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. 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. Dep’t 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.
The dispute in California over taxpayers’ ability to elect to use the evenly weighted, three-factor (i.e., property factor, payroll factor, and sales factor) business income apportionment formula provided by the Multistate Tax Compact (the “Compact”) has come to an end. On October 11, 2016, the US Supreme Court denied the taxpayers’ petition for certiorari in The Gillette Company, et al. v. California Franchise Tax Board, et al., No. 15-1442 — one of the most highly publicized MTC apportionment election cases.
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.