Pennsylvania Court Rules NOL Limitation Unconstitutional (AGAIN)

The Pennsylvania Commonwealth Court ruled yesterday that the Pennsylvania net operating carryover deduction limitation is unconstitutional. The taxpayer, RB Alden Corp, is entitled to a 100% offset of its corporate net income tax.

The Court overruled all of the Commonwealth’s exceptions to the Court's June 15, 2016 decision, concluding that, consistent with Nextel, the $2 million net loss carryover deduction limitation set forth in section 401(3)4.(c)(1)(A)(I) of the Code violates the Uniformity Clause of the Pennsylvania Constitution as it applies to RB Alden, entitling RB Alden to a 100% offset of its corporate net income tax. As a result, RB Alden owes zero tax to the Commonwealth for Fiscal Year 2006.

Note: The Nextel case is currently pending before the Pennsylvania Supreme Court. Oral arguments were heard April 5, 2017. Nextel Commc'ns of the Mid-Atlantic, Inc. v. Pennsylvania, No. 98 F.R. 2012, 2015 BL 384486 (Pa. Commw. Ct., Nov. 23, 2015) During the year in the Nextel case (2007), the cap was $3 million or 12.5% of taxable income.

Pennsylvania's current cap is $5 million or 30% of taxable income, whichever is larger.

28 State Tax Developments You May Want to Know - Sept 12, 2017

The following are state tax and business developments I have curated since September 5th, and posted in the LEVERAGE SALT LinkedIn group:

  1. State income tax return extended due dates 2016 calendar year

  2. While Virginia Supreme Court Holds “Subject-To-Tax” Means “Actually Taxed,” Determination of “Actually Taxed” is Relatively Broad for Purposes of Addback Exception

  3. Corporate Income Tax Rates around the World, 2017

  4. Wrapping Up August – and Looking Forward to September

  5. How Much Does Your State Collect in Corporate Income Taxes Per Capita?

  6. The Virginia Tax Amnesty Program will run for a 62-day period, beginning on September 13, 2017, and ending on November 14, 2017.

  7. Guidance for 2017 Tennessee Hall Income Tax Released

  8. As Political Division Grows, State Budgets Come in Later (If at All)

  9. How Did America's Richest State Become Such a Fiscal Mess?

  10. Indiana Ruling Holds that Taxpayer Successfully Showed Nexus with Foreign Jurisdictions for Sales Factor Throwback Purposes

  11. New York ALJ Rules in Favor of Taxpayer - Receipts from Online Services Sourced Out-of-State

  12. New York State Department of Taxation and Finance Removes Draft Proposed Regulation Section 4-2.12 Regarding Receipts from Certain Services to Investment Companies

  13. South Carolina Appellate Court Affirms that Satellite TV Provider Must Source Subscription Receipts Based on Market because Signal Delivery is Income-Producing Activity

  14. New York Advisory Opinion Explains Taxation and Sourcing of Interactive Software with Customized Skinning

  15. New New York Law Extends Certain Real Property Transfer Tax Rate Reductions to 1 September 2020

  16. California FTB proposes new withholding regulation for pass-through entities

  17. This week's local policy digest includes the NC Brunch Bill, a housing discrimination ordinance, and a balloon ban.

  18. California partnership returns: penalty relief available for 2016 returns and revised extension period in 2017

  19. NFL Superstars Sacked by Jock Taxes on Away Games

  20. State Revenue Volatility: An Inevitable Challenge With a Workable Solution

  21. States vs. Marketplace vs. Third-Party Sellers––The Amazon Sales Tax Challenge

  22. First U.S. Prosecution Over ‘Zapper’ Software Nets Guilty Plea

  23. New York Tax Office Loses Another Case Against Remote Company

  24. South Carolina income producing activity at customer location

  25. NORTH CAROLINA IMPORTANT NOTICE: SALES TAX BASE EXPANSION PROTECTION ACT

  26. TENNESSEE: Is there more than one formula for apportioning franchise and excise tax?

  27. TENNESSEE: 2017 SALES AND USE TAX GUIDE

  28. Virginia Supreme Court Rules in Addback Case

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 LS 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.

9/11 & Hurricanes - Hold Onto What Matters

Good morning. 9/11. Hurricanes. Monday. The news is uplifting and encouraging (NOT!). I was going to write about state taxes like I always do, but I couldn't do it today. Too many more important things to talk about, to think about, to discuss.

Tragedies unfortunately are a part of life. Wish they weren't. But like they say, we can't choose what happens to us, we can only choose how we respond. Life is what we make it, or how we remake it. We always have to turn lemons into lemonade. Find the good in the bad. 

Well, if we are trying to find the good in the bad from the hurricanes, it could be that it should force us to work together. To not argue about petty stuff. To find commonality. To respect the human in all of us. To realize what is really important in life. Not things, but people. Not money, but people. 

The other thing it should teach us is what to hold onto and what to let go of. All of our material possessions are things that are temporary. They could go at any moment. They are things that can give us joy, give us pleasure, and help us accomplish objectives. But they are replaceable. People - friends, family and pets. They are what is important. 

So today, I just want to say - regardless of where you are, if you are in the middle of the storm, or simply watching it from afar - I hope you pause to focus today on the things that matter. I hope you give those you love a little extra attention today (and every day). Don't lose focus. Let's not lose ourselves and the things that are irreplaceable while pursuing what is.

What Type of Evidence Do You Need?

If you are not a lawyer and you work in the state tax field, over time, after reading court case after court case, you begin to learn what different legal terms mean. If you have read any articles or statutes and regulations regarding the burden of proof taxpayers or departments of revenue must meet when proposing alternative apportionment, you have probably read the terms:

  • Preponderance of Evidence
  • Clear and Convincing (or Cogent) Evidence

But what do these terms mean?

Preponderance of Evidence

The preponderance of evidence standard is met if the proposition is more likely to be true than not true. Effectively, the standard is satisfied if there is greater than 50 percent chance that the proposition is true.

For example, in Mississippi, starting January 1, 2015, the commissioner may require a taxable corporation that is affiliated with one or more corporations that are not taxable to file a combined return with the affiliated corporation or corporations if he establishes by preponderance of the evidence that the intercompany transactions of the taxable corporation have resulted in the shifting of taxable income from itself to another member or members of its affiliated group not subject to tax. The commissioner may also require a taxable group of affiliated corporations to file a combined return if he establishes by preponderance of the evidence that the intercompany transactions of the corporations have resulted in the shifting of taxable income between members of the affiliated group (Miss Code Ann Sec. 27-7-37(2)(a)(ii)).

Clear and Convincing Evidence

Clear and convincing evidence is a higher level of burden of persuasion than "preponderance of the evidence."

Clear and convincing proof means that the evidence presented by a party during the trial must be highly and substantially more probable to be true than not and the trier of fact must have a firm belief or conviction in its factuality. In this standard, a greater degree of believability must be met than the common standard of proof in civil actions, which only requires that the facts as a threshold be more likely than not to prove the issue for which they are asserted.

This standard is also known as "clear, convincing, and satisfactory evidence"; "clear, cognizant, and convincing evidence"; and "clear, unequivocal, satisfactory, and convincing evidence"; and is applied in cases or situations involving an equitable remedy or where a presumptive civil liberty interest exists.

For your reference, the following is a sample list of cases that have discussed the level of evidence necessary to meet the burden of proof:

  1. Equifax, Inc. v. Mississippi Dep’t of Revenue, No. 2010-CT-01857-SCT (Miss. 2013) 
  2. CarMax Auto Superstores West Coast, Inc. v. South Carolina Department of Revenue, Docket No. 4953 (S.C. Ct. App. 2012) 
  3. Microsoft v. Franchise Tax Board, 139 P.3d 1169 (Cal. 2006)
  4. British Land (Maryland) Inc. v. N.Y. Tax App. Trib., 85 N.Y.2d 139, 147-48 (N.Y. Ct. App. 1995)

Note: the definitions above were obtained from "legal burden of proof" - Wikipedia. Other sources provide similar definitions.

17 State Tax and Business Developments You May Want to Know - Sept 5, 2017

The following are state tax and business developments I have curated since August 26th, and posted in the LEVERAGE SALT LinkedIn group:

  1. NC market discount income from US govt bonds is not interest

  2. CORPORATE CLOSE-UP: THE FTB’S SMALL CAP SOLUTION TO ALLEGED FINANCIAL AND NON-FINANCIAL COMBINED REPORTING APPORTIONMENT DISTORTION

  3. COST, EY & State Tax Research Institute Study: Total State and Local Business Taxes (fy16)

  4. Oregon revenue online educational services sourced faculty costs

  5. State Rundown 8/31: Modernizing Taxes is Sometimes a Sprint, Sometimes a Marathon

  6. Oral Arguments Heard in South Dakota’s Challenge to Quill

  7. Net Operating Loss Carryforward & Carryback Provisions by State

  8. Indiana Files Lawsuit to Defend Out-Of-State Sales Tax Law

  9. Amended Colorado Regulations Address Combined and Consolidated Filing and Apportionment

  10. Massachusetts DOR Issues Technical Information Release on Policy Change Regarding Treaty-Exempt Income

  11. Oregon Tax Court Explains that Only Direct Costs are Relevant in Determining Where Greater Proportion of Costs of Performance Was Incurred

  12. Indiana Attorney General Responds to Suit Filed by Trade Groups Regarding Enforcement of New Remote Seller Economic Nexus Law

  13. Limited-Time Voluntary Disclosure Program for Out-of-State Sellers Having Click-Through Nexus Runs through November 21 in New Jersey

  14. Rhode Island Division of Taxation Explains New Information Reporting and Notice Requirements on Some Remote Sellers - Including Marketplace Facilitators

  15. Seattle high-income resident income tax enacted

  16. Texas appellate court upholds subcontractor exclusion while reversing and remanding on COGS methodology

  17. VA Supreme Ct rules subject to tax exception post apportionment

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 LS 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.