| From Shane Lord and Andrew Appleby of the Sutherland SALT team:
The California Superior Court ruled that certain
special purpose entities (SPEs) owned by Harley-Davidson, Inc. had nexus in
California. The taxpayer formed the SPEs as securitization subsidiaries, which
the court held were subject to California income taxation because the SPEs: (1)
were “financial corporations” under California law; and (2) had substantial
nexus with California because the SPEs had agents in the state. The court
determined that independent dealerships and the SPEs’ parent and sister
corporations were agents of the SPEs. The taxpayer argued that the SPEs were
not “financial corporations” because the SPEs were bankruptcy remote
subsidiaries of the taxpayer and were not in substantial competition with
national banks, as required by Cal. Code Regs. tit. 18, § 23183. The court did not
address the implications of the SPEs constituting bankruptcy remote
subsidiaries. The court ultimately held that the SPEs were in substantial
competition with national banks because the SPEs and national banks conducted
the same activities of bundling loans and selling securities backed by those
loans. In addition to the above issues, the court sustained a demurrer early in
the case, dismissing the taxpayer’s two other causes of actions: (1) the
Franchise Tax Board discriminated against the taxpayer by not allowing it to
file separate returns; and (2) the taxpayer was entitled to use an
equal-weighted three-factor apportionment formula (see Gillette Co. v. Franchise Tax Bd., 147
Cal. Rptr. 3d 603 (Cal. Ct. App. Oct. 2, 2012)). Harley-Davidson, Inc. & Subs. v. Franchise Tax Bd.,
No. 37-2011-00100846-CU-MC-CTL (San Diego Super. Ct. May 1, 2013).
Available on the Sutherland SALT Online blog here.
|
| From Leah Robinson at McDermott:
On April 15, 2013, the New Jersey Division of Taxation (the
Division) released its proposed regulations for sourcing receipts from
services. The proposed regulations reflect a customer-based sourcing
approach for most service receipts. The statue controlling apportionment
of service receipts, however, unequivocally requires receipts to be sourced
based on where a service is performed. In many scenarios, where a service
is performed and where the customer would be treated as receiving the benefit
will differ. This article, which appeared in the May 13, 2013, edition of
State Tax Notes, discusses how in those scenarios the Division will have
exceeded its authority by adopting a regulation that reaches a result contrary
to that required by the statute.
Click here to
read the full article |
|
From
Art Rosen and Lidsay LaCava of McDermott:
A New York administrative law judge recently
held in Matter of C.V. Starr & Co., Inc. that income received by a
taxpayer from its ownership of common stock was investment income. In so
holding, the ALJ addressed an important issue for many New York taxpayers and
concluded that a taxpayer’s motive or intent for acquiring and holding stock
and the manner in which the taxpayer used that stock are irrelevant to the
determination of whether that stock qualifies as investment capital for
corporate income tax purposes.
Read the full
article here. |
|
Multistate corporate tax professionals need to comply with state
and local taxes nationwide. However, it can be challenging to stay up to date
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|
| From the Sutherland SALT team:
The Streamlined Sales Tax Governing Board, as well as its State and
Local Advisory Council and Business Advisory Council, assembled in Minneapolis
this week to discuss a number of policy matters related to Streamlined Sales
and Use Tax Agreement. The overarching theme, however, was the continued viability
of the Agreement in light of the Marketplace Fairness Act as it moves through
Congress. This Legal Alert summarizes the more notable issues addressed in
Minneapolis, particularly how the SSTGB plans to hit “refresh” on the Agreement
if the Marketplace Fairness Act is signed into law.
Read
Sutherland’s legal alert, "SST Governing Board Considers 'Best Practices' Matrix and Marketplace
Fairness Implementation; SLAC Contemplates Digital Goods Sourcing." |
| From the SALT group at KPMG:
Recently,
a California superior court held that two Harley Davidson special purpose
entities (SPEs) created for the purpose of bundling and selling securitized
loans had substantial nexus with California, despite their lack of physical
presence in the state. Harley Davidson, through its financing subsidiaries,
originated loans to customers in all 50 states. After the financing
subsidiaries originated loans with customers, certain loans were transferred to
the SPEs to be bundled and sold. The financing subsidiaries, however, continued
to earn fees from servicing the loans. The SPEs were created to function as
“bankruptcy remote” entities for financial statement purposes, meaning that the
assets and liabilities of the SPEs were not consolidated on the Harley Davidson
group’s financial statements.
Although the SPEs had no physical presence in
California, the court held that they had nexus with the state because of their
deeply integrated relationship with the financing subsidiaries, as demonstrated
by the interdependence and circular flow of funds among the entities. In the
court’s view, the SPEs were an integral part of an overall corporate enterprise
that was engaged in offering loans to buyers of Harley Davidson motorcycles,
equipment, clothing, insurance, and extended warranties. Although the SPEs were
separate corporations, the court concluded that they were doing business in
California through their agents (the financing subsidiaries and dealers). The
fact that the SPEs were created to be “bankruptcy remote” was irrelevant to the
determination of whether nexus existed. The next issue before the court was
whether the SPEs were considered “financial corporations,” which are entities
that predominantly deal in money or moneyed capital in substantial competition
with the business of national banks. Entities meeting the definition of a
financial corporation are, among other things, subject to a higher rate of
income tax and are required to use specific financial corporation apportionment
provisions. Although the taxpayers argued that the SPEs were not in substantial
competition with national banks, the court observed that federal banking
regulations allow national banks to deal in, purchase, and sell asset backed
securities, which were essentially the same activities as the SPEs. As
such, the court concluded that the SPEs had nexus with California and were
required to be taxed as financial corporations.
Read the full case summary
of Harley Davidson, Inc. v. Franchise Tax Board (May 1, 2013) here. |
| New
York, May 14, 2013 —
Thomson Reuters today announced a new version of ONESOURCE Indirect Tax
Integration for SAP designed to meet the indirect tax needs of global companies
doing cross border business in the regions of EMEA, Asia Pacific, Latin
America, and North America. Already known as the global indirect tax
innovators, with the first and only patented Universal Tax Engine®, this latest
news builds upon the company’s ten years of global SAP indirect tax
implementation expertise, which has resulted in successful SAP implementations
with some of the largest companies in the world. In addition, Thomson Reuters
has in-house, worldwide tax experts to maintain the broadest and deepest
coverage of tax content in more than 14,500 U.S. tax jurisdictions in more than
175 countries.
According
to a recent survey titled, “The 2013 Benchmark Survey on VAT/GST” by KPMG International,
two-thirds of respondents in Europe, Middle East and Africa and one-third in
the rest of the world believe that VAT/GST rates will increase in the next
three years indicating government’s continued reliance on indirect tax
revenue. For businesses charted with collecting this tax on behalf of
government, VAT/GST changes directly impact the operational resources required
to achieve compliance.
“In
the past, it was sufficient to keep abreast of in-country developments,
however, as businesses increasingly go global, and with more countries relying
on VAT and GST for revenue, companies must now be aware of what is happening
worldwide,” said Eric Ruud, managing director of ONESOURCE Indirect &
Property Tax at Thomson Reuters. “This latest version of ONESOURCE Indirect Tax
Integration for SAP underscores our commitment to providing global integration
solutions with the most widely used ERP systems. This is just one of the many
ways we are helping global businesses achieve confidence and global transparency
into their indirect tax compliance processes across all business entities and
locations.”
While ERP
systems generally provide comprehensive and highly configurable tax code-based
reporting that can be extended to provide box-level tax return reports, these
systems are often limited when it comes to determining and calculating
particular types of tax and offering reports that comply with specific rules
and regulations. ONESOURCE Indirect Tax integrated with ERP systems:
· Streamlines
tax calculation, determination, reconciliation, reporting, and audit
preparation with a single, intuitive interface.
· Facilitates
indirect tax planning so companies can identify and assess the overall impact
of new tax configurations, as well as document their tax systems, policies, and
processes.
· Guarantees
data integrity by working in conjunction with ERP Financials to ensure that the
latest data is available for tax calculation.
· Accurately
interprets government indirect tax policies then calculates and returns
detailed tax results for over 175 countries.
· Accurately
determines tax liability, eliminating tax penalties and interest costs, while
reducing overall cost of compliance.
· Provides
comprehensive audit trails to ensure Sarbanes-Oxley 404 compliance.
Availability
ONESOURCE Indirect Tax Integration for SAP is
part of the Thomson Reuters end-to-end indirect tax solution that delivers
initial tax determination, and calculation to final compliance reporting, all
supported by highly skilled CPAs and legal experts who maintain the widest
coverage of global tax content. This newest version of ONESOURCE Indirect
Tax Integration for SAP is currently being released to a limited number of SAP
clients and will be generally available in the latter half of 2013. For
more information on ONESOURCE Indirect Tax, visit: http://onesourceindirecttax.com. |
| From Jack Trachtenberg and Kathryn Pittman at Sutherland:
On April 17, 2013, Select Medical Corporation
(Select Medical) filed suit in federal district court seeking to enjoin
Delaware from enforcing an unclaimed property assessment issued for years that
had been resolved already through the state’s voluntary disclosure program. In
2006, Select Medical entered into Delaware’s voluntary disclosure program for
the years 1997-2001. As part of the voluntary disclosure process, Select
Medical escheated approximately $17,000 to Delaware and paid approximately
$300,000 in unclaimed property to states other than Delaware. On the same day
that Delaware cashed Select Medical’s escheatment check, it notified the
company that it was being placed under audit. Using a third-party auditor,
Delaware demanded payment of $297,436 for the period 1997-2001 based on an
estimate that looked to the amount of property owed to other states from
2002-2008. Unable to resolve the matter with the state, Select Medical
commenced a lawsuit and sought injunctive relief against the demand for
payment, alleging that Delaware exceeded its authority under state law by
estimating an unclaimed property liability through extrapolation of amounts
paid to other states for a different period, even though Select Medical had
actual records from which any liability could be determined and the owners of
any unclaimed property identified. Select Medical also alleged a variety of
federal common law and constitutional violations. Given Delaware’s position as
one of the most aggressive states in enforcing unclaimed property law, the
trajectory of this litigation will be important, especially given the recent
trend toward more aggressive unclaimed property enforcement in all states.
Taxpayers who have previously entered into voluntary disclosure agreements or
who are contemplating doing so should pay close attention to this case as it
may frame new powers for the states with respect to escheatment. Select Medical Corp. v. Del. Sec’y
of Finance, Del. Dir. Of Rev., & Del. State Escheator, Case No.
1:13-cv-00694-UNA (D. Del. Apr. 17, 2013).
Read more from the team at Sutherland on their blog here.
|
| From the SALT group at Deloitte:
New Mexico Governor Susana Martinez recently signed House Bill 641 ("H.B. 641"), which includes the following modifications to New Mexico tax law:
- Phases in, over five years, corporate income tax rate reductions
- Requires combined reporting for certain unitary corporations engaged in retail sales
- Phases in, over five years, elective single sales factor apportionment for eligible manufacturing corporations and eliminates throwback for electing corporations
- Amends the gross receipts tax deduction for tangible property consumed in the manufacturing process
- Extends the high-wage jobs tax credit and tightens the criteria for qualification
- Allows municipalities and counties to impose a local option gross receipts tax
- Expands the scope of the film production tax credit and requirements for eligibility
Read the rest of this alert with great details on these recent law changes here.
|
| DMA published its latest edition of the Texas Legislative Update from DMA on April 24. This edition includes a summary of bills introduced that would amend the Texas Margin Tax in ways that could have significant effects on many taxpayers.. Stay tuned as things continue to evolve in Texas. To read the entire publication and access earlier editions, click here.
|
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