On Wednesday, September 18, SALT attorneys Michele Borens, Jeff Friedman, Maria Todorova and Jeremy Gove will provide various SALT updates to TEI’s Seattle Chapter.
Sessions and speakers include:
At long last, the California Franchise Tax Board (FTB) issued a Notice of Proposed Rulemaking today to amend FTB’s market sourcing regulation: California Code of Regulations, title 18, section 25136-2 (“Reg. 25136-2”). This is the latest step in a long journey that began over seven years ago, when FTB held its first interested parties meeting (IPM) on the subject in January 2017. After five additional informal IPMs, each with its own iteration of draft amendments, the governing three-member Board authorized the agency to begin the formal amendment process in September 2021. Now, three years later, that process begins.
The proposed amendments largely mirror those found in the draft circulated in advance of FTB’s last informal IPM in June 2021. Among other things, the amendments include simplifying presumptions for sourcing receipts from services related to real property, tangible personal property, and individuals, special sourcing rules for receipts from asset management services, and a special assignment rule for professional services provided to more than 250 customers. See our prior coverage (here and here) for additional information on the proposed amendments and background on the entire process. If adopted, the amendments will apply to taxable years beginning on or after January 1, 2024.
FTB will accept written comments on the proposed amendments until October 31, 2024. FTB also will hold a public hearing on the draft language if it receives a written request for a hearing at least 15 days prior to the close of the comment period.
From back-to-school shopping to packing lunchboxes, it’s clear the new school year has already begun! Let’s look forward to another season of growth and early mornings as we move into fall.
Amidst the excitement of the new school year, we gathered some photos from members of our Eversheds Sutherland SALT family. Join us in celebrating these young scholars and wishing them a successful year!
1: Legal secretary Melissa Bragg’s daughters Madelyn (5th grade) and Emma (11th grade)
2, 4: Associate Cat Baron’s son Beau
3: Partner Jonathan Feldman’s son Micah (6th grade)
5: Counsel John Ormonde’s daughters Audrey and Betsy
6: Paralegal specialist Jaime Lane’s son Cooper (9th grade) and daughter Cassidy (7th grade)
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: Which state’s supreme court recently agreed to hear a case involving the denial of a sales and use tax exemption to a private correctional facility because it failed to establish that it was an agency or instrumentality of the state or federal government?
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. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
The Iowa Department of Revenue ruled that while a data center property owner and its tenant can both independently qualify for the sales tax exemption for data center businesses, the property owner and the tenant cannot aggregate their investments to meet the minimum investment requirement. Iowa law provides a sales tax exemption for data center businesses for the price of computers and equipment necessary for maintenance and operation of the data center business and property. Iowa Code § 423.3(95). To qualify for the exemption, the businesses must meet certain requirements, including a minimum investment made at an Iowa location of two hundred million dollars within the first six years of operation in Iowa. The DOR found that the language of the exemption (“an entity whose business among other businesses, is to operate a data center”), indicated that a data center business consists of a singular entity and therefore did not allow for two data centers to both qualify under the same set of facts. The DOR further found that the tenant and property owner could not aggregate their investments to meet the minimum threshold because the statute does not contain words such as “collective,” “aggregate investment,” or similar language. However, the DOR found that a data center property owner and a data center tenant based at the same physical location can both qualify for the exemption as long as they each independently meet the minimum requirements.
In the Matter of T5 Data Centers LLC 3344 Peachtree Rd NE Atlanta, Georgia 30326, Iowa Declaratory Order No. 439443.
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: Which state’s legislature recently concluded a special session by enacting property tax relief that caps local property tax growth and distributes property tax credits to school districts?
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. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
The New York State Division of Tax Appeals determined that income from the vesting of restricted stock units of a nonresident taxpayer were subject to New York State personal income tax based on the taxpayer’s performance of services in New York during the restricted stock units’ vesting period. The Tribunal also determined that dividends on stock paid out of a deferred compensation plan were not New York source income because the stock on which the dividends were paid had vested before the dividends were issued.
There were two sources of income at issue for the nonresident taxpayer: income from the vesting of restricted stock units and dividends paid out of a deferred compensation plan on restricted stock units that had substantially vested.
The nonresident individual taxpayer argued that the income from the vesting of the restricted stock units was New York source income only to the extent that the taxpayer worked in New York (i.e., a workday allocation method). However, the administrative law judge concluded that the restricted stock units fell within the ambit of a state tax regulation governing the determination of New York source income from restricted stock, 20 NYCRR 132.24. That regulation provided that income from compensation received from stock appreciation rights or restricted stock is New York source income if at any time during the “allocation period” a nonresident individual performed services in New York State for the corporation granting such options. The allocation period is the time from when the stock was received to the earliest of the date that the stock is substantially vested, the individual’s services terminate, or the date that the stock is sold.
With respect to the dividend income, the ALJ determined that, because the stock on which such dividends were issued had vested prior to the issuance of the dividends, the dividends were “clearly not taxable” to the nonresident taxpayer.
In the Matter of the Petition of Adams, Det’n DTA No. 850026 (N.Y. Div. of Tax App. Aug. 8, 2024).
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: Earlier this month, which east coast state enacted a law providing, among other things, tax credits for converting vacant office buildings into residential units?
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. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
Join us for the State & Local Tax Controversy Track of TEI’s 2024 Audits & Appeal Seminar. This year’s seminar includes a panel of distinguished state tax judges moderated by Professor Rick Pomp. The judges will provide their perspective on state tax controversies and reactions to the arguments that they hear.
State Tax Judges Panel
For more information, please contact: meetings@tei.org
The Massachusetts Appellate Tax Board (ATB) struck down a $17.9 million assessment and held that State Street Corp. (State Street), a bank holding company under the Bank Holding Company Act of 1956, was entitled to approximately $14 million in Massachusetts research tax credits because Massachusetts state tax provisions did not prohibit bank holding companies from benefiting from research credits.
State Street filed combined reports, including within such reports two financial institutions: State Street Bank Trust Company and Charles River Systems, Inc. State Street ultimately claimed nearly $14 million in research tax credits on its combined return. The Massachusetts Department of Revenue (Department) audited State Street and determined that it was not entitled to claim such credits under Massachusetts law, asserting bank holding companies were taxed under a different provision than general business corporations and as such were ineligible for research credits.
The ATB rejected the Department’s argument, reasoning that the statute did not limit credit eligibility based on the type of business corporation claiming the credit. As such, the ATB determined that the research tax credit provided under G.L. c. 63, § 38M was available to bank holding companies, and therefore, State Street properly claimed the tax credit.
State Street Corp. v. Comm’r of Revenue, Docket No. C344139 (Mass. App. Tax Bd. Aug. 15, 2024).
