New York's Penalty and Interest Discount Program (PAID)

New York's Penalty and Interest Discount ("PAID") program ends on March 15, 2010. The PAID program gives taxpayers with older unpaid bills the change to save up to 80% of the penalty and interest they owe.

To take advantage of the program's savings you must make all payments by the program's expiration date, March 15, 2010. If you do not pay in full by that date:

• your opportunity for these saving will be lost forever.
• any unpaid tax debts will continue to accrue interest at the full statutory rate.

Why PAID Is Good For Your Company.

You can save:

• 80% of accrued penalty and interest on unpaid bills issued on or before December 31, 2003.
• 50% of accrued penalty and interest on unpaid bills issued after December 31, 2003 and on or before December 31, 2006.
• Unpaid tax bills are bad for the company's credit rating and can lead to liens and other enforcement actions.
• The State is increasing its efforts to collect unpaid bills. If you act now and pay what you owe, you can take advantage of the savings and avoid collection action.

Reminder New York Filing Fee Now Applies to Partnerships

Under New York's new tax law, the New York filing fee applicable to limited liability partnerships (LLPs) and limited liability Companies (LLCs), is not appliable to partnerships.

The filing fee for regular partnerships only applies is the partnership's New York sourced gross income is $1 million or more. The filing fee applies to tax years beginning on or after January 1, 2009, and is due within 30 days of the last day of the partnership's tax year.

The amendment to tax law does not change the filing fee requirements or the fee calculations for LLCs and LLPs treated as partnerships, or the fee that applies to LLCs that are disregarded for federal tax purposes.

Eroding Conformity with Federal Tax Provisions

Two federal enactments in 2009 designed to provide economic stimulus raised conformity issues that increasingly pushed states further apart from the federal corporate income tax system. The American Recovery and Reinvestment Tax Act of 2009 ("ARRA") amended numerous provisions of the Internal Revenue Code ("IRC") including bonus depreciation, asset expending, cancellation of debt income, NOL carry backs, NOL limitations after a change in ownership, and S Corporations built-in gains.

The Workers, Homeownership, and Business Assistance Act of 2009 (WHBAA") provided taxpayers with an election to carry back NOLs for tax year beginning or ending in either 2008 and 2009 for three, four or five years.

Many states decoupled from these provisions, the resulting decoupling complicates matters for companies that operate in multiple states.

California: New Law Makes Techical Corrections to Perviously Enacted Single Sales Factor Law

A.B. 1546, signed by Governor on 10/11/2009. New law enacts technical correction language to the State's 2009-2010 budget legislation that was enacted in February 2009, clarifying that the State's single sales factor election is available for tax years beginning on or after January 1, 2011. In the original version of the law, an ambiguity in the language led some to potentially interpret the provision as offering the election beginning in 2009, with mandatory single sales factor apportionment in 2011.

Kentucky - Nonresident corporate limited partner has nexus.

Revenue Cabintet v. Asworth Corporation, HT-Form Inc. and D Aviation Services, Inc. Ky Ct. App (11/20/09) The Kentucky Court of Appeals affirmed a circuit court's previous ruling, agreeing that an out-of-state corporation had acquired nexus in Kentucky soley due to its investment in a pass-through entit as a 99% limited partner. The court agreed that the corporate limited partner had acquired nexus with the State through the partnership that did business within the State, as Kentucky recognizes the flow-through nautre of partnerships and accordingly, imposes state inocme tax upon partners rather than upon the partnership itself. The court also agreed that the corproation's derivation of income from a partnership doing business within and outside the State satisifed the Commerce Clause substantial nexus test, as well as Due Process Clause minimum contacts requirement.

North Carolina - New Law Imposes A 3% Corporate Income Tax Surtax

Effective for taxable years beginning on or after January 1, 2009, a new law imposes corporate income tax surtax equal to 3% of the corporate income tax payable by the corporate taxpayer for the taxable year. This surtax is in addition to the regular corporate income tax owed, and is due at the time prescribed for filing a corporate income tax return. The law also imposes a graduated surtax on individual income taxpayers, which is similarly effective for taxable years beginning on or after January 1, 2009, and set to expire for taxable years beginning on or after January 1, 2011. In addition, the law generally updates state corporate and individual income tax conformity with the Internal Revenue Code (IRC) as in effect on May 1, 2009 (previously, May 1, 2008), with some exceptions, effective for taxable years beginning on or after January 1, 2008. However, "any amendments to the IRC enacted after May 1, 2008, that increase North Carolina taxable income for the 2008 taxable year become effective for taxable years beginning on or after January 1, 2009." Effective for taxable years beginning on or after January 1, 2009, the law decouples from select federal income tax provisions, including the deferral of recognition of income from discharge of certain business indebtedness as enacted by the federal American Recovery and Reinvestment Act of 2009 under IRC Sec. 108(i). The law also partially decouples from certain IRC §168(k) and IRC §168(n) bonus depreciation provisions.