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Council On State Taxation. A National Overview: Are States Looking To You To Stimulate Their Economies? Taxpayers’ Federation of Illinois 2009 Tax Conference September 17, 2009. Beth Cooley, COST David Kupiec, Kupiec & Martin, LLC. Council On State Taxation. Tax Trends Outline.

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beth cooley cost david kupiec kupiec martin llc

Council On State Taxation

A National Overview:

Are States Looking To You To Stimulate Their Economies?

Taxpayers’ Federation of Illinois

2009 Tax Conference

September 17, 2009

Beth Cooley, COST

David Kupiec, Kupiec & Martin, LLC

slide2

Council On State Taxation

Tax Trends Outline

  • State Budgets
  • State Audits
  • State Tax Trends
  • U. S. Supreme Court
  • Financial Reporting Trends
  • Other
  • Opportunities???
slide3

Projected Budget Gaps: FY 2010As a Percentage of General Fund Budget

HI

Council On State Taxation

WA

VT

ME

MT

ND

OR

MN

NH

MA

ID

WI

SD

MI

NY

WY

RI

CT

PA

IA

NV

NE

NJ

OH

IN

IL

UT

DE

CA

WV

CO

MD

DC

VA

KS

MO

KY

NC

TN

OK

AZ

NM

AR

SC

GA

AL

MS

AK

TX

LA

FL

Key:

More than 15% of the state’s general fund

10% to 15% of the state’s general fund

Less than 10% of the state’s general fund

Not applicable or not reporting

Source: National Conference of State Legislatures, “State Budget Update: July 2009”

slide5

Council On State Taxation

State Audits

  • States Hiring More Auditors
  • Experience Level of State Auditors
  • Recordkeeping/Information Requests
  • Complex Tax Issues/Changing Laws
  • Settlement/Litigation
  • Textron Decision (August 2009)
slide6

Council On State Taxation

State Tax Trends

  • Nexus
  • Tax Base
  • Combined Reporting
  • Apportionment
  • Credits/Net Loss Deductions
  • Amnesties
state tax nexus trends

Council On State Taxation

State Tax Nexus Trends
  • Physical Presence (Flash Title, PL 86-272)
  • Attributional (Independent Contractors/Affiliates)
  • Economic (Numerous Decisions)
  • Statutes/Regulations (NY, WI, CA, OR, IL, …)
  • Business Activity Tax Simplification (HR 1083)
  • Related Issues – “Know Your Business”
internet nexus new york starts spreading the news

Council On State Taxation

Internet Nexus: New York “Starts Spreading The News”
  • New York: 2008 Budget
  • Proposals To-Date:
    • California (Gov. vetoed)
    • Hawaii (Gov. vetoed: HB 1405)
    • Illinois (by regulation)
    • Maryland (dead for 2009, will resurface 2010)
    • Minnesota (in omnibus tax bill; Gov. vetoed)
    • North Carolina (enacted)
    • Rhode Island (enacted)
    • Tennessee (dead for 2009; may resurface)
tax base

Council On State Taxation

Tax Base
  • Income Tax:
  • Addback Statutes (DC, Oregon, West Virginia)
  • Decoupling From Federal Provisions (Depreciation, Stimulus, IRC Conformity, C-Corp Election, …)
  • Section 482 Adjustments (IL Section 404)
  • Sales Tax:
  • Inclusion of Previously Tax Exempt Items
  • Base Expansion to Services
  • Streamlined Sales Tax
  • Gross Receipts/Franchise
tax base proposed il sales tax expansion not enacted

Council On State Taxation

Tax Base – Proposed IL Sales Tax Expansion (Not Enacted)
  • Other warehousing and storage
  • Travel agent services
  • Carpet and upholstery cleaning services
  • Dating services
  • Dry cleaning and laundry (except coin operated)
  • Consumer goods rental
  • Health clubs, tanning parlors, reducing salons
  • Linen supply
  • Interior design services
  • Other business services, including copy shops
  • Bowling Centers
  • Coin operated video games and pinball machines
  • Membership fees in private clubs
  • Admission to spectator sports (excluding horse tracks)
  • Admission to cultural events
  • Billiard Parlors
  • Scenic and sightseeing transportation
  • Taxi and Limousine services
  • Unscheduled chartered passenger air transportation
  • Motion pictures theaters, except drive-in theaters
tax base proposed il sales tax expansion not enacted11

Council On State Taxation

Tax Base – Proposed IL SalesTax Expansion (Not Enacted)
  • Pet grooming
  • Landscaping services (including lawn care)
  • Income from intrastate transportation of persons
  • Mini-storage
  • Household goods storage
  • Cold storage
  • Marina Service (docking, storage, cleaning, repair)
  • Marina towing service (including tugboats)
  • Gift and package wrapping service
  • Laundry and dry cleaning services, coin operated
  • Other services to buildings and dwellings
  • Water softening and conditioning
  • Internet Service Providers
  • Short term auto rental
  • Information Service
  • Amusement park admission and rides
  • Circuses and fairs – admission and games
  • Cable and other program distribution
  • Rental of video tapes for home viewing
slide12

Combined Reporting: Status 2009 Legislation

HI

Council On State Taxation

WA

ME

MT

ND

OR

VT

MN

NH

ID

MA

WI

SD

MI

NY

WY

CT

RI

PA

IA

NV

NE

NJ

OH

IN

IL

UT

DE

CA

WV

CO

MD

DC

VA

KS

MO

KY

NC

TN

OK

AZ

NM

AR

SC

GA

AL

MS

AK

TX

LA

FL

Key

Adopted combined reporting in 2009

Pending combined reporting legislation

Rejected combined reporting legislation

apportionment trends

Council On State Taxation

Apportionment Trends
  • Single Sales Factor
  • Market Based Sourcing
  • Joyce/Finnigan
  • Gross vs. Net Proceeds (General Mills/CA Law Change)
  • Throwback/Throwout (Pfizer v. NJ)
  • Distortion/Nowhere Sales
  • Alternative Apportionment
credits net losses

Council On State Taxation

Credits/Net Losses
  • Limitations on Amounts
  • Limitations on Carrybacks/Carryforwards
  • Limitations on Transferability
  • Survival of Tax Attributes During Dissolutions, Mergers, Bankruptcies
  • Uniformity Issues
amnesties

Council On State Taxation

Amnesties
  • Opportunity to Resolve Issues
  • Potential to Reduce Open Years
  • Abatement of Penalties
  • Potential Abatement of Interest
  • Potential for Additional Penalties/Interest
amnesties16

Council On State Taxation

Amnesties

Ongoing/Potential Amnesty Programs:

Delaware (9/1-10/30)

DC (Pending legislation)

Louisiana (9/1 – 10/31)

Maryland (9/1-10/30)

Penn. (Pending legislation)

Maine (9/1 – 11/30)

Oregon (10/1–11/19)

Virginia (TBD)

Wisconsin (7/1-9/30)

Recently Concluded:

Alabama

Arizona

Connecticut

Hawaii

Massachusetts

New Jersey

Vermont

Note: COST is maintaining an active spreadsheet of administrative & statutory amnesties on COST’s website at: http://www.cost.org/WorkArea/DownloadAsset.aspx?id=73518

slide17

Council On State Taxation

U.S. Supreme Court

  • Recent (Cuno, Mead, Davis, Polar Tankers)
  • Cert. Denied (Geoffrey/Mass, Capital One/Mass, VFJ Ventures/AL, Ventas Finance/CA, MBNA/WV, Lanco/NJ …)
  • Petition Pending (MO Gas Energy/OK)
  • Next?
slide18

Council On State Taxation

Financial Reporting

  • Expansion of FAS 5
  • FIN 48
  • Conversion to IFRS
other

Council On State Taxation

Other
  • Tax Commissions
    • CA, CO, MD, MN, SC, VA
  • Vendor Compensation
    • CO, IL, TX, VA
  • Alternative Base Taxes
  • Uniform Law Commission’s UDITPA Revision
    • Not This Time
opportunities

Council On State Taxation

Opportunities
  • Restructurings
  • Mergers/Acquisitions
  • Jobs
  • Improving Economy
questions

Council On State Taxation

Questions?

Beth Cooley David Kupiec

bcooley@cost.orgdkupiec@kupiecandmartin.com

(202) 484-5226 (312) 632-1022

CIRCULAR 230 DISCLOSURE - To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (2) promoting, marketing or recommending to another party any transaction, arrangement or other matter.