State and Local Thinking -- March 2016

State and local Thinking - February 2016SALT Alerts SALT Alerts are available via Twitter.

Wisconsin amends economic substance requirement to conform to federal law

Wisconsin enacted legislation on March 1 that amends the existing economic substance requirement that applies to corporate income tax and personal income tax to conform to the economic substance requirement provided by Internal Revenue Code Section 7701(o). Read the SALT Alert.

Nebraska Department of Revenue amends apportionment regulations to incorporate market-based sourcing
The Nebraska Department of Revenue on Dec. 27, 2015, issued long-awaited regulations clarifying and interpreting Nebraska’s statutory adoption of market-based sourcing for service revenue. Read the SALT Alert.

Virginia court clarifies scope of related party addback safe harbor exception
The Circuit Court of the City of Richmond on Feb. 3 ruled that the safe harbor exception from the Virginia corporation income tax related party addback for certain corporate expenses was limited in applicability to the portion of intangible expenses that was not only subject to tax in another state, but on which tax was actually imposed. Read the SALT Alert.

Ohio Supreme Court holds implied use restriction in property tax exemption for schools no longer exists
The Ohio Supreme Court unanimously has held that real property owned by a public school district’s board of education was exempt from property tax, regardless of how the property was used, reversing the Ohio Board of Tax Appeals (BTA). This decision allows schools to lease unused property without losing the tax-exempt status of that property. Read the SALT Alert.

Florida rental tax violates federal Indian law, but utility tax permitted on land leased by tribe to non-Indians
The U.S. Court of Appeals for the 11th Circuit held on Aug. 26, 2015, that federal law bars Florida’s imposition of rental tax on commercial rent payments by non-Indian retailers for land owned by an Indian tribe. Read the SALT Alert.

Illinois Appellate Court finds hospital property tax exemption unconstitutional
The Illinois Appellate Court held that a statutory exemption for hospital property based on the value of the charitable services the hospital provided was unconstitutional. Read the SALT Alert.

Puerto Rico value added tax takes effect April 1, 2016
Puerto Rico will soon replace its existing state-level sales and use tax with a value added tax system. Despite early indications that the transition would be delayed, the government has indicated the implementation will take place in two major phases, on April 1, 2016, and June 1, 2016. Note: Following the release of this SALT Alert, the Puerto Rico Treasury Department postponed implementation of the tax for 60 days, until June 1, 2016. Read the SALT Alert.

South Carolina Supreme Court rejects Duke Energy’s $126 million tax refund bid
The South Carolina Supreme Court determined that the principal recovered from the sale of short-term securities was distortive, couldn't be included in the sales factor and thus couldn't be used to reduce the percentage of income attributable to South Carolina. Read the SALT Alert.

President Obama signs legislation making Internet Tax Freedom Act permanent
President Barack Obama on Feb. 24 signed the Trade Facilitation and Trade Enforcement Act of 2015, which makes permanent the moratorium on Internet access taxes and multiple or discriminatory taxes on electronic commerce established by the Internet Tax Freedom Act. Read the SALT Alert.

Virginia Department of Taxation expands communications sales tax application to Internet connectivity fees
The commissioner of the Virginia Department of Taxation ruled on Dec. 8, 2015, that charges related to Internet connectivity didn't fall under the protection of the federal Internet Tax Freedom Act. Read the SALT Alert.

Federal Court of Appeals upholds Colorado’s sales and use tax notice and reporting requirements
The U.S. Court of Appeals for the 10th Circuit on Feb. 22 upheld the constitutionality of Colorado’s notification and reporting requirements imposed on out-of-state retailers that don't collect sales tax in the state. Read the SALT Alert.

Massachusetts Department of Revenue addresses sales taxation of employee recognition program charges
The Massachusetts Department of Revenue ruled on Jan. 8 that a company wasn't subject to Massachusetts sales and use tax on charges for the consulting, startup and website design associated with its online employee recognition and rewards program and related program management services. Read the SALT Alert.

Colorado court finds holding company not subject to combination with operating affiliates
A Colorado district court held that the Colorado Department of Revenue erred in requiring the inclusion of a holding company in a corporation’s combined corporate income tax returns because the holding company didn't meet the definition of an “includible C corporation” under state law. Read the SALT Alert.

Taxpayers reminded San Francisco gross receipts tax and payroll expense tax due on Feb. 29, 2016
A number of industries face higher taxes under the gross receipts tax, including businesses engaged in construction, financial services, insurance, professional, scientific and technical services, commercial and residential real estate, and arts, entertainment and recreation services. Read the SALT Alert.

Special considerations for Los Angeles business taxes filing due on Feb. 29, 2016
This alert focuses on the municipal-level tax imposed by the most populous city in California, the Los Angeles Business Tax. Read the SALT Alert.

Mandatory filing of Washington reports or surveys to ensure tax preferences
Taxpayers should be aware of the requirement to complete the important procedural step of filing a uniform Annual Report and/or Annual Survey, in order to receive various benefits characterized as tax preferences. Read the SALT Alert.

Tax webcasts and events Family office operations — Cybersecurity webcast
March 29, 3 p.m. ET
Cybersecurity is a critical issue for family offices, for good reason. Family offices are responsible for large amounts of money, making them a target. In addition, many family offices would admit they’re unprepared to protect the rich and sensitive information they house. 

Indirect tax trends in a digital world webcast
April 28, 3 p.m. ET
Indirect tax continues to metamorphosize. What was originally considered a tax on the transfer of tangible personal property continues to evolve into a tax on the provision of services. This is especially evident in the increasing number of digital goods and services. This program will provide an update on how states are evolving in taxing digital goods and services, including a discussion on transactions involving digital currency. In addition, it will address how the states are applying nexus to these digital service providers. Sign up now.

Tax basis step-up transactions webcast
May 12, 3 p.m. ET
In most taxable transactions, it is possible to structure the deal to achieve a tax basis step-up for the buyer. But is it always desirable, and what’s the best structure to accomplish this? We will summarize the pros and cons of basis step-up transactions and outline the options available to the buyer to achieve a basis step-up. Topics include asset purchases, Section 338(h) (10) and Section 336 elections, partnership transactions with Section 754 elections, Rev. Rul. 99-5 transactions, and other mechanisms to achieve basis step-ups.

Recent changes in IRS organization and exam practices: How do they affect you? webcast
June 1, 3 p.m. ET
This webcast discusses the recent reorganization of the IRS Large Business and International Division, as well as legislative and procedural changes affecting IRS examinations, including partnership audit procedures. Learn about how these changes may influence your business.

Replay past tax webcasts The following webcasts are available for replay for one year after original broadcast date:

Tax accounting quarterly update: March 2016
Learn about developments and significant issues that can affect your financial statements, including accounting for income and non-income taxes. We will focus on the financial reporting implications of these developments. This is part of our series of quarterly webcasts sponsored by Grant Thornton’s Tax and Risk Advisory Services practice. 

Understanding India’s budget for 2016–17
While there have been hiccups in getting certain key bills passed by the upper house of the parliament, the business community is still upbeat about the upcoming union budget for 2016-17. In this webcast, tax professionals from Grant Thornton India and Grant Thornton US address highlights of the 2016-17 budget, along with major policy initiatives and an overview of the long-awaited goods and service tax. 

Executive compensation — Proxy insights, 2016 regulatory updates and not-for-profits
This webcast covers insights gained from assisting our executive compensation clients during proxy season. Topics include updates on institutional advisory firms (proxy advisory firms) and key institutional investors, trends in equity incentive plan design and share requests, regulatory updates, and not-for-profit executive compensation issues and disclosures. 

Transforming your tax function — trends, leading practices and CFOs’ perspective
Tax changes and changing viewpoints about tax around the globe continue to challenge the most effective tax functions in meeting their regulatory requirements, effectively managing risk and adding value to their organizations. Members of Grant Thornton LLP’s national Tax and Risk Advisory Services tax business line and Technology Solutions practice discuss how CFOs view the value of a tax function, how legislative and regulatory changes continue to affect the risk profile of many multinationals, and how to transform a tax function to effectively manage the change. 

Understanding the United States’ response to OECD-BEPS documentation actions
The IRS recently proposed regulations for country-by-country reporting. The regulations don't break new ground, because they largely mirror the OECD’s previously published model template. However, under the surface are numerous complex procedural, policy and practical considerations that must be carefully analyzed. Learn about the IRS’s proposed requirements, related issues and the possible impact on multinational enterprises. Listen to a non-U.S. viewpoint regarding the proposals and hear about opportunities, strategies and practical considerations. 

Partnership creation and care with no regrets
Join an important review of economic and tax provisions in partnership and LLC operating agreements — including their administration from the perspectives of both the drafting attorney and the accountants who apply and administer those provisions. This presentation identifies and discusses commonly encountered mistakes, oversights and constraints, and their potential consequences, and tips on how to avoid them. 

Thought leadership from our State and Local Tax professionals Publications
  • March 15, Tax Analysts, “A SALT Guide to the Internal Revenue Code,” written by Vito Cosmo, SALT managing director, Michael Beck, SALT experienced manager, and Steve Allenson, SALT senior associate.
  • March 10, State Tax Today, “Hamer Leads Hearing on MTC Draft Marked-Based Sourcing Rules,” Jamie Yesnowitz, SALT principal, quoted.
  • March 9, Daily Tax Report, “Hearing on MTC Sourcing Rules Highlights Taxpayer Concerns,” Jamie Yesnowitz quoted.
  • Feb. 25, Tax Analysts, “California FTB Issues Guidance Recognizing Taxpayers Will Appeal Gillette,” Jamie Yesnowitz quoted.

Tax professionals Meet Adam Raschke, senior manager in the Tampa, Fla., office
Adam Raschke is a SALT senior manager in Indirect Tax in the Tampa, Fla., office. He has more than 10 years of experience in multistate and multinational tax matters, including sales and use tax, value added tax, income and franchise tax, personal property tax, intangible taxes and real property transfer taxes. He has worked in a wide variety of industries including manufacturing, retail/wholesale, mining, hospitality, health care and technology.

Before joining Grant Thornton, Adam worked for a Big Four accounting firm and a Chicago-based international consulting firm specializing in tax services.

Adam also serves as the firm’s U.S. Value Added Tax (VAT) liaison. In addition, he was recently appointed to the 2016 VAT Symposium Committee. That appointment coincides with Grant Thornton’s buildout of its VAT practice in the United States.

Adam earned a JD degree from Florida State University College of Law and a BSBA degree in Management from Coastal Carolina University.

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.