Policy and Legislation

On March 12, 2018, Idaho’s governor signed into law H.B. 463 (the Bill), which provides a series of changes to Idaho’s income tax law in response to H.R. 1, popularly referred to as the Federal Tax Cuts and Jobs Act (the Act). The main changes to Idaho tax law include:  (i) conformity, for tax years beginning after January 1, 2018, to the IRC as of January 1, 2018; and (ii) the add-back to federal taxable income of all amounts previously deducted on the corporation’s federal tax return under: (a) IRC § 245A (the 100% DRD for certain foreign-source dividend) and (b) IRC § 250 (containing the deductions for GILTI, IRC § 78 gross-up amounts related to GILTI, and FDII). The Bill also preserves the pick-up of the Act’s one time transition tax or repatriation tax under IRC § 965 for tax years beginning in 2017 and the add-back to federal taxable income the corresponding deduction in IRC § 965, which were enacted by H.B. 355 on February 9, 2018.

However, Idaho H.B. 659, currently pending, proposes to limit the add-back of amounts deducted under IRC § 250 to the deduction for GILTI and related IRC § 78 gross-up amounts, and H.B. 684, also pending, proposes to remove the add-back of amounts deducted under IRC § 965.

The Georgia Legislature has introduced its annual Internal Revenue Code (IRC) conformity bill—HB 821. Georgia conformity is typically updated annually to apply for the most recent tax year. In light of the recently enacted federal tax reform, this year’s conformity bill will receive particular attention because of what tax reform provisions Georgia chooses to adopt and not to adopt.

View the full Legal Alert.

Recently enacted federal tax reform is expected to generate $6.5 billion in additional federal revenue through 2027 by increasing corporate tax liability for certain state and local incentives. 

In their article for Bloomberg, Eversheds Sutherland attorneys Timothy Gustafson and Hanish Patel discuss the change and opportunities to minimize its impact.

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On January 10, 2017, California Assembly member Phil Ting introduced and read Assembly Bill (“AB”) 102 for the first time. Introduced as a placeholder bill, AB 102 consisted of a single section and sentence: “SECTION 1. It is the intent of the Legislature to enact statutory changes relating to the Budget.” 

Then, in less than two weeks in June 2017, the California Legislature gutted and amended this innocuous bill into a 19-page plan to drastically alter the landscape of California’s tax system. As signed by the governor, AB 102 stripped the California State Board of Equalization of all but its constitutional powers, created a new agency named the California Department of Tax and Fee Administration, and created a second new agency named the Office of Tax Appeals. Three months later, clean-up legislation in AB 131 made further changes. 

In his article for the January 2018 edition of the Journal of Multistate Taxation and Incentives, Eversheds Sutherland attorney Eric Coffill discusses the history and events leading up to those changes and provides a glimpse of the (somewhat uncertain) California tax landscape going forward.

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Under notice dated December 26, 2017, the California Office of Tax Appeals (OTA) released its Final Draft Emergency Regulations on the Rules for Tax Appeals (Emergency Regulations), which will be submitted to the Office of Administrative Law for review in the coming days.

  • The Emergency Regulations are largely based on the Board of Equalization’s prior Rules for Tax Appeals but contain some notable differences.
  • For example, the OTA is authorized to remove the precedential status of BOE opinions and designate its own opinions as precedential if the opinion establishes a new interpretation of law, resolves an apparent conflict in the law, or makes a significant contribution to the law, among other reasons.
  • The Emergency Regulations also outline procedures for requesting a closed hearing and/or sealed records in appeals from both the California Department of Tax and Fee Administration and the California Franchise Tax Board.

View the full Legal Alert.

By Chelsea Marmor and Jonathan Feldman

The Washington Administrative Review and Hearings Division of the Department of Revenue found that an out-of-state diamond and gold wholesaler was subject to the business and occupation (B&O) tax based on in-state consigned property. The wholesaler consigned jewels to Washington jewelry retailers for five days at a time, during which time the retailers had the option to purchase. The audit began when the Department identified the wholesaler as a creditor in financing statements within Washington UCC filings. Upon petition of an assessment for the wholesaling B&O tax, the Hearing Division concluded that the consigned jewels constituted substantial nexus as the person who consigns property retains ownership of that property. Further, the B&O tax applied because the jewels were located in Washington at the time they were sold to the retailer and thus the purchaser received the goods in Washington. Det. No. 17-0057, 36 WTD 529 (2017).

Tax reform efforts, if successful, will have a major impact on virtually every business. There has been a great deal of reporting on the tax reform process and the proposed changes to the US Internal Revenue Code (IRC). This Alert provides a high-level overview of the top 7 tax reform issues that all executives need to know:

  • Current status of tax reform
  • Tax rate for corporations and partnerships and other pass-through income
  • Limitations on interest deductibility
  • Immediate deductibility of otherwise capital costs
  • Changes to the US international tax system
  • State and local tax impacts
  • Compensation and benefits provisions

View the full Legal Alert.

On November 2, 2017, Republicans in the House of Representatives released their much-anticipated tax reform bill. The Tax Cuts and Jobs Act proposes numerous changes to the Internal Revenue Code, many of which will have an impact on taxpayers’ state and local tax liabilities.

  • Most states conform to the federal income tax base —at least in part. Consequently, federal base changes—either in the form of contraction or expansion—will have an impact on the state tax bases. States will need to weigh many considerations as they decide whether to conform.
  • The Commerce Clause may restrict a state’s ability to conform to some of the international tax provisions of the House Plan that may not also apply to purely domestic companies.
  • The House Plan proposes numerous changes that would move toward a territorial system of taxation. These will have an impact on state and local taxation, both by changing a taxpayer’s federal taxable income and by impacting taxpayer decision-making.

View the full Legal Alert.

At the conclusion of a state tax audit resulting in an assessment, one of the first questions to consider is: “How much time do we have to do something about this?” Likely, there is a reference to a deadline of some sort somewhere around the middle of page 2 of the assessment notice. Those deadlines are often 30, 60, or 90 days.

In this edition of A Pinch of SALT, using baseball as a theme, Eversheds Sutherland attorneys Open Weaver Banks and Charles Capouet describe variations in state administrative appeal processes and considerations taxpayers should be aware of once they receive an assessment or similar notification from a state taxing authority.

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On November 1, 2017, the District of Columbia will begin implementing a new sales and use tax exemption application process for Qualified High Technology Companies (QHTCs). The new application procedure signifies a shift to essentially a pre-certification process and creates new documentation requirements for companies seeking QHTC benefits. Key considerations include:

  • Companies will now be required to file an annual online application in order to obtain the QHTC Exempt Purchase Certificate. The current Exempt Purchase Certificates will expire on January 31, 2018.
  • In addition to questions relating to the statutory QHTC eligibility requirements, the District requires that companies state the number of QHTC employees hired and jobs created, along with the number who are District residents. These questions may have been formulated to gather information to determine the effectiveness of the QHTC program.
  • Because taxpayers have previously self-certified as QHTCs, the Office of Tax and Revenue may reject companies’ applications now, rather than audit them later.

View the full Legal Alert.