TEI Urges the Multistate Tax Commission to Update its Model Statute Governing the Reporting of Federal Income Adjustments

On December 14, 2016, TEI Tax Counsel Pilar Mata, along with Nikki Dobay of the Council on State Taxation (COST), presented at the Multistate Tax Commission’s (MTC) Fall Meeting and urged the MTC’s Uniformity Committee to undertake a project updating its 2003 model statute governing the reporting of federal income adjustments.  Pilar and Nikki noted the problems with current state statutes and the lack of uniformity among states.  They also maintained now would be opportune to update the 2003 model statute because states will soon need to consider how to update their reporting statutes to reflect changes to the federal partnership audit rules. 

Pilar and Nikki also presented a draft model reporting statute, which was developed by a working group consisting of members of TEI, COST, the ABA’s State and Local Tax Committee, and AICPA.  Proposed changes to the current model statute include updating the definition of a “final determination,” requiring a minimum of 180 days to report federal changes to states, allowing a streamlined model report to report federal adjustments, providing an exception for de minimis changes to state tax liabilities, and allowing taxpayers to make estimated tax payments prior to a federal final determination to toll the accrual of interest.  The MTC’s Uniformity Committee will decide whether to open a new project at its next meeting in March 2017.  However, MTC Executive Director Greg Matson commented that the project was a good example of the uniformity the MTC should strive to achieve.