Pennsylvania: Amnesty Program

Pennsylvania's amnesty program that will run from April 26, 2010 through June 18, 2010.

The amnesty program applies to liabilities for all taxes administered by PA. Department of Revenue that were delinquent as of June 30, 2009. To be eligible, to partcipate in the program taxpayers must file an amnesty application plus all applicable tax returns, and pay the tax and 50% of the interest due. The remaining 50% of interest and any penalties will be abated.

Additionally, if the taxpayer is fully compliant with the program, any “unknown liabilities” (i.e., unreported or underreported amounts that the department is unaware of) of tax, interest and penalty of the same type will be waived for amounts due prior to July 1, 2004.

Delinquent taxpayers that do not participate in the 2010 amnesty program will be subject to an additional 5% penalty on amounts that would have been eligible.

South Carolina Decouples from IRC Sec. 108(i).

Effective immediately, South Carolina's new law (S.B. 1174, signed by gov. 3/31/10), decouples from 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 Extended Federal NOL Carryback Period—State Tax Considerations

On November 6, 2009, President Obama signed H.R. 3548, The Worker, Homeownership, and Business Assistance Act of 2009. Under the legislation, certain businesses may elect to carry back federal net operating losses (NOLs) for up to five years for losses incurred in tax years beginning or ending in either 2008 or 2009 (at the election of the taxpayer), but not for both years. In this blog series, we address common questions regarding state tax consequences of carrying back a 2008 or 2009 loss.

Could state taxable income increase as a result of carrying back an NOL for federal purposes?

As odd as it sounds, a taxpayer might actually find that its state taxable income increases as a result of availing itself of the federal NOL carryback provisions. For example, if the taxpayer is permitted to take an IRC Section 199 deduction for “qualified production activities,” the taxpayer’s state taxable income could increase. The Section 199 deduction is limited to the lesser of (1) “qualified production activities income” and (2) a certain percentage of Line 30 (i.e., federal taxable income after application of NOLs and special deductions). Accordingly, if Line 30 income decreases (as a result of an NOL carryback), the Section 199 deduction may decrease.

The Section 199 deduction is generally allowed by a state simply by starting the computation of state taxable income with federal taxable income (either Line 28 or Line 30 of Form 1120) and not requiring the taxpayer to add back the deduction. When a Section 199 deduction decreases (due to application of the federal NOL carryback), federal taxable income increases. If a state does not require the Section 199 deduction to be added back, a taxpayer’s state taxable income (and ultimate state tax liability) could increase as a result of the decrease in the Section 199 deduction.

Hiring Incentives to Restore Employment (HIRE) Act

Last week, President Obama signed the $17 billion Hiring Incentives to Restore Employment (HIRE) Act. The act is part of the economic stimulus effort to encourage businesses to hire more employees. We wanted to make you aware of some of the incredible benefits for which your clients may be eligible.
The following are some key points you should be aware of:•

Social Security Taxes: Employers will not have to pay this tax — which amounts to 6.2% of wages up to $106,800 — for hiring someone after February 3, 2010 and before January 1, 2011. To qualify, the employer will have to certify that each employee they hired was employed for no more than 40 hours in the 60-day period ending on the date that employment begins. This must be verified with a signed affidavit (pending further detail from the IRS). However, there will still need to be withholding for the employee's share of the Social Security tax (which is also 6.2%). The law change will have no impact on an employee's benefits.

• Business Retention Credit: For employees that qualify for the HIRE Act, there is an additional $1,000 or 6.2 percent of wages income tax credit for new-hires that are retained for a minimum of 52 weeks. This credit applies if the wages paid in the last 26 weeks are at least 80% of what they were for the first 26 weeks.

• Extension of Business Expensing: The increased threshold Section 179 expensing has been extended for another year. IRS Section 179 allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes, as an expense (rather than requiring the property to be capitalized and depreciated). This property is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business.
The aforementioned provisions are effective immediately. The HIRE Act provides that businesses will prepare their first quarter 941's as if the law was not in effect. Employers will claim any qualifying payroll tax relief earned in the first quarter as a credit on their second quarter 941. The $1,000 retained worker credit is earned only after the qualified worker has been employed for at least 52 weeks. Considering this, calendar year employers will claim the credit on their 2011 returns.
We would be happy to help you explore your eligibility for these new credits. Contact us today to find out more.

Hiring Incentives to Restore Employment (HIRE) Act

Present Obama on March 18, 2010, signed into law the Hiring Incentives to Restore employment (HIRE) Act, a 17.6 billion jobs creation package that provides a payroll tax holiday for employers who hire displaced workers, boosts the current year general business credit for employers who retain those workers, extends the increaszed smaill-business expensing limits under section 179, and expands the build America Bonds program.

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.