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: What senate bill did the New York governor recently sign which aligns New York City’s nexus standards with New York State’s economic nexus standards?

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. Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

TEI’s Audits and Appeals Seminar, the only tax conference of its kind, is less than two weeks away. You won’t want to miss these ‘must-attend’ SALT sessions:

  • State Tax Judges Panel – Hear from the Other Side of the Bench is a perennial favorite at TEI’s Audits and Appeals Seminar, providing insights into the working of a court room and what state court judges value and dislike, enabling you to litigate cases more effectively.
  • State Auditors Roundtable – A discussion with MTC and State Auditors features four auditors to give a perspective from the other side of the table – discussing the greatest challenges, issues and opportunities on how to make audits go more smoothly.
  • Clear, Direct and Persuasive Writing features expert Ben Opipari from Persuasive Writing on how to ensure your communications are clear, direct and persuasive.

The seminar, being held just outside of Washington, DC, offers two distinct tracks – Federal Tax Controversies and State & Local Tax Controversies. The second day and a half is devoted to SALT matters and will cover the most pressing challenges in-house professionals face when managing state and local audits and appeals, as well as insights from state auditors and state tax court judges.

We hope you can join us! Register today: https://bit.ly/3NTWanS

In this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove welcomes back Counsel Charles Capouet for a discussion of taxpayer wins and losses in Q1 and Q2 of 2022. Thanks to the SALT Scoreboards, they cover key cases from each quarter and what the results mean.

Continuing tradition, they conclude with Jeremy’s favorite question—overrated/underrated? Are first day of school photos underrated or overrated?

Read the Q1 and Q2 editions of the SALT Scoreboard here.

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

 

 

 

 

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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: What state’s governor recently signed into law a bill that will reduce the state’s top corporate income tax rate from 5.9% to 5.3 % beginning on January 1, 2023?

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. Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

On August 31, 2022, New York Governor Kathy Hochul signed S.B. 9454, which aligns New York City’s nexus standards with New York State’s economic nexus standards. For tax years beginning on or after January 1, 2022, businesses have nexus with New York City and are subject to the City’s business corporation tax if they have at least $1 million in New York City receipts. A corporation also has nexus if it has less than $1 million in New York City receipts, but has at least $10,000 in receipts within the City, and is part of a unitary group that has at least $1 million in New York City receipts.  Grants received from the New York State and City’s COVID-19 small business relief programs do not count toward the New York City receipts threshold.

There is an additional nexus threshold for companies in the business of issuing credit card or merchant customer contracts. Under the existing law, the New York City nexus threshold was satisfied for companies that have issued either (1) credit cards to at least 1,000 customers with a mailing address in the city, (2) merchant customer contracts to at least 1,000 or more merchants located in the city, or (3) any combination of these two factors that add up to 1,000 customers. According to the new law, for those companies that do not meet the threshold on their own, New York City nexus can also be satisfied if the companies have at least (1) 10 customers with a mailing address in the city, (2) merchant customer contracts with at least 10 merchants located in the city, or (3) any combination of these two factors that add up to 10 customers, and are part of a unitary group whose members in the aggregate satisfy the above-referenced 1,000 customer threshold.

Eversheds Sutherland Observation: Out of state businesses operating in New York City without a physical presence, or New York businesses that have been subject to New York State but not New York City business corporation tax, will need to review their activity in New York City to determine whether their activities in New York City may now create nexus.

In addition to the nexus provisions, the bill provides that New York State taxes paid based on profits or income do not reduce an entity’s New York City entire net income subject to tax. For entities electing to pay the state and city pass-through entity-level taxes, those optional taxes also do not reduce the entity’s entire net income for purposes of determining its New York City general corporation tax or banking corporation tax liability.

On August 31, 2022, the D.C. Attorney General Karl Racine announced that his office was pursuing an action against an individual, Michael Saylor, for allegedly owing individual income tax to the District as a resident under a “fraudulent scheme.” The Attorney General is also pursuing a violation of the False Claims Act related to his failure to file and pay the tax since 2005, as well as fraud or negligence penalties. Further, the Attorney General is pursuing claims against his employer MicroStrategy, Inc. for allegedly conspiring with him to avoid paying D.C. income tax by failing to withhold District income taxes. The action highlights the breadth of the District’s False Claims Act statute (recently expanded in 2021), the Attorney General’s interest in pursuing tax cases outside of the administrative process, and – more generally – the District’s unique issues with respect to tax residency.

In its complaint filed August 22, 2022, the Attorney General contends that Mr. Saylor is responsible for D.C. individual income tax since 2005 because he was either, or both: (1) domiciled in the District; or (2) a statutory resident. A statutory resident is an “individual who maintains a place of abode within the District for an aggregate of 183 days or more during the taxable year, whether or not the individual is domiciled in the District.”  D.C. Code Ann. § 47-1801.04(42).

As acknowledged by the Attorney General, this is the first lawsuit it has filed under the recently-amended False Claims Act. Prior to 2021, the District’s False Claims Act (D.C. Code Ann. § 2-381.02) did not apply to tax matters whatsoever. However, the D.C. Council amended the act to apply to “claims, records, or statements … that refer or relate to taxation.”

Courts may impose treble damages for violations of the D.C. False Claims Act, in addition to civil penalties of between $5,500 and $11,000 for each violation.

A copy of the relator’s False Claims Act Complaint and Jury Demand is here. A copy of the complaint filed by the Office of the Attorney General is here. Stay tuned to Eversheds’ SALT Shaker for continuing information on this case, as well as District tax residency and False Claims Act tax matters.

District of Columbia et al. v. Saylor et al., Case No. 2021 CABSLD 001319 B (D.C. Super. Ct. complaint filed Aug. 22, 2022).

In this episode of the SALT Shaker Podcast policy series, Eversheds Sutherland Partner and host Nikki Dobay welcomes back Stephanie Gilfeather, Director of Indirect Tax at Expedia Group. They are joined by Sarah McGahan, Managing Director at KPMG’s Washington National Tax Practice SALT Group.

Sarah co-authored a recent STRI study entitled Locally Administered Sales and Accommodations Taxes: Do They Comport with Wayfair? The study addresses the compliance challenges faced by businesses subject to locally administered taxes. Sarah provides greater detail on the research, methodology and purpose of the study, and together they explore its impact and the burdens addressed.

Nikki’s surprise nontax question is holiday themed. Do you have any Labor Day Weekend traditions?

The Eversheds Sutherland SALT team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. This series, which is focused on SALT policy issues, is hosted by Partner Nikki Dobay, who has an extensive background in tax policy.

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

 

 

 

Listen now:

Subscribe for more:

   

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: What state’s Supreme Court recently found that the state’s combined reporting statute requiring taxpayers to include certain foreign affiliates in its income tax return was constitutional?

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. Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

In just the first few months of the 2022 tax year, we have already seen several states introduce legislation that would decrease corporate and individual income tax rates.  Idaho became the first state to pass such legislation this year, on February 4.  The Eversheds Sutherland SALT team expects other states to follow and will provide updates here as new changes are made.

The Latest Updates

On August 11, Arkansas Governor Hutchinson signed into law SB 1 and HB 1002, which will reduce the top corporate income tax rate from 5.9% to 5.3% beginning on January 1, 2023.  In addition, the bills will reduce the state’s top income tax rate for residents, individuals, trusts, and estates from 5.5% to 4.9% in 2022.

On July 8, Pennsylvania Governor Wolf signed into law HB 1342, which will reduce the corporate net income tax rate from 9.99% to 8.99% beginning on January 1, 2023.  The bill will also phase the corporate net income tax rate down by half a percentage point annually, until it reaches 4.99% in 2031.

On June 27, Philadelphia Mayor Kenney signed Bill No. 210284, which will lower the city’s business income and receipts tax on net income from 6.20% to 5.99% beginning with the 2023 tax year.

On June 17, New Hampshire Governor Sununu signed into law HB 1221, which will reduce the rate of the state’s business profits tax from 7.6% to 7.5% for tax years ending on or after December 31, 2023.

On April 13, Nebraska Governor Ricketts signed into law LB 873, which will gradually decrease the top rate on individual and corporate income tax rates.  Specifically, the legislation reduces the corporate income tax rate for taxable income in excess of $100,000 from 7.5% to 7.25% in 2023, 6.5% in 2024, 6.24% in 2025, 6% in 2026 and 5.84% in 2027.  In addition, the state’s individual top tax rate of 6.84% will be reduced annually from 2023 through 2027, ultimately resulting in a top tax rate of 5.84% in 2027.

On April 13, the Kentucky General Assembly voted overrode Governor Beshear’s veto of HB 8, which will reduce the state’s 5% individual income tax rate if certain revenue targets are met.  Specifically, if the balance of the state’s budget reserve trust fund account at the end of a fiscal year is greater than 10% of the receipts deposited in the general fund for that fiscal year, and such deposited receipts are equal to or greater than the authorization by the General Assembly to expend such receipts for that fiscal year, then the tax rate will be reduced by 0.5%.

On April 5, Mississippi Governor Reeves signed into law HB 531, which will gradually decrease the top rate on individual income in excess of $10,000 to from 5% to 4% by 2026 and eliminate the current 4% tax bracket on income between $5,000 and $10,000 in 2023.  Specifically, the legislation reduces the individual income tax rate for income in excess of $10,000 from 5% to 4.7% in 2024, 4.4% in 2025 and 4% in 2026.

On March 15, Indiana Governor Holcomb signed into law HB 1002, which will decrease individual income tax rates annually.  Specifically, the legislation reduces the gross income tax rate from 3.23% to 3.15% in 2023 and 2024.  In addition, the gross income tax rate will further decrease provided state revenue fund collections meet certain targets annually.

On March 1, Iowa Governor Reynolds signed into law HF 2317, which will decrease individual and corporate income tax rates annually for tax years 2023 through 2025.  Specifically, the legislation reduces the corporate income tax rate over time based on the net corporate income tax receipts for the preceding year.  If net corporate income tax receipts for the preceding fiscal year exceed $700 million, the corporate income tax rate will be adjusted in such a way that when combined with all other applicable rates, the tax rates would have generated net corporate income tax receipts that equal $700 million in the preceding fiscal year.  Such adjustments will take place at the end of each tax year until the corporate income tax rate is reduced to a cap of 5.5%.  In addition, the state’s individual top tax rate will be reduced annually from 2023 through 2026, ultimately resulting in a 3.9% flat tax being imposed in 2026.

On February 11, Utah Governor Cox signed into law SB 59, which will decrease individual and corporate income tax rates.  Specifically, the legislation lowers the individual and corporate income tax rates in Utah from 4.95% to 4.85%.  These individual and corporate income tax changes are retroactive to January 1, 2022.  Utah is the second state to pass such legislation this year.

On February 4, Idaho Governor Little signed into law HB 436, which will decrease individual and corporate income tax rates.  Specifically, the legislation lowers the corporate income tax rate from 6.5% to 6% and consolidates the personal income tax brackets from five brackets to four and lowers the rates as well.  HB 436 also provides a one-time tax rebate totaling $350 million of personal income taxes (returning approximately 12% of an individual’s 2020 Idaho personal income tax or $75 per individual taxpayer and dependents, whichever is greater).  These individual and corporate income tax changes are retroactive to January 1, 2022.

The principle of nondiscrimination plays a pivotal role in the field of state and local taxation. Discriminatory taxes are said to deter cross-border activity, distort competitive neutrality, and hinder economic efficiency by placing a thumb on the scale of the competitive marketplace. Recognizing these issues, federal and state governments have prohibited discrimination since the founding of our country.

Despite the many barriers to tax discrimination, state and local governments often are unable to restrain themselves from pursuing additional revenue or favoring some businesses over others. Over the last century, state and local governments have continuously been found to have engaged in impermissible tax favoritism or punishment. One avenue of curtailing that behavior is Congress’ affirmative grant of legislative authority to regulate interstate commerce under the Commerce Clause of the US Constitution.

In this installment of A Pinch of SALT for Tax Notes State, Eversheds Sutherland attorneys Maria Todorova, Eric Tresh and Fahad Mithavayani focus on state and local tax discrimination under the affirmative Commerce Clause, which has played a critical role in harnessing state and local taxes that impermissibly target inherently interstate industries and activities.

Read the full article here.