Throwback Thursday: This Business is Taxing

Today's edition is for all you tax enthusiasts out there. "Ahhhhhhhhh yaaaaaaaaaaaaaaa, it's party time."

Every year, we reach out to the various government agencies that handle tax filings and compile the Indiana Tax Calendar (here is the 2013 version), which lists the most critical tax deadlines facing Hoosier businesses.

Digging in the archives yielded the 1953 Indiana Tax Calendar (pictured). One striking difference is apparent, in that the document now is just a PDF; we don't even print it anymore.

Some interesting notes:

  • We've since removed the word "State" from "Indiana State Chamber of Commerce," lest people think we're part of the government. We are not.
  • A June 15, 1953 entry: "Dog tax penalty becomes operative. Dog subject to killing if without state tag issued by local official upon payment of tax." Yikes! That's a little harsh, 1953 society. "Sparky, where are ze papers?!?!?"
  • A June 30, 1953 entry: "Special federal tax on narcotics and marihuana due. Form 678." Modern day hippie: "Whoa, I went back in time and they taxed my weed and misspelled it, maaaaaaaaaan."

 

New Tax Guide a Valuable Asset for Indiana Businesses

We take great pride in helping to educate our members and customers through our many publications. The latest example is the newest edition of the Indiana Taxation Handbook, a valuable resource for those who deal with Indiana tax issues.

As a result of changes in tax law and policy over the last two legislative sessions, new and revised sections of the Indiana Tax Handbook: 2013-14 Edition include:

  • Elimination of the Indiana Inheritance Tax
  • Reduction in the Indiana Corporate Income Tax
  • New consolidated filing options for Indiana businesses
  • Overview of the new rolling reassessments for real property in Indiana
  • Adjustments to the property tax appeals process, and new obstacles that must be overcome in appealing property tax assessments
  • Impact of the automatic taxpayer refunds, and where Indiana taxpayers will receive savings

This informative publication is authored by attorneys at Ice Miller, LLP and is available for $111.75 for Indiana Chamber members and $149 for non-members. Order your copy today by calling (800) 824-6885 or through our web site.

Inheritance Tax Bills Aim to Lessen Burden on Small Businesses

Both the House and the Senate have now passed legislation addressing the inheritance tax. However, the bills take very different approaches in how they choose to deal with the egregious tax. The House bill (HB 1199) is simple and straightforward, slowly phasing the tax out over 10 years. The Senate bill (SB 293) is a little more complicated but makes a combination of meaningful improvements that offers more immediate relief for many.

These bills and their approaches are different but they are by no means incompatible. They could easily be combined to produce a ‘best of both’ bill – immediate relief, in the form of raised exemption thresholds and expanding the beneficiaries that are most favorably treated (as in the Senate bill) coupled with the permanence of a phase-out (as in the House bill). The easiest way to make this blend happen would be to replace the 50% rate reduction in SB 293 with a 50% credit, then proceed to phase the tax out over the following five years by increasing the credit an additional 10% each year thereafter. The hope is that would be a final product everyone can live with.

Bill # and Title: SB 293 – Inheritance Tax
Author: Sen. Jim Smith (R–Charlestown)
Summary: Reclassifies a spouse, widow or widower of a child of the transferor as a Class A transferee instead of a Class B transferee. Reclassifies a spouse, widow or widower of a stepchild of the transferor as a Class A transferee instead of a Class C transferee. Annually increases the inheritance tax exemption amounts through 2015. Reduces the inheritance tax rates by 50% beginning June 30, 2016.
Chamber Position: Support
Status: Passed the full Senate on Tuesday 50-0.

Update/Chamber Action: This bill addresses several negative aspects of Indiana’s inheritance tax. It updates who is included in the more favorably-treated category of inheritors (Class A beneficiaries) by redefining the group to encompass not just the children, but also the spouses of a child or stepchild. It also phases in significant increases in the ridiculously low threshold for the amounts that are excluded/exempted from the tax. And finally, starting in 2016, it cuts the rates in half. So the bill takes very meaningful steps to improve the tax, but it doesn’t go all the way and put Indiana on a course to completely rid our citizens of the onerous tax.

The Indiana Chamber, in its testimony at the hearing, acknowledged the very substantial steps that this bill provides in terms of lessening the detrimental impact of this tax and that it smartly addresses the standout problems. However, we took the opportunity to point out that while this bill provides more immediate relief than the House approach (see below), it falls short by not eliminating the tax altogether like the House version does via a scheduled (albeit slow) 10-year phase-out. We suggested that blending this bill’s more immediate improvements with the House bill’s ultimate elimination would represent the best amalgamation of policy choices. Our efforts during the second half of the session will be to promote the wisdom of combining the best provisions of the House and Senate bills as each is considered by the opposite chamber.

Bill # and Title:  HB 1199 – Inheritance Tax
Author: Rep. Eric Turner (R-Cicero)
Summary: Provides for a gradual, 10-year phase out of the inheritance tax, beginning July 1, 2013.
Chamber Position: Support
Status: Passed the full House 78-17.

Update/Chamber Action: The merits of doing away with this offensive tax are becoming more widely accepted as legislators consider its impact on small family businesses in their communities. This was evidenced by the bipartisan support it received as it easily passed out of the Ways and Means Committee. The Indiana Chamber is working hard to make sure everyone truly appreciates just how counter-productive the tax is, who is impacted, how they are impacted and why the state would be better off without it.

Amazon Deal a Step in Right Direction

We salute Gov. Mitch Daniels and Amazon.com for coming to a recent agreement, resulting in the company collecting Indiana sales tax, beginning in 2014. We think this is a step in the right direction to level the playing field for other businesses, but, like Daniels and Amazon.com, we believe there is a clear need for a federal solution to this matter.

Governor Mitch Daniels announced today that the state has reached an agreement with Indiana’s largest online retailer, Amazon.com, Inc., to begin collecting Indiana sales tax on internet purchases.

Indiana will become the fourth state to reach such an agreement with Amazon, but the governor said he will continue to push for federal action to fairly address the issue.

“The only complete answer to this problem is a federal solution that treats all retailers and all states the same. But for now, Amazon has helped us address the largest single piece of the shortfall, and we appreciate the company working with us to find a solution,” said Daniels.

According to the agreement between Amazon and the Department of Revenue (DOR), the company will voluntarily begin to collect and remit Indiana sales tax beginning January 1, 2014 or 90 days from the enactment of federal legislation, whichever is earlier. The state will not assess the company for sales tax for other periods.

Estimates of uncollected online sales taxes are about $75 million each year. Of that, the State Budget Agency and DOR estimate that revenue from sales tax remittal by Amazon would be approximately $20 million to $25 million per year.

Ah, But Ain’t That America: A Journalist Deals with the IRS

While I would argue government does provide many worthy functions in a civilized society, those who depend on its efficiency to help them solve problems have a tendency to be disappointed (read: enraged). Here’s the story of (former Reason magazine/soon-to-be Huffington Post) writer and native Hoosier Radley Balko and his dealings with the IRS this past year… and it sounds like he’ll get to relive this for years to come (warning: a little salty language, but you may have expected that):

So I never got around to updating you on my feud with the IRS. (See here, here and here.)

Quick summary to catch you up: Last year, the IRS rejected my tax return due to a “faulty Social Security number”. Apparently, someone else had also filed under my number. I then engaged in an increasingly frustrating series of letters and phone calls to try to get the damn thing straightened out. All on my own time, and at my own expense. But it wasn’t my mistake. The whole situation was complicated by the fact that I moved a couple weeks after filing, and no matter how many times I told them this, no matter how many times I asked them to change my address in their files, they kept sending all updates and notices to my old address.

After my last update, many of you suggested I call the IRS help line. I did. It was a really frustrating conversation. I explained the situation to the woman, who then replied, “Well what do you want me to do?”

I replied, “I’d like you to help me get my refund, and to get this corrected so I don’t have to go through it next year.”

To which she replied, “Oh, you’ll almost certainly have to go through it again next year.”

“Why?”

“Because if someone filed under your Social last year, they’ll probably use it again.”

“But that’s why I’m calling. Once I prove I’m the rightful person using that number, can’t they make a note to make sure that in the future, the return with my name on it is the only return they’ll accept under that Social Security number?”

“They can’t do that.”

“Why not?”

“Because they can’t.”

Pause, as I bite my lip.

“So what would you like me to do?”

“I want you to help me get my refund, and make sure I don’t have to go through this crap again next year.”

“Yes, but what do you specifically want me to do?”

“Well, I don’t know. I don’t know what you can do. I don’t know how the IRS works. Clearly they have my address wrong. I’d like them to change it. And I’d like them to make sure whoever filed under my number this year doesn’t do it again.”

“Yes, but what do you want me to do? You have to tell me specifically what actions you want me to take.”

“Again, how would I know that? You’re the taxpayer advocate. Aren’t you supposed to know that?”

These quotes are taken from memory. So they’re obviously approximate. But it went on like this, with me getting increasingly angry, she getting increasingly obstinate. I finally gave up. (I am proud to say I didn’t use a single, goddamned profanity during the entire conversation.)

A few days later, my refund came in the mail. It had been sent to my old address, of course. A former neighbor was kind of enough to forward it to me. Which means it had actually been sent before I called the taxpayer advocate. Yet it still wasn’t noted in whatever computer screen she was looking at. Or it was, and she didn’t tell me. This was last December. So it took eight months to get all of this straightened out. They also paid me about 15 dollars in interest.

A couple weeks later, I got another notice from the IRS. This one was sent directly to my new address. Hey, they got it right! What did it say? It was a reminder that on my 2010 return, under penalty of law, I am required to report and pay taxes on that 15 dollars I “earned” in interest while the federal government held my refund.

Here’s the punchline:  I just learned tonight that my 2010 return has again been rejected due to a “faulty Social Security number.”

Which I guess means I’ll now get to do this all over again.

If you’re looking for a bright side here, the “taxpayer advocate” did correctly warn me that the IRS would once again screw up this year. So if nothing else, I guess federal employees are at least pretty competent when it comes to predicting the incompetence of other federal employees.

Giving Some Credit to the Tax Folks

The Indiana Department of Revenue (IDOR), and its counterparts across the country, deal in numbers — big numbers. At the end of April, the agency released some statistics about the 2010 tax season. Here’s a few to ponder:

  • More than 140,000 phone calls to IDOR during the tax season, including an average of 1,100 a day in the first two weeks of April. (The agency touts its on-hold times decreased from over four minutes to less than three minutes per call)
  • More than 1.6 million refunds in 2010 compared to about 1.5 million a year earlier. Average refund amount: $324 this year; $279 in 2009
  • The push for more electronic returns continues — and with good reason. It costs the state about $2.3 million to process one million paper returns, but just $150,000 to process more than two million electronic returns; accuracy is 99% for electronic returns and less than 80% for paper returns; and refunds directly into taxpayers’ accounts from electronic returns are issued in an average of three days, while the paper route takes between six and 12 weeks

In the "I didn’t know that category," IDOR says about 700,000 mailed returns come in after April 15. By the end of the calendar year, the total number of returns processed will be approximately 3.1 million.

See, I told you there were some big numbers involved. And just to make sure the agency was living up to its claims, I checked and my refund did show up within a week. Hats off to the tax men and women.

Lacy: Hoosiers Benefit When Legislators Work Together

Our Chairman of the Board, Andre Lacy, provides convincing commentary for Inside INdiana Business outlining how true bipartisanship is necessary for successful governing.

We recommend you take a look at the column in its entirety, but here are some highlights and examples he offers:

In 1999, Indiana moved to the forefront of K-12 education standards and accountability measures. A key driver was the General Assembly working in a bipartisan fashion to create Indiana’s Education Roundtable. This group of education and business community leaders was able to come together (leaving politics at the door) to monitor and refine standards that remain highly regarded by national experts. It took additional bipartisan legislative support to make these initiatives a reality.

In 2002, the governor teamed with legislative leaders of both parties to help craft comprehensive tax reform that provided property tax relief and made Indiana much more competitive as a business location through (among other substantial changes) the elimination of the inventory tax. That started a series of legislative sessions that featured cooperation across the aisles and passage of important economic development initiatives such as telecommunications and further tax reforms. The results have been substantial new investment and thousands of new jobs.