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Peter L. Faber focuses his practice on corporate and business tax planning and controversy work involving federal, state and local taxes. Peter's state and local tax practice has included tax planning for corporate acquisitions, divestitures and restructurings, combined report planning, electronic commerce and nexus issues, cloud computing issues, residence matters, alternative apportionment issues and a variety of other matters. Read Peter Faber's full bio.

Due to the current impact and the likelihood that states will consider legislation and agency guidance addressing federal tax reform implications for state business taxes, a united, effective, nationwide advocacy effort is needed to ensure the issues are consistently addressed on a multi-state basis. In preparation for anticipated ramifications, a multi-state coalition will need to consider the subjects summarized below. For further coverage, continue reading here.

How McDermott Will & Emery Can Help You:

  • Formation of a coalition of companies and industry trade organizations dedicated to proactively addressing state tax issues raised by federal tax reform on a nationwide basis
  • Identify and track, in real time, proposed state legislative and regulatory responses to federal tax reform
  • Analyze proposed state reforms and develop substantive amendments and comments
  • Develop and implement advocacy campaigns to secure favorable legislative and regulatory outcomes, including
    • Preparation of all advocacy collateral
    • Organization of on the ground advocacy, including retaining in-state advocates where needed
    • Activating allied organizations to ensure broad support
  • Provide support concerning the proper reporting of state responses to federal tax reform on company financial statements

Coalition Goals: 

  • Prevent state legislation expanding tax base through decoupling from federal deductions
  • Support state legislation adopting comprehensive federal reform conformity, with appropriate deviations
  • Identify and remedy Commerce Clause issues
  • Encourage states revenue department to publish guidance on issues such as definitional questions, apportionment approaches and problems with different group calculations
  • Identify and act on opportunities to address related issues through state responses to federal reform
  • Prepare to address potential nexus changes in response to South Dakota v. Wayfair


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Many provisions of the House and Senate tax reform proposals would affect state and local tax regimes. SALT practitioners should monitor the progress of this legislation and consider contacting their state tax administrators and legislative bodies to voice their opinions.

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The White House and Republican congressional leadership released an outline this week to guide forthcoming legislation on federal tax reform. The states conform to the federal tax laws to varying degrees and the extent to which they will adopt any federal changes is uncertain. This memorandum outlines some of the key areas—individual taxation, general business

The new federal partnership income tax audit rules, scheduled to take effect on January 1, 2018, will have significant implications for the state and local taxation of partnerships and their partners. Most, but not all, states that impose a net income-based tax adopt by reference the federal definition of taxable income, but those that do typically adjust that income to reflect differences between state and federal tax policies. Moreover, state revenue departments generally do not regard themselves as being bound by Internal Revenue Service interpretations of the Internal Revenue Code even when substantive Code provisions are incorporated into state law by reference. The federal statutory rules relating to partnership audits are procedural rules and not ones of substantive tax law, so they will not be automatically adopted by states that generally conform to Internal Revenue Code provisions relating to taxable income. State legislatures may decide to adopt some or all of the federal statutory rules, or they may decide to adopt none of them. Arizona has already adopted its own version of the federal rules, and other state revenue departments are considering recommending to their legislatures that the legislatures take similar action, but most states have not reacted to the federal rules at this time.
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The recently released final regulations under Internal Revenue Code Section 385, addressing the circumstances under which related company debt will be classified as equity for federal income tax purposes, will have a significant impact on state and local taxes. Federal tax practitioners, as well as state and local tax practitioners, must address their implications.

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The Supreme Court of the United States has been asked to hear an appeal in a case involving the circumstances in which retroactive tax legislation will be constitutional.

In Dot Foods, Inc. v. State of Washington Department of Revenue, 372 P.3d 747 (Wash. 2016), the Washington State Supreme Court upheld legislation retroactively removing a corporate income tax exemption.  Although the legislature, in justifying its action, said that the retroactive legislation was intended to reflect the legislature’s initial intent, the facts did not bear that out.  The exemption was consciously adopted by the legislature and, indeed, upheld by the Washington Supreme Court when the Department of Revenue attacked Dot Foods’ use of it in an earlier case. 
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On April 4, 2016, without warning, the US Department of the Treasury proposed a new set of comprehensive regulations under section 385. There had been no advance indication that regulations were even under consideration. Although the Treasury indicated that the proposed regulations were issued in the context of addressing corporate inversions, their application went well