On June 2, 2015, the Tennessee Supreme Court heard oral argument in Vodafone’s appeal from an assertion of alternative apportionment by the Tennessee Department of Revenue in Vodafone, in which the Tennessee DOR asserted that the state’s statutorily-mandated costs-of-performance (COP) sourcing method unfairly under-represented the out-of-state service provider’s Tennessee receipts. On Sept. 3, 2015, a Virginia circuit court heard oral argument in a case in which the Virginia-based taxpayer argued that the state’s statutory COP method unfairly over-represented the taxpayer’s Virginia receipts.
In [...]Read more
When a client calls us to inquire about sales tax exposure, we instinctively start asking questions about people and possessions: “Do you have property in other states? Where do you have employees? Have you sent any sales representatives to any states where you have made sales?” For decades, tax practitioners have known that a proper sales tax nexus analysis begins with physical presence. It’s black-letter law, after all. States can’t levy sales tax on someone who isn’t there.
We know this because of Quill Corp. v. North Dakota and National Bellas Hess v. Illinois before it. [...]Read more
The Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”), signed December 18, 2015, introduces significant changes to the Foreign Investment in Real Property Tax Act (FIRPTA), particularly concerning REITs. The reforms are generally intended to make foreign investment in U.S. real estate more attractive, though some revenue-raising measures are thrown in the mix.
Among the PATH Act's taxpayer-friendly FIRPTA updates:
The ownership threshold for foreign “portfolio investors” in publicly traded REITs increases from 5% to 10%. These investors are exempt from FIRPTA tax [...]Read more
On Thursday, December 31, 2015, the Supreme Court of California issued its decision in Gillette Co. v. Franchise Tax Board, reversing the California Court of Appeal and holding that the Multistate Tax Compact is not a binding compact between its member states. Accordingly, the California legislature had the authority to, and did in fact, replace the state’s equally weighted apportionment formula with a double-weighted-sales formula in 1993. This highly anticipated decision by the California high court will undoubtedly have a significant impact on the landscape of ongoing disputes among taxpayers [...]Read more
Citing aggressive taxpayer positions, recently proposed regulations do away with the foreign goodwill exception to gain or income recognition for outbound transfers under Section 367. The rules also restrict the type of property eligible for the active business exception.
Reasons for Change
Per the preamble, taxpayers interpret Section 367 and the regulations in one of two ways when claiming favorable treatment of foreign goodwill and going concern value. One interpretation argues that goodwill and going concern value are not IP within the meaning of Section 936(h)(3)(B) and thus not subject [...]Read more
The Treasury issued the new Notice 2015-79 to beef up the anti-inversion section 7874. It contains three rules applicable to deals closing after the Notice and two rules that are retroactive to the 2014 Notice’s effective date. Those two rules increase the potential taxability of post-inversion restructurings. The three prospective rules are the most surprising and potentially harmful to taxpayers seeking to invert. They all relate to the use of holding company structures, which are common in cross border tax planning.
Holding company structure rules:
If the foreign acquiring corporation [...]Read more
If you go by what Yogi Berra says, tax policy and baseball have a lot in common. Just as we head toward the end of the regular season of baseball and hope we make it to play-offs, Congress is doing the same. Having returned from the August recess, they are looking ahead at what they need to do to finish strong. As for déjà vu, the atmosphere surrounding expired tax provisions is markedly similar to what it was last year around this time. Will the result be different this year? Maybe. Let’s take a look at the issues and what’s happened so far.
Discussions of tax reform have [...]Read more
On September 14, 2015, the government released Notice 2015-59 and Rev. Proc. 2015-43, both relating to Section 355 spinoffs. They respond to government concerns about spinoff transactions that result in the distributing corporation or the controlled corporation owning a substantial amount of cash, portfolio stock or securities, or other investment assets, in relation to the value of all of its assets and its qualifying business assets. In the Notice, the government states that it has become aware, in part through private letter ruling requests, that these transactions may present evidence of device [...]Read more
Beginning with foreign bank account reports (FinCEN Form 114, known as the FBAR) for the 2016 calendar year, FBARs will be due on April 15 of the following year. A six-month extension to October 15 will be available upon request.
FBARs of U.S. citizens and residents living abroad will be due on June 15 – with an additional four-month extension available to October 15. No additional two-month extension to December 15 will be allowed, however, as is permitted for the tax returns of U.S. persons living abroad.
These changes were part of the Surface Transportation and Veterans Health Care Choice [...]Read more