New York Governor Andrew Cuomo released his Fiscal Year 2022 budget and accompanying legislation on January 19, 2021 (the Budget Bill). In this webcast, Eversheds Sutherland attorneys Ted Friedman, Michael Hilkin and Chelsea Marmor analyze the state tax implications of the Budget Bill, along with recent New York litigation developments and Department of Taxation and Finance guidance that could impact businesses in 2021.
View the presentation slides here.
How do you change your state of domicile? What makes you a resident of a particular state? While these questions appear simple on the surface, the answers are complex and can vary depending on the state. That’s why Eversheds Sutherland’s SALT team has honed our knowledge and expertise on these issues to provide answers. Our practitioners have deep experience in addressing residency issues across the country, including issues in high tax jurisdictions like California, New York and Illinois.
If you’re facing a state tax residency audit, we can help. Our team has successfully defended taxpayers at all stages of the administrative process in cases that are incredibly fact-intensive and invariably intrusive. We also routinely assist high-net-worth individuals with navigating both the objective factual thresholds and the critical subjective elements – such as demonstrating intent – involved in adequately severing ties with one jurisdiction and establishing new connections in another.
Our team will continue to cover the latest developments in state tax residency – administrative guidance, decisions, rules and regulations – as well as introductions to and overviews of some of the relevant authority in various states – i.e. What makes a California resident?
These resources merely scratch the surface, however. If you have questions regarding state tax residency, please contact a member of our SALT team to learn more.
In this episode of the SALT Shaker Podcast, host Chris Lee discusses four recent developments, which includes a New York State advisory opinion addressing the taxation of email services (TSB-A-20(30)S, July 14, 2020), an Iowa publication addressing the taxability of computer peripherals, a Rhode Island rule concerning the taxability of online hosted software related to advertising services (Ruling Request No. 2020-03, December 29, 2020) and an Alabama Tax Tribunal decision addressing the taxability of prepaid wireless services (Cellular Express, Inc. v. Department, Ala. Tax Trib. No. S.14-320-JP – January 21, 2021). 
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Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!
We will award prizes for the smartest (and fastest) participants.
This week’s question: What state, which is home to a mega ranch owned by two musicians featured on The Voice, also has pending legislation to exempt master music recordings from sales tax?
E-mail your response to SALTonline@eversheds-sutherland.com.
The prize for the first response to today’s question is a $25 UBER Eats gift card.
Answers will be posted on Saturdays in our SALT Weekly Digest. Be sure to check back then!
On January 6, 2021, the Court of Appeals of New Mexico held that a power purchase agreement (PPA), entered into by a wholesale electricity generator to secure compensation in exchange for providing electricity, constituted intangible property that is not subject to property taxation and cannot be included in the value of the wholesaler’s electric plant for property tax purposes. The Court also held that, for purposes of valuing the plant, it was appropriate to use the cost of acquisition, rather than the cost of construction, to determine the tangible property cost of the plant. The Court reasoned that, under the applicable statute, “tangible property costs should first be based on the cost of acquisition, and then on the cost of construction only if the cost of acquisition is not known or available.” Finally, the Court concluded that it was appropriate to consider the PPA in determining whether the wholesaler was entitled to deductions from the plant’s value due to obsolescence, and that the wholesaler was not entitled to deductions because the PPA mitigated obsolescence.
On January 29, Connecticut Rep. Josh Elliot, D-Hamden, and twenty-four other co-sponsors filed proposed HB 6187, which proposes to establish a 10 percent tax on the annual gross revenues derived from digital advertising services in the state for any business with annual worldwide gross revenues exceeding $10 billion. The proposed bill calls for the revenue of this new tax along with several other revenue-raising measures in the proposed bill to be used to provide a one-time direct payment of $500 to individuals who experienced economic hardships due to the COVID-19 pandemic and received unemployment compensation during certain periods in 2020.
Because Connecticut legislators may introduced legislation as a short statement in non-statutory language, HB 6187 lacks the formal statutory language normally expected. The Joint Committee on Finance, Revenue and Bonding will now consider the proposed bill and determine if it should be sent to the Legislative Commissioners’ Office for full drafting of the bill’s text.
Connecticut will now join those states considering a tax on digital advertising, including Maryland and New York.
In this episode of the SALT Shaker Podcast policy series, Partner Nikki Dobay discusses the recently released New York State budget with Michael Hilkin, Counsel in the New York office. There doesn’t seem to be a lot to see here for businesses, or is there? Although there aren’t any significant revenue raisers aimed specifically at businesses, there is a provision that would eliminate a very important appeal protection. This proposed adjustment would be a costly and time-consuming change to the New York State tax appeal process.
The Eversheds Sutherland State and Local Tax team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. This series, which is focused on state and local tax policy issues, is hosted by Partners Nikki Dobay, Charlie Kearns and Todd Lard, who each have extensive backgrounds in tax policy.
Questions or comments? Email SALTonline@eversheds-sutherland.com.
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State legislators have been actively proposing state tax legislation. In this webcast, Partners Jeff Friedman and Michele Borens provide an update on the latest legislative proposals across the country that will impact marketplace facilitators and sellers with Associate Sam Trencs.
After a successful trial-run, the Illinois Department of Revenue (IDOR) recently announced plans to expand its Audit Fast Track Resolution (FTR) program to general income tax disputes in October.
The FTR program allows for the expedited resolution of audit disputes through a conference with a neutral mediator while a case is still under the jurisdiction of the IDOR Audit Bureau. The IDOR launched the FTR program as a pilot in December 2018, targeting certain “cash businesses,” such as restaurants, that may lack formal tax record-keeping processes. The IDOR then made the program permanent in September 2020 and expanded its scope to all sales tax audits except for Motor Fuel Use Tax.
Officials from the IDOR told Bloomberg Tax that the decision to expand the program follows the successful resolution of 80 percent of FTR cases that have gone through the conference process. Although the FTR program has mostly resolved cases involving cash-based businesses, the IDOR expects the mix of participants to evolve as the program starts processing income tax disputes, Audit Bureau manager Roger Koss told Bloomberg Tax.
Illinois FTR Program Basics
The primary goal of the FTR program is to resolve disputed audit adjustments through a one-day conference with a neutral mediator, called an “FTR Facilitator.”
The single-day FTR Conference can be attended by the taxpayer’s authorized designee and will only cover the documents and issues presented during the audit. The FTR program is optional, allowing a taxpayer to withdraw at any time without losing statutory rights.
Statute of Limitations
The FTR application includes a waiver of the statute of limitations period that runs from the application filed date through 120 days after the issuance of a closing memorandum that formally ends the FTR process.
Mandatory Confidentiality Agreement
The FTR application contains a confidentiality agreement that must be executed at the time the application is filed. A taxpayer must agree that any discussions, offers, counter-offers or proposed audit adjustments or resolutions are confidential and shall not be disclosed nor used as evidence or admissions in any subsequent administrative or judicial proceedings. Any violation of the agreement constitutes a material breach which may result in the voidance of any related FTR resolution and/or disqualification in subsequent participation in the FTR program.
Other FTR Program Considerations
Although the FTR program is an attractive option for taxpayers seeking to wrap up an audit and avoid the costs of litigation, acceptance is not guaranteed – the IDOR retains complete discretion regarding whether to accept a taxpayer into the FTR program. Reasons for rejection from the FTR Program include:
Finally, the IDOR states that it may reject an application if “one or more of the audit issues sought for FTR resolution requires judicial interpretation or is otherwise reserved for litigation and not appropriate for FTR consideration.” This last open-ended consideration means that it remains to be seen whether the IDOR will accept FTR applications involving high-dollar disputes or complex issues. It is also unclear whether the expansion of the FTR program will impact the willingness of auditors to resolve adjustment disagreements during the course of an audit, or if auditors will rely on FTR Facilitators to make difficult calls. We expect to see further guidance regarding the FTR program expansion later in the year.
On January 19, 2021, House Bill 1303 was filed, which would amend the Business and Occupation Tax to impose a tax of 1.8% on gross income of a business engaged in selling or exchanging personal data within Washington. The bill defines “personal data” to include any information that is linked or reasonably linked to an identified or identifiable natural person but does not include deidentified data, publicly available information or certain information sold by a state agency. “Gross income” subject to the 1.8% tax is calculated based on the ratio of Washington addresses (both physical and internet protocol addresses) in the personal data to all addresses, or if this information is not available, the ratio is based on Washington’s relative percentage of US population. This tax would become effective January 1, 2022.
