State tax roundup: recent tax action in Iowa, Louisiana and Rhode Island
By Kay Bell • Bankrate.com

Through mid-April, most tax focus is on federal income taxes.

But state and local governments are involved in your tax life, too, and usually year-round. Currently, taxpayers in Iowa, Louisiana and Rhode Island are seeing some changes.

Iowa residents get a fuel tax break this winter, Rhode Islanders could overpay their taxes if they follow state directions and Louisiana tax delinquents are installed in the state's new "Hall of Cyber Shame."

On Jan. 1, 2002, the state will start phasing out its 5 percent sales tax on all residential utility bills. The rate will drop to 4 percent next year and be eliminated by Jan. 1, 2006.

The two-month no-tax status and future rate cuts are for residential users only. Businesses still will face the 5 percent tax on utility use. For February and March, local taxes also will be suspended. But next year, when the state tax phase-out begins, the local option fees will continue to be assessed.

In addition, although the bill specifies the current rate cut is only for electricity used for heating, a spokeswoman for the Iowa Department of Revenue said all residential electrical usage will be covered during heating season because it would make little sense to require the installation of separate meters to determine the appropriate tax reduction. When the five-year phase-out of the state sales tax on utilities begins in 2002, residential electric use will be covered the same as fuel oils and natural gas, according to tax officials.

The February-March suspension of sales tax on residential utilities was designed to offer some relief from 2001's high heating costs, according to legislation sponsors. The move is expected to cost the state about $10 million this year. When the sales tax collection on residential utilities is fully eliminated, budget officials say it will cut state income by $88 million-to-$103 million.

Rhode Island state income tax piggybacks on the amount of federal tax owed. But the percentage indicated in the tax table booklets to figure state tax bills is too high. Using it to complete income tax returns could mean residents would pay the state too much tax.

Tax Administrator R. Gary Clark notes that in the booklets, the bottom of the table states that if the taxpayer's federal tax exceeds $3,000 the amount on line one of the state form should be multiplied by 26.5 percent. The correct multiplier is 26 percent.

State tax officials say the rest of the information in the tax table is correct and that the correct 26 percent figure is shown in the instructions accompanying the return. Also, according to the state tax office, a computer recalculates all state returns to ensure that taxpayers pay or receive a refund in the proper amount.

Taxpayers who want completely accurate tax tables may download a copy from the Rhode Island Division of Taxation's Web page.

The names of chronic delinquent taxpayers have been made public at the Louisiana Department of Revenue's online "Hall of Cyber Shame." Just the threat of civic embarrassment seems to be working.

Louisiana tax officials first gave negligent taxpayers a chance to escape induction into the hall. Revenue Secretary Cynthia Bridges says that in preparation for the Jan. 1 launch of the online listing, the state identified 126 delinquent taxpayers who owed a total of $9.8 million. Slightly more than a third of the offenders are individuals, with the remainder business tax scofflaws.

Letters went out to 125 of them alerting them of the public naming program and offering them the chance to avoid it by paying up. "The one taxpayer not sent a letter heard about the program before his letter was mailed and found that his name was on our publication list," says Bridges. "He came forward and submitted a payment of $300,000 and a promise to pay the balance within 30 days." Other potential Cyber Shame inductees also are working with state tax officials to clear up their tax bills.

Not everyone, however, is so easily humiliated. The online list now stands at 113 persons and businesses the state has identified as tax deadbeats. Most of the offenders, say state officials, have owed taxes for 10 years or more.

The Web site lists the delinquent taxpayer's name, address and the total amount each owes. The unpaid taxes range from several hundred dollars to several hundred thousand dollars. The individuals cited also cover a broad community spectrum: a sitting state district judge and former U.S. Representative showed up on the list.

New names will be added approximately every three months. Delinquent taxpayer names aren't posted on the Internet unless other means of collecting the money have been exhausted, according to Louisiana tax officials. That includes seizing property, garnishing wages and bank accounts, selling off assets and filing tax liens.

"The Cyber Shame is basically a last resort," says Kenneth Comeaux, assistant secretary over collections for the state Department of Revenue.

Several other states, including Connecticut, Illinois and New Jersey, have similar programs.

-- Posted Feb. 22, 2001