Eversheds Sutherland was delighted to sponsor and lead the two days of TEI’s Audit and Appeals seminar focused on State and Local Tax Controversy (May 2 – 3, 2018). Over the past two days, the conference featured unique and practical content including:

Industry Perspective on SALT Tax Controversy

Moderated by Jeff Friedman, this discussion demonstrated the perspectives and strategies of in-house state tax controversy practitioners.

Speakers included:

  • Linda Kim, The Wonderful Company
  • Denise Helmken, General Mills
  • Ken Wright, Smithfield Foods
  • Chris Lee, Koch Companies Service

Perspectives from the Other Side – State Tax Attorney Panel

Moderated by Pilar Mata from Tax Executives Institute, state tax attorneys from Maryland, Ohio and Texas revealed their department organization, decision drivers and advice for taxpayers.

  • Ray Langenberg, Texas Comptroller of Public Accounts
  • Christine Mesirow, Taxation Section, Ohio Attorney General’s Office
  • Brian Oliner, State of Maryland

All Rise – A View from the Bench

Moderated by Richard Pomp from the University of Connecticut School of Law, this discussion offered valuable insight into the inner workings of three state adjudicative bodies, best practices for taxpayers and counsel alike, and the jurists’ thoughts on the state of state tax.

  • Martha Blood Wentworth, Indiana Tax Court
  • Douglas Bramhall, California Office of Tax Appeals
  • Cade Cole, Louisiana Board of Tax Appeals

On Wednesday, May 2, Eversheds Sutherland hosted a reception at House of Blues New Orleans. A good time was had by all!

  

 

It is more complicated to determine an in-state sale regarding the provision of multistate services or licenses of intangibles. Historically, states looked to a taxpayer’s costs of performing the service or licensing the intangible. Some states have become critical of this cost-of-performance method and replaced it with a market-based method of computing in-state sales.

In this edition of A Pinch of SALT, Eversheds Sutherland Partner Jeffrey Friedman discusses the recent amendments to the Multistate Tax Commission’s (MTC) Model General Allocation and Apportionment Regulations; how the model regulations can be further improved; how states are responding to the model regulations; and what is next for the MTC.

View the full article.

Eversheds Sutherland is a proud co-sponsor of the 2018 TEI Region II Tax Forum taking place June 4-5, 2018, at the Borgata Hotel in Atlantic City, New Jersey. The Tax Forum will include four plenary and ten breakout sessions offering a wide selection of federal, international, and state and local topics.

The Eversheds Sutherland Tax Team presentations are listed below. Eversheds Sutherland will also sponsor the hospitality reception from 5:00 p.m. – 6:30 p.m. on June 4.

  • US federal tax reform
    ES Speaker: Partner Robb Chase
  • International implications of US tax reform
    ES Speaker: Partner Aaron Payne
  • Tax considerations in restructuring and mergers and acquisitions  
    ES Speaker: Partner Taylor Kiessig
  • SALT implications of US tax reform
    ES Speaker: Attorney Todd Betor
  • IRS audit update
    ES Speaker: Partner Jim Mastracchio
  • SALT considerations in restructuring and mergers and acquisitions
    ES Speaker: Partner Maria Todorova
  • Partnership and joint venture update
    ES Speaker: Partner David Roby
  • SALT controversy and related business decisions
    ES Speaker: Partner Jonathan Feldman
  • Ethics
    ES Speaker: Partner Vanessa Scott
  • International implications of US tax reform
    ES Speaker: Partner Daniel Nicholas
  • Managing tax controversies – A global perspective
    ES Speaker: Partner Susan Seabrook
  • State tax policy under the new US order
    ES Speaker: Partner Todd Lard
  • Accounting methods and significant issues and tax-planning opportunities
    ES Speaker: Partner Ellen McElroy
  • Financial reporting considerations post reform: The interplay of Section 451(b) and ASC 606
    ES Speaker: Attorney Mike Resnick

View details and register now!

Notes:

  • The $225 registration fee covers all of the technical sessions, breakfast, lunch and refreshments on both days, as well as our Monday evening reception.
  • Breakfast, luncheons and the reception are open to spouses, guests and vendor-sponsors as well.
  • To reserve your hotel room, use the Tax Executives On-Line Booking Link or call (609) 317-1000 and mention the TEI Conference Code GBTAX18
  • Golf, casinos, transportation to the Boardwalk, spa and other activities are available at all times; arrangements can be made. Attendees will be responsible for fees/costs.

The Rhode Island Department of Revenue recently released Advisory #2018-21 (PDF), which deals with “Section 965” income. The advisory states that the repatriation transition tax is not deferrable for Rhode Island state tax purposes.

Section 965 Background

On December 22, 2017, President Donald Trump signed into a law a bill popularly known as the Tax Cuts and Jobs Act (TCJA). A new Internal Revenue Code (IRC) provision introduced by the TCJA is Section 965, which provides for a transition tax on untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the US.

Certain taxpayers may make an election under Section 965(h) to pay the transition tax in installments over an eight-year period. This election does not, however, defer recognition of Section 965 income, which must be included on a taxpayer’s federal return for the last taxable year beginning before January 1, 2018.

Note that not all states allow transition tax installment payments.

Rhode Island Implications

Like many states, Rhode Island uses federal taxable income, as determined under the current IRC (but without special deductions allowed under federal law), as the starting point for determining taxable income for purposes of the business corporation tax. State law then further modifies the federal taxable amount. See: R.I. Gen. Laws § 44-11-11.

For Rhode Island’s treatment of Section 965 income, the Rhode Island Department of Revenue issued the following chart to clarify current state law:

The Department advised taxpayers to file amended returns if they filed a return that does not reflect this guidance.

More

For an overview on the SALT consequences of federal tax reform, see: “Waiting for the Other Shoe to Drop: State and Local Tax Implications of Federal Tax Reform – International Tax Provisions.” Bloomberg Tax – Daily Tax Report. (March 12, 2018)

For an in-depth look at the mechanics of Section 965, see the Eversheds Sutherland legal alert: “Transition tax—enough about how it works; here is what doesn’t work.” (April 9, 2018)

Read our April 2018 posts on stateandlocaltax.com or read each article by clicking on the title. For the latest coverage and commentary on state and local tax developments delivered directly to your phone, download the latest version of the Eversheds Sutherland SALT Shaker app.

FEATURED PUBLICATIONS

Eversheds Sutherland SALT Scoreboard Publication–First Quarter 2018
Eversheds Sutherland SALT releases the ninth edition of its SALT Scoreboard, and the first of 2018. Each quarter, we tally the results of what we deem to be significant taxpayer wins and losses and analyze those results. This edition of the SALT Scoreboard includes insights regarding New Jersey’s attempted taxation of foreign source income, Virginia’s corporate income tax addbacks, and Detroit’s sales factor numerator. View our Eversheds Sutherland SALT Scoreboard results from the first quarter of 2018!

FEATURED EVENTS

  • TEI’s Audits and Appeals Seminar
    Eversheds Sutherland is delighted to sponsor and lead the two days of the seminar focused on State and Local Tax Controversy (May 2-3, 2018) during TEI’s 2018 Audits & Appeals Seminar.
  • Georgetown Law’s 2018 Advanced State and Local Tax Institute
    Eversheds Sutherland is a proud sponsor of the Georgetown Law 2018 Advanced State and Local Tax Institute taking place May 31–June 1, 2018, in Washington DC. Eversheds Sutherland Tax hosts and sponsors a welcome reception at our DC office from 6:00–7:30 p.m. Eastern standard time, on May 30, 2018.
  • TEI’s 2018 Region II Forum
    Eversheds Sutherland is a proud co-sponsor of the 2018 TEI Region II Tax Forum taking place June 4-5, 2018, at the Borgata Hotel in Atlantic City, New Jersey. The Tax Forum will include four plenary and ten breakout sessions offering a wide selection of federal, international, and state and local topics.

EVENTS – LEARN ABOUT OUR UPCOMING EVENTS

Meet Gracie, the 15-week-old Australian Shepherd/Golden Retriever mix belonging to Eversheds Sutherland SALT Of Counsel Doug Mo and his wife Marcia. Gracie was adopted three weeks ago at a recent adoption event in Dublin, California, where 30 dogs were adopted, including all seven pups from Gracie’s litter.

This sweet girl loves to run around the house with her furry sibling (the 80-pound Catahoula, Nell) in pursuit. Doug says when this happens, Gracie looks like a greased pig in a rodeo, and Nell is one of the wranglers. Gracie has made herself right at home in the Mo household and is an excellent work companion for Doug. During working hours, you’ll often find her curled up under his desk.

We are so excited to feature Gracie as our April Pet of the Month!

To submit YOUR pet to be featured, visit the Eversheds Sutherland SALT Shaker App, click the Pet of the Month in the drop-down, then click “Submit A Pet.”

We hope to see you at the two-day State and Local Tax Controversy conference next week! Our unique sessions feature state attorneys general, a panel of judges, a hands-on protest workshop and an overview of litigation management technology.

In addition, we are featuring the perspectives of in-house SALT tax controversy practitioners:

Session: Industry Perspective on SALT Tax Controversy

This session, moderated by Jeff Friedman, will demonstrate the perspectives and strategies of in-house state tax controversy practitioners.

Speakers include:

  • Linda Kim, The Wonderful Company
  • Denise Helmken, General Mills
  • Ken Wright, Smithfield Foods
  • Chris Lee, Koch Companies Services

You are invited to register for the entire four-day seminar, or the two days devoted to state and local tax controversy, or whichever combination meets your individual needs.

Eversheds Sutherland also invites attendees to join us for a reception at House of Blues New Orleans the evening of Wednesday, May 2. Join us and register for TEI’s Audits & Appeals Seminar today!

Click here for event details and registration information.

The New Mexico Administrative Hearings Office affirmed the Taxation and Revenue Department’s assessment based on General Electric’s exclusion of foreign dividend and Subpart F income from its base income in its New Mexico consolidated return. In this case of first impression, the Hearings Office held that New Mexico’s inclusion of dividends and Subpart F income received from foreign affiliates, while excluding dividends received from domestic affiliates, did not unconstitutionally discriminate against foreign commerce, did not result in multiple taxation of foreign commerce, and did not result in unfair apportionment of foreign commerce. The Hearings Office engaged in a detailed analysis of US Supreme Court case law regarding state taxation of foreign commerce, as well as the New Mexico Supreme Court’s decision in Conoco, Inc. v. Taxation & Revenue Dep’t, 931 P.2d 730 (N.M. 1996), in which the court prohibited the state from including foreign dividend income in the base for separate method filers because domestic dividends were provided favorable treatment over foreign dividends.

With respect to facial discrimination, the Hearings Office determined that there was no facial discrimination under the consolidated reporting method elected by General Electric, because unlike the separate reporting situation considered in Conoco, the inclusion of the domestic subsidiaries’ income in General Electric’s consolidated group created a “taxing symmetry.” According to the Hearings Office, the consolidated reporting method ensured that the income generation activity of the entire group, including the income ultimately distributed through domestic dividends, is still included. The Hearings Office further found that there was no inevitable multiple taxation of foreign income because the apportionment factor included factor representation of the foreign activity and the New Mexico tax was not imposed on the foreign corporation itself, but was an apportioned tax on the entire domestic consolidated group’s income. Regarding General Electric’s third argument, the Hearings Office held that General Electric had not met its burden of showing that the apportionment method resulted in unfair apportionment of income to New Mexico. The Hearings Office cited the US Supreme Court’s decision in Container Corp. v. Franchise Tax Bd., 463 U.S. 159 (1983), for the proposition that standard three-factor apportionment formulas generally avoid unfair distortion and observed the difficulty of finding that General Electric’s 0.1895% New Mexico apportionment factor was “out of all appropriate proportion” to its New Mexico business activities.

In addition to the rulings based on the Commerce Clause arguments, the Hearings Office held that General Electric had a good faith legal basis for excluding foreign dividends and subpart F income from its New Mexico income, given that this was a case of first impression in New Mexico. As a result, the civil negligence penalty under N.M. Stat. Ann. § 7-1-69 was abated. Finally, the Hearings Office denied General Electric’s request for an award of costs and fees related to the protest. New Mexico law provides for the award of reasonable costs and attorney’s fees when a taxpayer is the prevailing party in an administrative proceeding under N.M. Stat. Ann. § 7-1-29.1. The Hearings Office held that General Electric did not prevail on the major issue of the hearing and therefore was not entitled to costs and fees. In the Matter of the Protest of General Electric Company & Subsidiaries, N.M. Admin. Hearings Office, Decision and Order No. 18-12 (Apr. 6, 2018).

On April 24, Maryland Governor Larry Hogan signed Senate Bill 1090 and House Bill 1794, which adds Maryland to the growing list of states that are moving towards a single sales factor formula to apportion corporate net income.

  • Under prior Maryland law, most corporations generally used a three-factor formula based on in-state property, payroll and a double-weighted sales factor.
  • The newly enacted Bills provide a four-year phase-in period to transition from Maryland’s current three-factor formula to a single sales factor formula by tax year 2022.
  • Interestingly, the Bills also allow certain “Worldwide Headquartered Companies” to elect to use the current three-factor formula rather than the new single sales factor formula.

View the full Legal Alert.

Eversheds Sutherland is delighted to sponsor and lead the two days of the seminar focused on State and Local Tax Controversy (May 2 – 3, 2018), which includes a practical focus on the ins and outs of protests:

Session: Challenging Assessments and Filing Protests

Decisions made at the protest level shape the chances of success and the cost of litigation. This session will highlight the tactical considerations and most effective strategies in challenging assessments and filing protests.

Speakers include:

  • Michele Borens, Partner, Eversheds Sutherland
  • Eric Coffill, Senior Counsel, Eversheds Sutherland

Session: Protest Workshop

Hone your protest skills in a real-time practical working session. Learn the best ways to challenge a hypothetical protest, and review strategies and tactics successfully employed by other practitioners.

Facilitated by:

  • Carley Roberts, Partner, Eversheds Sutherland
  • Scott Wright, Partner, Eversheds Sutherland

You are invited to register for the entire four-day seminar, or the two days devoted to state and local tax controversy, or whichever combination meets your individual needs.

Eversheds Sutherland also invites attendees to join us for a reception at House of Blues New Orleans the evening of Wednesday, May 2. Join us and register for TEI’s Audits & Appeals Seminar today!

Click here for event details and registration information.