GMG Knowledge Base

Salt Spotlight
10 Sep, 2015

Connecticut Corporate Tax Legislation Update

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Connecticut Enacts Mandatory Unitary Combined Reporting

On June 30, Connecticut Governor Dannel Malloy signed the State’s biennial budget legislation.  The legislation results in significant changes to the State’s corporate income tax by requiring mandatory combined reporting for unitary businesses, limiting the use of net operating losses and credits, and extending the corporate tax surcharge.  The combined reporting provisions were originally slated to take effect retroactively to years beginning on or after January 1, 2015.  However, the legislation was uniformly criticized by the corporate community.  As a result, the legislation was amended and the effective date of the combined reporting provisions was postponed until January 1, 2016. 

 

  

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03 Sep, 2015

NYS Investment Capital Identification Requirements

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NYS Issues Guidance Addressing Investment Capital Identification Requirements


The New York State (“NYS”) Department of Taxation and Finance recently issued TSB-M-15(4)C (“TSB”), which outlines procedures for the identification of assets as investment capital as required under NYS tax law.  Specifically, NYS Tax Law Sec. 208.5 requires that in order to treat an investment in stock as “investment capital,” taxpayers are required to clearly identify, in the corporation’s records, that the stock is held for investment in the same manner as required under Internal Revenue Code (“IRC”) Section 1236(a)(1).  This identification must occur before the close of the day on which the stock is acquired. 

The guidance, issued July 7, 2015 and summarized below, sets forth the procedures for complying with the identification requirement.  Taxpayers currently holding stock for investment purposes should carefully review these identification procedures, including the deadline to make the identification by October 1st of this year, in order to take advantage of the favorable tax treatment afforded to income from investment capital. 

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03 Mar, 2015

Computation of NY Net Operating Loss Deduction

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Computation of NY Net Operating Loss Deduction

In TD Holdings II, Inc., DTA No. 825329 (Div. of Tax App, January 22, 2015), an Administrative Law Judge (“ALJ”) held that a banking corporation was not required to utilize a net operating loss deduction (“NOLD”) to decrease its entire net income in a year in which its tax liability was measured by the capital base.  While ALJ decisions are not precedential, the decision is important since it contests the Division of Taxation’s (“Division”) longstanding position that a NOLD must be utilized to reduce a taxpayer’s income to zero, even when the taxpayer is not subject to tax on income. 

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15 Jan, 2015

New York Combination – IT USA, Inc.

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At the end of 2012, the New York Division of Tax Appeals decided yet another combination case involving New York’s “distortion requirement.”  In the case, the Department argue that related corporations should not be permitted to file on a combined basis because they did not meet the “presumption of distortion” (in existence prior to the enactment of the mandatory combined reporting rules). 

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04 Aug, 2014

New York Sales Tax: Data Processing Services Treated as an Information Service and not as the License of Prewritten Software

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In Matter of SunGard Securities Finance LLC (Division of Tax Appeals, February 6, 2014) (“SunGard”), a New York Administrative Law Judge (“ALJ”) held that the provision of certain computer data processing services accessed via the “cloud” was not subject to New York sales tax as the taxable sale of canned software, but rather was a nontaxable information service.  Although this is an ALJ decision (which may not be cited as precedent), it is nonetheless important because it challenges the longstanding view of the Tax Department that remote access to software is the taxable sale of tangible personal property, even in situations where the requisite possession and control of the software may be lacking.        

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15 Apr, 2014

New York State Corporate Reform Enacted

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 On March 31, 2014, New York Governor Andrew Cuomo signed the State’s budget legislation which, among other things, makes significant changes to the State’s corporate income tax laws, including the repeal of the Article 32 Franchise Tax on banking corporations (“Bank Tax”).  Taxpayers previously subject to such tax are now subject to tax under Article 9-A.  In addition to repealing the Bank Tax, the new legislation makes significant changes to Article 9-A, including adopting new economic nexus rules, modifying the net income and capital tax bases, adopting a market-based approach for apportioning receipts, modifying the net operating loss (“NOL”) deduction and carryover rules, and revising the combined reporting rules.  Most of these changes are effective for taxable years beginning on or after January 1, 2015.  To date, New York City has not adopted similar provisions, resulting in vastly different taxing regimes in the State and City.    

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02 Apr, 2014

New York Issues Guidance Regarding IDA Sales Tax Exemption Benefits

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 On February 12, 2014, the New York State Department of Taxation and Finance (the “Tax Department”) issued a revised technical memorandum explaining recently enacted legislation which changes the way Industrial Development Agencies and Authorities (IDAs) provide and report sales tax exemption benefits.  The legislative changes, effective March 28, 2013, include new recordkeeping and reporting requirements, new requirements related to the recapture of certain sales tax exemption benefits, and limitations on providing sales tax exemption benefits to certain retail sales projects. TSB-M-14(1.1)S

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03 Mar, 2014

New Jersey Tax Court Amplifies its Decision in Lorillard Licensing Co.

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On January 14, 2014, the New Jersey Tax Court issued an amplification of its bench opinion granting summary judgment to the taxpayer in Lorillard Licensing Co., LLC v. Director, Div. of Taxation, Docket No. A-2033-13T1 (August 9, 2013).  The Court confirmed that the throw-out rule applies only if a state lacks jurisdiction to tax the taxpayer’s sales assigned to that state (determined by applying the economic nexus standards set forth in Lanco), and is not dependent on whether the taxpayer actually files returns and pays tax in that state.

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02 Jan, 2014

New York Corporate Tax Relief Proposals

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 In his 2014 State of the State address, Governor Cuomo made several tax relief proposals aimed at increasing economic competiveness and tax fairness, two areas where New York has consistently ranked at the bottom in national studies.  These proposals were selected from recommendations made by the New York State Tax Relief Commission which was convened by the Governor in late 2013 to identify ways to reduce New York property and business taxes by approximately $2B.  Some of the corporate tax proposals identified by the Tax Relief Commission were taken from recommendations made by the Tax Reform and Fairness Commission which was convened to identify ways to make revenue-neutral structural changes to the State’s individual income, sales, and corporate income taxes to make the tax code more simple and fair.  

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16 Jan, 2013

California – Implications of the Gillette Decision

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A California Court of Appeals recently held that California's adoption of the Multistate Tax Compact (the "Compact") prevented the California legislature from statutorily precluding a corporate taxpayer from electing to use the Compact's three-factor apportionment formula contained in UDITPA.  Prior to the decision inGillette, California took the position that use of the State's four-factor apportionment formula, with double-weighted sales, was mandatory, and that taxpayer's were not permitted to use the Compact's three-factor methodology.  The Court held that adoption of the Compact was a valid contract entered into with other states which could not be unilaterally changed or modified by the California legislature.  The Court stated that a taxpayer could be precluded from using the Compact's provisions only if the State withdrew from the Compact.  The Court of Appeals, on its own motion, vacated the decision, and issued a revised decision on October 2, 2012.  While the revised decision does not materially alter the conclusions reached in the first opinion, it appears to clarify that California's statute mandating the use of the State's four-factor formula is unconstitutional only to the extent it that it seeks to supersede the use of the UDITPA apportionment formula.   

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