Allocation/Apportionment

Determining financial statement impact from the state flow through of federal tax reform will be complicated by changes in state tax policy expected to be adopted. In our latest Tax Takes video, McDermott’s Steve Kranz and Diann Smith discuss the issues with Joe Henchman, Executive Vice President of the Tax Foundation. The group suggests options

Last year, Illinois enacted a mid-year income tax rate increase. Effective July 1, 2017, Illinois increased the income tax rate for individuals, trusts and estates from 3.75 percent to 4.95 percent, and for corporations from 5.25 percent to 7 percent. The Illinois Personal Property Replacement Tax (imposed on corporations, partnerships, trusts, S corporations and public utilities at various rates) was not changed.

As we previously reported, the Illinois Income Tax Act contains a number of provisions intended to resolve questions regarding how income should be allocated between the two income tax rates applicable in 2017. 35 ILCS 5/202.5(a). The default rule is a proration based on the number of days in each period (181/184). For taxpayers choosing this method, the Department of Revenue (Department) has recommended the use of a blended tax rate to calculate tax liability. A schedule of blended rates is included in the Department’s instructions for the 2017 returns. The blended rate is 4.3549 percent for calendar year individual taxpayers and 6.1322 percent for calendar year C corporation taxpayers.
Continue Reading

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.

Continue Reading.

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 California Franchise Tax Board has scheduled an Interested Parties Meeting to discuss proposed changes to its apportionment regulations. Several years ago, when the statute called for sourcing receipts from services and intangibles at the location of income producing activity, based on cost of performance, the FTB, after a series on interested parties meetings, adopted 

The California Franchise Tax Board (FTB) will hold a second Interested Parties Meeting at their office in Rancho Cordova on April 20, 2016, dealing with the apportionment of income for combined reporting groups with both financial and non-financial members.  The Notice of Interested Parties meeting provides a description of the sourcing methods used in other

In the first Vermont Supreme Court decision addressing combined unitary reporting since Vermont’s combined reporting regime became effective in 2006, the court affirmed a lower court’s decision that AIG, the multinational insurance company, was not unitary with a ski resort operated by a subsidiary in Vermont; accordingly, a combined report covering the two businesses was

On November 17, the Illinois Joint Committee on Administration Rules approved a proposed regulation promulgated by the Illinois Department of Revenue (Department) implementing statutory changes to the apportionment formula for business income derived from providing transportation services. The changes are effective for tax years ending on or after December 31, 2008. See Prop. 86 Ill.

On April 30, 2015, out-of-state professional football players earned victories against the City of Cleveland, Ohio.  In a pair of cases decided by the Ohio Supreme Court, the court first struck the City’s method of allocating a nonresident professional athlete’s compensation as unconstitutional, and later that day ruled that the city tax cannot reach the

Allied Domecq Spirits & Wines USA, Inc. v. Comm’r of Revenue, 85 Mass. App. Ct. 1125 (2014)

In a unique case, the Massachusetts Appeals Court affirmed a ruling of the Appellate Tax Board (ATB) that two corporations could not be combined for corporation excise tax purposes for 1996 through 2004. The distinctive aspect of