Overview of state and local corporate tax and income tax nexus and apportionment issues arising for companies doing business across the U.S. Presented at the National CCH User Conference in October 2015.
El LibertàGià es una empresa tecnológica que opera a nivel internacional y nació con el propósito de desarrollar aplicaciones que permitan resolver los problemas comunes de la vida de las personas. Tiene como objetivo integrar la tecnología necesaria para todo el mundo en un solo lugar, se puede llevar a cabo sus actividades profesionales, personales y sociales.
Paquete Bronce 100% gratuito
Venga y sea parte de esta gran empresa.
Registrarse en: www.libertagia.com/paulovieira2
Berikut ini daftar manfaat yang akan diperoleh jika anda rajin meminumnya :
1. Menjauhkan anda dari kanker prostat berkat kandungan likopen dan karotenoid dalam jus tomat. Sedangkan serat dan kadar air di dalamnya berguna untuk menjaga kesehatan usus.
2. Jus sayur tomat merupakan antiseptik alami yang dapat mencegah diare maupun infeksi pencernaan lainnya.
3. Apabila dicampur jus bayam, khasiatnya adalah mencegah sembelit dan meningkatkan sistem pencernaan.
4. Apabila dicampur jus wortel, manfaatnya adalah menyembuhkan sakit mata seperti rabun senja, katarak dan mempertajam penglihatan.
5. Mampu menurunkan tingkat kolesterol tinggi berkat kandungan serat dan niacin yang bisa memecah LDL (Low-density lipoprotein) dalam tubuh.
6. Kaya akan anti-oksidan yang mampu melawan pertumbuhan berbagai jenis sel kanker dan meringankan sakit asma, diabetes, dan penyakit jantung.
7. Penelitian menunjukkan meminum jus tomat secara teratur dapat memperbaiki kerusakan sel kulit karena radikal bebas. Anda juga bisa membuat masker muka dari tomat untuk menghaluskan wajah secara alami.
8. Berguna untuk mengatasi gusi berdarah, menjaga kesehatan tulang serta mencegah tulang keropos berkat kandungan vitamin K dalam tomat.
9. Bagi anda yang suka olahraga, manfaat jus tomat bagi kesehatan adalah membantu memulihkan otot-otot yang kelelahan setelah berolahraga.
10. Kandungan vitamin C dalam tomat setara dengan buah jeruk, yaitu sekitar 34 mg/100 gram bahan.
Tomat merupakan salah satu sayuran paling populer dan bisa diolah menjadi berbagai jenis menu makanan sehat. Mulai dari sup hangat sampai resep aneka jus tomat segar yang mempunyai manfaat kesehatan luar biasa bagi organ-organ tubuh. Harganya pun terjangkau, mudah ditemukan dan bahkan, anda bisa menanam sayuran ini di halaman rumah tanpa membutuhkan tempat yang luas.Sebenarnya, tomat dikategorikan sebagai buah, meski banyak orang menganggapnya sebagai sayuran. Selain bisa diolah menjadi makanan maupun minuman, tomat juga dapat digunakan untuk membersihkan perabotan dari tembaga alih-alih memakai pembersih kimia yang berbahaya.
Berkat kandungan vitamin A, B1 dan C di dalamnya, meminum jus tomat secara teratur bermanfaat untuk menjaga kondisi tubuh tetap bugar fit sepanjang hari. Selain mampu mencegah beragam penyakit, manfaat jus tomat juga dapat membersihkan racun dalam darah dan membantu pembentukan glikogen pada hati.
1. Jangan mencampuri urusan orang lain, kecuali diminta
Banyak diantara kita mempunyai masalah karena terlalu mencampuri urusan orang lain.Kita melakukannya karena yakin bahwa cara kita adalah cara terbaik, logika kita adalah logika yang sempurna dan siapapun yang tidak sesuai dengan pemikiran kita harus dikritik dan ditunjukkan arah yang benar, arah kita.Pemikiran ini menyangkal keberadaan individu dan keberadaan Tuhan. Tuhan menciptakan setiap kita dengan cara yang unik. Tidak ada dua manusia yang berpikir persis satu sama lain. Setiap pria/wanita bertindak sesuai yang mereka inginka
The LibertàGià is a technology company that operates internationally and was born with the purpose of developing applications that allow to solve common problems of people's lives. Aims to integrate the technology needed for everyone in one place, can carry out their professional, personal and social activities.
Bronze Package 100% Free
Come and be part of this great company.
Register at: www.libertagia.com/paulovieira2
El LibertàGià es una empresa tecnológica que opera a nivel internacional y nació con el propósito de desarrollar aplicaciones que permitan resolver los problemas comunes de la vida de las personas. Tiene como objetivo integrar la tecnología necesaria para todo el mundo en un solo lugar, se puede llevar a cabo sus actividades profesionales, personales y sociales.
Paquete Bronce 100% gratuito
Venga y sea parte de esta gran empresa.
Registrarse en: www.libertagia.com/paulovieira2
Berikut ini daftar manfaat yang akan diperoleh jika anda rajin meminumnya :
1. Menjauhkan anda dari kanker prostat berkat kandungan likopen dan karotenoid dalam jus tomat. Sedangkan serat dan kadar air di dalamnya berguna untuk menjaga kesehatan usus.
2. Jus sayur tomat merupakan antiseptik alami yang dapat mencegah diare maupun infeksi pencernaan lainnya.
3. Apabila dicampur jus bayam, khasiatnya adalah mencegah sembelit dan meningkatkan sistem pencernaan.
4. Apabila dicampur jus wortel, manfaatnya adalah menyembuhkan sakit mata seperti rabun senja, katarak dan mempertajam penglihatan.
5. Mampu menurunkan tingkat kolesterol tinggi berkat kandungan serat dan niacin yang bisa memecah LDL (Low-density lipoprotein) dalam tubuh.
6. Kaya akan anti-oksidan yang mampu melawan pertumbuhan berbagai jenis sel kanker dan meringankan sakit asma, diabetes, dan penyakit jantung.
7. Penelitian menunjukkan meminum jus tomat secara teratur dapat memperbaiki kerusakan sel kulit karena radikal bebas. Anda juga bisa membuat masker muka dari tomat untuk menghaluskan wajah secara alami.
8. Berguna untuk mengatasi gusi berdarah, menjaga kesehatan tulang serta mencegah tulang keropos berkat kandungan vitamin K dalam tomat.
9. Bagi anda yang suka olahraga, manfaat jus tomat bagi kesehatan adalah membantu memulihkan otot-otot yang kelelahan setelah berolahraga.
10. Kandungan vitamin C dalam tomat setara dengan buah jeruk, yaitu sekitar 34 mg/100 gram bahan.
Tomat merupakan salah satu sayuran paling populer dan bisa diolah menjadi berbagai jenis menu makanan sehat. Mulai dari sup hangat sampai resep aneka jus tomat segar yang mempunyai manfaat kesehatan luar biasa bagi organ-organ tubuh. Harganya pun terjangkau, mudah ditemukan dan bahkan, anda bisa menanam sayuran ini di halaman rumah tanpa membutuhkan tempat yang luas.Sebenarnya, tomat dikategorikan sebagai buah, meski banyak orang menganggapnya sebagai sayuran. Selain bisa diolah menjadi makanan maupun minuman, tomat juga dapat digunakan untuk membersihkan perabotan dari tembaga alih-alih memakai pembersih kimia yang berbahaya.
Berkat kandungan vitamin A, B1 dan C di dalamnya, meminum jus tomat secara teratur bermanfaat untuk menjaga kondisi tubuh tetap bugar fit sepanjang hari. Selain mampu mencegah beragam penyakit, manfaat jus tomat juga dapat membersihkan racun dalam darah dan membantu pembentukan glikogen pada hati.
1. Jangan mencampuri urusan orang lain, kecuali diminta
Banyak diantara kita mempunyai masalah karena terlalu mencampuri urusan orang lain.Kita melakukannya karena yakin bahwa cara kita adalah cara terbaik, logika kita adalah logika yang sempurna dan siapapun yang tidak sesuai dengan pemikiran kita harus dikritik dan ditunjukkan arah yang benar, arah kita.Pemikiran ini menyangkal keberadaan individu dan keberadaan Tuhan. Tuhan menciptakan setiap kita dengan cara yang unik. Tidak ada dua manusia yang berpikir persis satu sama lain. Setiap pria/wanita bertindak sesuai yang mereka inginka
The LibertàGià is a technology company that operates internationally and was born with the purpose of developing applications that allow to solve common problems of people's lives. Aims to integrate the technology needed for everyone in one place, can carry out their professional, personal and social activities.
Bronze Package 100% Free
Come and be part of this great company.
Register at: www.libertagia.com/paulovieira2
Nylon 6-6, also referred to as nylon 6,6, is a polyamide from nylon class. Nylons come in many types, and the two most common for textile and plastics industries are nylon 6 and nylon 6-6. The polymer is made of hexamethylenediamine and adipic acid, which give nylon 6-6 a total of 12 carbon atoms in each repeating unit, and its name.
The Importance of State and Local Tax NexusSkoda Minotti
This course will lay out some of the important aspects of state income tax and sales tax nexus concerns, then address the importance of performing detailed state and local tax due diligence. It will also discuss the importance of performing due diligence to address the potential sins of the past before actually entering the M&A market.
State and Local Tax Nexus Issues and the Impact on Mergers and AcquisitionsSkoda Minotti
Would you sell a home before making it attractive enough to turn a profit? Selling a business is no different. Before you plan to sell, there are essential tax implications you should understand and steps you should take to ensure smooth sailing for a successful transaction
On June 21st, the United States Supreme Court issued its long-awaited decision in South Dakota v. Wayfair, overturning the requirement that an out-of-state seller have physical presence in order for a state to require the seller to collect and remit state and local sales tax. Under Wayfair, substantial nexus exists if the taxpayer “avails itself of the substantial privilege of carrying on a business in that jurisdiction.”
2018 Department Of Labor Rules and Surprise VisitsEPAY Systems
Companies can run into major problems if they aren’t up to date on the latest U.S. Department of Labor wage and hour rules. The Wage and Hour Division of the Department of Labor has an enormous impact on the interpretation and enforcement of the FLSA. On the state and local level, agencies play a large role in enforcing the wave of cutting-edge wage laws related to predictive scheduling, minimum wage, and sick time.
With many surprise visits and updates to the Department of Labor rules, it is important to align your company’s compliance goals with what we believe to be the current priorities of the Department of Labor and state and local agencies.
Join EPAY Systems and Seyfarth Shaw as we dive into practical advice that can be used to tackle a government wage and hour audit. Don’t wait until the government knocks on your company’s door before learning about the nuts and bolts of state and federal wage and hour agencies. Watch the webinar now.
Wayfair and the Changing Sales Tax LandscapeSkoda Minotti
The recent Supreme Court decision in South Dakota v. Wayfair has far-reaching implications for sales tax collection in the U.S.
Join Skoda Minotti’s Mary Jo Dolson, CPA, for a webinar discussing this recent Supreme Court decision that overturned the long-standing physical presence standard established in Quill v. North Dakota and its potential impact on your business. We will discuss the current standard for sales tax nexus in various states, as well as what your business should be doing now to start collecting sales tax.
Presentation titled, 'More Than Just Buying Stuff: New Procurement Regime,' delivered by Peter Gough JP, Cayman Islands Government at the Conference, 'Project Cycle Management Conference - A Cornerstone of Implementation and Delivery,' September 2019 in St. George's Grenada.
Original air date: May 17, 2018
Recording at http://www.mhmcpa.com
Service businesses that transact business across state lines and nationally are subject to state income taxes in many jurisdictions. The tax laws for each state are different, including the manner in which states determine the location of sales for apportionment purposes. Service businesses must contend with varying rules to determine the state to which sales revenues should be assigned.
This webinar will examine the common approaches utilized by state taxing jurisdictions to source service revenue in order to provide an overview of the principles involved.
Business Law Training | State and Local Taxes: Key Developments That Will Aff...Quarles & Brady
Most businesses pay more state and local taxes than federal. This program will update you on some of the key developments in the state and local tax world that will affect your companies now and in the future. Topics include how changes in federal law will affect state taxes, the ongoing debacle over sales tax collection requirements, an explanation of how states are fundamentally changing their corporate taxes, and much more.
Whether you manufacture pallets, you pivoted from your core product to produce PPE, or maybe you are a retailer who is looking for some great insight from industry experts or you have accounting or finance questions related to your construction business or any manner of business in between, we would be glad to have you join us.
The topics we will cover are not only relevant and timely, but they are also sure to reveal growth opportunities in your business. This special presentation features insight into the PPP Loan and Paycheck Protection Program Loan Forgiveness process, CARES Act implication, R&D opportunities, Human Resources compliance risks, and insight from leading professionals in the manufacturing and professional services space.
Specifically, we will discuss:
- Where we stand now and the future of manufacturing
- Risks in Manufacturing
- Cybersecurity Concerns and Issues
- State and Local Tax Risks
- HR Policies For Your Organization
This informative event will be hosted and moderated by Dustin Raber, director of manufacturing and distributions services at Rea & Associates.
Nylon 6-6, also referred to as nylon 6,6, is a polyamide from nylon class. Nylons come in many types, and the two most common for textile and plastics industries are nylon 6 and nylon 6-6. The polymer is made of hexamethylenediamine and adipic acid, which give nylon 6-6 a total of 12 carbon atoms in each repeating unit, and its name.
The Importance of State and Local Tax NexusSkoda Minotti
This course will lay out some of the important aspects of state income tax and sales tax nexus concerns, then address the importance of performing detailed state and local tax due diligence. It will also discuss the importance of performing due diligence to address the potential sins of the past before actually entering the M&A market.
State and Local Tax Nexus Issues and the Impact on Mergers and AcquisitionsSkoda Minotti
Would you sell a home before making it attractive enough to turn a profit? Selling a business is no different. Before you plan to sell, there are essential tax implications you should understand and steps you should take to ensure smooth sailing for a successful transaction
On June 21st, the United States Supreme Court issued its long-awaited decision in South Dakota v. Wayfair, overturning the requirement that an out-of-state seller have physical presence in order for a state to require the seller to collect and remit state and local sales tax. Under Wayfair, substantial nexus exists if the taxpayer “avails itself of the substantial privilege of carrying on a business in that jurisdiction.”
2018 Department Of Labor Rules and Surprise VisitsEPAY Systems
Companies can run into major problems if they aren’t up to date on the latest U.S. Department of Labor wage and hour rules. The Wage and Hour Division of the Department of Labor has an enormous impact on the interpretation and enforcement of the FLSA. On the state and local level, agencies play a large role in enforcing the wave of cutting-edge wage laws related to predictive scheduling, minimum wage, and sick time.
With many surprise visits and updates to the Department of Labor rules, it is important to align your company’s compliance goals with what we believe to be the current priorities of the Department of Labor and state and local agencies.
Join EPAY Systems and Seyfarth Shaw as we dive into practical advice that can be used to tackle a government wage and hour audit. Don’t wait until the government knocks on your company’s door before learning about the nuts and bolts of state and federal wage and hour agencies. Watch the webinar now.
Wayfair and the Changing Sales Tax LandscapeSkoda Minotti
The recent Supreme Court decision in South Dakota v. Wayfair has far-reaching implications for sales tax collection in the U.S.
Join Skoda Minotti’s Mary Jo Dolson, CPA, for a webinar discussing this recent Supreme Court decision that overturned the long-standing physical presence standard established in Quill v. North Dakota and its potential impact on your business. We will discuss the current standard for sales tax nexus in various states, as well as what your business should be doing now to start collecting sales tax.
Presentation titled, 'More Than Just Buying Stuff: New Procurement Regime,' delivered by Peter Gough JP, Cayman Islands Government at the Conference, 'Project Cycle Management Conference - A Cornerstone of Implementation and Delivery,' September 2019 in St. George's Grenada.
Original air date: May 17, 2018
Recording at http://www.mhmcpa.com
Service businesses that transact business across state lines and nationally are subject to state income taxes in many jurisdictions. The tax laws for each state are different, including the manner in which states determine the location of sales for apportionment purposes. Service businesses must contend with varying rules to determine the state to which sales revenues should be assigned.
This webinar will examine the common approaches utilized by state taxing jurisdictions to source service revenue in order to provide an overview of the principles involved.
Business Law Training | State and Local Taxes: Key Developments That Will Aff...Quarles & Brady
Most businesses pay more state and local taxes than federal. This program will update you on some of the key developments in the state and local tax world that will affect your companies now and in the future. Topics include how changes in federal law will affect state taxes, the ongoing debacle over sales tax collection requirements, an explanation of how states are fundamentally changing their corporate taxes, and much more.
Whether you manufacture pallets, you pivoted from your core product to produce PPE, or maybe you are a retailer who is looking for some great insight from industry experts or you have accounting or finance questions related to your construction business or any manner of business in between, we would be glad to have you join us.
The topics we will cover are not only relevant and timely, but they are also sure to reveal growth opportunities in your business. This special presentation features insight into the PPP Loan and Paycheck Protection Program Loan Forgiveness process, CARES Act implication, R&D opportunities, Human Resources compliance risks, and insight from leading professionals in the manufacturing and professional services space.
Specifically, we will discuss:
- Where we stand now and the future of manufacturing
- Risks in Manufacturing
- Cybersecurity Concerns and Issues
- State and Local Tax Risks
- HR Policies For Your Organization
This informative event will be hosted and moderated by Dustin Raber, director of manufacturing and distributions services at Rea & Associates.
Zappers: what’s new in electronic sales suppression?CGI
Tax cheats have been skimming cash from the receipts of businesses in various fashions for years. Technology has allowed this skimming to become fast, easy, and extremely hard to detect which is costing states hundreds of millions of dollars annually. Bryce Berg, Government Tax and Collections expert at CGI, discusses how the use of technology to place an electronic lockbox at the business location can dramatically reduce non-compliance and increase revenues. www.cgi.com/govcollect
FED GOV CON - Strategies for Success in Government ContractingJSchaus & Associates
This half day seminar held SEPT 19th 2014 in Pittsburgh with LEECHTISHMAN Law Firm, Aaron Grau & Associates and Jennifer Schaus & Asociates (of Washington DC) brings together top experts to share knowledge about government contracting.
More info at http://www.JenniferSchaus.com or 202-365-0598
Original air date: May 24, 2017
Rebroadcast and recording information at http://www.mhmcpa.com
Prospective acquirers in merger and acquisition transactions will conduct thorough due diligence procedures to assess a target's financial performance and liabilities. A target's abandoned or unclaimed property compliance may not be high on the list of areas to evaluate, but it's an important component for the acquirer. Merger and acquisition activity is one of the most common triggers for abandoned and unclaimed property exposure. With the increase in state enforcement actions, abandoned/unclaimed property exposure can bring significant risk of penalties or fines to your organization, which may remain undiscovered until critical negotiations are conducted in the transaction.
In this session, we will discuss how AUP affects merger and acquisition activities, recent updates in AUP laws and regulations, sanctioned use of independent contingent-fee audit firms, best practices for identifying and managing sources of AUP and how to proactively correct past mistakes through AUP remediation.
Original air date: Jan. 24, 2018
Recording available at http://www.mhmcpa.com
Several provisions in the new tax reform law will have a significant impact on not-for-profit organizations starting in 2018. From excise taxes to new unrelated business income considerations, organizations will need to take a close look at how tax reform changes affect their financial planning.
In our webinar, we will focus on the manner in which not-for-profit organizations are impacted by the new law, and will offer insight about how the not-for-profit sector should respond to the new provisions.
Going From Public to Private - The Oracle E-Business Suite Challengeseprentise
Companies going from public to private aim to continue operations with minimal disruption, but because the transfer of ownership is still considered a purchase transaction under US GAAP, there are challenges that must be tackled within Oracle E-Business Suite. This session explores case studies of companies that efficiently met their EBS needs for post-privatization, including undergoing calendar changes to address short tax year accounting and revaluing fixed assets to reflect the date of acquisition, all without impacting day-to-day operations.
9. @CCH_UC #CCHUC15
Enactment of
P.L. 86-272
“No State, or political subdivision thereof, shall have power to
impose, for any taxable year ending after September 14, 1959, a
net income tax on the income derived within such State by any
person from interstate commerce if the only business activities
within such State by or on behalf of such person during such
taxable year [is] ... the solicitation of orders by such person, or his
representative, in such State for sales of tangible personal
property, which orders are sent outside the State for approval or
rejection, and, if approved, are filled by shipment or delivery from a
point outside the State”
9
10. @CCH_UC #CCHUC15
The Elements of
P.L. 86-272
10
• Tax on “net income”
—So certain states aren’t covered
—OH, WA, NJ to name a few
—NJ Home Impressions Case
• Solicitation of Orders
—Lots of meat; we’ll get there
11. @CCH_UC #CCHUC15
The Elements of
P.L. 86-272
11
• For Sales of Tangible Personal Property
—Really? Just TPP?
—CA Example: Personal Selling Power Case
• Orders sent outside state for approval
• Orders shipped from out-of-state
12. @CCH_UC #CCHUC15
Meaning of “Solicitation”
12
Wisconsin v. Wrigley (1992):
Setting the Standard
Not THAT
solicitation
18. @CCH_UC #CCHUC15
Agency Nexus and the MTC
• Nexus Bulletin 95-1
— In-State Warranty Repair = Nexus
—Even if Performed by Agent
• Connecticut – Dell Catalog Sales v. Comm’r
• Louisiana – Louisiana v. Dell
• New Mexico – Dell Catalog v. New Mexico
18
20. @CCH_UC #CCHUC15
State Examples
• Ohio – SFA Folio v. Tracy
• California – Borders and Barnes & Noble Fight It Out
– Reader’s Digest Too
• New Mexico – Barnes & Noble Wins Again
• Tennessee – JC Penney v. Johnson
20
21. @CCH_UC #CCHUC15
In-State Delivery = Nexus?
• In Most Cases, Yes
• But Look Out For a De Minimis Argument (MD) or P.L. 86-272
(MA and VA)
• MTC Says It’s OK
21
23. @CCH_UC #CCHUC15
Other Nexus Issues
• Economic Nexus
—The Next Big Thing?
—What about Quill?
• Geoffrey and South Carolina – It All Starts With The Giraffe
• Opening The Flood Gates: Other States Jump On The Bandwagon
23
24. @CCH_UC #CCHUC15
Economic Presence = Nexus
24
• KFC v. Iowa: Kentucky-Fried Nexus
• A&F Trademark v. Tolson
• Geoffrey v. Tax Commission
(Can’t We Leave the Giraffe Alone?)
• Kmart v. Dept.
• SYL v. Comptroller
• Dept. of Revenue v. Gap
25. @CCH_UC #CCHUC15
Economic Presence = Nexus
25
• Lanco v. Division
• Tax Commissioner v. MBNA
• Capital One v. Comm’r
(The State Is In Your Wallet!)
• Acme and Gore
• Couchot
• Borden Chemicals
26. @CCH_UC #CCHUC15
Economic Presence = Nexus
26
• General Motors and Lamtec
• A&F Trademark
• MBNA and Letter Rulings
• Lanzi
• Capital One v. Comm’r
(The State Is In Your Wallet!)
27. @CCH_UC #CCHUC15
Economic Presence ≠ Nexus
27
• Cerro Copper v. Dept.
• Bandag v. Rylander
• Acme Royalty v. MO
• MBNA v. Indiana
• JC Penney and AOL
• Wascana Energy
28. @CCH_UC #CCHUC15
NY’s Attack on Economic Nexus
• Special Rules for Banks
• Denying Royalty Deductions
• 2015 Economic Nexus Test:
“Dr. Evil Rule”
28
29. @CCH_UC #CCHUC15
Factor Presence Nexus
• California
—$50,000 of property; $50,000 of payroll; $500,000 of sales
• Colorado
—$50,000 of property; $50,000 of payroll; $500,000 of sales
• Ohio
—$50,000 of property; $50,000 of payroll; $500,000 of sales
• Washington
—$50,000 of property; $50,000 of payroll; $250,000 of sales
29
30. @CCH_UC #CCHUC15
Other Nexus Issues
• Ownership of Partnership Interests?
—General vs. Limited Partners
• Ownership of Leased Property?
—Mobile vs. Immobile Property
• Qualify to do Business = Nexus?
• Presence of Telecommunications?
—Home Office Employees Create Nexus
30
32. @CCH_UC #CCHUC15
Determining a Multi-State Corporation’s
In-State Income
32
• Separate Accounting
—Separate geographical accounting
• Formula Apportionment
—States frequently use the 3-Factor Formula contained in the Uniform
Division of Income for Tax Purpose Act (“UDITPA”), or a derivative,
such as super weighted sales factor or single sales factor
• Specific Allocation
—Income is traced to its source
33. @CCH_UC #CCHUC15
How UDITPA is Structured to Accomplish Its Purpose
• UDITPA divides income into “business income” and “nonbusiness
income.”
• “Nonbusiness income” means all income other than business
income.
General Rule – Allocate Nonbusiness
Income To a Specific State
33
34. @CCH_UC #CCHUC15
Specific Allocation of “Nonbusiness Income”
• Net Rents and Royalties from Real Property – State Where
Property is Located
• Capital Gains and Losses – State Where Property is Located
• Interest and Dividends – Domiciliary State
• Patent and Copyright Royalties – State Where Property is Located
34
35. @CCH_UC #CCHUC15
Apportionment of Business Income
“Business income” means income arising from transactions
and activity in the regular course of the taxpayer’s trade or
business and includes income from tangible and intangible
property if the acquisition, management and disposition of
the property constitute integral parts of the taxpayer’s regular
trade or business operations. (emphasis added).
35
36. @CCH_UC #CCHUC15
Apportionment of Business Income
Rule – Business Income is apportioned among all the states in
which the taxpayer does business using the 3-Factor Formula.
Not all states use 3-Factor Formula; trend actually elsewhere, to
single-factor
36
37. @CCH_UC #CCHUC15
Business v. Nonbusiness Income
Business income: One Test or Two?
1. Transactional Test: did the transaction giving rise to the gain
occur in the regular course of the taxpayer’s trade or business?
[Phrase 1 in definition]
37
38. @CCH_UC #CCHUC15
Business v. Nonbusiness Income
2. Functional Test: was income-producing property integrated
into, or used in, business operations? [Phrase 2 in definition]
• “Liquidation Exception” recognized by many courts when a
business is liquidated or goes out of business.
• Is the Functional Test a separate test? Or is it a sub-part of the
Transactional Test (see underlining in definition – “and
includes”)? In other words are there two tests or one.
38
39. @CCH_UC #CCHUC15
Business vs. Non-Business Income
Transactional Test vs. Functional Test
Transactional Test: Did the transaction giving rise to the gain
occur in the regular course of the taxpayer’s trade or business?
Functional Test: Was income-producing property integrated
into, or used in, business operations?
39
40. @CCH_UC #CCHUC15
Transactional Test – Case Examples
40
In re Kimberly Clark Corp. v. Alabama Dep’t of Revenue, 69 So. 3d 144
(Ala. 2010).
•Lower court found business income existed under the Transactional Test when
a paper company sold a paper mill and related timberland in Alabama because
the company had bought and sold businesses in the past, making the sale a
normal part of its ordinary business.
•The Alabama Supreme Court reversed, holding that the sale did not satisfy the
Transactional Test even though it had acquired and sold other businesses during
the audit period because the sale was extraordinary in nature. The court applied
a Transactional Test only.
•One test or two?
41. @CCH_UC #CCHUC15
Functional Test – Case Examples
41
Texaco-Cities Serv. Pipeline Co. v. McGaw, 695 N.E.2d 481 (Ill. 1998)
•The court notes there were two tests under Illinois law for determining whether
income from the sale of capital assets constituted business income: the
Transactional Test and the Functional Test.
•The court applied the Functional Test and determined that the gain from the
sale of a pipeline in Illinois constituted business income.
42. @CCH_UC #CCHUC15
Functional Test – Liquidation Exception
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• Many courts recognize a “liquidation exception” to the Functional Test when a
business is liquidated or goes out of business. See, e.g., Lenox, Inc. v. Tolson,
548 S.E.2d 513 (N.C. 2001).
– Liquidations may fall into a separate category from other business transactions: the
transaction is a means of ceasing business operations rather than furthering them.
• Other states have rejected the liquidation exception. See, e.g., Jim Beam
Brands v. Cal. Fran. Tax Bd., 34 Cal. Rptr. 3d 874 (Cal. App. 2005).
– Court distinguished its ruling from other cases by stating that in California, the focus
of the Functional Test is on the nature of the income producing property, while
other cases focused on the nature of the income producing transaction.
43. @CCH_UC #CCHUC15
Functional Test – I.R.C. § 338(h)(10)
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• Most courts treat 338(h)(10) deemed asset sales as falling under the
liquidation exception to the Functional Test.
• See, e.g., Am. States Ins. Co. v. Hamer, 816 N.E.2d 659 (Ill. App. Ct.
2004).
– Gain from a stock sale, deemed to be an asset sale under § 338(h)(10),
generated non-business income because the Functional Test was not
satisfied in cases involving a liquidation and cessation of business.
45. @CCH_UC #CCHUC15
Apportionment Factors
• Traditionally states used the UDITPA Formula which was an
equally weighted three-factor formula including sales, property
and payroll
• Many states have modified the traditional formula by adding
weight to the sales factor
• Payroll and Sales factors are the most troublesome, especially in
the services context
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46. @CCH_UC #CCHUC15
UDITPA Three Factor Formula
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In-State Property + In-State Payroll + In-State Sales
Total Property Total Payroll
Total Sales
______________________________________________
3
Apportionable
(Business)
Income
Income
taxable by the
State
X =
47. @CCH_UC #CCHUC15
Property Factor
• The property factor is generally a fraction with the numerator
being value of real and tangible property in-state and
denominator being of property everywhere
Instate Property
Everywhere Property
• What about “property” like computer servers?
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48. @CCH_UC #CCHUC15
Payroll Factor
• The payroll factor is a fraction the numerator of which is the
corporation’s compensation in a particular state divided by the
denominator which is the taxpayer’s total compensation
everywhere
Instate Payroll
Everywhere Payroll
• Compensation usually includes wages, salaries, commissions;
generally anything showing up on an employee’s W-2 or in the
company’s state unemployment reports
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49. @CCH_UC #CCHUC15
Payroll Factor
• If an employee works in more than one state
—Allocate the compensation to the state in which most of the services
are performed
—If no one state has a majority assign the compensation to the
• Employee’s base of operations
• Location from which duties are directed or controlled
• Employee’s state of residency
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50. @CCH_UC #CCHUC15
Apportionment Formula – Payroll Factor
• Who is included in payroll?
—State auditors use Federal Form 940 to tie payroll figures since
payroll generally follows unemployment compensation rules
—Review common-law employees versus book employees
• Common law employee: Performs services for a company who controls
what will be done and how it will be done
—Exclusions
• Payroll attributable to non-business income
• Independent contractors
• Non-jurisdictional payroll
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51. @CCH_UC #CCHUC15
Sales Factor
• The sales factor is a fraction the numerator of which is the
corporation’s sales in a state divided by the denominator which is
its total sales everywhere
Instate Sales
Everywhere Sales
• Sales are usually sourced by destination for sales of goods, but it’s
tougher for services
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52. @CCH_UC #CCHUC15
Sales Factor Issues
• Cost of performance
—Source where income producing activities takes place
• Direct costs determined in a manner consistent with GAAP
• Income Producing Activity (IPA) is determined from each
transaction that goes into making a profit
• Many states pick up activities performed on behalf of
taxpayer by independent contractor in determining direct
cost
• This is the MTC rule
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53. @CCH_UC #CCHUC15
Sales Factor
Market-Based Sourcing
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• Most states use cost of performance, but trend towards market-
based sourcing
• States which use market-based sourcing
—Alabama, Arizona, California, Georgia, Illinois, Iowa, Maine,
Maryland, Michigan, Minnesota, Nebraska, New York, Ohio,
Oklahoma, Utah and Wisconsin
54. @CCH_UC #CCHUC15
Sales Factor
Market-Based Sourcing
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• Market-Based Sourcing: UDITPA Rule
—Looks to “if and to what extent” the service is delivered to a location in a
state
—If delivery cannot be determined sourcing location should be “reasonably
approximated”
—Includes a “throw-out” provision when taxpayer is not taxable in state to
which sale is assigned (or if state of assignment cannot be determined)
• Practical Application?
—How does a professional service firm allocate based on market sourcing?
56. @CCH_UC #CCHUC15
Throwback Rule
• Under UDITPA, sales of tangible personal property (TPP) are included in the
numerator of the sales factor if either:
—The property is delivered or shipped to a purchaser (other than the U.S.
government) within the state, or
—The property is shipped from a location in the state and (1) the purchaser is the U.S.
government, or (2) the taxpayer is not taxable in the state of the purchaser.
• The second clause is known as the “throwback rule.” Sales that would otherwise
be included in the numerator of another state’s sales factor are “thrown back” to
the state of origination, if the taxpayer is not taxable in the state of the purchaser.
• Has the effect of increasing the numerator of the state’s sales factor, with no effect
on the denominator—causing the sales factor (and thus, the apportionment factor)
to increase. 56
57. @CCH_UC #CCHUC15
The Gillette Case
Gillette Co. v. Franchise Tax Bd., 207 Cal. App. 4th
1369 (1st
Dist. 2012), on rehearing,
209 Cal. App. 4th
938, petition for review granted 291 P.3d 327 (2013).
•Prior to 1993, California used a three-factor apportionment formula.
•In 1993, California modified its apportionment formula to double-weight the sales factor.
•ISSUE: Can Gillette elect to use the MTC formula, or did the 1993 amendment repeal and
supersede the three-factor formula?
•APPELLATE DISTRICT COURT HOLDING: California is bound by the MTC’s apportionment
election provision.
—The MTC takes precedent over subsequent conflicting legislation.
—Federal and state Constitutions forbid enactment of state laws that impair
contractual obligations.
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58. @CCH_UC #CCHUC15
The Gillette Case (Continued)
CALIFORNIA’S RESPONSE:
•California withdrew from the MTC.
•The FTB appealed the case to the California Supreme Court, which
granted review; oral arguments set for October 6, 2015.
•Other states, including Minnesota, Oregon, South Dakota, Utah, and the
District of Columbia also withdrew from the MTC.
•What will Gillette mean for the future of the MTC and the future of
interstate compacts in general?
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59. @CCH_UC #CCHUC15
Decisions from Other States
MICHIGAN:
•In July 2014, the Michigan Supreme Court held that IBM was entitled to use the
MTC’s elective three-factor apportionment formula to calculate its 2008
Michigan Business Tax Liability. IBM Corp. v. Department of Treasury , 852
N.W.2d 865 (Mich. 2014).
•The court found that the Legislature did not implicitly repeal the MTC when the
state replaced the Michigan Business Tax (MBT) with the Corporate Income Tax
(CIT).
•The Legislature responded to the court’s ruling by expressly repealing the MTC
retroactively to January 1, 2008.
•In April 2015, the Michigan Court of Claims ruled that the state’s retroactive
repeal prevents IBM from making the three-factor election. IBM Corp. v.
Department of Treasury, Mich. Ct. Claims, No. 11-000033-MT (4/28/15). 59
60. @CCH_UC #CCHUC15
Decisions from Other States
TEXAS:
•Texas joined the MTC in 1967 and has never officially repealed the Compact.
•But in 2006, the state enacted the Texas Franchise Tax, which uses a single-
factor apportionment formula.
•In Graphic Packaging, taxpayers argued that the franchise tax meets the
definition of an income tax under the MTC, triggering its rules and formulas. The
taxpayers also rejected the state's assertion that the enactment of the franchise
tax implicitly repealed the Compact.
•In July 2015, the Texas Court of Appeals, Third District, determined that the
Texas Franchise Tax is not a tax imposed on net income for MTC purposes and
therefore the Compact’s three-factor apportionment formula provisions are not
available to taxpayers. Graphic Packaging Corp. v. Hegar, 2015 Tex. App. LEXIS
7717 (Tex. App. Austin, 7/28/15). 60
61. @CCH_UC #CCHUC15
Decisions from Other States
MINNESOTA:
•Kimberly-Clark Corp. v. Commissioner of Revenue, 2015 Minn. Tax LEXIS 33
(Minn. T.C., 6/19/15).
•In June 2015, the Minnesota Tax Court ruled on summary judgment that the
state’s repeal of Articles III and IV of the MTC does not violate the U.S. or
Minnesota Contract Clause constitutional provisions.
•The case can be appealed directly to the Minnesota Supreme Court.
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62. @CCH_UC #CCHUC15
Alternative Apportionment
• The standard alternative apportionment provision is found in UDITPA § 18
—“If the allocation and apportionment provisions of this Act do not fairly
represent the extent of the taxpayer’s business activity in this state, the
taxpayer may petition for or the [tax administrator] may require” alternative
apportionment.
• Alternative apportionment may include:
— Separate accounting
— The exclusion of one or more factors
— The inclusion of one or more factors that represents the taxpayers activities in
the state
— Or the employment of any other method to reach equitable apportionment
• Read literally the taxpayer may only ask; while the tax department may require
alternative apportionment. 62
63. @CCH_UC #CCHUC15
Invoking Alternative Apportionment
• Sidney Frank Importing Company v. Michigan, July 31, 2014
—Taxpayer seeks to exclude $2B gain on sale of Grey Goose from sales
factor
—Procedural issues abound; at Court of Appeals for 3rd
time
—Argument: including in tax base and EXCLUDING from sales factor
distorts MI income
—Argument #2: do we include in tax base at all?
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64. @CCH_UC #CCHUC15
Apportionment Formula – Special Industry
Apportionment
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• Considerations Related to Special Industry Apportionment
—Financial Institutions – Receipts sourced to location of borrower & property includes
intangible assets like loans and receivables
—Construction – Include construction in progress
—Professional Sports – Source by duty-days, i.e. proportion based on games played
—Motion Pictures – Source by audience data
—Transportation – Source by in-state mileage, passenger mileage, etc.
—Insurance – Source by premium dollars written
—Airlines – Airplane and flight crew payroll may be apportioned based on number of
departures from the state
—Communications – Source by cable-miles, circulation, satellite uplink and downlink
stations, or location of the customer
65. @CCH_UC #CCHUC15
Personal Income Tax Issues
• Nonresident Owners
—Partners, S corp shareholders, LLC members
• Tax Computation Methodologies
—Three-factor apportionment
—Direct accounting
—Entity v. Aggregate Approach
—Mixing and Matching in NY
• Difference between LLCs and S Corp factor-based apportionment
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