On Friday, July 24, 2020, the Commonwealth Court of Pennsylvania issued its decision and order on the Pennsylvania Department of Revenue’s motion to intervene in the highly-anticipated case of Synthes USA HQ, Inc. v. Commonwealth of Pennsylvania, No. 108 F.R. 2016. The Synthes case is noteworthy not only because the Commonwealth Court addresses, for the first time, the Department of Revenue’s hotly debated interpretation of the state’s former “costs of performance” statute, but also because…
In City & County of San Francisco v. All Persons Interested in the Matter of Proposition C, Dkt. A158645 (Cal. App., June 30, 2020), the California Court of Appeal upheld Proposition C—a voter initiative that created a new local business tax in San Francisco. The court upheld the initiative that was enacted by a simple majority of electors. This ruling answers a question that was been heavily debated since the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland, 3 Cal. 5th 924 (Cal. 2017). That is, do special taxes proposed by voter initiative require a supermajority of voters to pass? This decision expressly narrows the supermajority requirement to only those tax measures proposed directly by local governments and will likely trigger more tax initiatives proposed and passed by citizen groups.
On the heels of its loss in Matter of TransCanada Facility USA, Inc. DTA NO. 827332, on May 14, the New York State Department of Taxation and Finance proposed draft regulations addressing the Article 9-A Franchise Tax treatment of Qualified New York Manufacturers (“QNYMs”).[1] These draft regulations, which are not currently in effect but which do shed light on the Department’s current thinking, amplify a position that the Department has taken in prior informal guidance and on audit regarding contract manufacturing arrangements and the scope of activities that constitute “manufacturing” that is not in the statute. The position that a taxpayer that engages in contract manufacturing cannot qualify as a QNYM is contrary to prior New York authorities addressing “manufacturing” in the investment tax credit context and contrary to judicial authorities defining “manufacturing” under relevant federal tax law. In addition, the draft regulations set out a new position—again, one not found in the statute—that “digital manufacturing” is not manufacturing, and that only manufacturing that results in the production of “tangible” goods will qualify for QNYM treatment.
The Baker McKenzie State and Local Tax (SALT) Subpractice Group is presenting a series of short webinars to keep members of the SALT community abreast of recent developments in these less than certain times. We hope you will attend so we can stay connected as we address these issues together. The next session in the series, SALT Implications of Corporate Restructurings, will take place on Wednesday, May 20 at 1:00 pm ET. If you would…