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District of Columbia Takes First Step to Decouple from Federal Tax Reform

On December 19, 2017, DC Councilmember Mary Cheh introduced the District Tax Independence Act of 2017 (Act), which would require the Chief Financial Officer (CFO) to submit a report outlining the steps and amendments necessary to decouple the District’s tax deduction laws from federal law. As introduced, the Act would require this report by no later than April 30, 2018. The Act was referred to the Committee on Finance and Revenue the same day it was introduced and has not been taken up by the committee, which has been dormant since and is not currently scheduled to meet again until the Council returns in late January. The legislation is co-sponsored by Councilmembers Allen, Evans, McDuffie, Bonds, Gray, Nadeau, R. White, Grosso, Silverman, T. White, and Chairman Mendelson. Notably, all members of the Committee on Finance and Revenue—including Chairman Evans—are co-sponsors. Practice Note The introduction of the Act signals the Council’s overwhelming...

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MTC Marketplace Seller Voluntary Disclosure Initiative Underway

Yesterday, the application period opened for the limited-time MTC Marketplace Seller Voluntary Disclosure Initiative opened and it will close October 17, 2017. Since our last blog post on the topic detailing the initiatives terms, benefits and application procedure, six additional states (listed below) have signed on to participate in varying capacities. The lookback period being offered by each of the six states that joined this week is described below. District of Columbia: will consider granting shorter or no lookback period for applications received under this initiative on a case by case basis. DC’s standard lookback period is 3 years for sales/use and income/franchise tax. Massachusetts: requires compliance with its standard 3-year lookback period. This lookback period in a particular case may be less than 3 years, depending on when vendor nexus was created. Minnesota: will abide by customary lookback periods of 3 years for sales/use tax and 4 years (3...

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MTC Offers 18 State Marketplace Seller Amnesty Initiative

The Multistate Tax Commission (MTC) is moving quickly to implement a multistate amnesty program through its current National Nexus Program (NNP) for sellers making sales through marketplaces. The new MTC marketplace seller amnesty program is limited to remote sellers (3P sellers) that have nexus with a state solely as the result of: (1) having inventory located in a fulfillment center or warehouse in that state operated by a marketplace provider; or (2) other nexus-creating activities of a marketplace provider in the state. Other qualifications include: (1) no prior contact/registration with the state; (2) timely application during the period of August 17, 2017 through October 17, 2017; and (3) registration with the state to begin collecting sales and use tax by no later than December 1, 2017, and income/franchise tax (to the extent applicable) starting with the 2017 tax year. The baseline guarantee is prospective-only (beginning no later than Dec. 1, 2017)...

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Tax Highlights of Proposed Illinois “Grand Bargain”

In an effort to resolve Illinois’ 20-month budget impasse, the Illinois Senate leadership (Senate Majority Leader John Cullerton and Senate Minority Leader Christine Rodogno) have jointly proposed a series of bills to increase revenue, reduce spending, and respond to the Illinois Governor’s concerns regarding pension reforms, workers compensation reform and property tax relief.  A series of twelve bills have been introduced, all of which are interlinked for passage.  The bills are termed the Illinois “Grand Bargain.”  Most of the tax-related changes are found in Senate Bill 9.  The current version of the Senate Bill 9 (Amendment 3) (“Bill”) was submitted on March 3 and includes the following proposed changes:  Income Tax.  The Bill proposes to increase income tax rates, effective January 1, 2017 to 4.99% for individuals, trusts and estates, and 7% for corporations.  Other income tax-related features of the Bill include the elimination of the non-combination...

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Tax Amnesty Hits the Midwest (and Beyond)

With many state legislatures wrapping up session within the past month or so, there has been a flurry of last-minute tax amnesty legislation passed. Nearly a half-dozen states have authorized upcoming tax amnesty periods. These tax amnesties include a waiver of interest and, in some circumstances, allow taxpayers currently under audit or with an appeal pending to participate. This blog entry highlights the various enactments that have occurred since the authors last covered the upcoming Maryland amnesty program. Missouri On April 27, 2015, Governor Jay Nixon signed a bill (HB 384) that creates the first Missouri tax amnesty since 2002. The bill creates a 90-day tax amnesty period scheduled to run from September 1, 2015, to November 30, 2015. The amnesty is limited in scope and applies only to income, sales and use, and corporation franchise taxes. The amnesty allows taxpayers with liabilities accrued before December 31, 2014, to pay in full between September...

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ALJ: New York NOL Deduction Does Not Apply When Tax Is Not Paid on Income Base

A New York State Division of Tax Appeals administrative law judge (ALJ) recently determined that a banking corporation was not required to hypothetically use a net operating loss (NOL) deduction to decrease its entire net income in a year in which its banking corporation franchise tax liability under Article 32 of the New York Tax Law (bank tax) was not measured by the entire net income base.  Matter of TD Holdings II, Inc., DTA No. 825329 (N.Y. Div. Tax App. Jan. 22, 2015).  This case is a sterling example of how long-held and long-applied state tax audit policies can be successfully challenged.  Taxpayers - in several states at least - can rely on the state’s adjudicatory process to ensure that logical results that are consistent with legislative intent are ultimately applied.  McDermott represented the taxpayer in this case. Though the bank tax has been repealed effective January 1, 2015, during the years at issue, the tax was imposed on one of four...

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New Market-Based Sourcing in DC: Major Compliance Date Problem Fixed… For Now

The Problem On September 23, 2014, the District of Columbia Council enacted market-based sourcing provisions for sales of intangibles and services as part of the 2015 Budget Support Act (BSA), as we previously discussed in more detail here.  Most notably the BSA adopts a single sales factor formula for the DC franchise tax, which is applicable for tax years beginning after December 31, 2014.  But the market-based sourcing provisions in the BSA did not align with the rest of the tax legislation.  Specifically, the BSA market-based sourcing provisions were made applicable as of October 1, 2014—creating instant tax implications on 2014 returns.  Absent a legislative fix, this seemingly minor discrepancy will trigger a giant compliance burden that will require a part-year calculation for both taxpayers and the Office of Tax and Revenue (OTR) before the 2014 franchise return deadline on March 15.  For example, taxpayers filing based on the new BSA provisions, as...

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