Connecticut Revenue Commissioner Suggests That States “Ramp Up” Economic Nexus for Sales Tax Purposes

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In a provocative op-ed published in the March/April issue of the Journal of Multistate Taxation and Incentives, the Connecticut Commissioner of Revenue Services (Kevin Sullivan) argues that given Congress’s apparent unwillingness to pass the Marketplace Fairness Act, the states should consider taking matters into their own hands and simply act as if Quill is no longer good law. The Commissioner appears to have been emboldened by Justice Kennedy’s concurrence in the U.S. Supreme Court’s recent decision in Direct Marketing Association v. Brohl, No. 13-1032, __ S. Ct. __ (Mar. 3, 2015), in [...]Read more

The Cloudy Status of a “Profits Interest” Holder as an LLC Member

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Cumulus Radio Corp. v. Olson, U.S. Dist. Ct., C.D. Ill., March 10, 2015 The existence of federal jurisdiction in this case turned on whether an individual who held an unvested profits interest in a limited liability company (“LLC”), and whom the LLC considered a partner for tax purposes, was a “member” of the LLC under Delaware law.  The case illustrates some of the confusion commonly surrounding the nature of LLCs, LLC membership, and “profits interests.” Defendant Alpha at first admitted being a Delaware “corporation,” which, if true, would have given the court diversity jurisdiction.  [...]Read more

Temple-Inland District Court Denies Delaware’s Motion to Dismiss — Looks Good for Temple-Inland and Holders

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The District Court of Delaware signals Temple-Inland and other unclaimed property holders are likely to prevail on constitutional grounds against the Delaware Escheats Law. The decision may also have a meaningful impact on other holders that are domiciled in Delaware and are currently under audit or participating in a voluntary disclosure program with the state. However, the court also held that that the Texas Cases’ priority rules do not apply in disputes between private parties and states. Read the full advisory. [...]Read more

“Nobody Loses All The Time”: Remembering Negative Precedents

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The IRS can have a long memory when it comes to rulings and decisions against taxpayers. Even with the seemingly all-purpose economic substance doctrine in its utility belt, the IRS sometimes dusts off old precedents to attack transactions. Revenue Ruling 80-239, 1980-2 C.B. 103, and Basic, Inc. v. United States, 549 F.2d 740 (Ct. Cl. 1977) are two anti-taxpayer authorities that targeted perceived abuses that are now largely obsolete. Nevertheless, the IRS may still invoke these precedents for support in totally different situations. Taxpayers should be aware of how the IRS might use [...]Read more

Maryland is Still Confused About How to Apply Nexus to Affiliated Groups

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Last week, in ConAgra Brands, Inc. v. Maryland Comptroller of the Treasury, No. 09-IN-00-0150 (Md. Tax Ct., Feb. 24, 2015), the Maryland Tax Court issued an opinion perpetuating the state’s erroneous Gore decision from 2014, essentially holding that a corporate subsidiary had nexus in Maryland because its corporate parent had nexus there.  The Tax Court was constrained by the Maryland Supreme Court’s decision in Gore Enterprise Holdings, Inc. v. Comptroller, 437 Md. 492 (2014), so perhaps it is not surprising that the Tax Court issued an opinion that is a continuation of that very confused [...]Read more

IRS Private Letter Ruling Holds that Pass-Through Interests in Mortgages Can Qualify as Registered Form Obligations

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In late January, the IRS issued a private letter ruling (P.L.R. 201504004) dealing with whether interests in a non-grantor trust and a partnership are considered to be in registered form, a precursor to qualification for payments thereon to the portfolio interest exemption. Although the ruling answers in the affirmative, it does not ultimately state whether the particular payments addressed in the ruling would be eligible for the portfolio interest exemption. To qualify for the portfolio interest exemption, and avoid U.S. withholding tax on payments of U.S.-source interest to a foreign person, [...]Read more

Recent State Gift Card Policy Changes Are All Over the Map

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Oregon Invites Litigation The Oregon Legislature recently introduced legislation that would reestablish gift cards as a type of unclaimed property reportable to Oregon.  [https://olis.leg.state.or.us/liz/2015R1/Measures/Overview/HB2543]  The state previously amended its act to delete all references to gift cards.  Under HB 2543, the value of a gift card will be reportable as unclaimed property if it has not been redeemed for 3 years.  Oregon thus re-joins the minority of states that require the escheat of gift cards. Most significantly, however, HB 2543 provides that if the issuer of [...]Read more

Few Changes in Final Rules on Foreign Tax Credit Splitters

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On February 9, 2015, the U.S. Treasury released final regulations on foreign tax credit (FTC) splitting arrangements (the “2015 Regulations”). The final rules, released the same day that the 2012 temporary and proposed regulations were set to expire, offer some definitional and other clarifications and add useful illustrations. But for the most part, the 2015 Regulations adopt the prior proposed and temporary regulations, including the exclusive list of FTC splitter arrangements. Notably, the final rules fail to address several “mechanical issues” (i.e., issues concerning the tracking [...]Read more

Letter Ruling Addresses C Corporation’s Conversion to a REIT

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The IRS recently released the letter ruling (PLR 201503010) that was likely issued to Iron Mountain, a US multinational document storage company, on its conversion to a REIT. The taxpayer in the ruling proposed retaining its leases and ownership interests in warehouse-like buildings and racking structures therein in the corporation that would elect REIT status and moving its document storage activities into taxable REIT subsidiaries. The letter ruling contained more than a dozen separate rulings, evincing the complexity of transitioning from a C corporation to a REIT, particularly when [...]Read more

When Do a Foreign Fund’s Lending & Underwriting Activities Constitute a U.S. Trade or Business?

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In Chief Counsel Advice 201501013, the IRS determined that a foreign fund was engaged in a U.S. trade or business ("ETBUS") based on lending and underwriting activities conducted on the fund's behalf by a U.S. resident fund manager under a management agreement. The IRS attributed the manager's activities to the fund, for purposes of the ETBUS analysis, finding the activities to be "considerable, continuous, and regular." The CCA further concluded that the foreign fund's activities did not qualify for the "trading safe harbors" under Section 864, exploring the fine distinction between "traders" [...]Read more