States Change Audit Positions Without Authority: WHAT??

Throughout my career I have faced several instances where states have made audit assessments or taken positions under audit that contradict the position the state has taken in the past when it has audited the company.  This change in position by the state has occurred even when there has been NO CHANGE in the state's statutes, rulings and court cases since the last audit.

Should the state be able to change their position without any change in authority?  In most cases I would say no.  Unfortunately, when you challenge the position within the audit, you may not get anywhere.  You may have to go to appeals or even court to resolve.  My experience is that resolution is highly likely at the appeals level (this obviously depends on the facts of each case).

With that said, getting back to my original question, should a state be able to change its position without any change in authority?  Allowing states to do so causes a taxpayer to incur time and money to challenge the change in position, when there is no reasonable basis for the change. 

Why would a state make an assessment when there is no change or basis for the assessment?  Well, the answer may be that the state has changed its policy or interpretation of a statute or regulation.  The state may believe that this change in interpretation is enough.  It may or may not be, depending on the facts of the case.

Overall, if you run into this situation don't just accept it.  Question it.  Challenge it.  Just remember, you may have to go to appeals to resolve the matter. 

DISCLAIMER:  Each case is different and states may have justification for their change in position.  This is a reminder to not just accept the change, but to seek to clearly understand the state's position so you can determine if you should challenge it. 

NEW Leverage | SALT LinkedIn Group!!!

I decided today to finally start a Leverage | SALT LinkedIn group.  I know several of you subscribe via e-mail to this blog, but I thought it would be even better if you had a group within LinkedIn to share your comments, and connect with not only with me, but each other. 

Please go to LinkedIn and join the Leverage | SALT LinkedIn group today.

I look forward to hearing from you!!

State Tax Provision Time - Who Cares?

It's that time of year again - Tax Provision Time. Yeah!!!

Is your company currently calculating it's 2011 tax provision?  If so, how is your state income tax provision going?  Did you calculate your effective state tax rate?  Did you take into account your company's significant state tax addback and deductions?  How about changes in apportionment?  Law changes?  Rate changes?

How about everyone's favorite - state uncertain tax positions or UTPs.  Is your company taking those into consideration correctly?  Is your reserve growing year after year?  Did your company conduct the appropriate level of analysis (a thorough one) to determine what, if any reserve needs to be recorded for FIN 48 purposes? 

What items could you possibly need to set-up a reserve for?

1. Nexus
2. Intercompany transactions
3. Combined reporting vs. Separate company return filing
4. Apportionment factor  issues (measurement and sourcing)
5. Restructuring challenges (forced combination, etc.)
6. Business vs. Nonbusiness income characterization

Questions??

How Multistate Taxes Affect Businesses of ALL Sizes

Are you a start-up business?  A mid-sized business? Or a Fortune 500 company?  No matter the size of company, it doesn't really matter when it comes to state and local taxes.  If your company is doing business across state lines, your business is impacted by multistate taxes.

Common questions and issues:

1. Is my company required to register to file returns and pay income taxes?
2. Is my company required to register to collect and remit sales and use taxes?
3. Property taxes?
4. What credits and incentives is my company eligible to obtain?
5. My business operates as an affiliated group of multiple entities.  Does the state require us to file separate returns or one combined return?
6. How are intercompany transactions treated?  Do we have to addback intercompany expense deductions?
7. Is my affiliated group of entities unitary?
8. Does my affiliated group of entities need a transfer pricing study?
9. Are sales of services sourced differently than sales of tangible personal property?
10. What types of sales are included in the apportionment factor?
11. How are sales determined?  Gross sales or net sales?
12. Our company sales a service and a product.  Are we required to collect sales tax?  If so, on the whole charge or part of it? 
13. Our company has foreign (non-U.S.) operations.  How does that impact our state returns?
14. Our company is a foreign based company (non-U.S.) with operations in the U.S. If we don't have a permanent establishment in the U.S., are we still required to file state income tax returns?
15. How will changing the ownership and/or organization structure of our affiliated group of companies impact our state tax filing requirements? 
16. Do we owe sales tax on the purchase of a company's business assets?  Is there a bulk sale notification requirement?
17. If our company buys the assets of another company, are there any real estate transfer taxes due?
18. When can our company remove our FIN 48 reserve for uncertain state tax positions?
19. If our company owns an interest in a partnership, does that ownership interest give our company a taxable presence in the states in which the partnership operates?
20. If our company sells assets or liquidates a division of our company, is that treated as business or nonbusiness income?

Virginia Governor Releases Legislative Agenda: "The Greatest Opportunity"

According to a press release on the Governor's website, Governor Bob McDonnell, joined by Lieutenant Governor and Chief Jobs Creation Officer Bill Bolling and numerous legislators, announced yesterday his "The Greatest Opportunity: Jobs and Economic Development Legislative Agenda" for the 2012 General Assembly session during a morning press conference in Richmond.

This year's agenda builds on the aggressive job creation and economic development measures that passed the General Assembly with strong bipartisan support during the 2010 and 2011 sessions. In line with the budget priorities outlined in his address to the Joint Money Committees in December, Governor McDonnell has asked for increased support of job creating funds and initiatives as part of his introduced 2013/2014 biennial budget. He also will advance legislation to increase access to capital for business and implement greater coordination among economic development entities, along with budget items increasing the support of job creation funds and initiatives.

The legislative agenda includes several tax credits:

• Small business investor tax credit(Merricks/McDougle)

This bill would allow an individual income tax credit for qualified investments made to qualified small businesses and are held for two years, beginning on or after January 1, 2013, but before January 1, 2015.

The tax credit would be equal to 10% of the amount of the qualified investment. Qualified small businesses would be required to be designated as a qualified small business with the Department of Taxation before any tax credits are issued to eligible investors.

• Extend the Acceleration of the Major Business Facility Jobs Tax Credit(Kilgore/Reeves)

Extends the time during which the major business facility job tax credit may be taken over a two-year period from taxable years beginning January 1, 2009 through December 31, 2012, to taxable years beginning January 1, 2009 through December 31, 2014.

• Extend the sunset date for investments that qualify for the capital gains income tax subtraction

Extends 2010 legislation that grants an income tax deduction for any income taxed as a long-term capital gain for federal income tax purposes or any income taxed as investment services partnership interest income, on or after January 1, 2011, that is related to a qualified investment in a technology and science start-up business having a principal office or facility in the Commonwealth and less than $3 million in annual revenues in the fiscal year prior to the investment.

The deduction originally related to investments made between July 1, 2010, and June 30, 2013 this bill would extend the sunset date to June 30, 2015.

To view the full press release, go to Virginia Governor: The Greatest Opportunity.

Eliminate the Gap Between Knowing and Doing!

Happy New Year everyone!  I hope you had a safe and happy celebration as we enter 2012. 

At this time of year, most people make resolutions or set new goals for themselves.  But after the dust settles, and the hype is over, what will you actually do?  What will you actually accomplish? 

I can't remember who said it, but "the greatest gap in the world is between knowing and doing."  That statement is so true (as I am sure you have experienced firsthand yourself).  People will read books and books, and make plans, strategize, etc., but the "proof is in the pudding."  In other words, just do it. 

The action and execution mindset requires taking one day at a time, discipline, and real personal, self motivation.  If you don't have those qualities, then you probably better find a coach or someone else who will "make you do it."  Based on my experience, if you don't have those qualities when trying to achieve your goal, then you won't achieve your goal unless someone makes you do it, and keeps you accountable.

As I set goals for 2012, I think of two types of goals: 

1. Destination Goals
2. Journey Goals

Destination goals are goals that we normally think of, like:  "I want to get in shape.  I want to lose 10 lbs. I want to increase sales by 20%." 

Journey goals are the plan and strategy - the daily execution that will lead you to your destination goals.  Journey goals might be:  "I will run 2 miles a day.  I will not eat sugar 6 days a week.  I will make # sales calls per day."

What are your destination goals?  What are your journey goals?

Will you eliminate the gap between "knowing and doing" and accomplish your goals in 2012?

Take it one day at time.  Be you.  Expect success. 

Full speed ahead!

REWIND: The Top 18 State Tax Blog Posts of 2011! (I Think)

As the end of 2011 approaches, I thought it might be fun to provide you with my list of favorite posts from 2011.  Here are my Top 18 with links for your convenience.  Take a look and let me know what your favorites are.

1. State IRC. Section 382 Limitations on Net Operating Losses: Do They Exist?
2. Iowa Says: No Physical Presence? No Problem.
3. State and Local Taxes: What Will Happen in 2011?
4. Sales Tax Problems Cause SEC Fine!
5. "Bundled Transactions" - Who Cares?
6. All Companies Have Nexus in Washington State?
7. Amazon's State Tax Planning: Follow-Up Commentary
8. BEWARE: California's New "Doing Business" Standards In Effect!
9. State Tax Notices: A Game???
10. Nexus: To File or Not to File?
11. Where Should Your Company Relocate or Invest?
12. Don't Put the Cart Before the Horse (State Tax Planning vs. Business Purpose)
13. Practical Tips for Navigating the Sales Tax "Minefield" of "Cloud Computing"
14. FIN 48 Reserve for Uncertain State Tax Positions: Will It Ever End??
15. How to Avoid Intercompany Expense Addback and Combination
16. What Are Your State and Local Tax "Blind Spots"?
17. Are You A Victim of "Crunch Time"?
18. State and Local Tax Due Diligence: Don't Restructure Without It!

I hope each of you have a Merry Christmas and Happy New Year! 

May your time spent with family be blessed and may God give you a vision for 2012!!