The Eversheds Sutherland SALT Team is always excited to see what kind of pets our clients and friends have. Our team features a different pet at the end of every month, and we want to feature YOURS! Featured pets will receive a fun prize from the SALT Team. The deadline for October submissions is Wednesday, October 25.

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

Don’t have the app? It is available for download in the Apple App Store, Google Play and the Amazon Appstore.

View previously-featured furry friends.

Eversheds Sutherland (US) is a proud sponsor of the COST Annual Meeting taking place October 22-25, 2017, in Orlando, Florida. The Eversheds Sutherland SALT Team presents, and details of their presentations are below:

October 23, 2017
“The SALT Academy Awards”
Speaker: Partner Carley Roberts

October 24, 2017
“Are You Prepared? MTC and States to Finally Begin Transfer Pricing Effort”
Speaker: Partner Jonathan Feldman

October 25, 2017
“California’s State Board of Equalization is Being Substantially Replaced”
Speaker: Senior Counsel Eric Coffill

View details, including registration information, here.

Eversheds Sutherland SALT releases the seventh edition of its SALT Scoreboard, a quarterly publication that tracks significant state tax litigation and controversy developments. This edition of the SALT Scoreboard highlights developments regarding the sales taxation of drop shipments and the inclusion of entities in a combined report. Also included is a Spotlight on cases involving the United States Commerce Clause.

View our Eversheds Sutherland SALT Scoreboard results from the third quarter of 2017!

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In recent years, the tax community has engaged in an effort to promote transparency in tax administration. This effort culminated in Maryland with the passage of Senate Bill 843 by the 2016 General Assembly and was enacted in Chapter 582 of the Acts of 2016 (the “Act”). Included in a statute that largely addressed the evaluation process of certain tax credits are four lines that could provide Maryland taxpayers with the ability to obtain guidance through private letter rulings (“PLRs”).

Specifically, the Act required the Comptroller to adopt procedures and protocols related to the implementation of a PLR process intended to provide guidance to taxpayers. The legislation was hailed in tax blogs and tax publications, such as Tax Analysts and the Council On State Taxation’s Scorecard on Tax Appeals & Procedural Requirements. In their article for the October 2017 edition of Tax Talk, Eversheds Sutherland attorneys Jessica Eisenmenger and DeAndre Morrow discuss that the kudos may have been premature, as Maryland’s 2017 legislative session has called into doubt the future prospects of the Act’s PLR process.

View the full article.

By Alla Raykin and Charlie Kearns 

The US Court of Appeals for the Sixth Circuit held that the Tax Injunction Act (TIA) barred a religious nonprofit from bringing a federal suit over Tennessee’s denial of a retroactive property tax exemption. In Islamic Ctr. of Nashville v. Tennessee, the Islamic Center of Nashville sought a refund for property tax paid while its property was held by the bank under the terms of an ijara. Because Islamic doctrine prohibits interest, an ijara is a financial vehicle used to avoid interest. Here, the Islamic Center of Nashville transferred title of the property to the bank and paid the bank lease payments. Once title was transferred back to the Center, the Center sought a property tax refund for the years it paid tax while title was held by the bank. The Sixth Circuit upheld the District Court’s dismissal, because an action in a federal court seeking a refund of tax paid contravened TIA’s purpose of preventing the use of federal courts to avoid a state tax assessment. The Sixth Circuit distinguished the present case from US Supreme Court precedent in Hibbs v. Winn, 542 U.S. 88 (2004), where the plaintiffs sought to strike down a tax credit statute as unconstitutional, rather than to absolve the plaintiffs of tax. Here, the court reasoned, the Center sought a finding that the denial of the tax exemption was invalid. Therefore, the court concluded that the TIA prevented the federal court from interpreting state tax provisions when a sufficient state remedy existed. (– F. 3d –, 2017 WL 4159484 (6th Cir. Sep. 20, 2017).

Read our September 2017 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

  • Blazing a Trail for More Local Taxes by Ballot Initiative
    On Aug. 28, 2017, in California Cannabis Coalition v. City of Upland, the California Supreme Court held local taxes imposed by taxpayers via initiative are subject to less stringent requirements than taxes imposed by local governments pursuant to Proposition 218.

EVENTS – LEARN ABOUT OUR UPCOMING EVENTS

 

Eversheds Sutherland (US) is a proud sponsor of the TEI Dallas SALT Day 2017 taking place October 17, 2017, in Dallas, Texas. The Eversheds Sutherland SALT Team presents, and details of their presentations are below:

“State and Local Income Tax Litigation – Cases Not to Miss”
Speakers: Carley Roberts and Liz Cha

“Sales and Use Tax Update”
Speakers: Todd Betor and Ted Friedman

“Current Developments in Unclaimed Property”
Speakers: Liz Cha and Ted Friedman

“California’s Major Tax Agency Shakeup: What Now?”
Speakers: Carley Roberts and Tim Gustafson

“State and Local Tax Aspects of Mergers and Acquisitions”
Speakers: Todd Betor and Ted Friedman

View details, including registration information, here. 

By Huy “Mike” Le and Andrew Appleby

The New York State Tax Appeals Tribunal (Tribunal) held that the Department’s assessment of two non-admitted German insurance companies violated the United States-Germany Tax Treaty’s anti-discrimination clause and the US Constitution’s Foreign Commerce Clause.

The alien non-admitted non-life insurance companies had no premiums from sources in the United States. The insurance companies’ activities in New York and the United States were limited to holding interests in limited partnerships that owned real estate in New York and throughout the United States. The insurance companies did not challenge whether they had nexus with New York. An Administrative Law Judge (“ALJ”) previously determined that the insurance companies, as non-admitted non-life insurance corporations, were properly subject to insurance franchise tax, not premium tax. The ALJ also affirmed the Department’s alternative allocation method, which applied an entity theory and imposed tax only on the distributive share from the partnerships using the partnerships’ allocation factors. See previous coverage here. 

The Tribunal affirmed the ALJ’s reasoning. However, the Tribunal ultimately reversed the ALJ’s final conclusion based on an argument that the insurance companies had not raised at the ALJ level. The Tribunal concluded that the Department’s assessment discriminated against the insurance companies based on their status as alien insurers, which violated the United States-Germany Tax Treaty and the Foreign Commerce Clause. Although treaties generally do not apply to state and local taxes, the anti-discrimination provision generally does apply. 

The Tribunal compared the alien insurance companies’ treatment to the treatment of an otherwise similarly situated domestic, non-New York insurance company. The Tribunal determined that the Department’s assessment imposed a more burdensome tax treatment on the alien insurance companies. A crucial fact in these cases was that the alien insurance companies had zero premiums in the United States, and zero United States effectively connected income from premiums. 

The Tribunal also briefly noted that, although it did not have to decide the issue, the Department’s assessment would impede the federal government from “speaking with one voice” in regulating foreign trade, which would violate the Foreign Commerce Clause. In re Bayerische Beamtenkranekenkasse AG, DTA No. 824762 (N.Y. Tax App. Trib. Sept. 11, 2017); In re Landschaftliche Brandkasse Hannover, DTA No. 825517 (N.Y. Tax App. Trib. Sept. 11, 2017).  

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Meet Dante and DaVinci, two mini donkeys (aka “the donkey doodles”), belonging to Paychex Inc. Manager of State and Local Tax Dee Waldruff and her family. Dee’s thoroughbred, Alice, and her retired racing Greyhound, Indy, were previously featured as Pets of the Month in March 2015. Dante and DaVinci joined the Waldruff family shortly thereafter when Dee saw that they were available in a Facebook group post. The donkeys’ previous owner had passed away, and family members were trying to re-home the pair. Dee knew when she saw them that they had to be part of the family.  

Dante and DaVinci joined two horses, three dogs, two cats and a pony on the Waldruff property affectionately referred to as the “Walderosa.”  They quickly became quite the security team, alerting everyone with their loud braying anytime a stranger or animal wandered onto the property.

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Finding suitable names for the donkeys was not the easiest of tasks. Dee and her daughter went back and forth with ideas for weeks. Aragorn and Legolas, Buckbeak and Hedwig, Button and Bobbin were all considered, but nothing fit until they landed on Dante and DaVinci.   

Adding the donkey doodles to the Waldruff herd was admittedly the perfect solution to Dee’s mid-life crisis. She says, “Some people want fancy cars, I wanted mini donkeys.” If you ask her husband, he believes it was a moment of insanity. Either way you look at it, they are wonderful additions to the family and bring smiles to everyone they meet.

We are thrilled to feature Dante and DaVinci as our September Pets 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.”

By Mike Kerman and Jonathan Feldman

The Delaware Chancery Court held that a town’s $27,000 building permit “fee” was in substance a tax that could not be levied against a tax-exempt water and sewer authority. The town assessed the fee upon the water and sewer authority before it would issue a permit to construct a water storage tank. Whether the town could impose such a charge depended on whether it was properly characterized as a fee or a tax, regardless of its label as a fee. The distinction, the court said, is that a fee is directly related to a service received or a burden contributed by the payer, and is intended to offset the government’s costs of regulating or policing the conduct or risks. A tax, in contrast, is an enforced contribution (not a voluntary payment) imposed without any relationship to specific benefits received by the taxpayer. Based on this distinction, the court found the building permit fee to be a tax because it was calculated without regard to any benefits to the authority and would be used within the town’s general revenue fund. The record failed to show that the town would incur costs anywhere near the $27,000 charge in processing the authority’s permit. Thus, there was no direct relationship between the $27,000 and the benefits received or burdens contributed by the tax-exempt water and sewer authority, therefore the tax could not be imposed. Camden-Wyoming Sewer & Water Auth. v. Town of Camden, C.A. No. 12347-VCS (Del. Ch. Sept. 18, 2017).