Author

Lindsay LaCava

Browsing

The Utah Supreme Court handed taxpayers a victory on October 5, 2018 when it issued a unanimous (5-0) decision in the closely-watched Utah State Tax Commission v. See’s Candies, Inc., 2018 UT 57 (Oct. 5, 2018).  The Court affirmed the district court’s holding that the Utah State Tax Commission’s (“Commission”) discretionary authority to reallocate a taxpayer’s income under Utah Code Section 59-7-113 (“Section 113”) is limited by the “arm’s-length” standard set forth in the federal…

On September 27, 2018, the New Jersey Senate and General Assembly passed legislation amending certain provisions of the New Jersey Corporation Business Tax (“CBT”) reform bill that was enacted earlier this year (“Technical Amendments”). In July, Governor Phil Murphy and the New Jersey Legislature enacted a $37.4 billion budget package (the “Budget Bill”) that implements sweeping changes to the CBT.  Among these changes are mandatory unitary combined reporting, market-based sourcing, and a new four-year surtax on corporations with over $1 million of allocated taxable net income. The Technical Amendments, which are awaiting Governor Murphy’s signature, make several changes to the Budget Bill.  A summary of the most noteworthy provisions contained in the Budget Bill and Technical Amendments is below.

The physical presence standard is no more.  In a 5-4 decision issued this morning, the U.S. Supreme Court reversed its own precedent that, for over fifty years, provided an in-state physical presence by a retailer was a prerequisite for the constitutional imposition of a state sales or use tax collection obligation.  See South Dakota v. Wayfair, Inc., No. 17-494 (U.S. Jun. 21, 2018), rev’g Quill Corp. v. North Dakota, 504 U.S. 298 (1992) and National Bellas Hess Inc. v. Illinois, 386 U.S. 753 (1967).

The New York Legislature passed a budget bill (“NY Budget Bill”) that takes aim at several key provisions in the federal tax reform bill known as the Tax Cuts and Jobs Act (“Federal Tax Reform”). It has been no secret that Governor Cuomo was displeased with Federal Tax Reform, and this year’s NY Budget Bill reflects that displeasure.  Among other items, the NY Budget Bill contains two provisions designed to mitigate Federal Tax Reform’s limit on the deductibility of state personal income taxes—first, the NY Budget Bill creates state-operated charitable contribution funds and provides taxpayers with a credit against their New York State income tax liability equal to 85 percent of the amounts contributed for the immediately proceeding tax year, and second, the Budget Bill creates an optional payroll tax (the “Employer Compensation Expense Tax”) for which employees will receive a credit against their New York State income tax liability (effectively shifting the tax expense and corresponding deduction from the employees to the employer).  The NY Budget Bill also addresses some of the corporate income tax changes adopted under Federal Tax Reform, including Internal Revenue Code (“IRC”) section 965 income and the deduction found in IRC § 250(a)(1)(A) (“FDII”).  In this blog, we will focus on the provisions of the Budget Bill impacting corporate taxpayers under the New York State corporate franchise tax.