STATE TAX KNOWLEDGE UPDATE (59 ITEMS) - JUNE 11, 2018

The following are state tax and business developments I have curated since May 22nd, and posted in the LEVERAGE SALT LinkedIn group:

Some of the items may be on the same state/issue/topic, but they are from different sources which may give you a broader perspective to help your company or client.

  1. California proposes to amend entity classification rules; comments due June 26

  2. Delaware qui tam case against gift card retailers moves forward

  3. Colorado Market-Based Sourcing Legislation Goes to Governor

  4. California Launches Online Directory of Business Incentives

  5. Tennessee Decouples From Business Interest Deduction Limit

  6. Louisiana Governor Proposes Tax Cuts, Elimination of Deductions

  7. Minnesota Governor Vetoes Omnibus Tax Legislation

  8. Missouri Lawmakers Approve Corporate Rate Cut, Apportionment Changes

  9. 2018 State Tax Amnesty Programs (as of 5 25 18)

  10. California FTB holds interested parties meeting regarding significant proposed revisions to its market-based sourcing rules

  11. The SALT Deduction Limit: The IRS Responds to State Workarounds

  12. Online Travel Companies Are Not Liable for Local California Hotel Tax

  13. Hawaii Use Tax Held Constitutional

  14. TaxDay becomes official MLB Players Association partner

  15. IRS Discusses Certain Payments Made in Exchange for State and Local Tax Credits

  16. California FTB Provides TY 2017 Filing Guidance Regarding IRC Section 965 Repatriation Transition Tax

  17. New Louisiana Law Revises Due Date for Filing Corporate Franchise Tax Returns

  18. Maine Revenue Services Comments that Amended Returns May be Necessary Given State Nonconformity to Recent Federal Tax Law Changes

  19. Michigan Appellate Court Affirms that Holding Company Lacks Requisite Nexus for City of Detroit Income Tax Purposes

  20. New Jersey Appellate Court Affirms Lower Court Decision Involving Unreasonable Exception to CBT Intercompany Expense Addback Rule

  21. New Tennessee Law Includes Delayed Decoupling from New Business Interest Limitations under IRC Sec. 163(j)

  22. Hawaii State High Court Upholds Validity of Use Taxation Scheme on Purchases from Out-of-State Sellers

  23. Washington DOR Advisory Explains that Retailer’s Enhanced Delivery Services May Create Nexus

  24. Corporate Close-Up: No More Passing Through In Connecticut and New York?

  25. Georgia Property Tax Appeal Thresholds Decreased

  26. Delaware Creates Angel Investor Credit

  27. Georgia Creates Additional High-Technology Exemption

  28. Governor Signs Iowa Sales and Use, Excise Tax Reform Legislation

  29. Iowa Enacts Major Income Tax Reform

  30. Connecticut Enacts Pass-Through Entity Income Tax

  31. Montana Adopts Pass-Through Entity Apportionment Rules

  32. Connecticut enacts responses to federal tax reform

  33. California FTB Now Permitting Taxpayers to Make Oral Presentations in Staff-Initiated Alternative Apportionment Proposals

  34. Michigan Department of Treasury Issues New Bulletin on UBG Including Control and Relationship Tests

  35. Pennsylvania DOR Issues Ruling on New Law that Imposes Information Reporting and Notice Requirements

  36. New York Tax Appeals Tribunal Reverses ALJ to Hold that Taxpayer’s Transactions Must be Aggregated and Thus Subject to Tax

  37. Enacted Kentucky Legislation Provides for Mandatory Combined Reporting for Unitary Businesses and Additional Sales Tax Changes

  38. Alabama DOR Issues Guidance Regarding IRC Section 965 Deemed Repatriation Impact on Taxpayers

  39. Iowa enacts significant income tax and sales tax changes

  40. Legislative Session Review: Iowa

  41. Oregon's research credit sunsets - Opportunities for 2017 tax year

  42. Missouri reduces rate, adopts single factor and market sourcing, more

  43. LINK TO IOWA TAX REFORM WEBSITE CREATED BY IOWA DOR

  44. Iowa Governor Signs Tax Reform & Conformity Bill

  45. Wayfair Debated at Georgetown SALT Conference

  46. State Impacts of TCJA Analyzed at Georgetown Conference

  47. Missouri Enacts Corporate Tax Rate Cut and Apportionment Changes

  48. Sales Thresholds Trigger Sales Tax Nexus in Illinois

  49. Michigan Updates Unitary Business Group Guidance

  50. Colorado Enacts Market-Based Sourcing

  51. Connecticut Explains Repatriation Transition Tax Reporting

  52. New Colorado Law Imposes Market-Based Sourcing Provisions for Certain Receipts from Services and Intangibles

  53. New Connecticut Law Makes Various Changes in Response to Federal 2017 Tax Act

  54. Kentucky DOR Explains New Law that Includes Mandatory Unitary Combined Reporting Regime and Market-Based Sourcing

  55. Michigan Department of Treasury Comments on Federal 2017 Tax Act

  56. Montana DOR Issues New Regulations on the Apportionment and Allocation of Income Reported by Pass-Through Entities

  57. New Illinois Law Imposes Remote Seller Tax Collection and Remittance Responsibilities via Economic Nexus Provisions

  58. New Iowa Law Imposes Economic Nexus

  59. Recent Idaho Law Amendments Provide Income Tax Rate Reductions and Amend IRC Conformity

The above represents 'general curating' of state tax developments into one spot. If you still feel overwhelmed by the volume of state tax developments, please consider my 'custom curating' service. Meaning, clients hire LEVERAGE SALT to daily curate state tax developments relating to a specific industry, state(s), tax type and issueYou can make it as granular as you prefer. This allows you to reduce information overload, and only get the information you need to help your clients or company. This service is provided on a fixed-fee or subscription basis. Contact me at strahle@leveragesalt.com.

CLEANING UP STATE TAX EXPOSURE

In case you missed what states have amnesty programs going on currently, I thought I would send you a link to COST's (Council on State Taxation) quick summary.

Amnesty can be a great tool for states and taxpayers, but sometimes a voluntary disclosure agreement is a better option.

What is an Amnesty Program?

An amnesty program is generally a time period established by a state to allow taxpayers who are delinquent on their taxes to come forward, and pay those taxes without penalties being imposed. Usually interest is still imposed, but sometimes it may be waived as well. Each state amnesty program is different or unique; meaning, they each contain their own set of rules, guidelines and qualifications. Amnesty programs usually pertain to certain tax periods, specific tax types, and taxpayers who meet certain criteria. In other words, "look before you leap."

Taxpayers who are eligible for an amnesty program, but don’t take advantage of the program, are often faced with harsh penalties if caught after the program has ended.

Voluntary Disclosure Agreements

When amnesty programs are not in effect, most states still have what they call “Voluntary Disclosure Agreement” (VDA) programs which allow taxpayers to come forward on an anonymous basis, limit the number of prior years required to be filed (usually 4), and pay taxes and interest. Under most VDA programs, penalties are waived, but not interest.

Remember, a voluntary disclosure agreement is only able to be utilized if the state has not already contacted the taxpayer (in most cases). If the state contacts the taxpayer first, the state can make the taxpayer file returns for all previous years in which the company had nexus in the state.

7 Questions Companies & State Governments Should Consider

  1. If alternative apportionment is wide open and anything goes, why have statutes?

  2. Are we moving from apportionment to allocation when we use single-sales factor apportionment and market-based sourcing?

  3. Is single-sales factor apportionment 'fair apportionment'? It moves income to customer states, not to states where the activities occurred that generated the income. Income is not based solely on sales.

  4. Are throwback and throwout rules unconstitutional because they look beyond the borders of the state?

  5. Should states be able to enact retroactive legislation to protect the state budget from financial loss?

  6. Should retroactive legislation be limited to a state's statute of limitations?

  7. Should judicial decisions only apply to the taxpayer involved in the litigation if it involves a refund?

STATE TAX KNOWLEDGE UPDATE (59 ITEMS) - May 22, 2018

The following are state tax and business developments I have curated since May 2nd, and posted in the LEVERAGE SALT LinkedIn group:

Some of the items may be on the same state/issue/topic, but they are from different sources which may give you a broader perspective to help your company or client.

  1. Wisconsin Explains Reconciliation with Federal Consolidated Returns

  2. Preview of the share image State Sales Tax Shakeup

  3. Indiana Offers Voluntary Disclosure Initiative for Out-of-State Retailers

  4. Kentucky Requires IRC Sec. 199A Addback, Restores Credits

  5. South Dakota Provides Guidance on Foreign Dividend Recapture

  6. MTC Section 18 Alternative Apportionment Regulatory Project Moves Forward with Two Proposed Model Rules - Draft Model Use Tax Reporting Statute Also Advances

  7. Alabama DOR Issues Guidance on IRC Sec 965 Transition Tax Impact on State Tax Returns

  8. California FTB Moves Forward with New Draft Proposed Amendments to Market-Based Sourcing Regulation

  9. Florida DOR Issues Guidance on IRC Sec 965 Transition Tax Impact on State Corporate Tax Returns

  10. New Kentucky Law Imposes Mandatory Unitary Combined Reporting Regime

  11. Ohio Supreme Court Holds in Taxpayer Favor Regarding Credit Computation for Pre-CAT NOLs

  12. Oregon DOR Issues Proposed Administrative Rule on New State Repatriation Tax Credit Pursuant to IRC Sec 965 Repatriation Income for Tax Year 2017

  13. Growing Number of State Sales Tax Jurisdictions Makes South Dakota v. Wayfair That Much More Imperative

  14. Oklahoma Allows Transition Tax Installment Payment Election

  15. Tax Reform Task Force Names Income Tax Proposals for Further Study

  16. California OTA Readopts Emergency Rules on Administration and Procedures of Appeals and Petitions for Rehearing

  17. Focusing the Lens on Film Credits

  18. Indiana DOR Offers Special Limited-Time VDI for Out-of-State Online Retailers with In-State Inventory

  19. New Georgia Law Addresses Federal Partnership Audit Regime Changes and How to Report Adjustments for State Purposes

  20. Taxpayer Asks US Supreme Court to Review 2017 Pennsylvania Supreme Court Ruling on NOL Carryovers

  21. South Dakota DOR Discusses Federal Tax Law Changes Relating to Foreign Dividend Recapture and Potential Impact for State Bank Tax Purposes

  22. Texas Comptroller Issues Franchise Tax Ruling on Whether Proceeds from Certain Hedging Transactions Are Included in Apportionment Factor

  23. Alabama DOR Discusses New Law Requiring Certain Marketplace Facilitators to Collect and Remit Tax

  24. New Georgia Law Requires Some Remote Sellers to Collect and Remit Tax or Else Adhere to Information Reporting Requirements

  25. California FTB Issues Final Report on California’s Conformity to 2017 Federal Income Tax Changes

  26. State and Local Tax Technology Checklist (Techlist)

  27. TWIST - This Week in State Tax

  28. Georgia Expands “Dealer,” Adds Use Tax Notice Requirement

  29. Alabama Opens for Amnesty Applications on July 1

  30. Connecticut Legislature Approves Pass-Through Entity Tax

  31. Legislative Session Review: Georgia

  32. California May 18 meeting on changes to market based sourcing rules

  33. Connecticut Requires Bonus Depreciation, Sec. 179 Adjustments

  34. IRC Conformity Bill Goes to Hawaii Governor

  35. Indiana Special Session Considers IRC Conformity

  36. North Carolina Proposes Income Tax Rate Changes

  37. Legislative Session Review: Kansas

  38. Indiana Enacts IRC Conformity Bill

  39. Indiana Revises Corporate Income Tax Rate Calculation and Credit

  40. Massachusetts Provides Estimated Tax Penalty Relief for IRC Sec. 965 Income

  41. Oklahoma Creates New Credits for Vehicle Manufacturing Industry

  42. “One Maryland” Credit Revised

  43. Maryland Retains Personal Exemptions

  44. Alabama DOR Reminds that 2018 Amnesty Program Begins July 1

  45. Kentucky Claims Commission Amends Rules Related to Tax Appeals Procedures

  46. Alabama DOR Issues Amended Rules on NOL Carryforwards and Revised Filing Due Dates

  47. Updated Connecticut Administrative Guidance Discusses Treatment of IRC Sec 965 Federal Repatriation Transition Tax

  48. New Indiana Law Updates State Conformity to IRC

  49. Massachusetts DOR Issues Release on Estimated Tax Penalty Relief for Corporations Affected by Transition Tax on Deferred Foreign Earnings

  50. New Oklahoma Law Permits Electing Federal Transition Tax Installment Payers to Elect Similar Payment Scheme for State Purposes

  51. Pennsylvania DOR Announces that 2017 State Supreme Court Ruling on NOL Carryovers Will Not Be Applied to Earlier Years

  52. City of Seattle Poised to Impose an Employee Hours Tax on Some Businesses

  53. Alabama Tribunal Judge Denies DOR Motion to Stay in Online Retailer Legal Challenge of Economic Presence Rule for Out-of-State Sellers Making Threshold Sales into Alabama

  54. New York eyes UBT in response to federal tax reform

  55. Pennsylvania Clarifies Caps for NOL Calculations

  56. California Requires Return Adjustments for Sec. 965 Amounts

  57. Minnesota Legislature Passes IRC Conformity, Rate Reductions

  58. Friday Tax Reform: States Issue Guidance, Waive Penalties for Foreign Income

  59. Corporate Close-Up: Indiana Latest State to Respond to Federal Tax Reform

The above represents 'general curating' of state tax developments into one spot. If you still feel overwhelmed by the volume of state tax developments, please consider my 'custom curating' service. Meaning, clients hire LEVERAGE SALT to daily curate state tax developments relating to a specific industry, state(s), tax type and issueYou can make it as granular as you prefer. This allows you to reduce information overload, and only get the information you need to help your clients or company. This service is provided on a fixed-fee or subscription basis. Contact me at strahle@leveragesalt.com.

Will Your Company Owe More or Less State Tax After the Merger?

Is your company considering restructuring its business? Perhaps creating new legal entities or re-aligning its lines of business into different entities? Changing the ownership structure of the legal entities within the commonly controlled affiliated group? Or maybe it is considering acquiring or merging with a new business (unrelated third-party)?

Regardless of your company's situation, in each of the above mentioned scenarios, your company must perform its due diligence prior to completing any transaction or restructuring. That due diligence should take into consideration the impact the restructuring or transaction will have on the business operations, legal obligations, insurance, finance, and tax, etc.

Additionally, the company can't neglect state and local tax due diligence. If the transaction ends up costing the company a significant amount of state tax dollars now or in the future, you may be asked if these issues were considered or reviewed prior to completing the transaction.

The state and local tax impact can be material and varied. Some of the potential state and local taxes to take into consideration are: income tax, gross receipts taxes, franchise taxes, sales and use taxes, property taxes and transfer taxes.

Usually the biggest concern in regards to the transaction from a state and local tax perspective are:

1. Is there any sales tax on the sale or transfer of assets or change in ownership?

2. Is there any transfer tax on the transfer of assets or change in ownership?

The answers to these questions depends on the state or states involved.

In addition to the above, the impact that the restructuring will have on the business' state tax nexus (taxable presence) position across the country should be reviewed and considered before making any changes.

What do you think are the top issues/topics in state taxation today?

  1. State income tax reform/response to federal tax reform (which covers a wide variety of issues - depreciation, foreign income, dividends, charitable contributions, NOLs, Domestic Production Deduction, Sec. 199A, M&E, interest expenses, Sec. 118, related party expenses, deemed repatriation, like-kind exchange repeal, Sec. 179 expense, R&E expenses amortization)
  2. Wayfair Supreme Court Case regarding sales tax nexus/collection obligations/possible overturn of Quill/physical presence
  3. State taxation of foreign income
  4. Market-based sourcing impact (continuing trend)
  5. Alternative apportionment (is it all alternative?)
  6. Management & utilization of NOLs / 382 NOL issues
  7. Combined reporting vs. separate reporting 
  8. Single-sales factor apportionment impacts (continuing trend)
  9. Whether to utilize Voluntary Disclosure Agreement/Amnesty programs
  10. Utilizing and negotiating credits and incentives
  11. State income taxation of pass-through entities (new pass-through entity audit rules)
  12. Related party expenses / transfer pricing
  13. Private letter ruling requests
  14. Other?????