State Tax Alerts - This Week's Stories Worth a Second Look

Rusty Little

In case you missed them, the following is a summary of a few key state tax developments, news articles, and observations during the past week:

• Media continues to misinterpret the Amazon.com saga by depicting the issue as a "loophole" as if abiding by the U.S. Constitution and U.S. Supreme Court decisions is now an aggregious tax strategy.
• SALT To Taste - Well Done New Jersey! - from DLP
• Wal-Mart and Amazon.com - Strange Bedfellows?? - from DLP blog at statetaxalerts.com
• Social Media for Tax Professionals: Is It Time for Firms to Kick the Tires? - DLP article in BNA Tax Management Weekly State Tax Report
• Blog post from TEI summarizing the release of the Congressional Budget Office's cost estimate to the states of the Business Activity Tax Simplification Act of 2011 ("BATSA"). Approximately $2 billion in the first year - read more here
• Council on State Taxation files amicus brief in the Washington Supreme Court arguing that a 24-year retroactive period is unconstitutional - pdf copy of the brief here
• One state's Chamber of Commerce's take on corporate tax rates - “Illinois should never have a higher corporate tax rate than our neighboring states”

Reminder - Dow Lohnes Price recently launched its new website design at www.dlptax.com.  Check it out when you have a minute.

SALT To Taste: Well Done New Jersey!

Marshal Kline; Russell Padgett
In a well-founded application of unitary principles and constitutional restraints, the New Jersey Superior Court concluded that BIS LP, Inc. was not unitary with its ninety-nine percent owned limited partnership interest.  After reaching the non-unitary conclusion, the Superior Court determined that BIS LP, Inc. was not subject to New Jersey's corporation business tax.

Read entire newsletter here.

South Carolina Supreme Court Media General Decision Alters the Landscape for Combined Reporting by Taxpayers

On June 14, 2010, the South Carolina Supreme Court reversed a long-standing policy in the state and ruled that a communications company and its subsidiaries could file on a combined basis. In Media General Communications v. South Carolina Dept. of Rev., the court held that the state's relief statute, incorporating UDITPA § 18, provided the department the necessary authority to permit combined reporting. In this interview, BNA speaks with Geoffrey J. Christian, member of Dow Lohnes Price Tax Consulting Group LLC, in Greenville, S.C., about the decision. Dow Lohnes Price served as a consultant to the taxpayer and helped to develop its tax strategy.

Read Geoffrey J. Christian's interview by Dolores W. Gregory here.


Reproduced with permission from Tax Management Multistate Tax Report, Vol. 17 No. 8 (August 27, 2010). Copyright 2010 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com

Court Rules on Entity Apportionment in Tax Case [WebCPA]

A case decided on June 14, 2010, by the South Carolina Supreme Court may have nationwide implications on tax reporting.


Geoff Christian discusses the decision.

Full story here at Accounting Today for the WebCPA.

South Carolina Supreme Court Decision Reached in Alternative Apportionment Case

This announcement provides a description of the recent ruling handed down by the South Carolina Supreme Court in Media General, Inc. et al. v. South Carolina Department of Revenue. Dow Lohnes Price developed an alternative apportionment position to fairly reflect the apportionment of taxpayer’s income to South Carolina and provided legal, computational, and analytical expertise in this case beginning with the audit phase through litigation.

See complete announcement here.

SALT To Taste: It Serves an Operational Function to Whom? Many States are Applying 'Operational Function' in the Wrong Direction

One of the many areas of confusion and misapplication that we see, when states assert taxation of income based on an operational function concept, is determining in which taxing jurisdiction the operational function is served, thereby resulting in that state’s ability to tax non-domiciliary income earned from a separate asset.  In evaluating application of the operational function concept, the basic questions with which to begin are who or what is serving the operational function; to whom is the operational function being served; and where is the recipient of this benefit located?  It’s very possible the state has itself turned around and is lost on the operational function path.

Read this SALT To Taste newsletter here.

SC Supreme Court Hears Oral Arguments on Combined Filing Case

On March 16, 2010, the South Carolina Supreme Court heard oral arguments in the appeal of Media General Communications, Inc. & Media General Broadcasting of South Carolina Holdings, Inc. v. S.C. Dept. of Rev. & Media General, Inc. v. S.C. Dept. of Rev., Admin. Law Ct. Docket Nos. 07-ALJ-17-0089-CC, 07-ALJ-17-0090-CC (May 4, 2009).


View announcement here.

SALT To Taste: To What Extent Should Taxpayers Rely on State Statutes and Regulations in Flowing Through Apportionment Factors of a Partnership to Corporate Partner?

Properly acknowledging critical U.S. Constitutional principles when apportioning the income of a partnership is key when preparing state corporate income tax returns and guarding against erroneous state assertions involving the state's interpretation of statutes and regulations. In this article, see an example of how a state could misapply these Constitutional principles.

Read this SALT To Taste newsletter here.