are you leveraging state tax developments?

When state tax developments in the form of court decisions, rulings, proposed and enacted legislation, policy organization proposals, etc. are released daily, what do you do with them?

First of all, do you read them? Do you even scan them? 

If you do more than scan and you even read them, what next? Do you simply file them away and say, 'that is interesting.' Or do you take the development and attempt to determine its application to your company's facts or client facts?

Do you take a proactive approach or reactive approach?

Do you contact states to comment on proposed legislation to help form it or guide it to a fair and just enactment? Do you identify risks that may cause your company or client exposure upon audit? Do you identify refund opportunities?

Or better yet, do you read the state tax development in detail and turn it upside down to look at it from a different perspective that may yield unexpected benefits?

With so many state tax developments happening daily, it can be difficult to determine what is worth reading and what isn't. But even after you make that judgment call, it can be even more difficult to determine what it means for you? Why should you care? What can you do with it?

We need to leverage these state tax developments to their fullest extent to provide proactive benefits to our company and clients. We also need to leverage each other's expertise. We don't need to fight the struggle for clarity alone.

That is what I am all about. Working to make this 'game' of state taxation easier. Let's leverage knowledge and each other. To that end, please contact me with your questions and I may answer them in a future blog post. No obligation. All information kept confidential.

Join the LEVERAGE SALT LinkedIn group and start asking real questions. Follow me on Twitter. Let's really connect and interact.

2016 Survey of State Tax Departments

Bloomberg BNA recently released its annual Survey of State Tax Departments. I recommend you get your free copy and gain additional insight to what states are thinking. The answers may not be totally reliable, but they will help you make informed decisions.

Bloomberg BNA is also holding a webinar on May 20th regarding the survey. 

How are you protecting your company from state taxes?

As I was reading Deloitte's, "The New Normal in State Taxation," I was thinking, this is great information, but what are companies doing with this information? How are they responding? Are they doing anything differently? Are companies becoming more aggressive in light of the fact that states are aggressively expanding the definition of what is taxable and when you are taxable? Or are companies becoming more conservative, more risk averse? 

Companies are in a difficult position. All of the legal arguments are great, but practically speaking, where do opportunities exist to reduce state and local taxes or conduct your business in a tax-efficient manner? How will you find them? How do you know if other companies are taking similar positions or taking more aggressive positions?  Will those positions withstand the scrutiny of an audit or succeed upon appeal?

Companies seek outside counsel via accounting and law firms, and some times even call the state for guidance. Some companies lobby to obtain favorable legislation or get it changed because proposed legislation will have unintended consequences. 

What is your company doing to make sure it isn't overpaying its state and local taxes?

How is your company reducing risk? 

what level of tax avoidance is permissible?

The following is an excerpt from my December 2, 2013 article in Tax Analysts State Tax Notes:

Here’s a multiple choice: the difference between tax avoidance and tax evasion is (a) whatever the IRS says, (b) a smart lawyer, (c) 10 years in prison, (d) all of the above. — Avery Tolar (Gene Hackman) in The Firm

According to the courts, tax avoidance is legal, but tax evasion is not. However, tax avoidance without business purpose or economic substance may be treated as a sham and disallowed. The history of state tax planning and two recent conflicting state decisions raise a question: What level of tax avoidance is acceptable?

Senate Finance Committee member Chuck Grassley, R-Iowa, once said that at the heart of every abusive tax shelter is a tax lawyer or accountant. That may be true, but what about legal tax planning and avoidance? Who, or what, is at the heart of tax avoidance? The answer to that may depend on the experience of the individual responding — whether he has worked for the government or has represented taxpayers against the government. Hence, we all decide whether tax avoidance should be allowed based on our own biases. For example, I have always worked as a taxpayer representative or advocate. Thus, I naturally lean toward the taxpayer’s point of view.

From the taxpayer’s side, I have experienced tax authorities abuse power, neglect the law, and use vague laws to raise revenue. States have imposed unconstitutional state taxes and pleaded bankruptcy when found guilty. On the other side, I have experienced taxpayers and advisers who analyze laws to the finite detail to wiggle around corners and yet stay within the boundaries of the law. As a result, both government and taxpayers can take advantage of the law, but who is right? What is acceptable? What came first — aggressive tax planning or overreaching and vague tax laws?

I HATE WASTE

I hate wasting time, money, talent, assets, energy, strength, ambition, motivation, years of life.

How do these things get wasted?

• Acceptance of mediocrity. 
• Doing things the way they have always been done. 
• Stupid rules.
• Bureaucracy. 
• Conformity. 
• Busy work.
• Fighting fires.
• Wrong priorities. 
• Lack of clear direction. 
• Afraid of change.
• Desire to stay in comfort zone.
• Fear. 
• Improper management and allocation of resources.
• No collaboration. 
• Afraid to share.
• Ego.
• Lack of knowledge. 
• Pride.
• Wrong measurement. 
• Playing follow the leader. 
• Not raising your hand.
• Not asking questions. 
• Not speaking up.

Is your firm full of waste?

What can YOU do today to help your company or clients reduce waste?

Is your life full of waste?

What can you do today to live more fully? 

the Villain of State Taxation

Who is the 'villain' of state taxation? 

Unfortunately, there isn't just one villain. The villain is made up of several items. Here are a few:

• unintended consequences of 'grey' legislation
• regulations that alter the intention of statutes
• computer generated notices that cause corporations to pay instead of challenge
• retroactive law changes to allow states to avoid paying refunds
• state budgets that can't balance without imposing unconstitutional taxes
• wasteful government programs that make it necessary to raise taxes
• companies not paying what they may legally owe because of bad tax policy and legislation
• companies being penalized for legally lowering their taxes

If there is a 'villain,' who is the hero? 

We are the hero. By working together (corporate tax departments, state tax consultants and government officials / employees), we can create acceptable tax policy and legislation that balances state budgets in a constitutional manner, and causes corporations to pay what they legally owe without overreaching or unintended consequences.

When we don't work together, the villain gets stronger. The complexity grows. The unintended consequences of our actions go deeper. Being the hero requires cooperation. Do we have what it takes?

State Tax 'Think Tankers'

Who will be the next generation of state tax 'think tankers'? 

We have had great leaders in the SALT profession, you know the group of thought leaders, national tax office prognosticators, prolific professors that tell us what each case means, that tell us the impact proposed legislation will have. They are the ones that tell us what legislation is 'good' and what legislation is 'bad.' They speak at every seminar. They write the articles we read. They handle the big cases. They provide advice to the largest corporations. They are the ones we look up to. 

We have enjoyed their leadership for decades. My question is, who is next? Who will lead us in the future? Will it be you? Will it be someone else?

Those of you who work tirelessly in large corporate tax departments, are you holding onto a wealth of knowledge that needs to be released? Are you looking for an outlet? Are you wanting the opportunity to raise your hand and voice?

Those of you who are learning the ropes in a large firm. Are you looking for an opportunity to speak your mind? To share your thoughts? To express what you are learning?

We all have visions of the future. Aspirations. Dreams. To make those dreams come true, we all have the same requirement - we must start where we are. 

We don't know who will be the next state tax 'think tankers.' But one thing we do know, it could be you.