Speakers and panels announced for Day 3: Managing State and Local Tax Controversies

Eversheds Sutherland is delighted to participate in a full-day program on Managing State and Local Tax Controversies (May 3, 2017) during TEI’s 2017 Audits & Appeals Seminar. Session details:

  • Beyond Paper Pushing – Consequences of State Tax Filings
    Speakers: Michele Borens and Andrew Appleby
  • Overcoming the Challenges of State Tax Audit Management
    Speakers: Jeff Friedman and Carley Roberts
  • Pay Up or Protest! Challenging Assessments
    Speakers: Eric Tresh and Tim Gustafson
  • Resolution Through the Courts
    Speakers: Eric Coffill and Maria Todorova
  • Navigating Through State Tax Controversy – Considerations Everyone Should Know About
    Speakers: Jonathan Feldman and Leah Robinson
  • Lunch panel featuring state tax judges
  • Industry Perspective of Managing Audits and Litigation
    Featuring:

    • Jim Kennedy, OppenheimerFunds
    • Cooper Monroe, Duke Energy
    • Tom Pucci, Expedia
    • Elena Xu, Facebook

TEI’s Audits & Appeals Seminar will take place May 1-3, 2017, in Seattle, Washington:

  • May 1-2: Insights and Skills for Federal Tax Controversy Success
  • May 3: Managing State and Local Tax Controversies, sponsored by Eversheds Sutherland

You are invited to register for all three seminar days, the first two days or the final day devoted to state and local tax controversy, depending on your individual needs.

View details and register now!

 

By Chris Lutz and Charlie Kearns

On February 10, 2017, the US Court of Appeals for the Sixth Circuit held in Wayside Church v. Van Buren County, 847 F.3d 812 (U.S. 6th Cir. 2017) that the Tax Injunction Act (TIA) and the principle of comity barred federal courts from hearing the taxpayers’ arguments that a Michigan county court’s foreclosure sale of their properties constituted an unconstitutional taking in violation of the Fifth Amendment of the US Constitution. On appeal from the US District Court, the Sixth Circuit concluded that the TIA and comity “only allow federal courts to exercise jurisdiction when state courts cannot provide ‘plain, adequate, and complete’ remedies,” and therefore, “only one analysis is required.” Because the taxpayers could bring their suits alleging an unconstitutional taking to state court—a “plain, adequate, and complete remedy”—the federal courts did not have jurisdiction to hear the matter. Wayside Church v. Van Buren County, 847 F. 3d 812 (U.S. 6th Cir. 2017).

By Nicole Boutros and Scott Wright

A New York State Division of Tax Appeals administrative law judge (ALJ) determined that a telecommunications provider’s electricity purchases were not exempt from sales tax as sales for resale. In so doing, the ALJ rejected the taxpayer’s assertion that it resold electricity by incorporating it into its telecommunications services, explaining that the regulation on which the taxpayer relied applies to tangible personal property purchases, which electricity is not. The ALJ further held that the taxpayer was not exempt under a separate provision for resales of electricity, finding that the taxpayer was not reselling electricity upon sale of its telecommunications services and that the electronic signals powering its network were only incidental to the services for which its customers contracted. Matter of XO Communications Services, LLC, DTA Nos. 826686 & 827014 (N.Y. Div. Tax App. Mar. 9, 2017).

By Evan Hamme and Tim Gustafson

The New York State Department of Taxation and Finance issued an advisory opinion exempting from New York state sales tax a charge the petitioner paid to a cable company to cover the cable company’s costs to expand its cable network to bring broadband Internet to the petitioner’s rural location. The Department disagreed with the petitioner’s contention that the charge was exempt from sales tax as a charge for a capital improvement on real property. However, the Department found the charge to provide broadband Internet service to the petitioner was nonetheless exempt from sales tax as a charge for the “provision of internet access service.”  N.Y. Advis. Op., TSB-A-16(32)S (Dec. 2, 2016).

By Samantha Trencs and Eric Tresh

The New York State Department of Taxation and Finance issued an advisory opinion concluding that a detailed report of customer behavior that includes both client-specific and industry-related information is a service subject to sales and use tax. Tax Law § 1105(c)(1) imposes sales and use tax on information services; however, the tax is not imposed on information that is personal or individual in nature which cannot be substantially incorporated in reports furnished to other persons. The Department determined that the personal or individual information exclusion did not apply in this case because a portion of the information in the client reports came from public sources that could be utilized in other reports for similarly situated clients and thus was not personal or individual in nature. The Department further determined that the non-personal information included in the client reports was not de minimis. Without the use of the non-personal information about a client’s particular industry, a comparison of the client’s performance relative to its competitors would not be possible. TSB-A-16(33)S. The advisory opinion is consistent with the Department’s expansive interpretation of sales tax on information services. 

Earlier this week, the Multistate Tax Commission held its 2017 March Committee Meetings. Eversheds Sutherland Attorneys were on the scene for all committee meetings. Several interesting and enlightening items were discussed. This alert highlights key developments from the meeting, including:

  • Considerations of developing a model entity-level tax on pass-through entities;
  • The return of the Use Tax Information Reporting Model;
  • The Section 18 Regulatory Project; and
  • State tax implications of federal tax reform.

View the full Legal Alert.

Last week, the Michigan Department of Treasury issued a Notice to Taxpayers explaining its approach in administering the now final Michigan Court of Appeals decision in LaBelle Management, Inc. v. Department of Treasury, 888 N.W.2d 260 (Mich. Ct. App. 2016), leave to appeal denied by 889 N.W.2d 250 (Mich. 2017) (mem.). The Court invalidated the Department’s position of indirect ownership rules for purposes of determining whether companies are more than 50% owned and included in a unitary business group. The Notice explains that:

  • LaBelle applies retroactively;
  • The Department expects taxpayers to make corrective filings for all open tax years for purposes of both the Michigan Business Tax and the Michigan Corporate Income Tax; and
  • Corrected filings resulting from LaBelle will not be subject to penalties and the Department will waive interest for returns filed by December 31, 2017.

View the full Legal Alert.

By Chris Lutz and Carley Roberts

The Kentucky Court of Appeals held that the Kentucky Department of Revenue must publish final administrative rulings, even when those rulings are not appealed to the Board of Tax Appeals. The Office of Attorney General had previously determined that the Department’s decision not to provide even redacted copies of final rulings in administrative protests was supported by Kentucky law, which prohibits or restricts disclosure of certain taxpayer information. After a trial court held that all rulings should be disclosed, the Department appealed, contending that final rulings not subsequently appealed should not be subject to inspection because they contain private taxpayer information that is not otherwise a matter of public record and that cannot easily be segregated from non-exempt information.

Ruling against the Department, the Court of Appeals concluded that the Department had “taken an unreasonably and overly broad view of” the state’s privacy laws. The court explained that final rulings by the Department must contain a general statement of the issues in controversy and the Department’s position with respect to those issues; “[c]onsequently, the substantive portions of final rulings contain a wealth of information relative to the implementation of [Kentucky’s] tax laws.” Because redacting the rulings would sufficiently protect the privacy of the taxpayers involved in the rulings, the Open Records Act requires their publication. Finance and Administration Cabinet v. Sommer, No. 2015-CA-001128-MR (1/13/2017).

By Jessica Eisenmenger and Open Weaver Banks

The Wisconsin Court of Appeals for District III upheld the Tax Appeals Commission’s decision that separating dredged material from contaminated river water into its constituent parts for the purpose of water pollution remediation constitutes “processing” of tangible personal property and is therefore a taxable service. Tetra Tech EC, Inc. v. Wisconsin Dep’t of Revenue, No. 2015AP2019 (Wis. Ct. App. Dec. 28, 2016).

Traditionally, mandatory worldwide combined reporting was the state corporate tax issue of most concern to companies engaged in international business. States are now moving toward a water’s-edge unitary combination method for both US and foreign-based companies.

In his article for the Spring 2017 edition of Partnering Perspectives, Eversheds Sutherland (US) Senior Counsel Eric Coffill covers four trends towards increasing the tax base of a state by expanding the water’s-edge.

View the full article.