TX Franchise Taxes & LA Supreme Court

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We are going to look at our clients and see if it's cost effective to file amended returns.

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My dad is a retired CPA. He said that for some of his former clients, it would most certainly be worth it to file amended returns. He event went as far as saying he may go help file these returns just to get every penny out of the state. He also needs something to do.

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Why would you file an amended return if the state will just deny the refund?

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The state has no legal basis to deny the refund. If they do, they are just going to get sued again, and it's going to cost them even more money.

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State Revenue Secretary Kimberly Robinson feels otherwise

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I'm well aware of what the secretary has stated. She also stated on multiple occasions that the law was constitutional, and it was only after it was quite clear that they would lose, that they conceded the case.

I'm also well aware of the fact that the state doesn't have 60-90 million to pay out in claims, and also, that the state doesn't have the people and processes in place to handle 10s of thousands of amended returns.

LDR has gotten very good at scare tactics and saying things to try to dissuade people. Any CPA that deals with them knows this. And I'm not even mad at them... they are the ones that have to try to enforce the stupid laws passed by the legislature, and enforce them with a shoestring budget and staff.

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I'm also well aware of the fact that the state doesn't have 60-90 million to pay out in claims, and also, that the state doesn't have the people and processes in place to handle 10s of thousands of amended returns.

LDR has gotten very good at scare tactics and saying things to try to dissuade people

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To be fair, this isn't unique to LA. I've filed returns and refund claims in a dozen states this year, and I actually find Louisiana auditors fairly pleasant to deal with compared to many other states.

Competency is sometimes a different story.

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Is it a scare tactic if they really have to plan on paying out any of the refunds?

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If I had to guess... here is how it's going to play out.

People will file amended returns. They will start to get denied. Then the big taxpayers involved, with this being an election year, are going to start to heavily pressure the legislature. When the legislature meets this spring, they will use some surplus money to pass some sort of law / budget amendment that provides the money to pay the claims and forces the state to accept the claims.

Not unlike how the state eventually fixed the solar credit mess.

I still maintain the biggest issue is the state having to manually process all of this. It's going to be a nightmare.

Taxing Tiger, take a look at RS 47:1621 (f).

Here is what it says:

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F. This Section shall not be construed to authorize any refund of tax overpaid through a mistake of law arising from the misinterpretation by the secretary of the provisions of any law or of the rules and regulations promulgated thereunder. In the event a taxpayer believes that the secretary has misinterpreted the law or promulgated rules and regulations contrary therewith, his remedy is by payment under protest and suit to recover, or by appeal to the Board of Tax Appeals in instances where such appeals lie.

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Secretary Robinson is apparently taking the position that this was a "misinterpretation" of how the Texas Margin tax operates, and as such, it's oops, we sorry, but we don't have to refund it.

There is a case pending called Bannister Properties that is challenging this statue. BTA ordered a refund for a taxpayer. LDR took it to 1st Circuit and 1st Circuit reversed the BTA. Apparently it's pending before LA Surpreme Court with briefs due in January.

I think this is BS with regard to the "misunderstanding" of Texas Margin. However, even that doesn't cover the cap issue. The caps are statutory... there is nothing to "misinterpret" So even if LDR wants to hide behind this RS for not refunding Margin Tax claims, I don't see how they can deny cap refund claims.

This is going to have to be resolved by the legislature... in an election year, they may be willing to do so.

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So much for a peaceful December before tax season.

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199A assured it would not be peaceful for me. This just adds to it.

I am having several of our staff today look through our S corp and partnership clients looking for Texas filings, and having them schedule out for 2014 (the returns not filed before June 2015) and 2015-2017, what the pro rata share of tax is per partner/shareholder.

We also are pulling lists of every individual taxpayer with out of state tax credit that hit a cap.

We will then reach out the clients and discuss their individual issue and see how it goes.

For many of them, it will be financially sensible for us to file amended returns, even considering what we will need to charge for the work.

However, if we have to get into BTA, the savings may evaporate for many of them.