Category Archives: Controversies – State

‘Wayfair’: What Are the Practical Retroactivity Concerns?

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What is the practical risk that states attempt to apply Wayfair retroactively? And should taxpayers rush to limit exposure for historical periods by entering into voluntary disclosure agreements with states that might assess tax retroactively under Wayfair? In an article originally published in Bloomberg BNA’s Weekly State Tax Report, Zach Gladney and Charles Wakefield explain why applying Wayfair retroactively would be misguided and unsuccessful. To read the full article, click here. [...]Read more

SEC Staff Provides Guidance on the Tax Accounting Implications of the Tax Cuts and Jobs Act

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Our Securities Group analyzes the Securities and Exchange Commission’s new staff guidance on the accounting impacts U.S. tax reform will have on publicly traded companies and their financial statement disclosures. Staff Accounting Bulletin (SAB) No. 118 SEC Staff Compliance and Disclosure Interpretation (C&DI) 110.02 SEC Consultation Guidance Click here to read the full advisory. [...]Read more

Colorado Asks the Supreme Court to Overturn Quill

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On August 29, the Direct Marketing Association (DMA) submitted a certiorari petition to the U.S. Supreme Court asking the Court to review the Tenth Circuit Court of Appeals’ decision in Direct Marketing Association v. Brohl (Brohl II). The case already made one trip to the Supreme Court (Brohl I), in which the Court held that the Tax Injunction Act did not bar federal-court review of the case. On remand, the Tenth Circuit held that Colorado’s use tax reporting regime did not violate the Commerce Clause. (To refresh: Colorado’s regime requires out-of-state sellers to report sales to Colorado [...]Read more

The Panama Papers: Taking a New Look at an Old Problem

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On April 3, 2016, the International Consortium of Investigative Journalists (“ICIJ”) published more than 11.5 million documents connected to Mossack Fonseca, a Panama law firm that helped establish offshore financial operations for some of the world’s wealthiest power players. The implicated offshore operations allegedly failed to adhere to transparency and beneficial ownership reporting requirements thereby permitting some corporations to operate behind a veil of secrecy and avoid taxing authorities around the world. The release of the Panama Papers has prompted a new firestorm of international [...]Read more

State & Local Tax Advisory – Gillette Overturned: One Test, Two Decisions in California

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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

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 & 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