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Duly Noted

A Connecticut Consumer Tax Break Comes At The Expense Of Business. Companies and trade groups in Connecticut are not happy with provisions in Gov. Dannel Malloy’s budget that would hit business with higher taxes while handing a small break to consumers. Malloy, a Democrat, proposed retaining a 20 percent surtax on corporate income taxes that was due to expire this year. He also asked the Legislature to trim the state’s 6.35 percent sales tax in two steps, to 6.2 percent this year and to 5.95 percent in 2017. Shoppers would not go unscathed in Malloy’s spending plan, however; the governor sought to cancel a planned sales tax exemption for clothing priced at $50 or less. Overall, Malloy’s budget would increase state spending by a bit more than 3 percent in each of the next two fiscal years, beginning July 1. 2015 STT 47-5.

Supreme Court Seeks Rough Justice In Alabama Railroad Tax Case. Alabama imposes its 4 percent general sales tax on diesel fuel that is sold to railroads, but not on diesel used in the road- and water-borne commerce that compete with rail traffic. CSX Transportation, which operates 21,000 miles of rail service in the East and Midwest, challenged the Alabama tax as discriminatory and illegal under the Railroad Recovery and Revitalization Act — also known as the “4R Act” — which Congress enacted in 1976. While railroads pay the sales tax on their fuel, truckers pay a 19-cent-per-gallon excise tax; boat and barge operators pay neither tax. After an earlier trip to the Supreme Court that got its case reinstated, CSX prevailed in the 11th Circuit Court of Appeals, which found Alabama’s tax system discriminatory. But the state then sought another Supreme Court review, and won a partial victory when the 7-2 majority sent the case back to the 11th Circuit with instructions to determine whether the taxes imposed on other carriers are “roughly comparable” to the sales tax charged to the railroad. Justices Clarence Thomas and Ruth Bader Ginsburg dissented, arguing that water and highway traffic are not comparable to rail service and thus not subject to a discrimination claim under the 4R Act. Alabama Department of Revenue v. CSX Transportation, Inc.

Another Good Reason To Get That Tax Return Extension. Taxpayers who donate money or goods exceeding $250 to a charity must obtain a “contemporaneous” acknowledgment that specifies what was given and whether the donor received anything in return. The acknowledgment must also be received no later than the due date of the donor’s tax return. Donors have had deductions disallowed even when there was no dispute that the gift was made or what it was worth if the charity did not provide the acknowledgment soon enough. One such case was Durden v. Commissioner, T.C. Memo 2012-140. Extending a return’s due date provides an extra six months to gather acknowledgments.

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