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California

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Starting the new year off with legislation aimed directly at the pockets of corporate taxpayers, New York has issued a legislative proposal to nearly cut in half corporate taxpayers’ available GILTI exemptions, and at the same time almost double the top corporate franchise tax rate. Senate Bill 953 (“SB953”), pre-filed in the state senate on January 8, 2025, has the potential to significantly increase New York franchise tax exposure for corporations doing business in the…

In Matter of Gatewood Corp, OTA Case No. 19105425 (July 3, 2024), the California Office of Tax Appeals (“OTA”) concluded that Gatewood Corporation’s (“Gatewood”) transfer of stock did not entitle it to a $10 million deduction because the transaction lacked economic substance and was for the purpose of tax avoidance, resulting in $831,398 additional tax.  The California Franchise Tax Board (“FTB”) conceded a $332,559 non-economic substance transaction (“NEST”) penalty that it had originally imposed. In…

The California legislature is proposing a 7.25% tax on “data extraction transactions in the state” through Senate Bill (“SB”) 1327. If enacted, the bill would target businesses that monetize data extracted from users (e.g., social media companies, large search engines, online retailers, etc.). “Data extraction transaction” means: “(A) A taxpayer sells user information or access to users to advertisers” and“(B) The taxpayer engages in a barter by providing services to a user in full or partial…

California’s long-anticipated market-based sourcing “guidance” is finally out. Legal Ruling No. 2022-01 provides the Franchise Tax Board’s take on how to find the market in certain business-to-business sales. Though the guidance emphasizes that a seller should look to where its direct customer receives the benefit of sales of services, it keeps with current market-based sourcing trends amongst states and directs taxpayers to source such receipts based on the location of the taxpayer’s customer’s customer. The…