General Return Requirements (I.R.C. 6011)

March 9, 2015

General Matters:

Requirements for making and filing tax returns are found in Subtitle F of the Code.  Every individual with gross income in excess of the specified amount, every corporation, every estate and every trust must make an income tax return.

References:

For deadlines to report matters on forms 1042-S, 1097-BTC, 1098, 1098-C, 1098-E, 1098-MA, 1098-T, 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-LTC, 1099-MISC, 1099-OID, 1099-PATR, 1099-Q, 1099-R, 1099-S, 1099-SA, 3921, 3922, 5498, 5498-ESA, 5498-SA, W-2G and W-2, and other information return matters, see Department of the Treasury, Internal Revenue Service, General Instructions for Certain Information Returns, including particularly the table preceding the index.


Taxes versus Fees, Tax Injunction Act, Federal Telecommunications Act

March 3, 2015

Taxes Versus Fees, FTA and TIA:

A telecommunication company operates in a locality and provides services over cables installed in the public right of way (“PROW”).  The locality will typically impose one-time or annual fees to recover the costs of PROW management and maintenance.  Some localities have seized on the opportunity to charge fees by charging larger and continuous revenue fees that are used to subsidize the locality’s operations.

The Federal Telecommunications Act of 1996 (“FTA”) requires incumbent carriers to lease access to established networks at regulated rates.  The lessee networks typically avoid all or almost all of the PROW fees and charges.

By continuing to charge revenue-generating fees to incumbent carriers, localities are creating an uneven playing field in favor of lessee entities.

Section 253 of the FTA provides a safe guard that is intended to prevent localities from using their monopoly power over PROW to create competitive imbalances.  The safe guard in Section 253 provides that no action by a locality may prohibit or have the effect of prohibiting the provision of telecommunication services.  Section 253, however, permits localities to set requirements for “fair and reasonable compensation … on a competitively neutral and nondiscriminatory basis.”  The FTA appears to limit local governments to asserting only PROW fees and not taxes for the use of PROWs.

Telecommunications companies, despite Section 253, are still encountering fee structures that are based on localized revenue needs rather than concepts of fairness and reasonableness.

Telecommunications companies have initiated law suits to address fee structures viewed as unfair and unreasonable.  In many instances, localities have argued that the fees are, in reality, taxes, and that the Tax Injunction Act (“TIA”) prohibits federal district courts from enjoining, suspending or restraining the assessment, levy or collection of taxes under state law.

For purposes of the TIA, when dealing with the “assessment, levy or collection of any tax under state law,” what constitutes a tax is not a matter of state law but, rather, is determined by federal law.  In other words, one must turn to federal law to determine whether an assessment, levy or collection is a tax under state law for purposes of the TIA.  See Lavis v. Bayless, 233 F. Supp. 3d 1217 (DC Ariz., 2001).

Issue: What is a “tax” for purposes of the prohibition under the Tax Injunction Act of federal district court involvement in state tax matters?

Tax Injunction Act and Internet Sales:

See Direct Marketing Ass’n v. Brohl, U.S. S. Ct., 13-1032, 03/03/2015.  U.S. Supreme Court reversed Court of Appeals for the Tenth Circuit’s decision by holding that the Tax Injunction Act does not bar an out-of-state retailer’s suit to contest the enforcement of a Colorado law that imposes notice and reporting obligations on retailers not collecting sales or use tax on online purchases.  The TIA provides that federal district courts “shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law.”

References:

Federal Telecommunications Act of 1996

Tax Injunction Act

Lavis v. Bayless, 233 F. Supp. 2d 1217 (DC Ariz., 2001)

Bidart Brothers v. California Apple Commission (sets forth elements a court should examine to determine whether a governmental assessment is a tax)

19-SEP J. Multistate Tax’n 30 (2009)

Hexom v. Oregon Department of Transportation

Qwest v. City of Portland, Oregon

Snyder, Thomas W. and Fitzsimmons, William (2011) “Putting a Price on Dirt: The Need for Better-Defined Limits on Government Fees for Use of the Public Right-of-Way Under Section 253 of the Telecommunications Act of 1996,” Federal Communications Law Journal: Vol. 64: Iss. 1, Article 5


New Clean Renewable Energy Bonds (I.R.C. 54C)

March 2, 2015

General Matters:

See Notice 2015-12 regarding new application procedures for remaining New Clean Renewable Energy Bonds (NCREBs) volume cap.