Holding: The Tax Court held the refundable portion of the QEZE
real property tax credit was gross income under the tax-benefit rule because the Maineses received a tax benefit when their distributive share of Huron's income was lower due to Huron's property tax deduction.
It determined that the third, the QEZE real property tax credit, while being a refund of past overpayments of real property tax, was includible in income under the tax benefit rule because Huron had deducted the payments of real property tax on which the credit was based.
The Tax Court found the QEZE real property tax credit to be different from the other credits.
As a result, any refundable portion of the Maineses' QEZE real property tax credit payments was includible in income to the extent that the Maineses benefited from the previous deductions for the property tax payments taken by Huron.
If it is anticipated that a QEZE will pass the new tests for continued certification, then the only time an amended return must be filed is when the retention certificate is issued by the ESDC.
If a taxpayer thinks that the QEZE may not survive the ESDC review with its Empire Zone certification intact, it can do the following:
* Petitions for refunds based on EZ tax credits may be filed with the DTF beginning six months from the date that an EZ retention certificate was issued to the QEZE.
QEZEs that filed their returns claiming EZ benefits assuming that their QEZE status will be renewed that subsequently receive a notice of revocation of their certificate of eligibility must file an amended return without claiming any EZ benefits.
Effective April 1, 2009, the Budget Act repeals the QEZE exemption from sales and use tax.
Pass-through entities such as partnerships, S corporations, and LLCs that are QEZEs should distribute copies of the EZ retention certificate to their partners, shareholders, and members for use in claiming the EZ credits.
In the first 10 years, the credit is equal to the product of an employment increase factor and the real estate taxes paid by the QEZE. In year 11, the taxpayer is allowed 80% of this amount, and each year thereafter the allowable credit decreases by 20%, to zero after year 14.
Taxpayers that are QEZEs are eligible for a credit against corporate or personal income taxes for real property taxes paid on real estate located in an EZ, beginning on or after January 1, 2001.