise tax return. Every business enterprise must also file a declaration of its estimated business enterprise tax for its subsequent taxable period unless the estimated tax is less than $260 (previously, $200). L. 2012, H1418 (c. 279).
Internet Access Not Subject to Communications Service Tax. The Legislature clarified that Internet access service is not subject to the communications services tax. The Department of Revenue Administration cannot enforce any existing assessment of communications services tax on charges for Internet access, must promptly withdraw all such pending assessments, and must issue no additional assessments with respect to such charges. L. 2012, H1418 (c. 279).
Pierce Atwood SALT Group News
- Pierce Atwood hosted U.S. Tax Court Special Trial Judge Lewis Carluzzo at its Portland Office earlier this month. Judge Carluzzo gave an illuminating overview on the role of the Tax Court and current trends. In particular, Judge Carluzzo focused on the relationship between the Court and the Courts of Appeals, and on areas in which the Court is seeing increased activity, such as whistleblower claims.
- Jon Block will be attending the 42nd Annual Wichita Program for Appraisal for Ad Valorem Taxation of Communications, Energy and Transportation Properties later this month.
- Jon Block will speak on Maine and New Hampshire Tax Developments at the NYU Institute on State and Local Tax in New York City in November.
- Jon Block and Kris Eimicke spoke to the Maine Society of CPAs in Bangor and Portland on State and Federal Tax Developments earlier this year.