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The Maryland Court of Special Appeals upheld the Maryland Tax Court’s decision holding that the State Comptroller can subject an out-of-state holding company to tax because the holding company did not have economic substance apart from its parent, which was conducting business in the state. In addition to upholding the assessment of tax, the Court…

New York’s highest court dismissed taxpayers’ appeal of an Appellate Division ruling that the payment of tax on intangible income to New York as statutory residents, without a credit for tax paid to Connecticut as domiciliaries, determining that the appeal did not raise a “substantial constitutional question.” Edelman v. New York State Dep’t of Taxation …

The Colorado Supreme Court issued two decisions simultaneously holding that neither Oracle Corporation nor Agilent Technologies, Inc. were required to include in their combined income tax returns holding companies that did not meet the statutory definition of an “includable C corporation.” To be included in a combined return in Colorado, an affiliate must have more…

In a 5-to-4 decision, the US Supreme Court held that states retain sovereign immunity from private suits brought by individuals in courts of other states, and therefore, overruled its prior decision in Nevada v. Hall, 440 US 410 (1979). The decision arose from a longstanding dispute brought by an individual taxpayer against the California…

On April 1, 2019, the Arkansas Office of Hearings and Appeals held that a taxpayer could not deduct interest expense for long-term debt used to finance a cash dividend as a non-business expense allocable to Arkansas because there was no corresponding non-business income allocable to the state.

The taxpayer was a corporation based in Arkansas…

The Maryland Tax Court held that six nonresident Limited Liability Companies (LLCs) wholly-owned by another out-of-state limited liability company owed Maryland income tax despite the fact that the LLCs, as disregarded entities, had no federal income tax liability. Maryland law imposes an income tax “on each pass-through entity that has . . . any member…

The Tennessee Department of Revenue issued a letter ruling finding that a taxpayer’s mobile and web data analytics services were not subject to sales and use tax. The taxpayer’s customers installed the taxpayer’s software code, which collected user data about the customers’ websites or mobile applications. The taxpayer then analyzed the data and granted the…

The Kentucky Court of Appeals held in an unpublished opinion that an out-of-state parent company was not an “includible corporation” as defined by Kentucky law and could not file a consolidated return with its in-state subsidiary. The Department argued that the parent company taxpayer was not an includible corporation because it fell within two exceptions…

On February 26, 2019, the Oregon Tax Court held that an out-of-state cigarette manufacturer’s in-state activities violated Public Law 86-272, resulting in the manufacturer being subject to Oregon’s corporation excise tax. P.L. 86-272 prohibits any state from imposing a net income tax on out-of-state taxpayers that generally limit their in-state business activities to solicitation. The…