State Corporate Income Apportionment: Key Fundamentals
State Corporate Income Apportionment:Key Fundamentals and Legislative TrendsTHURSDAY, MAY 15, 2014, 1:00-2:50 pm EasternIMPORTANT INFORMATIONThis program is approved for 2 CPE credit hours. To earn credit you must: Attendees must listen throughout the program, including the Q & A session, in order to qualify for full continuingeducation credits. Strafford is required to monitor attendance. Record verification codes presented throughout the seminar. If you have not printed out the “Official Record ofAttendance,” please print it now (see “Handouts” tab in “Conference Materials” box on left-hand side of your computerscreen). To earn Continuing Education credits, you must write down the verification codes in the corresponding spaces foundon the Official Record of Attendance form. Please refer to the instructions emailed to the registrant for additional information. If you have any questions, pleasecontact Customer Service at 1-800-926-7926 ext. 10.WHOM TO CONTACTFor Assistance During the Program:- On the web, use the chat box at the bottom left of the screen- On the phone, press *0 (“star” zero)If you get disconnected during the program, you can simply call or log in using your original instructions and PIN.
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State Corporate Income Apportionment:Key Fundamentals and Legislative TrendsUnderstanding State Approaches to Factor Weighting, Service Revenue,Joyce v. Finnigan, Gillette and Other Apportionment ConceptsMAY 15, 2014Pat Derdenger, Steptoe & JohnsonBob Rosato, Ryanpderdenger@steptoe.comBob.rosato@ryan.comBen Gardner, Steptoe & Johnsonbgardner@steptoe.com
NoticeANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BYTHE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANYOTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THATMAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING ORRECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.You (and your employees, representatives, or agents) may disclose to any and all persons,without limitation, the tax treatment or tax structure, or both, of any transactiondescribed in the associated materials we provide to you, including, but not limited to,any tax opinions, memoranda, or other tax analyses contained in those materials.The information contained herein is of a general nature and based on authorities that aresubject to change. Applicability of the information to specific situations should bedetermined through consultation with your tax adviser.5
STATE CORPORATE INCOMEAPPORTIONMENTMay 15, 2014Pat DerdengerPartner, Steptoe & Johnson LLP(602) 257-5209pderdenger@steptoe.comBen GardnerAssociate, Steptoe & Johnson LLP(602) 257-5291bgardner@steptoe.com
BUSINESS VS NON-BUSINESSINCOME7
Only In-State Income is Subject to Tax(1) Corporations with “In-State” Source Income are taxable.(2) Due process clause and commerce clause require nexus between taxingstate and the multi-state business. Physical presence is sufficient nexus (e.g. traveling salesman) What about intangible nexus or economic nexus? O.K. for income tax but not sales/use tax.Intangible Nexus – Good for income tax. See Geoffrey Inc. v.S.C. Tax Comm’n, 437 S.E.2d 13 (S.C. 1993) and K-Mart Corp. v.Taxation and Revenue Dep’t , 131 P.3d 22 (N.M. 2005).Economic Nexus – Good for income tax. See W.Va. v. MBNAAmerican Bank, 640 S.E.2d 226 (W. Va. 2006).8
Only In-State Income is Subject to Tax(3) Public Law 86-272 prohibits states from taxing out-ofstate businesses when only in-state activity is solicitationof sales of tangible personal property.Does P.L. 86-272 apply to sales of services or intangibles?No.(4) Tax test for nexus is not the same as qualification test.9
Determining a Multi-State Corporation’sIn-State Income(1) Separate Accounting Separate geographical accounting.(2) Formula Apportionment States frequently use the 3-Factor Formulacontained in the Uniform Division of Incomefor Tax Purposes Act (“UDITPA”), or aderivative, such as super weighted sales factoror single sales factor.(3) Specific Allocation Income is traced to its source.10
UDITPA Three Factor FormulaIn-State property Total PropertyIn-State payrollTotal Payroll In-State salesTotal Sales311Apportionablex(Business)Income Incometaxable bythe State
UDITPA’s Purpose to Avoid NonUniform ApportionmentUDITPA’s purpose is to provide a formulary method toensure that a multistate taxpayer is not taxed in theaggregate on more than its net income.12
Taxpayers Subject to UDITPAUDITPA applies to any taxpayer that has income frombusiness activity which is taxable both within and withoutthe state.13
Taxpayers Subject to UDITPAThe Uniform Act excludes public utilities and financialinstitutions. Regulations establish industry specific apportionmentmethods.14
How UDITPA is Structured toAccomplish Its PurposeUDITPA divides income into “business income” and“nonbusiness income.”15
Specific Allocation of “NonbusinessIncome”“Nonbusiness income” means all income other thanbusiness income.General Rule--Allocate Nonbusiness Income ToA Specific State16
Specific Allocation of “NonbusinessIncome” Net Rents and Royalties from Real Property – StateWhere Property is Located Capital Gains and Losses - State Where Property isLocated Interest and Dividends - Domiciliary State Patent and Copyright Royalties - State Where Propertyis Located17
Apportionment of Business Income“Business income” means income arising from transactionsand activity in the regular course of the taxpayer’s trade orbusiness and includes income from tangible and intangibleproperty if the acquisition, management and disposition of theproperty constitute integral parts of the taxpayer’s regular tradeor business operations. (emphasis added).18
Apportionment of Business IncomeRule-- Business Income is apportioned among all the states inwhich the taxpayer does business using the 3 Factor Formula.19
Business v. Nonbusiness IncomeBusiness Income: One Test or Two?1. Transactional Test: did the transaction giving riseto the gain occur in the regular course of thetaxpayer’s trade or business? [Phrase 1 in definition]20
Business v. Nonbusiness Income2. Functional Test: was income-producing propertyintegrated into, or used in, business operations? [Phrase 2 indefinition] “Liquidation Exception” recognized by many courts when abusiness is liquidated or goes out of business. Is the Functional Test a separate test? Or is it a sub-part ofthe Transactional Test (see underlining in definition -- “andincludes”)? In other words are there two tests or one.21
Business Income CasesTransactional Test UsedAlabama Dept. of Rev. v. Uniroyal Tire Co., Inc., 779So.2d 227 (Ala. 2000) (“and”) Court of Appeals held that gain on sale of partnership(which manufactured tires) is business income. Courtused functional test. The Alabama Supreme Court reversed holding thatAlabama’s definition of business income contains only atransactional test.22
Business Income CasesTransactional Test UsedIn re Kimberly Clark Corp. v. Alabama Dep’t of Revenue, 69So. 3d 144 (Ala. 2010). Lower court found business income under the transactional testwhen a paper company sold a paper mill and related timberland inAlabama because the company had bought and sold businesses inthe past, making the sale a normal part of its ordinary business. The Alabama Supreme Court reversed, holding that the sale didnot satisfy the transactional test even though it had acquired andsold some businesses during the audit period because the sale wasextraordinary in nature. The court applied a transactional test only.23
Business Income CasesTransactional Test UsedOther cases adopting only a transactional test include: Phillips Petroleum Co. v. Iowa Dep’t of Revenue & Fin., 511N.W.2d 608 (Iowa 1993). Gen. Care Corp. v. Olsen, 705 S.W.2d 642 (Tenn. 1986). W. Natural Gas Co. v. McDonald, 446 P.2d 781 (Kan. 1968). In re Chief Indus., Inc., 875 P.2d 278 (Kan. 1994).Note that several states where courts adopted only atransactional test revised their statutory definition of businessincome to include the functional test.24
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Business Income CasesFunctional Test UsedTexaco–Cities Serv. Pipeline Co. v. McGaw, 695 N.E.2d 481(Illinois 1998) (“and”) Gain from the sale of pipeline in Illinois is businessincome. Court used the functional test.26
Business Income CasesFunctional Test UsedPolaroid Corp. v. Offerman, 507 S.E.2d 284 (N.C. 1998)(“and/or”) Court awarded damages for patent infringement and loss ofroyalties is business income. North Carolina definition ofbusiness income included a functional test.Hoechst Celanese v. Cal. Franchise Tax Bd., 22 P.3d 324 (Cal.2001). (“and”) Surplus from pension plan reversion to corporation treatedas business income under functional test, relying onPolaroid.27
Business Income CasesFunctional Test UsedMay Department Stores Company v. Indiana Departmentof State Revenue, 749 N.E.2d 651 (Ind. Tax Ct. 2001). When a company sold its subsidiary, the Court foundnon-business income because the sale failed both thetransactional and functional tests. As an issue of firstimpression, the Court held that Indiana recognizes boththe transactional and functional tests.28
Business Income CasesFunctional Test UsedGannett Satellite Info. Network, Inc. v. Mont. Dep’t ofRevenue, 201 P.3d 132 (Mont. 2009). Most recent state supreme court decision to adopt thefunctional test. Found the UDITPA definition of “business income” to beambiguous as to the existence of one test or two, butnonetheless adopted a functional test in reliance on UDITPA’slegislative history and UDITPA’s goal of promoting uniformityamongst the states. Relied heavily upon Hoechst.29
Business Income CasesFunctional Test UsedHarris Corp. v. Ariz. Dep’t of Revenue, 312 P.3d 1143(Ariz. App. 2013). Recent Arizona Court of Appeals decision adopting thefunctional test. Ignoring the maxim that ambiguous statutes must beconstrued in favor of taxpayer, the court purported to derive afunctional test from the plain language of the business incomedefinition. Followed California’s approach in Hoechst.30
Business Income CasesFunctional Test UsedOther courts to adopt a Functional Test include: Kroger Co. v. Dep’t of Revenue, 673 N.E.2d 710 (Ill. 1996). District of Columbia v. Pierce Associates, 462 A.2d 1129(D.C. 1983). First Data Corporation v. Ariz. Dep’t of Revenue, 313 P.3d548 (Ariz. App. 2013) (companion case to Harris).31
Business Income CasesLiquidation Exception to Functional TestLenox, Inc. v. Tolson, 548 S.E.2d 513 (N.C. 2001). (“and/or”). Income from the liquidation sale of jewelry division (Art Carved)determined to be non-business income under functional test. The court ruled that liquidation transactions “are in a category bythemselves . . . [W]hen the transaction involves a complete or partialliquidation and cessation of a company’s particular line of business, andthe proceeds are distributed to shareholders rather than reinvested in thecompany, any gain or loss generated from the transaction is nonbusinessincome under the functional test.” The liquidation transaction was not an integral part of thetaxpayer’s regular trade or business.32
Business Income CasesLiquidation Exception to Functional TestLenox, Inc. v. Tolson, 548 S.E.2d 513 (N.C. 2001). (“and/or”). Overruled Polaroid on definition of functional test. Functionaltest required that the “property constitute an integral part of thecorporation’s regular trade or business.” The extraordinary nature or infrequency of the transaction bearson functional test. Important Factor: Not Reinvested.33
Business Income CasesLiquidation Exception to Functional TestMcVean & Barlow, Inc. v. New Mexico Bureau of Revenue,543 P. 2d 489 (Ct. App. 1975). Income from an asset sale and partial liquidation of abusiness was non-business income because the sale andliquidation was not an integral part of the taxpayer’s regulartrade or business operations. Not Reinvested.34
Business Income CasesLiquidation Exception to Functional TestLaurel Pipe Line Co. v. Commonwealth of Pennsylvania, 642A.2d 472 (Pa. 1994). The court found non-business income on a partialliquidation where the company ceased business in thatgeographic area and the proceeds of the sale were distributedto the shareholders. Not Reinvested.35
Business Income CasesLiquidation Exception to Functional TestBlessing/White, Inc. v. Zehnder 768 N.E.2d 332 (App. Ct. Ill.2002). Income from a liquidation, where the corporation ceasesoperations and distributes all the proceeds from the sale to itsshareholders is non-business income as an exception to thefunctional test. Not Reinvested.36
Business Income CasesLiquidation Exception to Functional TestNat’l Holding, Inc. v. Zehnder, 369 Ill. App. 3d 977 (Ct.App. 2007). Proceeds from an asset sale which liquidated twosubsidiaries of a parent corporation generated nonbusiness income. Court found an exception to thefunctional test when the proceeds from the liquidationwere not reinvested into the ongoing business of thecompany. Not Reinvested.37
Business Income CasesLiquidation Exception to Functional TestThe Mead Corp. v. Illinois Dep’t of Revenue, 861 N.E.2d1131 (App. Ct. Ill. 2007). The court found apportionable business income where ataxpayer liquidated a section of its business but reinvestedthe proceeds into its ongoing business, thus satisfying thefunctional test for business income. U.S. Supreme Court reversed the Illinois Court (2008),holding that the business division sold must be unitarywith the seller to give rise to business income.38
Business Income CasesLiquidation Exception to Functional Test PartnershipShakkour v. Hamer, 859 N.E.2d 49 (App. Ct. Ill. 2006). Court found non-business income when a partnership sold anintangible asset and distributed the proceeds to the partners underthe liquidation exception to the functional test. The Court also found Illinois could not then tax a non-residentpartner on the distribution if the money received by thepartnership was non-business income.39
Business Income CasesLiquidation Exception to Functional TestS-CorporationKemppel v. Zaino, 746 N.E.2d 1073 (Ohio 2001). Court found non-business income under both thetransactional and functional tests, where an S corporationliquidated, dissolved and distributed the proceeds toshareholders.40
Business Income CasesLiquidation Exception Rejected by CaliforniaJim Beam Brands v. Cal. Fran. Tax Bd., 34 Cal. Rptr. 3d 874 (Cal. App.2005). Going Out of Business (Liquidation) Exception to Functional TestREJECTED by California. Found business income under functional test. The Court distinguished its ruling from other cases by stating that inCalifornia the focus of the Functional Test is on the nature of the incomeproducing property, while other cases focused on the nature of the incomeproducing transaction. Does the Court’s interpretation square with thedefinition of business income?41
Business Income CasesLiquidation Exception Rejected by ArizonaHarris Corp. v. Arizona Department of Revenue, 312 P.3d 1143 (Ariz. App.2013). The Arizona Court of Appeals issued the first decision following California’srejection of the Liquidation Exception to the functional test. Relied heavily on Jim Beam. Reasoned that adopting the liquidation exception would result in a lack ofsymmetry.“Assets would be depreciated and expenses deducted, reducing businessincome prior to disposition of the assets, but upon sale any gain wouldbecome nonbusiness income under a liquidation exception. Consequently, asingle state might capture all the income while the states that had previouslyallowed expenses on an apportioned basis would shoulder the deductions.”42
I.R.C. §338(h)(10) CasesStock Sale Treated as Asset Sale for Income TaxPurposes Most reviewing courts have treated a 338(h)(10)deemed asset sale as falling under liquidation exception tofunctional test. The gain on a “deemed” asset sale is not reinvested butdistributed to shareholder parent.43
I.R.C. §338(h)(10) CasesCanteen Corp. v. Commonwealth of Pennsylvania, 818 A.2d594 (Pa. Comm. Ct. 2003). Court found non-business income when a corporation soldthe stock of a subsidiary and made the election under I.R.C.Sec. 338(h)(10). Court reasoned that gain from a fictionalasset liquidation pursuant to the election should be treatedthe same as an actual liquidation.44
I.R.C. §338(h)(10) CasesMcKesson Water Prods. Co. v. Div. of Taxation, 23 N.J.Tax 449 (2007), aff’d 974 A.2d 443 (N.J. Super. App. Div.2009). Court applied the functional test and found nonoperational income where a parent company sold the stockof a subsidiary and made the election under I.R.C. Sec.338(h)(10).45
I.R.C. §338(h)(10) CasesOsram Sylvania, Inc. v. Commonwealth of Pennsylvania,No. 310 F.R. 1998, Pa. Tax Rptr. (CCH) ¶203-090 (Pa.Comm. Ct. 2003); affirmed by Penn. Supreme Court, 863A.2d 1140 (Pa. 2004). Court found non-business income when a parentcorporation sold its subsidiary and made the electionunder I.R.C. Sec. 338(h)(10). The Court upheld CanteenCorp.46
I.R.C. §338(h)(10) CasesAm. States Ins. Co. v. Hamer, 816 N.E.2d 659 (Ill. App.Ct. 2004). Gain from a stock sale, deemed to be an asset sale underI.R.C. Sec. 338(h)(10), generated non-business incomeafter the court found that the functional test was notsatisfied in the case of a liquidation and cessation ofbusiness.47
I.R.C. §338(h)(10) CasesABB C-E Nuclear Power Inc. v. Director of Revenue, 215S.W.3d 85 (Mo. 2007). ABB was a wholly owned subsidiary, whose parentcorporation sold it through a stock sale to a third party.The buyer and seller made the election under I.R.C. Sec.338(h)(10). Court found that ABB’s income was nonbusiness income.48
I.R.C. §338(h)(10) CasesChambers v. Utah State Tax Commission, Utah Tax Rptr.(CCH) ¶400-501, (Utah D. Ct. 2007). Court found non-business income when S corporationshareholders sold their stock in the corporation and madethe election under I.R.C. Sec. 338(h)(10).49
I.R.C. §338(h)(10) CasesBusiness Income FoundFirst Data Corporation v. Ariz. Dep’t of Revenue, 313 P.3d548 (Ariz. App. 2013). The Arizona Court of Appeals had rejected theLiquidation Exception in Harris, and also rejected it herein the context of a §338(h)(10) election.50
Business Income Example California corporation has plant in Nevada. Sells for 10 million gain. Taxpayer’s California apportionment percentage is 60%and Nevada is 40%.51
Business Income Example If Business Income: 6 million apportioned to California and taxed. 4 million apportioned to Nevada - no tax. If Non-Business Income: All gain allocated to Nevada - no tax. Nothing allocated to California.52
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Apportionment FundamentalsBob Rosato, Ryan LLC05/15/2014www.ryan.com
Apportionment Fundamentals – Apportioning State Income Typical State Taxable Income CalculationFederal Taxable Income - State AdjustmentsNonbusiness Income Apportionable State IncomeXApportionment Percentage (From 3-factor Formula) Apportioned Business Income Nonbusiness Income Allocated to State State Taxable IncomeXStatutory Tax Rate Gross State TaxState Tax Credits Net State Tax55
Apportionment Fundamentals – Apportioning State Income U.S. Supreme Court precedent has interpreted the Commerce Clause torequire fair apportionment.–Apportionment is a method of dividing the business income of taxpayeramong the states in which the taxpayer does business.–What is fair apportionment?–When do taxpayers have a right to apportion? If so, when?–Apportionment formula must reasonably reflect how income is generated.56
Apportionment Fundamentals – Apportioning State Income Multistate Uniform Laws & Rules–Uniform Division of Income for Tax Purposes Act (UDITPA) Adopted in 1957 by the National Conference of Commissioners on Uniform StateLaws to address the “need for a uniform method of division of income for taxpurposes among the several taxing jurisdictions.” Article IV of the MTC adopts UDITPA for purposes of determine business and nonbusiness income as well as allocation and apportionment.–Multistate Tax Compact (MTC) Drafted in 1966 and became effective in 1967 after seven states adopted it. Established The purpose of the MTC is to properly determine state and local taxliability of multistate taxpayers, including equitable apportionment by:»Promoting uniformity and compatibility in significant components of tax systems.»Facilitating taxpayer convenience and compliance in tax administration.»Avoiding duplicative taxation.57
Apportionment Fundamentals – Apportionment Formula Standard UDITPA Apportionment Formula–All business income is apportioned by multiplying the income by a fraction –the numerator is the property factor plus the payroll factor plus the salesfactor divided by the denominator which is three. Property Factor: The numerator is property within the state and the denominator isproperty everywhere. Payroll Factor: The numerator is payroll within the state and the denominator ispayroll everywhere. Sales Factor: The numerator is sales within the state and the denominator is saleseverywhere. Total Apportionment Factor: Add the property factor, payroll factor, and sales factor,then divide the sum by three.58
Apportionment Fundamentals – Apportionment Formula Apportioning Income to the StatesIn-State PropertyProperty Factor Everywhere PropertyIn-State PayrollPayroll Factor Everywhere PayrollIn-State SalesSales Factor Everywhere SalesApportionment Factor (Property Factor Payroll Factor Sales Factor)/359
Apportionment Fundamentals – Apportionment Formula Trending the Standard Formula–Apportionment achieves the objectives of states by allowing them to taxbusiness income derived from the state. The income attributed to a state by that state’s apportionment formula must berationally related to the values connected with the taxing state.–Apportionment also achieves the objectives of taxpayers by helping alleviatethe risk of double taxation.–Only a handful of states still use the traditional formula, because it punishesinvestment in the state by measuring property and payroll in the state. Apportionment formulas with weighted sales factors. Single-sales factor apportionment.60
Apportionment Formula – Property Factor Property Factor under UDITPA–Property is included in the Property Factor if it is owned or rented, and usedby the taxpayer during the tax period.–The property must be used or be capable of being used in the taxpayer’sregular course of trade or business, and it must produce business income(intangible property generally is not included).–The MTC includes property in the property factor when it is actually used oravailable for use during the tax period.61
Apportionment Formula – Property Factor Property Factor defined by UDITPA–Owned and leased real and tangible personal property are included in thefactor.–“Real and tangible personal property” is defined by the MTC to include land,buildings, machinery, stores of goods, equipment, and other real or tangiblepersonal property. Intangibles and currency are generally not included.–Owned property is valued at its original cost unless original cost is not know. If original cost not known, fair market value at the time of acquisition is used. The factor is determined by averaging beginning and end of year values.–Leased and rented property is valued at eight times its net annual rental rate. Imputed/Deemed Rent – Include fair market value of property used by the taxpayerfor which rent is not paid or paid at a nominal rate.62
Apportionment Formula – Property Factor Movable Property MTC Reg. IV.10(d)–MTC approach is to distribute movable property on a pro-rata basis. The value of mobile or movable property such as construction equipment, trucks, orleased electronic equipment located within and without a state during the tax periodis determined based on the total time within the state during the tax period. An automobile assigned to a traveling employee is included in the numerator of thefactor of the state to which the employee’s compensation is assigned under thepayroll factor or in the numerator of the state in which the automobile is licensed.63
Apportionment Formula – Property Factor In-transit Property MTC Reg. IV.10(d)–MTC approach is to source in-transit property to its state of destination. “Property in transit between locations of the taxpayer to which it belongs shall beconsidered to be at the destination for purposes of the property factor.” Cal. CodeRegs. Tit. 18 §25129(d). NJ Throwout: Inventory in transit from one state to another is not included in thenumerator or denominator of the property factor. N.J. Admin. Code §18:78.4(c)(3). Maryland required inclusion of the value of automobiles on the high seas in theMaryland numerator, despite the fact that in-transit inventory was not addressed inthe property factor statute. Mercedes Benz of N. Am., Inc. v. Comptroller ofTreasury, Dkt. No. 2813, (MD Tax Ct. Oct. 7, 1988).64
Apportionment Formula – Property Factor Outer-Jurisdictional Property MTC Reg. IV.18(h)(4)(ii)A–MTC approach excludes outer-jurisdictional property from the propertyfactor. Outer-jurisdictional property includes satellites and undersea transmission cablesthat are owned or rented by the taxpayer but not physically located in a state.–New Hampshire includes outer-jurisdictional property in the property factorbased on the number of uplinks and downlinks in New Hampshire over thenumber of transmissions everywhere. N.H. Reg. 304.08.65
Apportionment Formula – Property Factor Special Considerations–Construction in Progress The MTC does not include property under construction in the property factor, generally. Massachusetts includes construction in progress in the property factor. Commissionerof Revenue v. New England Power Co., 562 N.E.2d 543 (Mass. 1991).–Idle Property The MTC includes idle property if it is intended for later business use. Idle property is only removed when permanent withdrawal is established by anidentifiable event such as conversion to production of nonbusiness income, sale, orlapse of time – normally, five years.–Service v. Lease Must determine whether bundled charges for use of space are charges for rent orservice.66
Apportionment Formula – Payroll Factor Payroll Factor–Includes amounts paid as compensation by the taxpayer in the regularcourse of its trade or business. Compensation includes taxable wages, salaries, commissions, etc. Compensation does not include any amount paid to independent contractors. Some states exclude executive compensation in the payroll factor.–Payroll related to the production of non-business income is excluded.67
Apportionment Formula – Payroll Factor Payroll Sourcing Rules–The numerator of the payroll factor includes compensation paid toemployees for services rendered within the state. If an employee works both within and without the state, his or her wages aresourced according to the Model Unemployment Compensation Act (MUCA).»State in which the employee’s services are wholly or substantially performed, ifservices performed outside of the state are incidental or rendered in connectionwith isolated transactions.»The state in which the employee’s base of operations is located, if some part ofthe services are performed in that state.»The state from which the employee is directed or controlled, if some part of theservices are performed in that state.»The state in which the employee resides.68
Apportionment Formula – Payroll Factor Who is included in payroll?–State auditors use Federal Form 940 to tie payroll figures since payrollgenerally follows unemployment compensation rules.–Review common-law employees versus book employees. Common law employee: Performs services for a company who controls what willbe done and how it will be done.–Exclusions Payroll attributable to non-business income. Independent contractors. Non-jurisdictional payroll.69
Apportionment Formula – Payroll Factor Other Definitions of Compensation–Alabama does not exclude independent contractors, because the Alabamalaw states that the payroll factor is measured by compensation paid forservices in the state versus compensation paid everywhere. C&D ChemicalProducts, Inc. v. Alabama Dept. of Rev., No. 00-288 (Ala. Admin. Law. Div.Feb. 9, 2001).–Kentucky ruled that compensation paid to an affiliate by a taxpayer forservices rendered by the affiliate’s employees to the taxpayer were includableas Kentucky compensation. Cincinnati, New Orleans & Texas Pacific Railwayv. Kentucky Dept. of Rev., 684 S.W.2d 303 (Ky. Ct. App. 1
May 15, 2014 · (2) Due process clause and commerce clause require nexus between taxing state and the multi-state business. Physical presence is sufficient nexus (e.g. traveling salesman) What about intangible nexus or economic nexus? O.K. for income tax but not sales/use tax. Intangible N
Apportionment July 1, 2022 ‐ 5 ‐ 93 Section 4-1.2 General rules for apportionment.[Tax Law, section 210-A] 94 (a) All corporations apportion within and without New York State their total business 95 income and business capital by a business apportionment factor (BAF) that is a fraction.The 96 numerator and denominator of the BAF includes only those receipts, net income, net gains, and
Income Tax Act 2007 2007 No 97 BC 6 Income tax liability of filing taxpayer 106 BC 7 Income tax liability of person with schedular income 106 BC 8 Satisfaction of income tax liability 108 Subpart BD—Income, deductions, and timing BD 1 Income, exempt income, excluded income, non- 108 residents' foreign-sourced income, and assessable income
apportionment law as "radical", "a diametrical change", and a "new regime". From a historical perspective, it must be kept in mind that from 1932 to 1968, a period of 36 years, the law of apportionment in California was basically the same as it is currently under SB 899, as reflected in Labor Code Sections 4663 and 4664.
G-50A Sales Manual CONTENTS 1. . Electric power apportionment information can be obtained to calculate air conditioning charge for each area. (Optional function. A separate license number has to be input.) Using electric power apportionment function (optional), you can enter the electric power apportionment data for each indoor unit into a PC .
Payroll Factor [Marianne Evans] Specific Industry Apportionment [Kelly Brown] Combined/Consolidated Return Issues [Richard Call] Latest Important Developments Slide 51 [Kelly Brown] Slide 8 - Slide 10 Slide 40 - Slide 44 Slide 45 - Slide 50 Slide 11-Slide 14 Slide 15 - Slide 26 Slide 27 - Slide 33 Slide 34 - Slide 39
12. Income received in anticipation 13. Valuation of trading stock 14. Transfer of trading stock with other assets or for inadequate consideration 15. Deemed income arising from expenditure or loss discharged 16. Apportionment of income on incorporation and disincorporation [Sub-Part AA -Solidarity Income Tax] Repealed 16A.
AREA MEDIAN INCOME (AMI): The median family income in the metropolitan or nonmetropolitan area EXTREMELY LOW-INCOME (ELI): Households with income at or below the Poverty Guideline or 30% of AMI, whichever is higher VERY LOW-INCOME (VLI): Households with income between ELI and 50% of AMI LOW-INCOME (LI): Households with incomes between 51% and .
RP-2 ISO 14001:2015 Issued: 8/15/15 DQS Inc. Revised: 5/12/17 Introduction This Environmental Management System Assessment Checklist is a tool for understanding requirements of ISO14001:2015 “Environmental management systems – Requirements with guidance for use”. The Checklist covers Clauses 4-10 requirements with probing questions about how an organization has addressed requirements and .
