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The long saga of Michigan’s Multistate Tax Compact election continued on Wednesday with oral argument before the Michigan Court of Appeals. A packed courtroom witnessed a 1.5 hour proceeding before an active three-judge panel. The arguments focused primarily on: (1) whether legislation can retroactively repeal the state’s adoption of the Multistate Tax Compact; (2) whether…

By Michael Penza and Timothy Gustafson

The California Franchise Tax Board (FTB) issued an information letter explaining that a trust is taxable in California if any of the following three conditions are met: (1) the trust has income from California sources; (2) a trustee is a resident of California; or (3) a non-contingent beneficiary is…

Upholding retroactive legislation recently enacted by the Michigan Legislature, the Michigan Court of Claims today dismissed multiple cases where taxpayers had appealed the Department of Treasury’s denial of their ability to elect three-factor apportionment under the Multistate Tax Compact.  See, i.e., Taskawa America, Inc. v. Department of Treasury, Case No. 11-000077-MT (Mich. Ct.

By Evan Hamme and Timothy Gustafson
A California Superior Court held that passive membership in a limited liability company (LLC) is insufficient to meet California’s statutory “doing business” standard. In Swart Enterprises, Inc. v. California Franchise Tax Board, an Iowa corporation with no business activities or physical presence in California invested in a fund organized

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By Christopher Chang and Jack Trachtenberg

New York’s highest court has ruled that the state violated the Constitution when it retroactively denied tax credits to businesses under the 2009 amendments to the state’s Empire Zone Program. The Empire Zone Program is designed to stimulate private investment and job creation in designated areas throughout the state…

By Todd Betor and Pilar Mata

Oregon’s $29 million corporate excise tax claim against the taxpayers’ parent company was held to violate both the Due Process and Commerce Clauses of the U.S. Constitution by the U.S. Bankruptcy Court for the District of Delaware. Oregon claimed that Washington Mutual, Inc. (WMI) was liable for its subsidiaries’…

This morning, the North Carolina Court of Appeals released its decision in Delhaize America, Inc. v. Lay, No. COA11-868 (N.C. Ct. App. 2012). Delhaize, formerly known as Food Lion, formed an intangible holding company as part of a restructuring in the late 1990s. The Secretary of the North Carolina Department of Revenue sought to combine Delhaize with its intangible holding company on the ground that combination was necessary to reflect Delhaize’s “true earnings,” which is a North Carolina statutory standard used to justify the application of forced combination. The Department assessed Delhaize approximately $20.6 million in tax, interest, and penalty, which Delhaize challenged primarily on procedural due process grounds.

The definition and application of “true earnings” has been a controversial issue. In Wal-Mart Stores East, Inc. v. Hinton, 676 S.E.2d 634 (N.C. Ct. App. 2009), the North Carolina Court of Appeals held that the Secretary of Revenue has discretionary authority to apply forced combination, and the court will not disturb the Secretary’s findings absent an abuse of discretion. Moreover, the Wal-Mart court defined “true earnings” to include income up to the limit found in the U.S. Constitution.Continue Reading Delhaized and Confused: North Carolina Court of Appeals Finds Forced Combination, Penalty