California’s New Escheat Reporting Requirement on Income Tax ReturnsAugust 26, 2022
By Jordan M. Goodman and Joe Carr, Tax Partner, BDO USA. Please feel free to reach out to the authors with questions. A new trend in state and local tax reporting in California combines certain income tax and unclaimed property reporting requirements on 2021 and future business income tax returns to enhance compliance. The increased compliance efforts of the California…
California Franchise Tax Board to Share Unclaimed Property Information with State ControllerJanuary 31, 2022
Effective January 1, 2022, the California Franchise Tax Board (“FTB”) has the authority under Assembly Bill 466 to share information with the State Controller’s Office (“SCO”) relating to a taxpayer’s compliance with the California’s unclaimed property laws. To gather this information, the FTB has added a few questions to California’s business entity tax returns for tax year 2021, including whether…
Cover Your SaaS – Issue V, Q3 2021October 4, 2021
As we move into harvest season, we here at Cover Your SaaS (CYS) have cultivated a fresh crop of updates for your enjoyment. Keen observers will note that there has been a somewhat larger gap than usual between newsletters and we admit, it has been a minute. Of course, absence makes the heart grow fonder so we are excited to…
Chicago Department of Finance Issues Nexus GuidanceJanuary 25, 2021
On January 21, 2021, the Chicago Department of Finance (“Department”) issued an anticipated Information Bulletin (“Nexus Bulletin”) providing guidance on nexus and establishing a prospective “safe harbor” for certain taxes, including electronically delivered amusements under the Chicago’s Amusement Tax (“Amusement Tax”) Ordinance and nonpossessory computer leases taxed under the Chicago Personal Property Lease Transaction Tax (“Transaction Tax”) Ordinance.
Chicago Lease Transaction Tax Rate Increase for "Cloud" Software ProductsDecember 16, 2020
On November 16, 2020, the City Council for the City of Chicago (“City Council”) amended the Chicago Personal Property Lease Transaction Tax Ordinance (“Ordinance”), eliminating the lower rate of tax on a nonpossessory lease of a computer, which includes “cloud” software products.
Cover Your SaaS - Issue IVDecember 8, 2020
With the holidays upon us, it seems like a good time to take a pleasant stroll through the cloud computing and digital product SALT developments you and your clients should be aware of. We returned to the “classic” format for this edition, organizing the stories by jurisdiction, headlining them in summary fashion, and then providing context and snappy analysis. If you have follow-up questions, please let us know.
Cover Your SAAS - Issue IIIAugust 18, 2020
Welcome to the third edition of Cover Your SaaS. Following a brief mid-summer hiatus from which the authors returned pale as ever, we dive once more into the cloud computing and digital product SALT developments you and your clients should be aware of. This is a bumper edition, so we have organized the updates by general topic rather than solely by jurisdiction.
Cover Your SaaS - Issue IIJune 22, 2020
Welcome to the second edition of Cover Your SaaS, your new favorite(ish) semi-regular publication from HMB Legal Counsel’s State & Local Tax team. Far from accepting a sophomore slump, this edition boldly delves into SALT developments in the digital products sphere, the importance of separately stating charges, and the dangers of straying into taxable telecommunications.
Cover Your SaaS: A Semi-Regular Publication on State and Local Tax Developments in the Cloud Computing and Digital Space - 4/10/20April 10, 2020
Welcome to the first edition of Cover Your SaaS, a new semi-regular publication from HMB Legal Counsel’s State & Local Tax team. Using the latest in news-scanning technology, i.e., the daily emails that land in our inbox, our goal is to keep you updated on key SALT developments in the digital and cloud computing space.
Illinois House Bill Requires Public Corporations with Principal Executive Offices in Illinois to Report to Secretary of StateJanuary 7, 2020
House Bill 3394, approved by the Governor on August 27, 2019 and effective immediately (Public Act 100-589), amends the Business Corporation Act of 1983 (“BCA”) to add new Section 8.12 and amend Section 14.05.
Applying the Chicago Lease Transaction Tax to “Cloud” Software ProductsSeptember 11, 2019
In a prior post, I explained the basics of the Chicago Personal Property Lease Transaction Tax (“Transaction Tax”), including the applicability of the tax to tangible personal property and software, potentially applicable exemptions and exclusions from the tax, and collection issues. This follow-up post in the Practitioner Series further clarifies the application of the Transaction Tax to “cloud” software products and explores the interplay with the Illinois Retailers’ Occupation Tax (“ROT”).
State Tax Developments for Pass-Through Entities, Apportionment of Income for Corporate PartnersJune 18, 2019
State taxation of corporate partners in multistate partnerships raises interesting issues. In many circumstances, the corporate partner is subject to multistate taxation and is therefore engaged in the process of allocating and apportioning its income on a multistate basis.
Cook County Taxes: Parking Lot and Garage Operations TaxDecember 11, 2018
The "Parking Lot Tax" has recently been targeted by the Cook County Department of Revenue. In the past 3-5 years, we have seen a significant uptick in the Department's audit activity, and challenges to Taxpayer positions. Their efforts have primarily focused on the enforcement of its Amusement, Tobacco, and Gasoline and Diesel Taxes. However, more recently, the Department has turned its attention to its Parking Lot Tax.
The Illinois Franchise TaxOctober 9, 2018
The Illinois Franchise Tax is a weird tax. It is imposed on the privilege of exercising a franchise in Illinois or, in the case of foreign corporations, for the authority to transact business in the state. It is administered by the Illinois Secretary of State, not the Department of Revenue, and is measured by paid-in capital. Knowing the ins and outs of the Franchise Tax is a must for any corporation doing business in the state.
Illinois Motor Fuel TaxesSeptember 25, 2018
Like many states, Illinois and a number of Illinois localities impose motor fuel taxes. Although these taxes are each generally similar, they function slightly differently and are administered by different agencies. It is important not only for retailers of motor fuel, but any business that uses motor fuel in the operation of its business to understand the different layers of motor fuel taxes in Illinois.
The Illinois Constitution and TaxesAugust 28, 2018
The Illinois Constitution was adopted on December 15, 1970. The constitution sets forth the taxing powers of home rule units and describes the exclusive power of the General Assembly to raise revenue. Because the constitution creates the framework for how Illinois' taxing system functions, this post will discuss the constitution's general structure and the impact it has on Illinois taxes.
Application and Abatement of Penalties in IllinoisAugust 14, 2018
At the close of an audit, in addition to tax and interest, a taxpayer may also be assessed various types of penalties that can be substantial and even surpass the underlying tax liability. However, there are several courses of action for seeking penalty abatement, which can often prove to be a worthy exercise for taxpayers.
Illinois Corporate Income Tax: Alternative ApportionmentJuly 31, 2018
Like most states, Illinois statutes and regulations permit taxpayers and the Director of the Department of Revenue to obtain alternative apportionment of Illinois base income. Although case law is relatively scant, alternative apportionment remains an important means of reaching a fair income tax liability in the State. And with the State's amorphous treatment of market based sourcing, alternative apportionment is likely to become an increasingly important tool, particularly in resolving controversies.
Illinois Corporate Income Tax- Financial OrganizationsJuly 17, 2018
Financial organizations in Illinois are required to follow different apportionment rules than general service providers. Prior to December 31, 2017, such businesses were also required to file separate unitary business returns from taxpayers that filed their income tax returns under the standard apportionment rules. Beginning with the tax year ending December 31, 2017, however, financial organizations must be included in the combined return with the entire unitary business group. It is therefore crucial for taxpayers to understand the nuances as to how to calculate the apportionment factor for financial organizations in Illinois.
Wayfair and its Impact on Illinois' Economic Nexus LegislationJune 26, 2018
The Commerce Clause and interstate commerce were thrust into the spotlight last week, as the United States Supreme Court reversed the longstanding physical presence standard for sales tax nexus.
Local Sourcing Rules for the Illinois Retailers' Occupation TaxJune 12, 2018
As we have discussed previously, Illinois localities have adopted a variety of unique taxes, such as the Chicago Personal Property Lease Transaction Tax, the Amusement Tax, and dozens more. Illinois localities may also impose a local option tax which is imposed in addition to the state Retailers' Occupation Tax ("ROT"). Illinois localities use a unique sourcing methodology. Whereas sales of tangible personal property to Illinois are subject to a destination-based sourcing method under the Illinois Use Tax Act, the local ROT is an origin-based tax. Exactly where a sale originates, however, has been a source of much debate.
Illinois Corporate Income Tax: Throw-Back and ThrowoutMay 29, 2018
In calculating the Illinois sales factor, Illinois employs both a "throw-back" and "throwout" rule. While many states employ some form of throw-back rule, Illinois' adoption of both a throw-back and throwout rule is unique.
Illinois' Unique Treatment of Leases and Traps for the Unwary LessorMay 22, 2018
Illinois? treatment of leases is an anomaly when compared to almost all other jurisdictions. While most jurisdictions impose sales tax on the lease receipts collected from the lessee, the user of the equipment, Illinois differs by treating the lessor as the user of the equipment. As such, the lessor is subject to Illinois use tax.
Illinois Corporate Income Tax Basics - ApportionmentMay 7, 2018
In a previous post, we addressed the basics for calculating Illinois base income. In this post, we will focus on Illinois' general apportionment rules, and in later posts, we will discuss Illinois' combined reporting rules and the specific treatment of insurance companies and financial organizations in more depth.
Illinois Corporate Income Tax Basics- Base IncomeApril 24, 2018
Now that we have provided a primer on procedural issues at Illinois, Chicago, and Cook County, it's time to jump into the fun stuff! Illinois has a relatively high corporate income tax rate compared to most states. While calculating Illinois base income is generally straightforward, certain aspects are rather complex, particularly with respect to foreign income and dividend income from certain types of investment companies.
Navigating a Cook County Department of Revenue Audit and the Procedure for a Formal ProtestApril 17, 2018
A recent national trend in the practice field of state and local tax has been the uptick in local jurisdictions' audit activity. The Cook County Department of Revenue has taken aggressive positions in the interpretation of its tax ordinances which has led to increased litigation in the administrative proceedings before the Cook County Department of Administrative Hearings. This post provides an overview of the Department's audit and ensuing D.O.A.H. processes and will highlight some of the procedural differences compared to other jurisdictions such as Chicago and Illinois.
An Introduction to Illinois Audits and AppealsApril 3, 2018
There's no way around it: Illinois is a complicated state in which to do business. This post is the first in a series that will address how to navigate even the most byzantine aspects of Illinois's tax structure. More specifically, this post will address the unique rules regarding tax audits and appeals throughout each stage in the state.
What Illinois Auto Dealers, Financial Institutions and other Lessors Need to Know About Taxing Post Lease ChargesMarch 12, 2018
Three years ago, Illinoisans cheered the changes to the motor vehicle leasing law that were to lead to tax savings for lessees and level the playing field with other state's leasing laws. Now, as the first wave of three-year leases comes to an end, lessors can no longer afford to overlook these changes regarding the post-lease charges.
The Cubs Won the World Series and Illinois Finally Has a Budget!July 7, 2017
Today marks the first time in over two years that Illinois will be operating under a budget. This is a result after the House voted to override Governor Rauner?s veto of Senate Bill 9. The House garnered the necessary votes to end the two year stalemate full of political puffery and sparring. Some of the relevant changes that Illinois? taxpayers should be aware of are noted below. All changes are effective July 1, 2017, unless otherwise noted.