Pop quiz: when it comes to business earnings, the State of Texas imposes: (a) an income tax; (b) a business activity tax that is not an income tax; or (c) no tax at all. Good news (or bad news)—no matter which answer you chose, you may be right (or wrong). Right now, the answer appears to be (b), but in a few months we may find out that the answer is actually (a), and barring a change of course by the State Legislature, the answer may be (c) in the near future. One thing is clear; the Texas Franchise Tax (or “margin tax,” as it is colloquially known), is in a state of flux.
Texas—never known for doing anything on a small-scale—is starting off 2017 with what is likely to be billions of dollars worth of good news for the Comptroller. On January 6, the Third District Court of Appeals released a substituted opinion in American Multi-Cinema Inc. v. Hegar, No. 03-14-00397-CV, a case dealing with the scope of the Texas franchise tax costs of goods sold (“COGS”) deduction. The Comptroller’s office predicted that the court’s original decision, issued…
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.