Browse through our previous homepage releases, listed chronologically, with the most recent postings first.
The New England State and Local Tax Forum is a one-day conference designed to provide an annual update on significant state and local tax developments from across the nation with a particular focus on New England. Designed for SALT professionals from industry, private practice and the public sector, the Forum addresses both technical and policy issues to help practitioners comply with changes in the law as well as anticipate evolving issues that will impact the SALT field for years to come.
Joe Huddleston, Executive Director will be one of the distinguished guest speakers at the conference on November 15, 2012. For additional information visit the New England State and Local Tax Forum website.
The Commission welcomes your comments on these articles, suggestions for topics, and submissions for future issues of the Review.
Back to the BAT Cave
It seems like every year for the past ten years a new version of the Business Activity Tax Simplification Act is introduced in Congress. This year is no exception. On April 13, 2011, the Subcommittee on Courts, Commercial & Administrative Law of the House Judiciary Committee held its first hearing on H.R. 1439, The Business Activity Tax Simplification Act of 2011. The purpose of this proposed legislation is to make clear that state tax jurisdiction over out-of-state businesses is limited to those entities that maintain certain forms of physical presence within the state's boundaries. While minimizing uncertainty and creating a stable business environment are laudable, there is no evidence that extending Public Law 86-272 — a 52 year old law that was designed as a stop-gap measure — to the interstate sale of services and intangible products will actually achieve those goals. Furthermore, there is no evidence that if H.R. 1439 were to become law, business investment would actually increase given the relatively small impact of business activity taxes on the private business sector. This article, appears in the latest edition of the Multistate Tax Commission Review, provides information on the size of state and local government business activity taxes relative to state budgets and to the overall size of the business sector.
MTC Wants Your Input – Draft Mission, Vision, Values and Goals
The MTC Strategic Planning Steering
Committee is asking the states and our external stakeholders to comment
on our working draft mission, values, vision and strategic goal areas – click here to access
this document. Please encourage anyone in your organization who works
with the MTC to take the time to review that document and provide their
comments and suggestions.
The Steering Committee will review your comments and ideas during its next meeting on Thursday, February 23rd, so we ask that comments be provided by February 20th. Please submit any comments to Elizabeth Harchenko.
Commission Adopts Three Uniformity Recommendations
At its 44th annual business meeting on July
27th in Whitefish, Montana, the Commission considered three uniformity
proposals. The three proposals before the Commission were all adopted
as uniformity recommendations to the states: (1) a model statute for
Disallowance of Deductions for Certain Payments to Captive Real Estate
Investment Trusts, (2) a model Mobile Workforce Statute, and (3) an
amendment to the Commission's model Combined Reporting Statute Section
1.I. – Definition of “Tax Haven” for Purposes of Water’s Edge Election.
(Note: Each of these can be accessed from the Commission's agenda
found using the 2011 Annual Conference and Committee Meetings link.)
uniformity recommendations will be submitted to the states for their
consideration. All recommendations of the Commission are advisory to
the states. For a recommendation to become effective in any state, that
state must affirmatively adopt the proposal through its own legislative
or regulatory process.
State Fiscal Conditions - Updated
On February 16, Scott
Pattison, Executive Director of the National Association of State Budget
Officers (NASBO), spoke to the Tax Economists Forum, a Washington, DC
based group of public finance economists, about the current condition of
state finances and the outlook for the future. To briefly summarize Mr.
Pattison’s presentation: the current fiscal condition of state
governments has improved somewhat when compared to last year, states, as
a whole, face significant challenges in both the near-term and the
long-term. States will face slow revenue growth – revenue levels may not
return to 2008 levels until 2013 or 2014. Read more ...
43rd Annual Conference and Committee Meetings
July 25-29, 2010
The Commission held its 43rd Annual Conference & Committee Meetings in Hood River, Oregon. Visit the 2010 Annual Conference page to see presentations from this event.
In Memory of William F. (Will) Yancey
The Commission would like to recognize the passing of Dr. Will
Yancey, PhD, CPA, on February 11, 2010, and acknowledge his
contributions and participation in numerous MTC projects and conferences
over the past decade. His intellect, knowledge, and, most of all,
friendship will be missed.
Executive Director Joe Huddleston Awarded Honorary Degree
The Commission is pleased to announce that Executive Director Joe Huddleston was awarded the honorary degree of Doctor of Laws on December 14, 2009, by University of South Carolina President Harris Pastides. The award of an honorary degree is the highest honor the University of South Carolina can bestow. Joe Huddleston was cited for his considerable leadership and commitment to the pursuit of efficient and effective government and commerce through sound public policies; for his dedication and devotion to the concept of equitable and simplified taxation; and for his dedication to the communities in which he has lived as well as to his alma mater, the University of South Carolina. You can read more about this tremendous honor.
Marshall Stranburg Receives 2009 MTC Paull Mines Award
||On July 29, 2009, Marshall Stranburg, General Counsel for the Florida Department of Revenue, was presented with the second annual Paull Mines Award for Contribution to State Tax Jurisprudence. The Commission established this award to honor Paull Mines, who served as MTC general counsel for eight years until his death in 2002. We are pleased to recognize Marshall’s outstanding contributions, and the leadership, legal excellence, and professional integrity that Marshall exercises in the best tradition of the profession.
Commission Seeks Information for its Automated Audit Program Software Project
The MTC Technology Committee is seeking information from interested vendors regarding computer software to be used for case management by its Joint Audit Program. The deadline for responses has been extended to March 15, 2010. Click here for more information.
42nd Annual Conference
The Commission held its 42nd Annual Conference, The States, The Economy, and the Great Recession, on July 29, 2009 in Kansas City, Missouri. Visit our 2009 Annual Conference page to see presentations from this event.
State Fiscal Outlook: It's bad and it's going to get worse before it gets better
It's bad: According to data from the U.S. Department of Commerce, Bureau of Economic Analysis, total state and local government surpluses fell from a record high of $63.1 billion in the second quarter of 2006 to a deficit of $103.6 billion in the third quarter of 2008, the latest data available (both figures are seasonally adjusted at annual rate). Total state and local government surpluses were $4.7 billion in the third quarter 0f 2008. Total state and local government borrowing went from $33.4 billion in the first quarter of 2006 to more than $200 billion in the third quarter of 2008. See the accompanying chart for state and local budget deficits and surpluses and net borrowing from the first quarter of 1990 to the third quarter of 2008. Read more...
The Business Activity Tax Simplification Act of 2009
The latest iteration of the Business Activity Tax Simplification Act, it is almost identical to the previous versions of this bill. Read more...
Business Tax Provisions of the Stimulus Package
As a service to those who peruse our website, the Policy Research Division staff has culled the business tax provisions from the stimulus package that was recently signed off on by the House and Senate. Read more...
Commission Supports NCCUSL Efforts to Review its Uniform Law
The MTC submitted comments to NCCUSL's drafting committee on division of income, addressing a list of issues that the committee had published for discussion in advance of its meeting in Chicago, Illinois, May 30-31, 2008. Executive Director Joe Huddleston emphasized that "substantial uniformity in apportionment of state tax bases is critcial for efficient and fair administration of state taxes, and ultimately for state tax sovereignty." NCCUSL's Uninform Distribution of Income for Tax Purposes Act has been the foundation on unformity efforts for more than 50 years, and the MTC fully supports NCCUSL's efforst to review and update its model uniform law.
Click here for the Commission's letter; Click here for the Response of the MTC on UDITPA Issues to Consider for Revision
Commission Sends Letter Regarding H.R. 5267
On February 13, 2008, the Commission sent a letter opposing H.R. 5267, the Business Activity Tax Simplification Act of 2008, to the House Committee on the Judiciary. The short letter highlighted two key problems with the bill: its enactment would hurt small, local businesses and hurt important state services. Click here for a copy of the letter
Alabama Wins VFJ Add-Back Case
On February 8, 2008, the Alabama Court of Civil Appeals held in Tom Surtees, Commissioner of Revenue, et al. v. VFJ Ventures, Inc. that Alabama's add-back statute was properly applied to deny a deduction for royalty expense paid by VFJ to two related Delaware trademark management companies (reversing the earlier decision by a lower court). The Alabama add-back statute requires expenses related to intangibles owned by related-member corporations to be added back into the calculation of taxable income, unless an exception applies. Two exceptions were at issue the case: (1) the expense payment was "subject to tax" in another state, and (2) the corporation "establishes that the adjustments are unreasonable." VFJ argued the payments had been "subject to tax" because its total net-income, pre-apportionment, had been reported on another state's tax return, and also argued add-back was "unreasonable" because its trademark royalty payments had a legitimate business purpose and the management companies had economic substance.
On the "subject-to-tax" exemption issue, the Court held that it applied where the income is actually taxed as a part of a tax on net income -- that is, it applies on a post-apportionment, rather than on a pre-apportionment, basis. The Court also agreed with the Department of Revenue's position that the term "unreasonable" should be interpreted to prevent tax liabilties arising from the add-back which bear "no fair relation" to the taxpayer's activities in Alabama. The Court found that the department's consistent interpretation of "unreasonable" was entitled to deference and that the taxpayer's alternative definition would "provide the add-back statute with little, if any, field of operation other than to disallow sham deductions" which Alabama could do under the judicial sham transaction doctrine.
VFJ's constitutional challenge of Alabama's add-back statute under the commerce clause, relying on the nexus and fair-apportionment prongs of Complete Auto, was also rejected.
Click here to read the Court's opinion in this case.
The Commission filed two amicus briefs in support of Alabama in this case: Click here to read the Commission's amicus brief. Click here to read the Commission's amicus reply brief.
State and local government finances are inextricably linked to the performance of the national economy. When the economy is expanding, tax revenues rise as incomes and purchases rise. The converse is equally true. After a long period of growth, economic performance is weakening. According to the Department of Commerce Bureau of Economic Analysis, which released its advance estimate of fourth quarter Gross Domestic Product at 8:30 A.M. on January 30th, real gross domestic product — the value of the output of goods and services produced in the United States — measured in 2000 dollars, increased at an annual rate of 0.6 percent in the fourth quarter. In contrast, the rate of real GDP growth in the previous quarter was 4.9 percent. The final fourth quarter estimate of GDP growth will be available on February 28th.
As economic growth has slowed, so has state revenue growth. According to Allison Grinnell of the Rockefeller Institute, state tax revenue totaled $147 billion in the third quarter of 2007 — a 4.4 percent increase over the 3rd quarter of 2006. However, when adjusted for legislated tax changes and inflation, total state tax revenue declined by 0.6 percent. State by State detail and historical data are available from the Institute’s State Revenue Report Number 70, State Tax Revenues Falter Again.
A companion report written by Donald Boyd titled "What Will Happen to State Government Finances in a Recession?" provides insights into how state and local governments will meet the challenges of the possible recession.
The Center for Budget Policies and Priorities has also just release its analysis of the Senate Finance Committee’s fiscal stimulus package.
Commission Sovereignty Membership Continues to Expand
Georgia Commissioner Bart L. Graham has announced that Georgia will become a sovereignty member of the Multistate Tax Commission effective July 1, 2007. Additionally, Georgia will begin participating in the MTC’s Joint Audit Program for sales and use taxes; currently, Georgia is an associate member and is a participant in the Commission’s National Nexus Program.
This announcement follows one made last month by Executive Director Joe Huddleston that Maryland and West Virginia would be joining the ranks of the Commission's sovereignty member states and that Indiana would be joining as an associate member, effective July 1, 2007. More information
Dan Bucks to Receive Anderson Medal
Dan Bucks, Director of Montana's Department of Revenue, has been awarded the 2007 Wade Anderson Medal in Interstate Tax Cooperation. The Award was commissioned by the Texas Comptroller's Office in 2004 to honor the contributions to interstate tax cooperation by Wade Anderson, a long- time employee of the Comptroller's Office. Dan’s years of dedication to interstate cooperation include nearly two decades as Executive Director of the MTC. The Medal will be presented by Texas Comptroller Susan Combs at the FTA Annual Meeting in Chicago on June 11, 2007.
North Dakota Office of State Tax Commissioner Announces the Retirement of Robert W. Wirtz
After serving the North Dakota Office of State Tax Commissioner and the Multistate Tax Commission's Executive Committee, Robert W. Wirtz has retired. Donnita "Dee" Wald, Special Assistant Attorney General and Legal Counsel will replace Mr. Wirtz as the North Dakota representative on the Commission.
MTC Files Statement Opposing ITFA Moratorium
On May 22, 2007, the Commission filed written statements with committees in the Senate and House of Representatives opposing the Internet Tax Freedom Act moratorium. Senate version | House version
Commission Membership to Expand July 1st
At the MTC's spring executive committee meeting, Executive Director Joe Huddleston announced that Maryland and West Virginia would be joining the ranks of the Commission's sovereignty member states and that Indiana would be joining as an associate member, effective July 1, 2007. More Information
States Launch Multistate Tax Shelter Voluntary Compliance Program
To encourage taxpayers who have entered into abusive tax shelters to disclose their participation and amend their returns, 23 states have established a multi-state tax shelter voluntary compliance program. Hosted by the MTC, the program allows taxpayers to unwind abusive tax shelters in exchange for a state benefit, usually full abatement of penalty. The program runs from May 1 until October 1, 2007. The MTC is pleased to announce that Utah, Florida, and Idaho are now among the participating states.
States Adopt Combined Reporting
New York and West Virginia are the newest states to adopt combined reporting to prohibit abusive income-tax-avoidance strategies practiced by corporations. On April 1st, the New York legislature accepted Governor Spitzer's proposal that the state require combined reporting, retroactive to the beginning of 2007. In addition, Governor Manchin of West Virginia signed new legislation mandating combined reporting effective with the 2009 tax year.
Appellate Division of State Supreme Court of New York rules that Disney Enterprises, Inc. Owes $1.3 Million in Taxes
After an audit conducted by the Department of Taxation and Finance, it was determined that Disney Enterprises, Inc. owes the State of New York $1.3 Million in corporate franchise taxes. Disney Enterprises, which is part of the Walt Disney Company, argued that the state should not have included New York sales from Buena Vista Home Video's in the formula used to determine a company's tax liability in the state from 1990-1995. Disney contended that the inclusion was in violation of Public Law 86-272.
View the full document from the Appellate Division of State Supreme Court of New York Website.
Massachusetts Corporate Income Tax: REIT Distributions Held Ineligible for Dividends-Received Deduction
On February 2nd, the Massachusetts Appeals Court denied the dividends-received deduction from the computation of net income for distributions received from a real estate investment trust (REIT) to a corporate shareholder. Under Federal law, corporate shareholders are not allowed to claim dividends-received deductions for REIT distributions when computing federal taxable income. The court held that applying the same rules to Massachusetts taxation would support the principal of uniformity between Massachusetts and federal tax law as required by Massachusetts statutes.
View the full document from the Commonwealth of Massachusetts Appellate Tax Board Website.
Commission Files Amicus Brief in Union Pacific Railroad Co. and Soo Line Railroad Co. v. Dan Salomone, Commissioner of Revenue, et. al.
Minnesota sales tax exemptions for purchases of fuel upon which petroleum excise tax has been paid were challenged by the railroads as impermissible discrimination pursuant to subsection (b)(4) of the 4-R Act, which prohibits "another tax [other than property tax] which discriminates against a rail carrier . . .," because motor carriers and airlines qualify for the exemption while railroads [along with barges and great lakes shippers] do not. The Commission's brief in support of Minnesota relies on the U.S. Supreme Court's reasoning in a similar case dealing with the 4-R Act and property tax exemptions (Department of Revenue of Oregon v. ACF Industries, Inc.) to argue that where Congress has not expressed any intent (either in the language of the statute or in legislative history), to pre-empt important, pre-existing state tax exemptions, principles of federalism compel that the exemptions be upheld. The Commission also pointed out a holding to the contrary would be inconsistent with the Supreme Court's holding in the ACF case that the term "discriminates" does not include discrimination via property tax exemptions, and distinguished the 8th Circuit's prior ruling in Burlington Northern, Santa Fe Ry. Company v. Lohman where, unlike here, the railroads were singled out as the only form of transportation that did not qualify for exemption from sales tax.
See the PDF version of the brief here.
Bruce Johnson Awarded 2006 Wade Anderson Medal
On Wednesday, August 16, 2006, Commission Chair Joan Wagnon presented Utah Tax Commissioner R. Bruce Johnson with the 2006 Wade Anderson Memorial Medal for Leadership in Interstate Tax Cooperation during the Commission’s Annual Conference. The Wade Anderson Medal is awarded annually by the FTA and the MTC in conjunction with the Texas Comptroller’s Office to the individual who best exemplifies the commitment to interstate cooperation to promote fairness, simplicity, and consistency in state tax administration.
Multistate Tax Commission Voluntary Disclosure Program Lauded in Government Innovation Award Process
The Voluntary Disclosure Program, whichenables businesses to clean up past state tax liabilities without undergoing the risks of bankruptcy or employee layoffs, is among the 50 semifinalists for the prestigious 2005 Innovations in American Government Awards, which are often referred to as the“Oscars” of government prizes. View the press release