Category Archives: Corporate – State

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

State and Local Tax Advisory – California Voters Approve Proposition 39, but Significant Questions Remain Regarding How Corporate Taxpayers Can Apportion Their Income

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This advisory discusses the recently approved Proposition 39, a California ballot initiative that requires corporations conducting a multistate business to apportion their income using a single-sales factor apportionment formula beginning January 1, 2013. Two other recent developments in California raise significant questions regarding the effectiveness of Proposition 39’s single-sales factor apportionment requirement. In Gillette Co. v. Franchise Tax Board, the Court of Appeal of California held that a corporate taxpayer could elect to apportion its income using either the statutory formula [...]Read more

Federal Tax Advisory: F Reorganizations and Double Dummies

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This advisory discusses LTR 201222014, which ruled that persons contributing property to a new corporation in exchange for stock can form a control group with other persons contributing the stock of another corporation (target), and therefore enjoy Section 351 nonrecognition treatment. This might seem obvious to practitioners familiar with combined reorganization/351 contributions that were first treated favorably under Section 351 by LTR 9143025. The transaction often takes the form of a double dummy drop down, whereby a new holding company puts the contributed property in one subsidiary and holds [...]Read more

State & Local Tax Advisory: Gillette: Not Exactly a Close Shave – California Court of Appeal Approves Taxpayers’ Compact Elections, Leaving FTB in a Lather

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It was perhaps viewed as a close shave prior to the California Court of Appeal’s issuance of its opinion in Gillette Co. & Subsidiaries v. Franchise Tax Board, No. A130803 (Ct. App., July 24, 2012), but in fact, the court soundly rejected the California Franchise Tax Board’s (FTB) arguments that taxpayers were not entitled to make a so-called “Compact election” and file California tax returns using the Uniform Division of Income for Tax Purposes Act’s (UDITPA) equally-weighted, three-factor apportionment formula. This advisory explains how the court’s decision [...]Read more

The MTC Section 482 Proposal

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A memorandum dated July 19, 2012, from the MTC Counsel to the chair of the MTC Income and Franchise Tax Uniformity Subcommittee proposes adoption of a uniform regulation akin to, or actually adopted under the states’ version of, I.R.C. Section 482. The proposal is posted on the MTC website. The regulation would authorize a forced combination of two affiliates that have engaged in a nonrecognition asset transfer that the state deems to separate income from related expenses. The proposal will be considered at the MTC meeting on July 29, 2012. The proposal has these unusual and questionable [...]Read more

“Technical” Revenue Laws Changes in North Carolina

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On June 21, 2012, the North Carolina General Assembly enacted its annual updates and so-called technical revisions of the revenue laws. Session Law 2012-79. Affiliated Corporations. GS 105-130.2(a) is amended to add a definition of “affiliate” for all corporate income tax purposes. Originally, the corporate tax part referred to affiliate in two places: GS 105-130.6, which authorized correcting non-arms-length pricing between affiliates, and GS 105-130.5, listing the North Carolina adjustments to federal taxable income. Two of those adjustments were and still are adjustments for pricing [...]Read more

Forced Combinations Suspended in North Carolina

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The Governor of North Carolina signed Session Law 2012-43, which suspends the authority of the NCDOR to force corporate combinations for years beginning on or after January 1, 2012 until the DOR issues and has approved an administrative rule defining the standards for forced combinations. The new law is the most recent of a long chain of events that began when the NCDOR realized that its 1992 administrative rule creating nexus for intellectual property holding companies would not solve all perceived problems with multistate corporation tax planning in a single entity taxing state. By the end of [...]Read more

Tax Equal Protection

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Armour v. City of Indianapolis, 132 S. Ct. 2073 (2012) ruled that a city did not violate the Equal Protection Clause of the Fourteenth Amendment when it chose to forgive remaining unpaid installments of a special assessment for sewage improvements but not to refund those taxpayers who had paid in full without choosing to pay in installments. The Chief Justice and Justices Alito and Scalia dissented. Therefore, the “liberal” Justices plus Justice Thomas ruled in favor of maximum discretion for the taxing authority, and three fourths of the “conservative” Justices would have [...]Read more

NCDOR Appeals Still Slow

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In what is hopefully one of the last of the old modifiable decisions in tax cases by North Carolina Administrative Law judges, the NCDOR allowed the ALJ to relieve a shareholder of transferee tax liability, but still modified the ALJ opinion. 10 REV 04058; Cherry v. Dep’t of Revenue (May 16, 2012). The Case: The DOR wanted to collect a corporation’s sales taxes from one of its shareholders. The corporation had operated a restaurant that closed. The DOR auditor caused the petitioner Cherry to sign sales and use tax forms after the fact. When the taxes were not paid the DOR attempted [...]Read more

Reorganization and Consolidated Rulings Issued

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The usual Friday release of a large number of letter rulings by the IRS included several rulings of interest on reorganizations and consolidated return issues. Bankruptcy Reorganization: LTR 201208036 addresses the use of qualified settlement funds, disputed ownership funds and liquidating trusts (all referred to as trusts) to hold both some of the assets of the debtor and the securities of Newco, the corporation into which the debtor was reorganized. This debtor evidently was brought down in part by environmental liabilities. It is not clear what assets the debtor transferred to Newco in exchange [...]Read more