A Grain of SALT: May State Focus – Georgia

Georgia was one of the first states to enact comprehensive legislation in response to the federal tax reform bill, known as the Tax Cuts and Jobs Act (TCJA).  As a preliminary matter, the Georgia bill provides conformity to the IRC as of February 9, 2018, with certain exceptions.  Before the bill’s enactment, the Georgia Code had conformed to the IRC as of January 1, 2017, and, in turn, did not conform to the TCJA.

The new legislation contains numerous exceptions to Georgia’s conformity with the current IRC. For example, the tax bill explicitly provides that Georgia will decouple from the new interest expense limitations in IRC § 163(j) and also from the new provisions in IRC § 118 that provide inclusion in gross income of certain capital contributions.

With respect to the international provisions of the TCJA, Georgia’s dividend-received deduction for dividends received from foreign corporations seems to  apply to the global intangible low taxed income (GILTI), included in the federal tax base under IRC § 951A, and to the deemed repatriated foreign earnings, included in the federal tax base under IRC § 965(a). The legislation provides that the deductions in IRC § 250 for a portion of the GILTI and in IRC § 965(c) for a portion of the deemed repatriated foreign earnings will be disallowed to the extent such income is excluded from the Georgia tax base pursuant to the dividend received deduction.

Finally, the Georgia bill provides that the new federal net operating loss (NOL) provisions (including the restriction that the NOL cannot exceed 80 percent of taxable income and the new federal carryback and carryforward provisions) apply for purposes of computing the Georgia net operating loss deduction with the specification that the 80 percent limitation is computed based on Georgia taxable net income (not federal taxable income).

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Looking Forward to May

May 2, 2018: Stephen Kranz is presenting “Wayfair Oral Argument Summary and Status Update” at the Streamlines Sales Tax Governing Board (SSTGB) Spring 2018 Meeting in Jackson Hole WY. On April 17, 2018, Supreme Court justices listened to both sides of the case of South Dakota v. Wayfair, Inc. as South Dakota argued to repeal a 1992 decision from the case Quill v. North Dakota which ruled that companies only had to collect sales tax in states where they are physically located. South Dakota argued that the state, along with many other states, had been robbed of billions of dollars as a result of the decision. He will discuss how this case, which the Supreme Court is expected to decide in June, is very important. 

May 3, 2018: Peter Faber and Alysse McLoughlin will be speaking at The Business Council’s 2018 Annual Conference on State Taxation on the topic “New York State Budget / Legislative Review and Comment / Federal “Conformity” & Mitigation” in New York, NY.

May 3, 2018: Scott Susko is presenting “Ethics for Tax Professionals” at The Business Council’s 2018 Annual Conference on State Taxation in New York, NY.

May 11, 2018:  Stephen Kranz is presenting “Handling Tax Controversy to Win” and “The Digital Tax Tsunami:  What You Need to Know to Help Your Clients” at Avalara’s CRUSH DC 2018 in Washington DC.  Mr. Kranz will discuss an approach to solving tax problems holistically, understanding the offensive and defensive tools available and the avenues for relief when interacting with the government, planning and building the team to effectively work all avenues the government offers, tools available including FOIA, policy solutions, and litigation. He will overview new technology models and the evolution to cloud-based products, demystify the division of ownership of cloud service, as well as characterize digital goods products, delivery, and the contractual language of a purchase.

May 15, 2018: Madeline Chiampou, Peter Faber, Britt Haxton, Steve Kranz, John Lutz, Alysse McLoughlin, Alan Schwartz, Diann Smith, and Mark Yopp are presenting at TEI’s Tax Reform Seminar titled “The State of Federal Tax Reform:  A Federal and State Corporate Tax Perspective” in the McDermott New York office. Click here to register.

May 15, 2018: Mary Kay Martire is presenting about Illinois residency issues (“Fleeing Illinois: State Income and Estate Tax Overview for Individuals and Fiduciaries”) at the Illinois Institute for Continuing Legal Education’s 61st Annual Estate Planning Seminar in Champaign, IL.

May 15, 2018: Lauren Ferrante is moderating the Chicago Bar Association State and Local Tax Committee’s Spring Seminar, scheduled for May 15 from 12:00 p.m. – 2:10 p.m. CST and held at the CBA’s headquarters in downtown Chicago. The seminar consists of two panels: (1) “U.S. Supreme Court’s consideration of the Wayfair case and its impact on the SALT world”; and (2) “Recent Changes in Illinois Tax Law.”

May 24, 2018: Mary Kay Martire and Tim Halleron are presenting about Illinois residency issues (“Fleeing Illinois: State Income and Estate Tax Overview for Individuals and Fiduciaries”) at the Illinois Institute for Continuing Legal Education’s 61st Annual Estate Planning Seminar in Chicago, IL.

May 30, 2018: Alysse McLoughlin is presenting “The Amazon Effect on Public Finance – What is the Optimal Tax Structure in the Internet Age?” at the National Federation of Municipal Analysts 35th Annual Conference in Coronado, CA.

Virginia and Georgia are two of the latest states to pass laws responding to the federal tax reform passed in December 2017, known as the Tax Cuts and Jobs Act (TCJA). Both states updated their codes to conform to the current Internal Revenue Code (IRC) with some notable exceptions.

Virginia

On February 22, 2018, and February 23, 2018, the Virginia General Assembly enacted Chapter 14 (SB 230) and Chapter 15 (HB 154) of the 2018 Session Virginia Acts of Assembly, respectively. Before this legislation was enacted, the Virginia Code conformed to the IRC in effect as of December 31, 2016. While the new legislation conforms the Virginia Code to the IRC effective as of February 9, 2018, there are some very notable exceptions. The legislation explicitly provides that the Virginia Code does not conform to most provisions of the TCJA with an exception for “any… provision of the [TCJA] that affects the computation of federal adjusted gross income of individuals or federal taxable income of corporations for taxable years beginning after December 31, 2016 and before January 1, 2018…” Thus, despite Virginia’s update of its IRC conformity date, Virginia largely decouples from the TCJA. Continue Reading Southeast States Respond to Federal Tax Reform and NJ Senate Leader Talks Tax Surcharge to Limit Corporate “Windfall”

On October 6 and 7, 2014, the Multistate Tax Commission (MTC) will hold an Arm’s-Length Adjustment Service (ALAS) Advisory Group Conference at the Atlanta Airport Marriott.  On the first day, third-party contract auditors will give presentations on transfer pricing issues.  An ALAS Advisory Group meeting will be held on the second day.

This past year, the MTC has been designing a joint transfer pricing program.  So far, nine members have committed money to the development of this program: Alabama, the District of Columbia, Florida, Georgia, Hawaii, Iowa, Kentucky, New Jersey and North Carolina.

Dan Bucks, former executive director of the MTC and former director of the Montana Department of Revenue, is the project facilitator.  In the lead-up to the event, he discussed arm’s-length issues with numerous third-party contract auditors.  On October 6, the contract auditors will explain how they believe a multistate transfer pricing program should work and how the MTC would best use their services to conduct transfer pricing audits on behalf of member states.

The list of contract auditors includes Chainbridge Software, Economics Analysis Group, Economists Incorporated, NERA, Peters Advisors, RoyaltyStat and WTP Advisors.  While project facilitator, Dan Bucks, has indicated that this meeting is not an audition for a procurement process, the discussion seems to be headed in that direction and the MTC has not ruled out utilizing third-party audit assistance in the transfer pricing program.

Businesses concerned with the overall direction of the ALAS Advisory Group, including the possibility of subjecting taxpayers to Chainbridge-style audits on a nationwide scale, should contact the authors.  For more information on the conference, please visit the MTC ALAS webpage.