expense disallowance

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The New York State Tax Appeals Tribunal affirmed a New York State Division of Tax Appeals determination denying a refund claim to a taxpayer that sought to apply the income sourcing rules for registered broker-dealers to receipts from its separate investment advisory business. The taxpayer structured its broker-dealer operations and investment advisory operations into two…

The New Jersey Tax Court held that distributions made to a corporation’s two shareholders constituted dividends, and rejected the corporation’s argument that the distributions should be treated as compensation for managerial services that could be deducted for New Jersey Corporation Business Tax purposes. The Court explained that New Jersey has adopted the federal test to…

The Massachusetts Appellate Tax Board disallowed a deduction for Indiana utility receipts tax (URT) paid by a natural gas distribution operator with operations in Indiana. The deduction for the URT was disallowed, for purposes of computing Massachusetts net income for corporate excise tax, because the URT is not a deductible “transaction tax.” The Board found…

In Kraft Foods Global, Inc. v. Director, Division of Taxation, 2018 WL 2247356 (May 17, 2018), the New Jersey Superior Court, Appellate Division, recently upheld a New Jersey Tax Court decision denying a taxpayer an exception to the state’s interest add-back requirement in determining the taxpayer’s corporate net income subject to New Jersey’s corporation…

By Andrew Appleby and Dmitrii Gabrielov

The New York State Tax Appeals Tribunal released its precedential decision in Stewart’s Shops, affirming an Administrative Law Judge’s determination that payments by a corporation to its captive insurance company did not qualify as deductible insurance premiums because the arrangement did not constitute insurance for federal income tax…

By Zachary Atkins and Charlie Kearns

The Massachusetts Appeals Court upheld an Appellate Tax Board decision disallowing interest expense on certain intercompany financing transactions because the underlying agreements did not establish an “unqualified obligation to repay.” The taxpayers, subsidiaries of a British utility, entered into a series of complex agreements—deferred subscription agreements—to sell and repurchase…

By Charles Capouet and Andrew Appleby

A New York State Division of Tax Appeals ALJ determined that payments by a corporation to its captive insurance company did not qualify as deductible insurance premiums because the arrangement lacked risk shifting and risk distribution. The taxpayer primarily owned and operated convenience stores and gas stations, and insured…

By Zack Atkins and Eric Coffill

A Virginia trial court held that royalties paid to related members that are reported to, but not taxed by, other states do not qualify for the exception to the state’s corporate income tax addback statute. In granting summary judgment in favor of the Virginia Department of Taxation, the court…