The Center of the California Enterprise Zone Information Universe


Ryan, Inc. Wins Suit Against GO-Biz

According to the Sacramento Business Journal:

A Sacramento judge has thrown out a state rule that bars site-selection consultants from claiming a share of incentives awarded by the California Competes program.

Sacramento Superior Court judge Timothy Frawley on Thursday sided with a Dallas firm that challenged the rule. That firm, Ryan, sued the Governor’s Office of Business and Economic Development over a 2014 regulation involving tax credits the state provides to businesses that create jobs here.

The administration imposed the ban to ensure that businesses — not consultants — received the entirety of awards from its California Competes program. But Frawley wrote that the agency, known as GO-Biz, “exceeded its statutory authority” with its regulation. The ban does not advance the program’s goals of stimulating job growth and business investment in California, he concluded.

“The only thing the ban is likely to accomplish is discourage businesses with contingent fee arrangements from participating in the California Competes tax credit program,” Frawley wrote.

GO-Biz declined to comment on the ruling or say if it plans to appeal. A representative of Ryan was not immediately available for comment. Ryan filed the suit in August 2014.


The IRS Just Delayed the Due Dates for ACA Employer Reporting

On December 28, the IRS published Notice 2016-4 providing additional transition extending the due dates for filing 2015 Section 6055 and 6056 reporting. The due date for furnishing 1095-B or 1095-C forms to employees has been extended from 2/1/2016 until 3/31/2016. And the deadline for filing 1094-B/C forms with the IRS has been extended from 2/29/2016 to 5/31/2016 for those not filing electronically, and from 3/31/2016 until 6/30/2016 for those who are filing electronically.

The Notice explains that all other options for requesting individualized extensions are now superseded by this Notice and no other extensions will be granted:

In view of these extensions, the provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates. Employers or other coverage providers that do not comply with these extended due dates are subject to penalties under section 6722 or 6721 for failure to timely furnish and file. However, employers and other coverage providers that do not meet the extended due dates are still encouraged to furnish and file, and the Service will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause.


ACA Employer Reporting: IRS Clarifies that Employees Don’t Actually Need 1095-Cs to File Taxes

In a new FAQ regarding employer ACA reporting, the IRS is stating very clearly that individuals do not actually need their 1095-B or 1095-C in order to file their taxes:

While the information on these forms may help you complete your tax return, they are not needed to file. You can file your federal tax return even if you have not received one of these statements.


Fallback Extender Bill Still Includes Enhancements

Ways and Means Chairman Kevin Brady has introduced a two-year extender bill to serve as a fallback position in case a larger deal proves elusive. The buzz is certainly making it sound like two years will be the best Congress can do.

However, even this two-year proposal is not just a simple extension of the dates. It includes some significant enhancements to business tax credits.

1. A new category of qualified employee would be added to the Work Opportunity Tax credit. Individuals who have been unemployed at least 27 consecutive weeks and received federal unemployment benefits for at least part of that time would become eligible for the credit.

2. The research credit would be improved in multiple ways. The alternative simplified credit (ASC) would be increased from 14 to 20 percent, and eligible small businesses would be able to use the credit to offset AMT and/or payroll tax liability. Qualified small businesses are businesses with $50 million or less in gross receipts.


Senator Hatch: One-Year Retro Extenders Not an Option

Bloomberg BNA is reporting that Senate Finance Committee Chairman Orin Hatch is saying that extending the expired tax provision just for 2015 (as was done last year) is not an option this year.

Another one-year or shorter extension of lapsed tax extenders won’t be acceptable, said Senate Finance Committee Chairman Orrin G. Hatch (R-Utah).

That happened last year when all the provisions were extended for 2014 only, after talks on making some long-temporary tax credits permanent and continuing others on a short-term basis fell apart.

Hatch said that isn’t an acceptable fall-back option if similar talks this year fail to produce an agreement. “It’s got to be multi-year,” Hatch told Bloomberg BNA Dec. 2. “We’re not going to put up with one year.”

For weeks, lawmakers have continued discussing a possible deal on permanency for popular tax breaks like the business credit for research and development and the Earned Income Tax Credit that households can claim.


Ways and Means Chairman Brady’s Priority is Permanence for Extenders

The following is from the San Antonio Express News:

Brady’s immediate priority as Ways and Means chairman will be to press for the permanent extension of a package of temporary tax cuts that have to be renewed every year. Among them is a research and development tax credit for businesses worth an estimated $177 billion over the next decade.

Democrats, in turn, are expected to press for extending temporary increases to the Child Tax Credit and the Earned Income Tax Credit for the working poor. Together, making those changes permanent is estimated to cost $118 billion over the next decade.

Backers of the worker tax credits have sought to apply early pressure by pointing to the estimated 61,000 families in Brady’s district who benefit from the earned income and child tax credits for low-income people.

Some see the makings of a modest budget compromise by combining the business and worker tax credits as part of a must-pass comprehensive 2016 spending bill.

“It could be a small win-win,” said Chuck Marr, director of federal tax policy for the liberal-leaning Center on Budget and Policy Priorities.

It’s clear that Chairman Brady wants to see a permanent R&D credit, it’s less clear how many other extenders he thinks should be (or could be) made permanent.


Governor Brown Vetoed 9 New Tax Credits

The Los Angeles Times reports:

Jerry Brown on Saturday vetoed nine bills that would have provided new tax credits to benefit California lawmakers’ priorities, including low-income housing, energy efficient appliances, seismic retrofits, small businesses, food bank donations and hiring.

Brown reminded lawmakers that when he took office in 2011 the state faced a $26.6-billion budget deficit and estimated shortfalls of $20 billion and it has taken tough measures to turn around the state’s finances. He also said there are new budget issues on the horizon because lawmakers failed to deal with the expiration of a healthcare tax.

“Despite strong revenue performance over the past few years, the state’s budget has remained precariously balanced due to unexpected costs and the provision of new services,” Brown said in his veto message. “Now, without the extension of the managed care organization tax that I called for in special session, next year’s budget faces the prospect of over $1 billion in cuts.”

“Given these financial uncertainties, I cannot support providing additional tax credits that will make balancing the state’s budget even more difficult,” he added.

The bills rejected by the governor include one that was especially important for Los Angeles County because it would have provided a credit for seismic retrofitting of buildings not safe for earthquakes.

Among the bills vetoed were AB 437, sponsored by Assembly Speaker Toni Atkins, which would have provided a grant for small business that had earned research and development credits but lacked the tax liability to use them. And AB 931 which would have expanded the definition of a qualified veteran for the New Employment Credit (NEC).


Senator Cardin’s Statement on the WOTC Long-Term Unemployed Category

Senator Cardin (MD) was the co-author (along with Senator Portman) of the amendment accepted into the Finance Committee extender bill which would add a new category to WOTC for hiring long-term unemployed individuals. In a press-release, Senator Cardin said the following about this amendment:

I am very proud of my work to extend the availability of the Work Opportunity Tax Credit (WOTC) to promote the hiring of the long-term unemployed. WOTC has been extremely effective in encouraging employers to take chance on hiring individuals who are difficult to hire and in so doing, dramatically reduced the burden of public assistance with respect to the unemployed. Studies on the Work Opportunity Tax Credit have shown that for every WOTC hire, the federal government saves approximately $17,000 by encouraging the hiring of hard-to-employ individuals.


Senate Finance Committee Passes Two-Year Extender Bill With Enhancements to WOTC and R&D

The Senate Finance Committee has passed a two-year extender bill. While 105 amendments were offered by committee members, Chairman Hatch did not allow very many of those to be included. In order to enhance the chance of passage, Senator Hatch even withdrew his own amendments related to permanent extension of certain provisions such as the R&D tax credit.

The modified Chairman’s Mark included enhancements to WOTC and the R&D credit that had appeared in last year’s EXPIRE Act.

Regarding WOTC:

The Chairman’s modification extends the work opportunity tax credit to employers who hire individuals who have exhausted regular compensation benefits under State and Federal unemployment compensation laws. With respect to wages paid to such individuals, employers would be eligible for a 40 percent credit on the first $6,000 of wages paid to such individual, for a maximum credit of $2,400 per eligible employee.

To hear the kind words committee members had for WOTC, scroll to a little past the hour and 10 minute mark of the hearing.

The modification to the research credit would allow certain small businesses to utilize the credit against payroll withholding taxes as opposed to income taxes. This is important because many small businesses or start-ups engaged in research and development are not yet profitable and therefore do not have income tax liabilities. In addition, eligible small businesses would be able to offset AMT liability which is currently not allowed and hampers the use of the credit for small businesses.


Amendments Offered to Senate Finance Extenders Bill

The Senate Finance Committee is still scheduled to markup an extenders bill tomorrow, July 21. The Committee has released the amendments which various Senators would like to have included in the bill. Notably, Committee Chairman, Senator Hatch himself has offered an amendment for the permanent extension of the R&D credit which is consistent with legislation already passed by the House.

Senators Portman and Cardin have offered two amendments related to WOTC. First, so expand WOTC by adding a new target group for individuals who are long-term unemployed. They note that this amendment was included in the last extenders bill passed by the Committee last year. Second, they propose making WOTC permanent, which was not a part of the 2014 EXPIRE Act.


Senate Finance Committee Scheduled to Markup Extenders Bill July 21

The Senate Finance Committee has released a “Description of the Chairman’s Mark of a Bill to Extend Certain Expired Tax Provisions” with the notice that it is scheduled for markup in committee on July 21.

The description simply extends the provisions for two years, from the beginning of 2015 through the end of 2016. It will be interesting to see if there are any amendments made during the committee’s markup similar to those that appeared in last year’s “Expire Act.”


New Tax Extender Talk

POLITICO’s “Morning Tax” has a pair of updates on tax extender legislation:

Lots happening on the tax extenders front, at least rhetorically. Pro Tax’s Katy O’Donnell reports the Senate Finance Committee could mark up a two-year catch-all extenders package as early as next week, according to aides and lobbyists. Over on the House side, Ways and Means Chairman Paul Ryan renewed his pitch for early action on the issue to avoid another end-of-year rush like the one last year that forced Congress to renew expired tax cuts for just a few weeks. “I would love nothing more than to come back from the August recess with a plan in place to enact in September,” Ryan said during a POLITICO breakfast, adding that he would like to make some extenders permanent. On the last point, even though Democrats generally oppose making some routinely extended breaks permanent, several signed on to legislation that would indefinitely extend an expired tax deduction for teachers who buy school supplies with their own money.

However, since tax extenders are generally supported by everyone, they are easily used as leverage to get something else done too. That dynamic doesn’t lend itself to speedy resolution.

A CCH report confirms that the Senate Finance Committee may be looking at extenders soon, but also quotes committee Chairman Hatch as saying, “There’s no urgency on that…”:

Over 50 tax credits and deductions commonly referred to as extenders could be marked up as soon as the end of July, but Senate Finance Committee Chairman Orrin G. Hatch, R-Utah, said there might not be enough time to reach that goal despite his desire to do so. “There’s no urgency on that as far as I’m concerned,” Hatch told reporters on July 9. “I’m not saying were going to do it by the end of July. I’m just saying its likely we could.”

Part of the problem, according to Hatch, lies in the Senate schedule and the demands of other legislative priorities, especially an extension of the Highway Trust Fund, all of which will keep Hatch busy on the Senate floor. Despite his interest in holding an extenders markup in the near future, he admitted that the timing is hard to nail down. “It’s difficult to bring the committee together. We’ll see,” he said. “We have so many pressure packs on our plate on this committee that it’s not going to be easy no matter what we do.”

At the same time, Hatch said he has contemplated holding a markup during the week beginning July 13. “Well we’re certainly looking at it,” he noted. But that seems highly unlikely as committee members John Cornyn, R-Tex., and Rob Portman, R-Ohio, said they have heard of no plans to hold a markup during the coming week.


Senate Finance Committee Releases Tax Reform Proposals

After multiple delays, the Senate Finance Committee has released a series of five working group reports on tax reform:

The Business Income Bipartisan Tax Working Group Report

The Community Development & Infrastructure Bipartisan Tax Working Group Report

The Individual Tax Bipartisan Tax Working Group Report

The International Tax Bipartisan Tax Working Group Report

The Savings & Investment Bipartisan Tax Working Group Report

The subject of tax extenders and federal credits are dealt with in the Business Income working group report. There are few specific proposals outside the idea that businesses would benefit from more certainty than the current extenders process provides. One of the pillars of the report, however, is a major emphasis on “strengthening and making permanent the research and experimentation tax credit.”


California Competes Fiscal Year 2015-2016 Application Dates Announced

GO-Biz has announced the application deadlines for the next year of California Competes Credits:

July 20, 2015, through August 17, 2015 ($75 million available)
January 4, 2016, through January 25, 2016 ($75 million available)
March 7, 2016, through March 28, 2016 ($50.9 million plus any remaining unallocated amounts from the previous application periods)

Decisions for the above application rounds will be made at committee meetings scheduled on November 10, 2015, April 14, 2016, and June 16, 2016.


IRS Provides Notice That All Empowerment Zones Extended Through 2014

While the federal Empowerment Zones were extended legislatively as part of tax extender legislation at the end of 2014, the IRS requires that the states extend the expiration dates of their zones. In the past, the IRS decided to deem all Empowerment Zones extended unless a state proactively requested that their zones not be extended.

IRS Notice 2015-26 explains that states had until May 11, 2015 to affirmatively decline extension and that none did.


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