Meet Fiver, the adorable pet rabbit belonging to Brandi Drake, Strategic Tax Senior Director at Charter Communications. Brandi and her husband Matthew volunteer at Charlotte-Mecklenburg Animal Care and Control in Charlotte, North Carolina, where they agreed to foster two rabbits, Fiver and his twin brother Roger. Roger was adopted by another family and after fostering Fiver for four months, Brandi and Matthew knew they were his forever home. 

Fiver is a feisty little rabbit who loved playing with his late dog brother Logan and cat sister Key. He adores vegetables and will sit up and pay attention when he hears them being taken out of the fridge. He also demands daily ear rubs, sitting beside his people until he gets them, and if they take too long to give him attention, he will nudge them with his nose.

Fiver gets his daily exercise by running laps around the living room and through his play tunnel before settling down to cool off on top of the air vent.

We are so excited to feature Fiver as our May 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.”

On May 24, 2018, the Circuit Court of Cook County upheld the City of Chicago’s imposition of its amusement tax on streaming services.

  • On June 9, 2015, the Chicago Department of Finance issued a ruling indicating that electronically delivered amusements are subject to the amusement tax.
  • The circuit court upheld the tax against arguments that the tax violated the federal Internet Tax Freedom Act, the Commerce Clause of the United States Constitution and the Uniformity Clause of the Illinois Constitution, and that the tax exceeds Chicago’s home rule authority.
  • Now that Chicago has received a court ruling that the tax does not violate state and federal law, taxpayers should expect that Chicago will aggressively step up their enforcement of the tax.

View the full legal alert.

Maryland Tax Court holds that Maryland’s limitation of interest on refunds resulting from the US Supreme Court’s decision in Comptroller of the Treasury of Maryland v. Wynne violates the US Constitution.

  • In 2014, the Maryland legislature passed a law to retroactively limit the statutory interest rate on refunds related to the Comptroller of the Treasury of Maryland v. Wynne decision.
  • The Tax Court held that the same rationale used by the Supreme Court in finding the law at issue in Wynne was in violation of the dormant commerce clause also applies to the limited interest rate on Wynne refunds.
  • The limited interest on Wynne refunds is also the subject of a separate class action lawsuit filed in the Circuit Court of Baltimore City, which had previously been dismissed due to Plaintiff’s failure to exhaust administrative remedies.

View the full legal alert.

The IRS intends to issue regulations pertaining to states’ attempts to subvert the state and local tax deduction cap.

  • The Tax Cuts and Jobs Act imposed a $10,000 ($5,000 for married individuals filing separately) limit on state and local tax deductions for federal income tax purposes.
  • Certain states, including New York, New Jersey, and Connecticut, have enacted legislation to allow taxpayers to claim a federal tax deduction in excess of the SALT cap.
  • The pending regulations will emphasize that federal income tax substance-over-form principles, not state laws, dictate the characterization of the charitable contributions.

View the full legal alert.

The Oregon Tax Court held that the state was not constitutionally prohibited from imposing its statewide 911 tax on an out-of-state VOIP service provider with no physical presence in the state. The court held that the 911 tax was not a sales or use tax because it was not measured by sales price (rather it was a fixed fee) or imposed on the purchase or sale of telecommunication services (rather on those who have access to the 911 system through such services). Accordingly, the 911 tax was not a tax controlled by the Quill physical presence standard for Commerce Clause purposes. Instead, the court found that the taxpayer’s regular sales of telecommunication devices and services directly to Oregon residents constituted sufficient purposeful availment (Due Process) and substantial nexus with the state (Commerce Clause) to satisfy both constitutional standards. In finding that the tax did not create an undue burden on interstate commerce, the court found that the taxpayer did not show that the tax created a “welter of complicated obligations” similar to the sales and use taxes in Bellas Hess and Quill. Ooma Inc. v. Dep’t of Revenue, No. TC-MD 160375G (Or. Tax Ct. Apr. 13, 2018).

On May 14, 2018, Indiana Governor Eric Holcomb signed into law H.B 1316 (the Bill). The Bill provides a number of changes to Indiana’s tax laws, including responding to provisions of the federal Tax Cuts and Jobs Act. Some notable provisions of the Bill include:

  • updating Indiana’s conformity to the Internal Revenue Code from January 1, 2016 to February 11, 2018, effective for taxable years beginning on or after January 1, 2018;
  • specifying that any IRC amendments made by an act passed by Congress prior to February 11, 2018, other than the 21st Century Cures Act or the Disaster Tax Relief and Airport and Airway Extension Act, that is effective for a taxable year that begins before February 11, 2018 and affects corporate taxable income, is also effective for the same taxable year for purposes of determining Indiana adjusted gross income.
  • specifying that amounts under IRC 951A (GILTI) are treated as foreign source dividends for Indiana purposes, which means that Indiana’s Dividends Received Deduction for foreign source income under Ind. Code § 6-3-2-12 will apply to GILTI;
  • providing for similar treatment of amounts under IRC 965 Repatriation Transition Tax;
  • specifying that to the extent any amounts from the Repatriation Transition Tax or GILTI are included in Indiana income, these receipts will be included in the Indiana apportionment factor and sourced based on the rules for dividends from investments;
  • decoupling from the limitation on interest expenses under IRC 163(j); and
  • decoupling from the federal unlimited NOL carryforward period under IRC §172 and instead providing for a carryforward period of 20 years.
Eversheds Sutherland Observation: Indiana’s treatment of GILTI as a “foreign source dividend” puts GILTI on equal footing with Subpart F income (including the Repatriation Transition Tax) for Indiana corporate tax purposes. Under Indiana Code § 6-3-2-12, a 100% DRD is allowed for foreign source dividends from 80% owned corporations. The DRD is reduced to 85% for dividends from corporations in which the US shareholder owns a 50-80% interest, and further reduced to 50% for dividends from corporations in which the ownership percentage is 50% or less. Indiana’s treatment of GILTI under the Bill is similar to certain other states’ treatment of GILTI including Georgia, which exempts both GILTI and Subpart F income from state taxation, and Illinois, which has a foreign dividend subtraction that applies to both GILTI as well as Subpart F income.

Read more here: Indiana H.B. 1316

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 May submissions is Friday, May 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.

The Eversheds Sutherland SALT team presents at the Tax Executives Institute (TEI) Denver Chapter State and Local Tax Day on May 15, 2018, in Lakewood, Colorado. Details of their presentations are below.

The Future of Sales Tax Collection – Update on Wayfair and Sales Tax Preparedness
Speakers: Michele Borens

Oh So GILTI – Update on State Tax Implications of Federal Tax Reform
Speakers: Robb Chase and Maria Todorova

Not A Class Act – The Recent Aggressiveness of Local Taxing Authorities and Class Action Lawsuits
Speakers: Michele Borens

Legislative Roundup – Update on State Tax Legislative Developments
Speaker: Michele Borens and Alla Raykin

Slicing the Pie – Update on State Tax Apportionment Litigation
Speakers: Maria Todorova and Ted Friedman

The Tax Cuts and Jobs Act, P.L. 115-97,[1] made sweeping changes to the Internal Revenue Code, and will have far-reaching implications for state tax systems that broadly conform to the IRC.

In this article for Law360, Eversheds Sutherland attorneys Jeffrey Friedman, Eric Tresh, Todd Lard and Todd Betor focus on the major state income tax implications of the TCJA’s international tax provisions, including:

  • The transition tax imposed by revised IRC § 965;
  • The foreign-source dividends received deduction, or DRD, allowed by new IRC § 245A;
  • The tax on global intangible low-taxed income, or GILTI, in new IRC § 951A and related deduction in IRC § 250;
  • The deduction allowed for foreign-derived intangible income, or FDII, in new IRC § 250; and
  • The base erosion anti-abuse tax, or BEAT, imposed under new IRC § 59A.

View the full article.

The New York City Department of Finance recently announced the availability of penalty abatements for certain taxpayers that have underpaid business taxes due to the inclusion of Section 965 income.

NYC Finance Memorandum No. 18-4 (PDF) describes tax considerations and late payment penalty relief for NYC taxpayers affected by Section 965 and subject to the General Corporation Tax (GCT), the Banking Corporation Tax (BTX), and the Unincorporated Business Tax (UBT).

Like many states and localities, New York City does not provide for the deferred payment of NYC tax attributable to net Section 965 income. Therefore, S corporations and unincorporated businesses taxed under the GCT, BTX and UBT may see substantial increases in their NYC tax liability. Memorandum No. 18-4 indicates that penalty abatements are available to certain taxpayers that receive bills from the NYC Department of Finance that include an underpayment penalty attributed to net Section 965 income.

For information regarding submitting a penalty abatement, see the instructions on Memorandum No. 18-4 and the NYC Department of Finance website.

Section 965 Background

NYC Finance Memorandum No. 18-4 addresses changes caused by Federal Public Law 115-97, known as the Tax Cuts and Jobs Act (TCJA), which was signed into law on December 22, 2017. The TCJA introduced a new Internal Revenue Code provision, Section 965, which imposes a one-time transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.

The TCJA allows certain taxpayers to 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.

New York State Notice on Section 965 Income

Many states and localities do not provide for the deferral of Section 965 income or repayment. In April, the New York State Department of Taxation and Finance issued Notice N-18-4 (PDF) indicating that in the case of S corporation shareholders, individual taxpayers are required to pay the additional New York tax generated by Section 965 income in the tax year it is recognized and included in federal adjusted gross income. Rhode Island and several other states have issued similar guidance.

Related Content

“New York State budget adopts substantial changes in response to federal TCJA” (April 2, 2018)

“Transition tax—enough about how it works; here is what doesn’t work” (April 9, 2018)

“Party Like It’s 1986: Business Impacts of the Bill Formerly Known as the Tax Cuts and Jobs Act” (December 22, 2017)