Tax News Brief: 2024 Fourth Quarter
Related
Never miss a thing.
Sign up to receive our Tax News Brief newsletter.
Welcome to Weaver’s Specialty Tax Services quarterly news brief. This news brief covers the top issues across our Specialty Tax Services, including State and Local Taxes (SALT), Fixed Assets, Transaction Tax Advisory, Tax Provisions, Tax Credits, International Taxes and Motor Fuel Taxes.
©2024
State and Local Taxes
Property Tax | Income Tax | Sales and Use Tax
Property Tax
- Florida homeowners impacted by the recent hurricanes can claim a property tax refund if the property is determined to be “uninhabitable” for at least 30 days due to a catastrophic event.
- Illinois implemented a 20-year time limit on property tax refund claims if the claim resulted from a final order.
Income Tax
- Illinois issued guidance for corporations (other than S corporations) affected by statutory changes to the net loss deduction limitation for tax years 2025–2027.
- Massachusetts will establish a 60-day tax amnesty program during fiscal year 2025 for tax returns due on or before December 31, 2024.
- Acting Texas Lieutenant Governor Dan Patrick declared a state of disaster in certain Texas counties due to the impact of Hurricane Beryl, giving eligible taxpayers an extension of time to file and pay taxes due.
- Tax changes in Washington, D.C., including the transition from the “Joyce” method to the “Finnigan” method of apportionment for tax years beginning after December 31, 2025, took effect October 1, 2024.
Sales and Use Tax
- Illinois will require Illinois Direct Pay Permit holders to review purchase activity annually to verify the purchases made in the preceding 12-month period.
- Maine will impose a sales tax on each payment paid by the lessee for leased or rented tangible personal property, beginning January 1, 2025.
- Michigan clarified that if a non-fungible token (NFT) represents an ownership interest in tangible personal property, the sale of the NFT constitutes a taxable sale of tangible personal property.
- New Jersey will exempt the sale of investment metal bullion and investment coins from its sales and use tax.
- Vermont is subjecting all sales of prewritten computer software to sales and use tax, including software purchased on storage media, downloaded to a computer system or accessed remotely via the internet, effective July 1, 2024.
- The Tennessee Department of Revenue ruled that a contractor’s purchase of piping for a municipal fresh water plant was exempt from sales and use tax because the piping, when installed, qualifies as industrial machinery.
- The Texas Comptroller ruled that materials incorporated into the new construction of railroad tracks or roadbeds are essential to the operation of locomotives and trains and are exempt from sales and use tax.
- Washington extended until December 31, 2033 the reduced business and occupation tax rate and the sales and use tax exemption on purchases of gases and chemicals used in producing semiconductor materials.
Fixed Assets
Businesses Can Use IRC Sections 162 or 165 for Deducting Severe Weather Losses
Many businesses have suffered significant losses from the recent hurricanes and extreme weather events. As part of their financial recovery, these businesses face the question of how to account for the losses. The Internal Revenue Code allows businesses to treat repairs to weather-related damages as ordinary and necessary business expenses under IRC Section 162 or as casualty losses under IRC Section 165. Key factors in deciding which section to use are the timing of the deduction and the documentation requirements.
Read Weaver’s full article here.
Transaction Tax Advisory
IRS Announces Second ERC Voluntary Disclosure Program
The Internal Revenue Service (IRS) announced a second Voluntary Disclosure Program for employers to resolve erroneous Employee Retention Credit (ERC) claims. The program allows businesses to correct improper payments at a 15 percent discount and avoid potential audits, full repayment, penalties and interest. This second voluntary disclosure program is for tax periods in 2021 and is open through November 22, 2024.
Tax Provisions
Interim Tax Reporting Should Include RTP Calculations
Public companies that file their Federal and/or state income tax returns prior to September 30 should include the results of their return-to-provision (RTP) calculations in their Q3 interim income tax provision. The results of the RTP calculation can impact the effective tax rate, overall income tax expense and balance sheet accounts. In addition, significant RTP adjustments may highlight areas of risk and initiate a change in process, depending upon the circumstances. Q3 interim provisions also provide an opportunity to fine-tune the previous quarter’s estimates, as the majority of the year has passed. Filing state returns before September 30 also provides an opportunity to update any significant impacts of changes to apportionment or other state estimates used in the tax provision calculations in the previous quarter.
Tax Credits
Apache’s Research Tax Credit Challenge Could Set Precedent for Oil and Gas Industry
Apache Corporation (Apache), a Houston-based oil and natural gas company, is challenging the Internal Revenue Service’s (IRS) disallowance of $8.1 million in Research Tax Credits under IRC Section 41 related to developing new and improved oil and gas extraction methods. The complaint, filed in the Southern District of Texas, argues that the company's research activities included drilling pilot model and prototype wells; conducting field trials; evaluating data; designing wells; developing location-specific drilling, completion and fracturing methods; and developing a method to recycle water produced during hydraulic fracturing.
Apache claims that these research activities were necessary for its engineers and geophysicists to resolve technical uncertainties related to the development of new oil and gas production methods. Conventional production methods, the company claims, were not technically feasible due to the resource’s complex characteristics. Apache is seeking a jury trial, refund and litigation expenses. The case is likely to set a precedent for how the Research Tax Credit is applied to oil and gas operations and could impact tax strategies for companies claiming the credit in the energy sector. A more detailed tax alert is forthcoming.
International Taxes
IRS Finalizes Regulations on “Killer B” Transactions
The IRS finalized its regulations under IRC Section 367 related to inbound cross-border transactions, known as “Killer B” transactions. In these transactions, U.S. corporations repatriate foreign subsidiary earnings tax free by having a foreign subsidiary purchase the stock of its parent company and then use the parent-company stock to acquire the stock of a separate foreign subsidiary of the parent company. The IRS issued anti-abuse regulations in 2011, but they left areas for abusive transactions. The IRS issued proposed regulations in 2023 before finalizing them in July 2024.
Motor Fuel Taxes
States and Federal Governments Provide Fuel Tax Relief after Hurricane Helene
The federal government and some state governments issued fuel tax relief in areas worst affected by Hurricane Helene. The IRS has issued dyed diesel penalty relief from September 26, 2024, through October 15, 2024 in Alabama, Georgia, North Carolina, South Carolina and certain counties in Florida, Tennessee and Virginia. Alabama has temporarily suspended the licensing requirements for exporters, importers or transporters supporting disaster relief efforts by engaging in the export of motor fuel to areas in other states impacted by Hurricane Helene. Alabama has also temporarily suspended the requirements under the International Fuel Tax Agreement (IFTA) for any motor vehicle engaged in interstate disaster relief efforts resulting from Hurricane Helene that is traveling through Alabama as part of the disaster relief. The temporary suspensions are effective until October 27, 2024.
Read Weaver’s full article here