MINNESOTA enacted a renewable portfolio standard.
Starting in 2005, at least 1% of retail electric sales by each utility in the state must come from wind farms, small hydroelectric facilities, solar, hydrogen or biomass fuels. The percentage will increase by 1% a year until 2015. Meanwhile, the Public Utilities Commission is expected to set up a program of tradable credits. Utilities will be able to satisfy the requirement that they supply a certain percentage of electricity from renewable sources by buying credits from independent generators who use renewable fuels.
The credits will be tradable in neighboring states that adopt renewable portfolio standards that are similar to the new standard in Minnesota.
ILLINOIS will now subject self-help gas that is purchased out of state and imported into Illinois for use there to a gas excise tax of 2.4¢ per “therm” or, if less, 5% of the purchase price for the gas. Such gas had been exempted from the tax. A “therm” is 100,000 Btus.
MICHIGAN may hold buyers of whole businesses accountable for income taxes that the seller failed to pay for the year of sale.
Michigan imposes a “single business tax” on companies doing business in the state. Each company files an annual return. The tax is 1.9% of gross income from Michigan sources. In 1993, a company bought a McDonald’s restaurant from another corporation. The seller filed a single business tax return for 1993 two years after the sale, but failed to pay the full tax shown. The state tried for two years to collect, but gave up after discovering the responsible parties had moved to Mexico. It then went after the buyer for the unpaid tax.
A Michigan appeals court confirmed in July that the state can collect the tax from the buyer.
The Michigan statute requires anyone buying a going business to make sure the seller paid his single business taxes for the year of sale. The seller must file a single business tax return within 15 days after selling his business. The buyer must pay the sales price into escrow until the seller produces a certificate from the state tax department confirming that the seller paid his single business taxes in full.
Otherwise, the law makes the buyer “personably liable” for the seller’s gross income taxes for the year of sale up to the fair market value of the business he purchased. The case is S.T.C. Inc v. Michigan Department of Treasury.
LOUISIANA confirmed that equipment leasing is a way to avoid a tax on capital stock.
Louisiana requires every company doing business in the state to pay an annual tax on its capital stock. A company’s capital stock includes its “borrowed capital,” meaning any debts that mature more than a year after the date incurred or that are not in fact repaid within a year. The tax is $3 for every $1,000 in capital.
The state tax department insisted that a company that leased three fuel oil storage facilities and two boats for transporting fuel oil had to include the rents it expected to pay over the lease term as part of its “borrowed capital.” It argued the lease was a financing.
An appeals court disagreed. The court said the leases were “true leases,” and that they might have had to be included in borrowed capital if the lessee had a nominal purchase option at the end of the lease term, but the lessee in this case had no such option.
It also said that no debt arises for rent under a true lease until the rent comes due. Rents were due at six-month intervals. The case is System Fuels Inc. v. Kennedy.