With the 2017 Tax Cuts and Jobs Act (“Tax Reform”) fully enacted, taxpayers and practitioners are racing to find last-minute planning opportunities prior to the new year, and states are looking for ways to assist their residents prospectively. The most talked about planning opportunity, currently, is prepaying property taxes for 2018 to create a 2017 tax benefit around Section 11042(a)(6), which limits the state and local tax deduction to $10,000 beginning in 2018. However, imprecise wording contained within Section 11042(a)(6) could feasibly be interpreted to permit a deduction for state and local income taxes as well – depending on how you read the provision.
On June 12, 2017, Congressman Jim Sensenbrenner (R-WI) reintroduced into Congress H.R. 2887, also known as the “No Regulation Without Representation Act of 2017” (the “Legislation”), which codifies the physical presence nexus requirement established by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992) (“Quill”). The Legislation is interesting for several reasons: (1) it proposes to employ a result that is the exact opposite of the recent trend to overturn Quill; (2) it defines “tax” broadly to include net income and business activity taxes; and (3) it expands the law to require a physical presence for states to regulate a person’s activity in interstate commerce outside of the tax context.
The U.S. House of Representatives passed H.R. 2315, the Mobile Workforce State Income Tax Simplification Act of 2015 (“Mobile Workforce Act” or “Act”), on September 21, 2016. The Senate received the House-approved bill on September 22, 2016, and its ultimate fate remains unclear.