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The Senate on December 14 approved legislation offering tax relief to homeowners caught in the sub-prime mortgage crisis. The bill was approved as an amendment to the Mortgage Forgiveness Debt Relief Bill of 2007 (HR 3648) and creates a three-year exception for debt forgiveness on home loans. When debt is forgiven on a home loan, the homeowner usually must count the amount forgiven as income and pay taxes on it. The measure also extends a provision allowing homeowners to deduct mortgage insurance payments from their taxable income.
"Homeowners who are already in trouble on the mortgage certainly can't afford a big hit from the tax man too," said Senate Finance Committee Chairman Max Baucus, D-Mont., in a prepared statement. "This mortgage tax bill will help to ease the burdens of homeowners who are hurting today," he added.
In addition to tax relief for debt forgiveness and mortgage insurance payments, the bill includes: tax relief for volunteer firefighters and emergency medical technicians; protection of tax relief for homeowners after the death of a spouse; and flexibility to help co-op tenant/owners deduct real estate taxes and mortgage insurance. The bill is fully offset by increased penalties for failure to file S corporation or partnership returns and new requirements corporate estimated tax payments. It is now necessary for the House to pass the updated legislation and send it to the president for signature.
Farm Bill Passes
Also on December 14, the Senate approved a comprehensive farm bill (the Farm, Nutrition, and Bioenergy Bill of 2007, HR 2419) that includes a tax title providing for codification of the economic substance doctrine as a means to offset most of the $17 billion-plus price tag. The final vote was 79-14. Codification of the economic substance doctrine raises about $10 billion over ten years as a revenue offset and would apply to transactions entered into after the date of enactment. The measure would convert a number of conservation payment programs into fully offset tax credit programs and offer additional incentives for rural economic development and energy-related tax relief to aid agricultural producers. In addition, it would create a disaster assistance trust fund and convert payment programs to tax credits in order to free up previously obligated spending funds for the Senate Agriculture Committee. The measure needs full approval by the House before President Bush can sign it into law.
By Jeff Carlson, CCH News Staff
SFC Release: Senate Passes Mortgage Tax Relief For Families In Crisis
Baucus Amendment to Mortgage Forgiveness Debt Relief Act of 2007, HR 3648
JCT Very Preliminary Estimated Revenue Effects of a Possible Amendment to HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007
SFC Release: Baucus Wins on Agriculture Tax Package as Senate Approves Comprehensive Farm Bill
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An out-of-state financial services processing company had nexus with Florida for corporate income tax purposes even though its only contact with the state was through unrelated authorized vendors. The taxpayer did not maintain real or tangible personal property or employ personnel or agents in Florida. However, the taxpayer was licensed, as required, with the Office of Financial Regulation of the Florida Department of Financial Services as a payment instrument seller and, under this license, the taxpayer had registered locations (authorized vendors) in the state. For nexus purposes, "doing business "in Florida means actively engaging in any transaction for the purpose of financial gain. Following decisions from other state supreme courts, and in light of the fact that the U.S. Supreme Court has declined to review the issue, the Florida Department of Revenue's position is that physical presence is not required to impose the state's corporate income tax. The taxpayer's unrelated authorized vendors were licensed agents of the taxpayer who operated on the taxpayer's behalf within Florida. The activities of these vendors were sufficient to create corporate income tax nexus, because without them, the taxpayer could not operate its business in Florida.
Technical Assistance Advisement, No. 07C1-007, Florida Department of Revenue, October 17, 2007, ¶205-125
Other References:
Explanations at ¶10-075
The North Carolina Supreme Court has ruled that its initial discretionary grant of review of an appellate court's decision upholding class certification in an action challenging North Carolina's personal income and corporate income taxation of interest earned on out-of-state bonds was improvidently allowed (see TAXDAY, 2007/05/14, S.19). The case will now be returned to the Superior Court for further proceedings.
Dunn v. State of North Carolina, North Carolina Supreme Court, No. 605PA06, December 7, 2007.
The Streamlined Sales Tax (SST) Governing Board has approved a compromise allowing Texas and other sales tax-dependent states to continue taxing intrastate sales at the rate in effect at the seller's location (origin sourcing), but to tax interstate sales at the rate in effect where the merchandise is delivered (destination sourcing). (TAXDAY, 2007/12/14, S.1)
The original SST plan required destination sourcing for both interstate and intrastate sales. The destination sourcing requirement for intrastate sales had been a major barrier preventing Texas from supporting the plan. As a result of the compromise, Texas is a major step closer to joining the SST Agreement.
Intrastate Sales
Under the compromise, on interstate sales, Texas could continue to collect the state sales tax and use origin sourcing to determine the correct local tax on sales of goods. Local sales tax would be collected for the place where the order is taken. On interstate sales, the seller would collect state and local tax based on the place of delivery.
The Comptroller's release on the SST compromise may be viewed at http://www.window.state.tx.us/news2007/071213-streamline.html
News Release, Texas Comptroller of Public Accounts, December 13, 2007.
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