Cal-Tax has been asked to participate as amicus before the California Supreme Court in support of respondent Dicon Fiberoptics, Inc. on the merits of Dicon Fiberoptics, Inc. v. Franchise Tax Board. In that case the lower court sustained the FTB’s demurrer in a tax refund lawsuit arising out of a claim for enterprise zone hiring credits. The FTB claimed that because the taxpayer could not produce underlying documentation in support of its vouchers entitling it to hiring credits, the taxpayer could not state a cause of action.

Dicon Fiberoptics appealed to the Second District, claiming that the FTB did not have the right to audit the voucher once issued. The court held that FTB was entitled to audit the voucher, but that the voucher was prima facie evidence that an employee is a qualified worker for the purpose of the hiring credit and the voucher shifts the burden to the FTB to prove that the worker is not qualified. The California Supreme Court has granted review.

This is an important case because the only other case on the issue is Appeal of Deluxe Corporation, a BOE decision that held the FTB has the authority to audit vouchers, and statutes granting FTB authority to examine and audit tax returns bear no exception for decisions by other governmental bodies, such as zone coordinators that issue vouchers. It is important that a Supreme Court decision on this issue be favorable to taxpayers and that it decline to rule that FTB has unlimited authority to require voucher documentation from the taxpayer.

Happy Labor Day from C&I Tax Consultants!

From the Sacramento Bee:

IOUs take last ride
The state controller’s office announced this afternoon it sent out its last IOU — at least for now.

Hallye Jordan, spokeswoman for Controller John Chiang, said the lucky (?) recipient of the formally titled “registered warrant” was Yellow Cab of Sacramento. Jordan said the warrant was issued for an account with the cab company by an unidentified state agency.

The good news is that the IOU can be redeemed starting Friday.

California was forced to start paying vendors, counties and others with rubber checks in July, because of a severe cash flow shortage. The issuance marked only the second time since the Great Depression that warrants were used. (The other time was 1991.)

The IOUs totaled 449,241, worth $2,601,894,756.26.

Not including tip.

The California State Board of Equalization (BOE) today began sending letters to 5,188 retailers in 6 different zip codes notifying them of upcoming visits by BOE specialists. The affected zip codes receiving letters this month are: San Jose (95128, 95129, 95130, and 95131); Garden Grove (92840); and Temecula (92592).

The BOE specialists will be canvassing the areas to ensure that businesses are properly registered and paying taxes. The new enhanced compliance effort began in September 2008, with 130 zip codes already notified. Specialists have visited more than 74,000 businesses statewide.

These visits are part of the Statewide Compliance and Outreach Program (SCOP). The goal of these visits by the BOE specialists is to ensure all businesses are properly registered so there is no unfair business advantage over those businesses that are properly registered and reporting their taxes and/or fees. A recent two-year pilot estimated that more than three percent of businesses operating in California do so without the appropriate permits or licenses that allow for collection of sales and use tax, as well as other taxes and fees. Non-compliance is a part of the more than $2 billion sales and use tax gap. The tax gap is the difference between the amount of taxes owed and the amount paid.

The BOE specialists will conduct checks for seller’s permits of all storefronts and other known business locations.  When the specialists visit, business owners will be asked business-related questions and not be asked for personal financial information. If an owner has questions about the inquiries from the specialists, they should call their regional SCOP team contact or the Taxpayer Information Call Center at 800-400-7115.

There are seven teams of approximately eight people each located throughout the state that began their door-to-door visits based on zip code. Registered retailers will be checked for appropriate permits and licenses, as well as service industry businesses, especially if the particular service industry also sells taxable retail items. Those businesses found to be out of compliance will be given instructions on how to register with the BOE and given information about other necessary licenses. For more information on the Statewide Compliance and Outreach Program, click here.

Northern California has been experiencing a tremendous pressure to retain jobs in the region due to the tech sector’s drop during the recession. And the tough times may not be over for workers in the area. Bayer HealthCare, one of the largest employers in Oakland and Berkley could leave the region altogether. With this in mind, Berkley and Oakland have partnered to offer a number of tax incentives.

One of the most prominent of these tax breaks could come from the Enterprise Zone program. Current estimates peg the tax break at $13 million dollars in savings over the next 10 years. “There’s a competitive process,” said Bayer spokeswoman Cathy Keck Anderson. “The enterprise zone for the region only strengthens the Berkeley site.”

FREMONT, CA (KGO) — Toyota announced the news thousands of Bay Area auto workers feared — it is ending production at the Fremont NUMMI plant. This, as plant managers get set to meet with leaders of the workers’ union later on Thursday afternoon.

The Toyota board voted very early this morning to end production at the NUMMI plant in March of 2010 and that will affect about 4,600 employees. Many of them rallied last week and hoped to changed the decision about keeping the facility operating.

NUMMI is the largest auto manufacturing plant west of the Mississippi and it could impact as many as 35,000 people tied to the production in the supply chain. The joint venture between Toyota and General Motors has been very successful since 1984, but the operation was thrown into turmoil in June when GM announced it was withdrawing the 50/50 joint venture and its partnership as part of its bankruptcy proceedings.

Essentially, the workers and this surrounding community now have six months notice, and many people say it is not over despite Toyota’s announcement.

Following the announcement, Lt. Governor John Garamendi said that a resolution must be reached to save the last auto plant in California. He is talking about perhaps stimulus money or an enterprise zone. There was also some legislation mentioned in Sacramento prior to Toyota’s announcement, and Lt. Governor Garamendi said those efforts will continue despite the announcement.

Sacramento – The Franchise Tax Board (FTB) today released the 2009 state tax brackets. Brackets are “indexed” each year by adjusting them to reflect changes in the California Consumer Price Index (CPI).

Filing requirement thresholds, the standard deduction, and certain credits were adjusted along with income tax brackets based on the deflation rate of -1.5 percent, as measured by the California CPI for all urban consumers from June 2008 to June 2009. Last year’s inflation rate measured 5 percent. This has only occurred one other time since indexing became law in 1978.

The standard deduction will decrease for single or “married filing separate” taxpayers from last year’s rate of $3,692 to $3,637. For joint, surviving spouse, or head of household taxpayers, the standard deduction decreases from $7,384 to $7,274. The personal exemption credit amount for single, separate, and head of household filers will decrease from $99 to $98 and for joint filers or surviving spouses it will decrease from $198 to $196. The Renter’s Credit is available for single filers with adjusted gross incomes of $34,412 or less and joint filers with adjusted gross incomes of $68,824 or less.

A new tax law sets the dependent exemption credit for tax years 2009 and 2010 to the indexed personal exemption credit, lowering the credit to $98. Last year’s credit was $309.

In addition, FTB provides minimum filing requirement thresholds to ensure that most people who will not owe taxes are not required to file a tax return. FTB adjusts these tables each year to include the added senior exemption and the dependent exemption credits. For example, most single people under 65 years old with no dependents would not need to file a state return until they have adjusted gross income of $11,698 or more.

Other tax credits affected by indexing include the Joint Custody Head of Household Credit, Dependent Parent Credit, and Qualified Senior Head of Household Credit.

More information about this and other tax matters is available at ftb.ca.gov.

At long last, Merced received its final designation and remove the “conditional” tag. Presumably all the maps and TEA should be finalized as well. Merced businesses can run with the ball and fully utilize the great Enterprise Zone benefits.

The Franchise Tax Board (FTB) outlined several arguments that are widely established as frivolous and advised that using those arguments to avoid paying taxes could result in a penalty.

The baseless arguments include contending that paying taxes or filing a return is “voluntary,” that tax returns can ignore all taxable income, or that filing a tax return violates constitutional protections against self-incrimination. FTB has adopted the IRS’ list of frivolous tax arguments, explained in IRS Notice 2008-14 and IRS Publication The Truth About Frivolous Tax Arguments.

Unpaid taxes and false tax returns both contribute to the annual $6.5 billion tax gap facing California. The State of California also spends considerable resources responding to frivolous tax arguments, putting a strain on other public services.

FTB does not expect to issue many penalties. However, it can assess a $5,000 frivolous submission penalty on a specific submission that includes material that:
· Is based on a position FTB identifies as frivolous.
· Reflects a desire to delay or impede the administration of federal income tax laws determined by the IRS or California income or franchise tax laws determined by FTB.

A “specified submission” can be one or more of the following documents:
· A protest filed with the FTB.
· A request for an oral protest hearing.
· A request for an installment agreement or offer in compromise.
· A complaint submitted through the Taxpayer Advocates Office.

FTB will notify the person in writing before issuing the penalty. Taxpayers can avoid the penalty by withdrawing their frivolous submission, in writing, within 30 days after the notice is sent. Otherwise, there are two ways to contest the penalty:
· Request relief by sending FTB 626, Request for Chief Counsel to Relieve Penalties.
· After paying the penalty in full, file a claim for refund within the statute of limitations.

For more information, visit ftb.ca.gov, and search for “frivolous submissions,” or call FTB at 916.845.7790, Monday through Friday, from 8 a.m. to 5 p.m.

The above was a news release from the FTB.