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Roman Patzner

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The Illinois legislature recently passed several tax related bills along with a budget. The tax changes are primarily reflected in Senate Bills 689 and 690. Governor Pritzker signed S.B. 689 on June 5, 2019 and is expected to sign S.B. 690 shortly. The following is a summary of some of the more significant tax changes applicable to businesses.

The Indiana Tax Court recently ruled in favor of The University of Phoenix, Inc. (“University of Phoenix”) on an important issue of first impression involving the sourcing of service revenue for purposes of computing Indiana’s corporate income tax apportionment factor.   The University of Phoenix, Inc. v. Indiana Dep’t of State Revenue, Cause No. 49T10-1411-TA-00065 (Ind. Tax Ct. 2017).  Baker & McKenzie LLP represented the University of Phoenix in the case.  The Tax Court held that in sourcing service revenue, Indiana law requires a taxpayer activity/cost-based analysis and rejected the market/customer-based analysis historically advanced by the Indiana Department of State Revenue (“Department”). 

President Trump and Congressional Republicans appear eager to move onto federal tax reform given their recent failed attempt to repeal and replace the Affordable Care Act. But, enacting the first major overhaul to the Internal Revenue Code since the Tax Reform Act of 1986 will be no small task, especially considering that the proposed legislation greatly differs in its effects on corporate taxpayers.

The U.S. Supreme Court has requested Michigan’s response to several certiorari appeals from taxpayers seeking relief from Michigan’s retroactive repeal of its Multistate Tax Compact (“MTC”) election.  The Court was originally scheduled to review the Michigan petitions at its conference on January 19, but has now provided a February 9 deadline for Michigan’s response.  Additionally, the Court’s January 19 conference to discuss Dot Foods, Inc., another state tax retroactivity case appealed to the Court several months ago dealing with the interpretation of a Washington business and occupation tax exemption, has been put on hold. See Dot Foods, Inc. v. Wash. Dept of Revenue, U.S., No. 16-308, cert. petition filed 9/9/16 and cert response filed 12/5/16.  These recent actions by the Court appear to signal an interest in retroactivity cases, with heightened potential to take one or both cases.