On July 30, the Multistate Tax Commission (MTC) approved amendments to the Multistate Tax Compact’s (1) definition of nonbusiness income, (2) definition of “sales,” (3) factor-weighting, (4) alternative apportionment, and (5) sourcing of service and intangible revenue. With the approval, the amendments officially become a model act of the MTC, and taxpayers should expect legislation
Multistate Tax Compact
Dazed and Confused: Alaska Supreme Court Determines Foreign-Source Dividends are Includable in the Apportionable Tax Base
The Alaska Supreme Court held that a foreign member of a water’s edge unitary group must include its foreign dividend income in the Alaska apportionable tax base, regardless of whether the income is “effectively connected income” (ECI) for federal income tax purposes. Alaska law incorporates the Internal Revenue Code, including the ECI…
Michigan Supreme Court Upholds the Compact Election
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MTC Executive Committee Advances Significant Part of UDITPA Rewrite
On May 8, the Multistate Tax Commission’s Executive Committee voted to advance its amendments to the Multistate Tax Compact’s definition of nonbusiness income, definition of “sales,” factor weighting, and the sourcing of service and intangible revenue. The Committee essentially embraced the MTC’s original proposed amendments and failed to incorporate any of the comments and observations…
In-and-Out in Oregon: Department Updates Rules on Apportionment and Adjustments
By Mary Alexander and Timothy Gustafson
In an administrative order, the Oregon Department of Revenue (1) repealed a rule related to Oregon’s Multistate Tax Compact (MTC) statute, (2) changed the method for utility and telecommunication providers to elect a double-weighted sales factor and (3) provided instructions on the time to adjust a return based on…
Compact Texas Trial Court Decision Denies MTC Three-Factor Election
By Madison Barnett and Jonathan Feldman
A Texas trial court denied a taxpayer’s claim that it was entitled to use the Multistate Tax Compact’s three-factor formula election for the Texas Margin Tax. The court’s order did not specifically address either the availability of the election or whether the tax meets the MTC’s definition of an…
Two States, One Compact: Michigan Joins California in Reviewing the Multistate Tax Compact
By Todd Betor and Pilar Mata
On July 3, 2013, the Michigan Supreme Court granted International Business Machines Corporation’s (IBM) motion for leave to appeal the Court of Appeals’ November 20, 2012, judgment in favor of Michigan in International Business Machines v. Department of Treasury, Michigan Supreme Ct., Case No. 146440. Consequently, the highest…
Texas, the Lone Apportionment State: Comptroller Rejects MTC Election, Declining to Consider Merits of Gillette Decision
By David Pope and Pilar Mata
The Texas Comptroller of Public Accounts determined that a taxpayer was not permitted to elect the Multistate Tax Compact’s (Compact) three-factor apportionment formula. This treatment is consistent with prior Texas Comptroller decisions holding that Texas law requires a single-factor apportionment methodology (see Sutherland SALT’s previous articles on this topic…
Michigan Court Allows Multistate Tax Compact Election
On June 6, 2013, the Michigan Court of Claims became the second court in the country to hold that the Multistate Tax Compact (the Compact) is a binding multistate compact that cannot be repealed by a separate, subsequent statute. The taxpayer was thus entitled to apportion its income under the former Business Income Tax component…
MTC Three-Factor Election Falls Flat in Texas
By Zachary Atkins and Prentiss Willson
A Texas administrative law judge ruled that a taxpayer was not entitled to make an alternative three-factor apportionment election under Article IV of the Multistate Tax Compact (Compact) for Texas franchise tax purposes. The Texas Tax Code requires taxpayers to use a single gross receipts factor to apportion taxable…