Americans for Tax Reform: “In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011: First Wave: Expiration of 2001 and 2003 Tax Relief. In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:”
Recent North Carolina law school graduate Daniel Cowan’s law review article is entitled “New York’s Unconstitutional Tax on the Internet: Amazon.com v. New York State Department of Taxation & Finance and the Dormant Commerce Clause.” The law reveiw’s abstract is:
As the current economic downturn continues to ripple through every sector of the economy, state governments from North Carolina to California are struggling to develop innovative tax policies to boost their plummeting revenues. Traditional methods of taxation are no longer sufficient to satisfy state expenditures—either government spending must change drastically or legislatures must approve new taxes to bolster falling revenues. The recent “Amazon tax” passed by the New York State Assembly is a prime example of the latter. The tax requires out-of-state retailers—such as Amazon.com, Inc. and Overstock.com, Inc.—to collect a use tax from in-state consumers if the retailers have marketing affiliates in the state which produce at least $10,000 in sales. In Quill Corp. v. North Dakota, however, the United States Supreme Court held that, under the Commerce Clause of the U.S. Constitution, a state cannot require an out-of-state retailer to collect and remit a use tax unless the retailer has a “substantial nexus” with the taxing state. The Court invalidated a sales tax imposed by North Dakota on an out-of-state mail-order retailer, which had no offices or employees in the state. By invalidating this tax, the Court reaffirmed the bright-line rule of National Bellas Hess, Inc. v. Department of Revenue of Illinois that “a vendor whose only contacts with the taxing State are by mail or common carrier lacks the ‘substantial nexus’ required by the Commerce Clause;” in other words, some physical presence is required. Attempts by New York and other states to create statutorily this “substantial nexus” between out-of-state Internet retailers and the taxing state through the retailers’ marketing affiliates run afoul of Quill and its bright-line rule.
This Recent Development analyzes the recent New York County Civil Supreme Court decision, Amazon.com v. New York State Department of Taxation & Finance, which upholds the constitutionality of the tax. The focus is on Amazon’s Dormant Commerce Clause argument and the trial court’s application of the Supreme Court’s decision in Quill. This Recent Development argues that the New York trial court failed to apply Quill’s “substantial nexus” test properly and exaggerated the role of Amazon’s associates. As a result, the trial court incorrectly held that the tax on Amazon did not violate the Commerce Clause. When applied correctly, the Quill decision should invalidate New York’s tax on Amazon and similar out-of-state Internet retailers.
The Treasury Inspector General for Tax Administration released a report on June 17, 2010, titled Additional Steps Are Needed to Prevent and Recover Erroneous Claims for the First-Time Homebuyer Credit. A study by the Inspector General found widespread fraud involving the government hand out that gives people a tax credit of $8,000 for buying a home. Here are some of the findings from the audit of the IRS, the agency that will be in charge of enforcing the trillion dollar plus Obamacare:
We identified 4,608 prisoners listed on the IRS 2009 Prisoner File8 who attempted to claim the Homebuyer Credit on their Tax Year 2008 returns, despite the fact that they were in prison at the time their qualifying home was reportedly purchased (951 of these claims were filed by paid preparers).
From the file of 4,608 prisoners claiming the Homebuyer Credit, we researched a judgmental sample of those that we considered to be the most egregious. These included 715 prisoners whose filing statuses were something other than joint (i.e., they were not filing with a spouse) and who were serving life sentences during the period their home would had to have been purchased (174 of these claims were filed by paid preparers).9 We found 241 of these prisoners received Homebuyer Credits totaling more than $1.7 million.
For . . . (84 percent) of these 86 claims, we found no indication of any IRS post-refund compliance activities to recover the refunds.
we estimate that at least 1,295 prisoners received refunds totaling more than $9.1 million for fraudulent Homebuyer Credits claimed on their 2008 tax returns.
Multiple Claims Exceeding the Maximum Homebuyer Credit Were Paid for the Purchase of the Same Home
The amount of these 18,832 claims
[for the same home more than once] totaled more than $134 million.Homebuyer Credits Were Allowed for Purchases Made Prior to the Dates Allowed by Law
We identified 2,751 claims filed on Tax Year 2008 electronic tax returns totaling almost $18.8 million that were based on homes reportedly purchased prior to April 9, 2008
we estimate that for Tax Year 2008, approximately 2,555 taxpayers filing electronic returns inappropriately received Homebuyer Credits totaling $17.6 million based on homes purchased prior to dates allowed by the law.
Internal Revenue Service Employees Made Questionable Claims for the Homebuyer Credit
Forbes: “Tax law can get pretty interesting when sex, marriage, injustice or even zoo animals are involved. Most tax lawyers are quick to say they don’t prepare tax returns, but beyond that it’s unclear. That’s a shame, as tax law is far more interesting than most people realize. Here are five examples, all taken from my own decades of tax practice. . . . . 1. First comes marriage, then divorce. . . . 2. Zoo animals have to eat, too . . . . 3. Wrongful conviction, wrongful taxes . . . . 4. Sex and the single church . . . . 5. Call the moving vans (or the hospital jet).”
Just when you thought things could not get worse for residential home values and the residential home industry, President Obama and the Democrats want to kill the interest deduction for interest paid on home loans. Without the deduction, the net cost to own a home will increase by the amount of the lost interest amount times the home owner’s marginal tax rate. For example, if a home owner pays $10,000 a year in home loan interest and is in the 40% combined federal and state marginal tax bracket, the loss of the deduction will increase the home owner’s actual cost to own the home by $4,000 a year, which is $120,00 over a 30 year loan. It’s the equivalent of increaing the home owner’s monthly payment by $333. Higher monthly costs means fewer people will qualify for home loans, fewer home sales, lower home prices and fewer people employed in the many industries that profit from the residential home market.