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Idaho’s Supreme Court Means Business, Handing Taxpayers a Win on Definition of “Business Income”

by , and 7 Mins Read

The Idaho Supreme Court recently affirmed a District Court’s judgment that the gain from the sale of a 78.54% membership interest in a limited liability company did not constitute “business income” under Idaho Code section 63-3027.  In Noell Indus. Inc. v. Idaho State Tax Comm’n, Docket No. 46941 (Idaho 2020), the court determined that “this type of gain does not meet the definition of ‘business income’ under either the transactional test or functional test (including the unitary business test),” and was therefore not apportionable income.

Indiana Tax Court Rejects Department’s Long-Standing Market-Based Application of Indiana’s Costs of Performance Sourcing Statute

by and 4 Mins Read

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”). 

Much Ado About the Texas Franchise Tax: The Past, Present and Future Impact of the State’s Tax on Business Earnings

by 6 Mins Read

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.

Gillette v. California Franchise Tax Board –Taxpayers Lose the Election

by 3 Mins Read

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.