Virginia General Assembly Passes Transportation Bill / Awaits Gov. Signature

HB 2313, which passed the House 60 to 40 on February 22 and the Senate 25 to 15 the following day, would raise $880 million for transportation annually while eliminating motor fuel taxes and replacing them with wholesale taxes, effective July 1. It would also increase the sales tax rate on non-food items from 5 percent to 5.3 percent.

According to Gov. Bob McDonnell, the current 17.5-cent-per-gallon fuel tax is worth 45 cents on the dollar of its value in 1986. Under the bill, it would be replaced with wholesale taxes of 3.5 percent and 6 percent on gasoline and diesel fuel, respectively. Sales tax on non-food items would rise from 5 percent to 5.3 percent to allocate more general fund revenue to transportation.

The sales tax in the northern Virginia and Hampton Roads regions would rise to 6 percent, with additional funds used for transportation projects in those regions.

A registration fee of $100 for electric, alternative fuel, and hybrid vehicles would also go into effect, along with an increased levy on car sales from 3 percent to 4.3 percent.

The Governor is expected to sign the bill.

FREE Insight on D.C. Combined Reporting for Real Estate Investors and Developers

Real estate investors or groups that own, develop or manage real estate in Washington D.C. are facing a new franchise tax reporting methodology that may change the amount of franchise tax paid to D.C. for tax years beginning after December 31, 2010. This new methodology is called Combined Reporting (DCCR).

If you are a real estate investor or developer with real estate projects in D.C., please contact me to receive a free two-page explanation to learn about the potential impact on your business, the key tests to determine if combined reporting applies to you, and the action steps you can take to mitigate the impact.  

What's Your Story?

As a follow-up to yesterday's post (Life is short. Underdogs should win.), please take some time and post a comment to this post with YOUR STORY.

Life is short. Underdogs should win.

It starts in elementary school and doesn't seem to stop.  The "cool kids" or the "athletes," or "you fill in the blank" seem to get all of the breaks.  They are popular, drive the nice car, date the pretty girl, go to the best college, own the company, get the best advice and have the most money. 

If that is you, then great.  If that isn't you, then welcome to the club.

I have always viewed myself as an Underdog.  You could say that my marriage and my career choices and experiences have not been the "traditional" route. 

My college experience wasn't the normal experience.  I got married when I was 19 to my high school sweetheart.  We put each other through college.  I worked nights at UPS and my wife worked full-time while I finished college.  When I got done, she went back and got her degree.  I always joke that we spent the first five years of our marriage going into debt.  We spent the next five years paying off the debt.  Right after my wife graduated from college, we soon became pregnant with our first daughter.  Never got the chance to have two incomes to help pay off our debt, but we did it anyway. 

My career path has not been easy or direct.  I started my career working in state income tax at a Fortune 500 company.  After a few years, I went into public accounting to be a state tax consultant at a Big 4 firm.  I then worked at a few large regional and national firms.  I also made a short venture back into industry before ending up at my current employer.  I sometimes look back and think that it would have been a lot easier to have just stayed at my first employer.  It was a good job at a large company.  However, something always pushed me to want more.  To learn more.  To become more.  The main pros or positives of making the job changes throughout my career is:  I have learned and developed so many more skills than I ever would have if I had stayed at my first employer. I have also met and developed so many more relationships and contacts.  My unconventional path (or too numerous job changes), despite not being the easiest path, makes me who I am today.  And for that, I am truly thankful.

I also did not obtain my masters degree in taxation in the most conventional way.  Because no college in my area offered a masters degree in taxation, I obtained my masters degree via distance learning.  I worked full-time and studied at night. 

I also chose not to obtain the coveted CPA designation and chose the EA (Enrolled Agent) designation instead.  During my college years (which I obtained a bachelors' degree in accounting), I actually did not like accounting or auditing.  I liked tax.   Hence, I decided to take the EA exam because the test is 100% tax law, no accounting or auditing.  (I have been blessed to spend my entire career in tax.)

Despite my indirect career path and job changes, and the fact that my wife and I have moved 9 times during our 20 year marriage, the one constant in my life has been my wife and my faith in Christ.  We have two great daughters and my wife has become a self-taught artist, painter, leather-cuff making, interior designer, furniture restorer, small business woman.  It is truly amazing what she can do.

What's the point of me sharing my story with you? Well, I wanted you to get to know me better. I also wanted you to know my perspective. My perspective is that I feel as though I have always played the underdog in my life, but I always kept finding a way to achieve or succeed.

I want the Underdogs to win. I usually side with the individual, the group, the team, or the company that appears to be out manned. I want to help those who need a protector, defender, or a fixer to fight for them.
I am thankful for the past and hopeful for the future.  I hope you are too.

I am reminded of the quote:  "Don't look back and ask why.  Look forward and ask why not."

Remember, "life is short, eternity is forever."  Focus on what really matters today.

Delaware's NEW Voluntary Disclosure Program for Unclaimed Property: Should You Utilize It?

According to Delaware, the Secretary of State has been authorized by the recent passage of Senate Bill 258 to resolve claims for abandoned property, provided that holders of such property voluntarily disclose information related to the property within the required timeframes.

The new three-year voluntary disclosure agreement (“VDA”) program for holders of unclaimed property is independent of the current VDA program supervised by the State Escheator in the Department of Finance.

A holder participating in the new VDA program with the Secretary of State will be able to fully resolve all claims for any past due unclaimed property by voluntarily disclosing and remitting property related to transaction years 1996 or 1993 to the present, depending on when the holder enters the program and completes its submission.

The Secretary of State will not conduct audits or investigations of holders, outside of resolving claims brought pursuant to the new VDA program. In addition, eligible holders, who have submitted written notice of their intent to participate in the new VDA program by June 30, 2014, will have no exposure to audit by the State Escheator until after July 1, 2015.

For detailed information on the program, please visit DelawareVDA.com.

The Maryland Wynne Case is Decided, Will The State Appeal Further?

On January 28th, the Maryland Court of Appeals found in favor of the taxpayer stating the State has to allow a credit for taxes paid to other jurisdictions against both the state tax and the local (county) tax. The Court of Appeals is the highest court in Maryland and it is unclear at this time whether the State plans to appeal the decision to the U.S. Supreme Court. In the meantime, the decision is a clear victory for the taxpayer.

However, for those taxpayers that have filed Maryland protective claims, the Comptroller’s office has said they are compiling statistics to aid the Comptroller in his decision whether to appeal. Current year returns should continue to be filed under existing law (meaning take the non-resident state credit ONLY against the state tax). If the credit is also taken against the local tax portion, an assessment notice will be issued to the taxpayer as the State’s processing systems have not been adapted to allow the credit against the local tax.

Similar to earlier years, taxpayers having 2009 returns with a closing statute should file a protective claim prior to April 15th claiming the potential refund.

How Property Management Companies and Building Owners Can Pay Less Sales Tax in New York

A recent New York State Advisory Opinion (TSB-A-13(2)S) determined, in application to the taxpayer's facts, that property management companies providing different building maintenance services were not required to collect New York sales tax on the wages of certain maintenance workers because those workers were employees of the building owners.

In New York state's Advisory Opinion (TSB-A-93(52)S), the Department provided guidance to the Building Owners and Managers Association of Greater New York and the Real Estate Board of New York about general factors used to determine whether maintenance workers are the employees of the building owner for purposes of the wage exclusion.  The factors included: 

1. Even though the workers were typically hired by the agent, the owner (as principal) approved the prescribed work rules and practices for the workers, and the owner determined the number of employees, their work hours and shifts, etc.
2. The contracts between the owner and agent expressly provided that the employees were solely employed by the owners and not the agent.
3. The agent issued W-2 forms to the employees as agent of the owner.
4. The agent used a special payroll account into which payments from the owner for payroll expenses were placed and that account was held in trust for the owner.
5. The owner was liable for payment of unemployment insurance, social security, workmen's compensation and disability benefits.
6. The owner was liable for the actions of the employees for tort liability purposes.

In the recent Advisory Opinion (TSB-A-13(2)S), the Petitioner entered into specific agreements with the building owner.  Each of the agreements expressly provided that the Petitioner acted as the agent of the owner and that the workers were the employees of the owner.

So What?

If you are a New York real estate property management company, it is very important that you review your relationships with the building owners to determine if you have the proper agreements in place to ensure that you will be able to exclude the salaries of the maintenance workers from sales tax and support that position under audit. 

The recent ruling is only applicable to the taxpayer that requests the ruling, but it does provide guidance in how the New York State Department of Taxation and Finance may apply the law to your facts.

If you would like assistance in taking advantage of this sales tax saving opportunity, please contact me.