Shaking things up in state and local tax
Shaking things up in state and local tax
On January 12, 2017, the California Court of Appeal held in a published opinion that a taxpayer passively holding a 0.2 percent interest in a California-based limited liability company (CA LLC) was not “doing business” in the state for purposes of being subject to California’s franchise tax. The court reasoned as follows:
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By Douglas Upton and Andrew Appleby
The New Jersey Tax Court determined that credit card issuers must source to New Jersey all of their interest and interchange fee receipts, and half of their credit card service fees, from New Jersey accountholders. The Tax Court concluded that the Division of Taxation’s regulations required the taxpayers to…
The Louisiana Department of Revenue has proposed a new regulation expansively interpreting Louisiana’s recently enacted related party expense addback statute.
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By Robert Merten and Madison Barnett
The Oregon Tax Court held that Oregon was not constitutionally prohibited from determining the applicable graduated income tax rate of a part-year resident individual based on the individual’s full-year taxable income, even though a majority of that income was earned outside of the state. The taxpayer argued that applying…
By Ted Friedman and Madison Barnett
The North Carolina Court of Appeals held that it would violate Due Process to impose income tax on an out-of-state inter vivos trust because the trust lacked a sufficient connection with North Carolina. The trust was created and governed by laws outside of North Carolina, the Trustee resided outside…
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…
Recently proposed Treasury regulations under IRC § 385 would create sweeping changes to the federal income tax treatment of related-party debt. The Proposed Regulations could also have far-reaching effects for state income tax purposes, particularly on the deductibility of intercompany interest expenses in separate company reporting states.
View the full Legal Alert.
By Mike Kerman and Open Weaver Banks
The Virginia Tax Commissioner ruled that an out-of-state corporation had nexus with Virginia because an employee performed accounting, human resources, payroll and customer support functions from a home office in Virginia. The Commissioner explained that out-of-state corporations are subject to Virginia corporate income tax if they have sufficient…
By Samantha Trencs and Eric Tresh
The Michigan Court of Appeals held that the mandatory apportionment provision of the Michigan Single Business Tax Act did not impliedly repeal Michigan’s enactment of the Multistate Tax Compact’s alternative apportionment election provision. In addition, the court held that the Single Business Tax (SBT) was an income tax under…
By Hanish Patel and Marc Simonetti
In a Chief Counsel Ruling, the California Franchise Tax Board (FTB) ruled that, for purposes of determining its sale factor, a financial information provider should source the sales of its information services based on where the taxpayer’s customer receives the benefit of the service, and not where the ultimate…
