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Current developments.

EXECUTIVE SUMMARY

This two-part article discusses a plethora of recent state and Multistate Tax Commission pronouncements issued in the income tax and sales and use tax areas. In Part I, the income tax discussion covers nexus, apportionment, and trends in business and nonbusiness income; Part II, in the May issue, will examine other income tax developments, as well as sales and use tax nexus issues and other developments.

Nexus Issues

State Pronouncements

* Alabama

The Alabama Department of Revenue recently issued regulations providing that entities leasing, renting, licensing or otherwise disposing of tangible personal property, or engaged in transactions involving intangibles (e.g., franchises, patents, copyrights, trademarks, service marks, etc., or any other type of property), are removed from the protection of P.L. 86-272.(1) These regulations were later withdrawn for further study.

* Florida

The Florida Department of Revenue has ruled that an out-of-state corporation's use of its own vehicles to deliver goods to Florida customers established nexus.(2)

* Idaho

The Idaho Supreme Court has held that an out-of-state corporation is not subject to Idaho income tax due solely to the presence in that state of its railcars that have been leased to other railroads.(3)

* Michigan

A company did not maintain offices in states other than Michigan, but regularly sent employees to other states. Although Due Process concerns were satisfied for Michigan single business tax purposes by the company's sales solicitation activities in the other states, reversal and remand of the case to the Court of Claims was warranted to determine whether the company had substantial nexus under the Commerce Clause with states in which it solicited sales to warrant exclusion of such sales from its Michigan sales factor.(4)

* Missouri

The Missouri Supreme Court held that income earned by a Missouri real estate holding company from a Florida mobile home park was taxable in Missouri because the taxpayer made all management decisions there; specifically, the holding company's president had authority to sign checks from the park's general account and all bookkeeping and tax preparation services were performed in Missouri by a contractor chosen by the holding company.(5)

* New York

A Delaware corporation that held a greater-than-50% interest in a New York limited partnership was not subject to New York corporation franchise tax. An administrative law judge ruled that the corporation did not have sufficient nexus with New York for several reasons--the corporation's partnership interest was its sole interest in New York, the company did not maintain a separate office or conduct business in New York and had limited communication with the general partner. In addition, the partnership had been formed for a valid business purpose and not to avoid tax.(6)

* Vermont

Out-of-state corporate clients of a Vermont corporation that performs services within the state on behalf of such clients (e.g., handling customer complaints, maintaining bank accounts, depositing checks and credit card payments, removing inventory from storage and packaging and shipping to customers) have nexus and are thus subject to Vermont corporate income tax.(7)

* Wisconsin

A foreign sales corporation (FSC) is subject to the corporate franchise (income) tax as a separate corporation if the company has nexus in Wisconsin and is a viable corporation with substance. The FSC's net income will be subject to tax because Wisconsin excludes the Federal tax treatment of FSCs.(8)

Multistate Tax Commission Pronouncements

* Revised P.L. 86-272 nexus guidelines

The Multistate Tax Commission (MTC) has updated its guidelines regarding P.L. 86-272 nexus to reflect the Supreme Court's ruling in Wisconsin Dep't of Rev. v. William Wrigley, Jr., Co.(9) In addition, in response to the decision in Geoffrey, Inc. v. South Carolina Tax Comm'n,(10) the definition of property afforded the limited immunity for solicitation excludes intangible property.

* Final Report on MTC Statement regarding P.L. 86-272

In addition to issuing an updated policy statement regarding P.L. 86-272, the MTC has issued the Final Report of the Hearing Officer on the MTC Statement on P.L. 86-272. A number of recommendations included in the Report are favorable to taxpayers; for instance, the Report recommends that states permit sales representatives to maintain limited "in-home" offices (even if they are paid directly or indirectly by the out-of-state company) without losing immunity under P.L. 86-272. The recommendations also provide that the use of personal property (e.g., cellular phones, fax and copy machines, software and computers) solely for solicitation activities should not remove P.L. 86-272 protection. Similarly, providing shipping and delivery information both before and after sale and coordinating deliveries or shipments of the customer's goods should not cause an out-of-state corporation to lose immunity. The Hearing Officer also recommended that states treat the mere registration to do business by an out-of-state company as not removing the immunity otherwise available. However, if the company seeks to use or protect other state benefits (e.g., trade or corporate name protection), the state could reasonably take the position that the immunity is lost.

On the other hand, the Hearing Officer recommended that there is no protection afforded the collection of current or delinquent accounts, whether directly, indirectly by a third party, through assignment (presumably, for some immediate or contingent value) or otherwise. The Report also recommends that the protections under P.L. 86-272 not be extended to sellers of services and to those who perform services (e.g., installation or maintenance) in connection with the sale of goods. On the issue of whether the in-state delivery of goods in the seller's own trucks removes the protection, the Report recommends that, until the issue is judicially settled, states treat shipments and deliveries of goods by means of private carrier as unprotected activity, regardless of whether a separate delivery fee is charged to the purchaser.

With respect to the question of the extent to which immunity is lost if, during a portion of a tax period, the out-of-state seller conducts unprotected activities, the Hearing Officer concluded that the immunity is lost for the entire tax year.

The Report also recommended that the Executive Committee authorize the Uniformity Committee to review the appropriateness and feasibility of establishing de minimis gross receipts or apportionment factor standards for inclusion in the Statement at a future date.

With respect to the application of the throwback rule in calculating a unitary combined return, until the Finnigan(11) / Airborne Navigation(12) approach is judicially affirmed in those states that have adopted it (California and Kansas), the Hearing Officer recommended that states adhere to the Joyce(13) rule.

* Nexus Bulletin 95-1

In a controversial action, the MTC issued National Nexus Program Bulletin 95-1 in December 1995, advising computer manufacturers and marketers that nexus is established for sales and use and income and franchise tax purposes if instate repairs are provided through third-party repair service providers. A significant number of states have indicated that they intend to enforce these principles.

These actions are being challenged by various industry coalitions and taxpayers based on what they believe to be faulty legal analysis and administrative procedural problems in the states' adoption of the new standards.

Apportionment

State Pronouncements

* California

In accordance with McDonnell Douglas Corp. v. Franchise Tax Board(14) (FTB), the FTB has withdrawn Legal Ruling 348, which interpreted California Revenue and Taxation Code Section 25135 concerning the assignment of sales of tangible personal property to California. Under McDonnell, if goods are received by a purchaser in California and immediately transported by it to its place of business in another state, the sale is treated as a sale in the destination state and is assigned there for apportionment purposes, unless the seller is not taxable in the destination state.

* Connecticut

The Connecticut Supreme Court held that a company's rental interest in an out-of-state warehouse storage space need not be a possessory interest to be included in the property factor for apportionment purposes. The warehouse space at issue was leased in terms of square footage instead of specifying a particular location within the warehouse.(15)

* Illinois

An Illinois appellate court ruled that a taxpayer must actually pay tax in the destination state to avoid Illinois's throwback provisions. In Dover Corp. v. Ill. Dep't of Rev.,(16) the court held that a taxpayer must do more than demonstrate nexus in the destination state before it can avoid throwback of sales for inclusion in the Illinois sales factor. Further, the taxpayer, not a member of its unitary group, must actually pay tax in the destination state. The Illinois Supreme Court denied review of this case; thus, the decision is final.

* Indiana

Indiana has indicated that it will follow the decision in Appeal of Finnigan Corp.(17) for unitary taxpayers filing state combined reports. That case defines "taxpayer" as all corporations (members) of a unitary group. For purposes of computing the apportionment factor, Indiana follows Finnigan. (This apportionment method applies only to taxpayers filing an Indiana combined return.)(18)

* Iowa

The Iowa legislature passed Senate Bill 478 to eliminate a financial institution's deductions for investments in investment subsidiaries. Previously, a taxpayer calculated a ratio composed of its investment in investment subsidiaries compared to total assets and multiplied it by total expenses to arrive at the amount attributable to investment subsidiaries. This legislation is retroactively effective for tax years beginning after 1994 and to financial institutions with investments in investment subsidiaries after June 30, 1995.

* Maine

The seller corporation, a member of a unitary business group, did not need to include in the numerator of its sales factor receipts from sales of goods it shipped from Maine to other states in which it was not taxable. The sales were not sales in Maine under the throwback rule because a member of the unitary business group was taxable in the destination state.(19)

* Massachusetts

In The New York Times Sales, Inc. v. Comm'r of Rev.,(20) the Massachusetts Appellate Tax Board (ATB) ruled that no interest income could be imputed to a subsidiary on transfers of money between it and its parent corporation. The taxpayer participated in a cash management system with 46 other subsidiaries and its parent. The subsidiaries remitted cash to a central bank account which the parent then used to pay the subsidiaries' expenses. The Commissioner attempted to impute interest income to the subsidiary on amounts remitted to the parent in excess of the amounts paid on the subsidiary's behalf. The ATB stipulated in its ruling that the transfers shared no common characteristics with loans; accordingly, the excess transfers were actually dividends between the subsidiary and the parent.

* Massachusetts

The Massachusetts Department of Revenue has issued a comprehensive regulation setting forth its policies concerning the apportionment of income for business corporation excise tax purposes, applicable to tax years ending after Aug. 10, 1995.(21)

* Mississippi

A multistate corporation determined its income tax liability via three-factor formulary apportionment because it was unable to determine net income from downstream operations using direct or separate accounting. Although it could directly determine Mississippi downstream receipts (sales revenues) from its accounting records, it could not directly determine or allocate the Mississippi portion of downstream expenditures (e.g., national advertising), and so used the three-factor apportionment formula.

In a dispute in which the state argued that the taxpayer had to likewise use formulary apportionment in computing the receipts factor for apportioning franchise taxes, the taxpayer argued that because franchise tax liability is based on capital employed in the state and, unlike income tax liability, is not affected by expenses, it should not be required to use the apportionment formula to determine its franchise tax liability simply because its inability to directly account for Mississippi expenses necessitated its use of the formula to determine its income tax liability. However, under Miss. Code Ann. Section 27-13-13, an organization that uses formulary apportionment for income tax purposes must also do so for franchise tax purposes.(22)

* New York City

An administrative law judge held that a Vermont office maintained in the home of a corporate executive constituted a regular place of business for purposes of the New York City general corporation tax. Consequently, the taxpayer, a New York corporation, was entitled to use the three-factor business apportionment formula to apportion its entire net income within and without New York City.(23)

* New York State

In In re Petition of Silver King Broadcasting of N.J. Inc.,(24) an administrative law judge concluded that a New York destination sale of an out-of-state subsidiary protected under P.L. 86-272 would not be included in computing its New York receipts factor on the parent company's combined report. The court reasoned that if the subsidiary included its sales in the New York receipts factor, the subsidiary would be subject to New York tax in violation of P.L. 86-272. While this case has no precedential value, it indicates New York's acceptance of the decision reached in Appeal of Joyce.(25)

* New York State

In an Advisory Opinion,(26) an out-of-state investment company that staffed a New York sales office did not generate receipts from "services performed in New York State." The Department of Taxation and Finance found that the company generated its receipts from investment consulting and the conduct of related financial transactions; the only function of its New York sales office was to sign up new clients, which did not result in New York service revenue.

* Tennessee

The Tennessee Department of Revenue (TDOR) has ruled that a company was not required to include certain sales in its sales factor numerator for excise tax apportionment formula purposes. The taxpayer, a Tennessee wholesaler, sold tangible personal property to an out-of-state retailer. The retailer picked up the goods at the taxpayer's warehouse in Tennessee using its own trucks and immediately shipped the goods to other states; goods were also shipped directly from the warehouse to retail outlets via common carrier. The TDOR determined that such sales were not includible in the numerator of the Tennessee sales factor.(27)

MTC Pronouncements

* Intangibles Report

On Dec. 28, 1995, the "Interim Report of Hearing Officers" was issued, recommending the continued review of the proper treatment of net gains from the sale of intangibles for receipts factor purposes.(28)

Tax Base Calculation

State Pronouncements

* Alabama

A foreign corporation was allowed an investment tax credit (ITC) as a result of a merger, even though the credit agreement with the state provided that the ITC could not be assigned or transferred without the state's written consent. The court found that as a result of the merger, the credit was not transferred or assigned; rather, the surviving corporation possessed all the rights and responsibilities of the predecessor corporation.(29)

* California

In Willamette Industries, Inc. v. FTB,(30) a California court of appeal held that dividends paid to a taxpayer from its wholly owned subsidiaries' pre-acquisition earnings and profits were not excludible from its gross income for California corporation franchise tax purposes because no unitary business existed prior to the taxpayer's acquisition of the subsidiaries. According to the court, only the dividends paid to a taxpayer by a member of its unitary group may be excluded from its gross income.

* Connecticut

The Connecticut Superior Court ruled that a surviving corporation could use the net operating loss (NOL) carryover of a predecessor corporation because there was continuity of business enterprise, and established a four-part continuity test. According to the court, continuity of business enterprise exists if the surviving corporation retains the same corporate identity, the business enterprise of the predecessor continues, there is no substantial change in ownership of the survivor and the income-producing business of the survivor continues.(31)

* District of Columbia

Taxpayers and the Department of Revenue are debating the correct method for computing NOL deductions for D.C. purposes. D.C. Code Ann. Section 47-1803.3(a) (14) allows an NOL deduction when the taxpayer computes the deduction "in the same manner as allowed under [sections]172 of the Internal Revenue Code and as reported on any federal tax return for the same taxable period." Consequently, the Department argues that NOLs arrived at on a separate-company basis cannot be carried forward if a loss was not reported on the Federal consolidated return. In two pending cases, Sovran Bank v. District of Columbia.(32) and Riggs National Corp. v. District of Columbia,(33) the taxpayers argue that the law only requires that the NOL be computed consistent with Sec. 172.

* Maine

The Maine Superior Court, in E.I. Du Pont De Nemours & Co. v. State Tax Ass'r,(34) held that the Maine taxing formula, which incorporates a Federal deduction for domestic dividends with no corresponding deduction for foreign dividends, facially discriminated against foreign commerce and violated the Commerce Clause in accordance with Kraft General Foods, Inc. v. Iowa Dep't of Rev. and Fin.(35)

* Massachusetts

A book publisher was deemed a domestic manufacturing corporation for purposes of the ITC for the 1988 tax year. The taxpayer's acts were an essential and integral part of the manufacturing process even though they did not result in a finished product.(36)

* Massachusetts

The Massachusetts Supreme Judicial Court held that the net worth portion of the corporate excise tax facially discriminated against interstate commerce in violation of the Commerce Clause. The provision in question, G.L. c. 63, Section 30(8) and (9), drew a distinction solely on the basis of the subsidiary's domicile; a heavier tax burden was placed on (1) domestic corporations with foreign subsidiaries than those with domestic subsidiaries and (2) foreign corporations with domestic subsidiaries than those with foreign subsidiaries. Additionally, the tax failed the internal consistency test and interfered with free trade among the states.(37)

* Massachusetts

An NOL carryover survives a statutory merger when the transaction qualifies as an F reorganization under the Internal Revenue Code.(38)

* New Hampshire

The Department of Revenue has amended regulation Rev. 303.04 to simplify the NOL rules for business organizations filing combined returns. Combined groups comprised of the same members in all carryback years may elect to calculate NOL deductions for all members by computing a separate unitary apportionment percentage for each group member with a taxable presence in the state and applying that percentage to the overall combined loss.

* New Jersey

The New Jersey Supreme Court overruled a lower court holding disallowing a nonsurviving corporation's use of a predecessor corporation's NOL carryovers. The court ruled valid the requirement in N.J. Admin. Code Section 18:7-5.13(b) that an NOL can be used only by the entity that generated the loss; accordingly, any NOLs generated by the decessor corporation did not carry over to the acquiring corporation.(39)

* Ohio

Manufacturers are eligible for a corporate franchise and individual income tax credit for purchases of qualifying machinery and equipment during the 18-month period from Jan. 1, 1995 through June 30, 1996. The credit is 20% of qualifying purchases, with a $500,000 maximum credit allowed to a taxpayer or its consolidated group. The item purchased must be located in Ohio and used for manufacturing.(40)

* Tennessee

The Tennessee Court of Appeals ruled that a unitary group of financial organizations filing a combined report was not required to offset its combined NOL carryforward with intercompany dividends otherwise eliminated in consolidation. The court held that Tenn. Code Ann. Section 67-4-817(d), which requires the offset of NOL carryforwards by intercompany dividends, does not pertain to financial institutions filing a unitary combined return.(41)

* Texas

The Texas Comptroller of Public Accounts ruled that the surviving corporation in a merger could not use the nonsurviving corporation's business loss carryovers. The Comptroller reasoned that business losses are unique to the entity generating them; since the predecessor entity did not survive, neither did the losses. While this ruling only pertains to the taxpayer to whom it was addressed, it offers guidance on how Texas attempts to treat business loss carryovers in a merger.(42)

Consolidated and Combined Returns

State Unitary Filing Update

* California

A San Francisco Superior Court held that an interstate motor carrier and a wholly owned oil and gas production subsidiary constituted a unitary business. The relationship evidenced strong centralized management.(43)

* California

A subsidiary that makes a meaningful contribution to its parent's business is part of the unitary group even if the subsidiary has no direct business in California.(44)

* California

A California court of appeal held that a corporation engaged in wholesale food operations and investments in oil and gas working interests was entitled to a refund of corporate franchise taxes paid because the two distinct operations constituted a unitary business.(45)

* California

The SBE held that a passive holding company parent can be unitary with an operating subsidiary, allowing the filing of a combined report. The SBE rejected the state's argument that holding companies are inactive and per se incapable of providing or receiving a flow of value to or from their operating subsidiaries. The SBE held that a passive holding company need not be operationally integrated with its operating subsidiaries to be unitary, but reserved opinion on whether a passive holding company can be unitary with two or more subsidiaries engaged in diverse businesses.(46)

* California

Reg. 25137-6 was replaced with Reg. 25106.5-3, effective Mar. 21, 1995, which provides that the FTB must accept reasonable approximations of information needed for the filing of a worldwide combined report if the operations in a foreign country do not maintain the necessary information.

* Kentucky

The Kentucky Supreme Court ruled that a Kentucky Revenue Cabinet (KRC) administrative policy disallowing combined returns in most cases was invalid. From 1972-1988, unitary groups were allowed to file combined returns. In 1988, the KRC issued Revenue Policy 41P225 to disallow combined returns in all but a few cases. This ruling was particularly harsh, as it disallowed combined returns both prospectively and retroactively. The court ruled that because the KRC is not a legislative body, merely an administrative agency, it could not add to or detract from a statute by introducing a policy or regulation. Accordingly, the court struck down the policy and allowed the filing of combined returns.(47)

* Kentucky

Following a February 1995 hearing on Proposed Regulation 103 KAR 16:190 (dealing with combined reporting), the KRC issued a Statement of Consideration containing its responses to hearing participants' questions and comments. While the Statement generally failed to give specific responses to questions, the KRC did state that the regulation would be effective for tax periods beginning after 1994 and would be applied prospectively only. The regulation was later withdrawn.

* New Jersey

The New Jersey Division of Taxation announced a significant change in its treatment of the sale of a business for which Sec. 338(h)(10) is elected. For transactions occuring after Jan. 13, 1992, New Jersey will follow the Federal treatment of Sec. 338(h)(10) transactions, and will no longer require the seller to report gain or loss arising from the sale of a target's stock if a valid Sec. 338(h)(10) election is made. The gain or loss on the deemed sale of the target's assets will continue to be reported on the target's New Jersey tax return.(48)

* New Jersey

The New Jersey Tax Court acknowledged that separately operated divisions of an S corporation do not necessarily constitute a unitary business. The taxpayer, a New York S corporation, was engaged in two distinct businesses--investment in publicly held securities, conducted at its New York City headquarters, and operation of a multistate forest products business. Although the assets of the investment division were occasionally used by the forest products division and there were some centralized functions, the court concluded that there were no economies of scale, centralization of management, or functional integration; thus, income earned by the investment division in New York City was not subject to New Jersey tax.(49)

* New Mexico

The New Mexico Court of Appeals has held that N.M. UBI Reg. 19:10, which allows corporations to include a portion of the property, payroll and sales factors of foreign subsidiaries in the denominator of the New Mexico apportionment formula, adequately cures facial discrimination resulting from the inclusion in the tax base of dividends received from foreign, but not U.S., subsidiaries.(50)

* New York

A Delaware subsidiary was required to be included in a New York bank holding company's New York City banking corporation tax combined returns. Because the parent conducted all of the subsidiary's daily business affairs and made its significant business and investment decisions, the subsidiary was doing business in New York City.(51)

* New York

A newspaper corporation was not required to file a combined franchise tax return with its wholly owned subsidiary that delivered newspapers outside the metropolitan area because (1) separate reporting would not result in distortion of income, because the cost-sharing arrangement with the subsidiary for the development of the newspapers' editorial content was at arm's length; (2) the costs were shared proportionally by the two corporations in relation to the benefits each anticipated receiving; and (3) a comparison of operating margins of the newspaper and the subsidiary with other newspapers showed that the newspaper was not shifting income to the subsidiary. The subsidiary was set up merely to insulate the taxpayer from libel actions in jurisdictions other than New York.(52)

* New York

A New Hampshire corporation's receipt of a lump-sum payment from a client for marketing services performed in New York had to be included in the numerator of its sales factor for New York franchise tax purposes. The amount to include was to be determined based on the relative values (or amounts) of time spent performing such services.(53)

* New York

An administrative decision held that wholly owned trademark subsidiaries could be excluded from a combined report because intercorporate transactions were conducted at arm's length. The decision focused on the extensive activities of the trademark subsidiaries with respect to protection and registration of the trademarks and the corporate parent's numerous business reasons for creating the subsidiaries. The subsidiaries were found to be viable business entities rather than shell companies.(54)

* Virginia

An election to file a consolidated return was valid because both the taxpayer and its subsidiary made the election in the first year both parties were required to file Virginia income tax returns. The subsidiary had been registered to do business in Virginia but had not conducted business there until the year in which it elected to file on a consolidated basis with its parent.(55)

Business/Nonbusiness Income--Trends

MTC Pronouncements

* Proposed Reg.

The MTC released a proposed business income regulation to provide a uniform definition of business and nonbusiness income. The proposed regulation is intended to be consistent with the Multistate Tax Compact and recent judicial interpretations of the U.S. Constitution and conforms to the MTC's historical expansive definition of business income.(56)

State Pronouncements

* California

Idle funds invested in liquid financial instruments were part of a unitary business's working capital pool and, thus, generated business income.(57)

* California

Losses from triple net computer leases were nonbusiness losses allocable for California franchise tax purposes to the states in which the computers were located because the losses were generated by an activity unrelated to the taxpayer's hotel management activities. The computers served an investment, rather than an operational, function; accordingly, the taxpayer could not treat net losses generated by the computer leases as business losses apportionable to the states in which the hotel management business was conducted.(58)

* Illinois

Illinois law, 35 ILCS 5/304(a), defines business income as income derived from transactions or activity normally conducted by a business. The Department of Revenue's reliance on National Realty and Investment Co.(59) as justification for its use of the functional test for distinguishing between business and nonbusiness income was held to be misplaced because that decision never addressed the validity of that test. Thus, because the sale of leasehold interests was not an activity normally undertaken by the taxpayer (a grocery business), the gain was nonbusiness income.(60)

* Kansas

With three judges dissenting, gain from the sale of a subsidiary's stock was held to be nonbusiness income. The Kansas Supreme Court nullified the functional test (and a "broadly defined" transactional test) and upheld the validity of its 1968 decision in Western Natural Gas Co. v. McDonald.(61) The "narrowly defined" transactional test is the standard in Kansas, in light of the Department of Revenue's adoption of the Uniform Division of Income for Tax Purposes Act and subsequent enactment of administrative regulations patterned after the MTC regulation. The court had the power to modify the test, but saw no compelling reason to disturb it.(62)

* Maryland

The Tax Court has ruled that capital gain generated on a chemical company's sale of a 50% interest in a joint venture corporation that manufactured polypropylene resins was apportionable business income because the joint venture served an operational, as opposed to an investment, function.(63)

* New York

The Court of Appeals ruled that the four-factor apportionment formula did not fairly reflect income earned in New York by a taxpayer that sold an office building located in Baltimore, Maryland at a substantial capital gain. The taxpayer argued that the formula grossly distorted the amount of income attributable to the state when compared to the taxpayer's actual income earned in New York and demonstrated that all of the factors that led to the appreciation of the Baltimore property occurred before the taxpayer began doing business in New York.(64)

* Ohio

The Board of Tax Appeals ruled that a deferred tax asset reserve account may not reduce a taxpayer's net worth. Under Ohio Revenue Code Section 5733.05(a)(2), only taxes due and payable during the year may reduce a taxpayer's net worth. The taxpayer argued that the deduction for taxes was proper under generally accepted accounting principles; however, the Board held that the actual taxes paid that exceeded back taxes and led to a debit balance in the "company's deferred taxes" account could have been paid in one year or many years prior to the tax year in question. This opinion was vacated by the Ohio Board of Tax Appeals on Feb. 24, 1995, pursuant to a motion for reconsideration.(65)

* Texas

A district court granted summary judgment allowing a taxpayer to exclude post-retirement benefits other than pensions from the taxable capital component of the franchise tax base. The court's order does not provide the basis for its ruling; there is speculation that the decision was based on an Employee Retirement Income Security Act preemption argument. The state is appealing the decision.(66)

Editor's note: Mr. Ruez is a member of the AICPA Tax Division State and Local Taxation Committee.

(1) Alabama Reg. 810-27-1-4-.19 (effective 2/2/95).

(2) Technical Assistance Advisement (TAA) No. 95(C) 1-004 (3/17/95).

(3) TTX Company v. Idaho State Tax Comm'n, Id. Sup. Ct., No. 20525 (5/11/95).

(4) Howmet Corp. v. Dep't of Treasury, Mich. Ct. of Apps., No. 161904 (8/18/95), rev'g and rem'g Mich. Ct. of Cls., No. 87-11161-CM (1/22/93).

(5) Lemay Bldg. Corp. v. Dir. of Rev., Missouri Sup. Ct., No. 76731 (12/20/94).

(6) In the Matter of the Petition of Bar-Val Corp., N.Y. Div. of Tax Apps., Admin. Law Judge Unit, DTA Nos. 808165 and 808166 (1/19/95).

(7) Vermont Dep't of Taxes, Ruling 95-04 (4/26/95).

(8) Tax Release, Tax Bulletin No. 90, Wisc. Dep't of Rev. (January 1995).

(9) Wisconsin Dep't of Rev. v. William Wrigley, Jr., Co., 1125 Sup. Ct. 2447 (1992).

(10) Geoffrey, Inc. v. South Carolina Tax Comm'n, 437 SE2d 13 (1993), cert. denied.

(11) Appeal of Finnigan Corp., California State Board of Equalization (SBE) (1/24/90).

(12) Airborne Navigation Corp v. Ariz. Dept. of Rev., Ariz. State Bd. of Apps., No. 395-85-1 (1987).

(13) Appeal of Joyce, SBE, No. 66-SBE-069 (11/23/66).

(14) McDonnell Douglas Corp. v. FTB, 26 CA4th 808 (1994).

(15) Foodways National, Inc. v. Allan A. Crystal, Comm'r of Rev. S'vces, 232 Conn. 325 (1995).

(16) Dover Corp. v. Ill. Dep't of Rev., Ill. App. Ct., 1st Dist., No. 1-93-3340 (3/31/95).

(17) Appeal of Finnigan Corp., note 11.

(18) Indiana Information Bulletin No. 12 (1994).

(19) Great Northern Nekoosa Corp. v. State Tax Ass'r, Maine Super. Ct., No. CV-92-615, CV-92-202, CV 92-470, CV-94-283 (3/3/95).

(20) The New York Times Sales, Inc. v. Comm'r of Rev., Mass. App. Tax Board, No. 161857 (5/6/95).

(21) Mass. Reg. 830 CMR 63.38.1.

(22) Miss. State Tax Comm'n v. Chevron USA, Inc., Miss. Sup. Ct., Docket No. 93-CA-00787 (1/19/95).

(23) In re Merlite Industries, Inc., N.Y.C. Tax App. Trib., TAT(H)93-30(GC) (2/28/95).

(24) In re Petition of Silver King Broadcasting of N.J. Inc., N.Y. Div. of Tax Apps., No. 812589 (8/10/95).

(25) Appeal of Joyce, note 13.

(26) TSB-A-95(5)C (3/29/95).

(27) Revenue Ruling 95-05 (2/3/95).

(28) Interim Report of the Hearing Officer regarding the Amendment of Reg. IV.18.(c) to Include the Net Gains From the Sale of Intangibles in the Sales Factor of the Income Apportionment Formula.

(29) International Paper Company v. Ernest Broadhead, Ala. Ct. of Civ. Apps., No. AV93000559 (1/6/95).

(30) Willamette Industries, Inc. v. FTB, Cal. Ct. of App., 1st App. Dist., No. A066452 (4/5/95), modified 5/4/95.

(31) Grade A Market Inc. v. Comm'r, Conn. Super. Ct., No. CV-91-03987215 (1/5/96).

(32) Sovran Bank v. District of Columbia, D.C. Super. Ct., No. 6029-94, 6042-94, 6043-94.

(33) Riggs National Corp. v. District of Columbia, D.C. Super. Ct., No. 6032-94.

(34) E.I. Du Pont De Nemours & Co. v. State Tax Ass'r, Maine Super. Ct., Kennebec County, Docket No. CV-93-566 (3/3/95).

(35) Kraft General Foods, Inc. v. Iowa Dep't of Rev. and Fin., 112 Sup. Ct. 2365 (1992).

(36) Houghton Mifflin Co. v. Comm'r of Rev., Mass. ATB, Docket No. 196733 (3/6/95).

(37) Perini Corp. v. Comm'r of Rev., Mass. Sup. Jud'l Ct., Suffolk, 419 Mass. 763 (1995).

(38) Letter Ruling 95-4 (3/31/95).

(39) Richard's Auto City, Inc. v. Dir., Div. of Tax'n, N.J. Sup. Ct., No. A-54 (6/21/95), rev'g N.J. Super. Ct.

(40) Ohio Dep't of Tax'n, Information Release, Income Tax Audit Division (10/14/94).

(41) Independent Southern Bancshares v. Huddleston, Tenn. Ct. Apps., No. 01-A-01-9412-CH-00579 (4/26/95).

(42) Texas Private Letter Ruling No. 9406L1315B04 (6/2/95).

(43) Yellow Freight System, Inc. v. FTB, Cal. Super. Ct., City and County of San Francisco, No. 955046 (12/24/94).

(44) A.M. Castle & Co. v. FTB, 36 Cal. App. 4th 1794 (1995).

(45) Richmond Wholesale Meat Co. v. FTB, 36 Cal. App. 4th 990 (1995).

(46) Appeal of PBS Building Systems, Inc. and PKH Building Systems, Inc., SBE, No. 94-SBE-008 (11/11/94).

(47) GTE v. KRC, Commonwealth of Kentucky, Ky. Sup. Ct., No. 94-SC-168-DG (12/22/94).

(48) See New Jersey State Tax News (Summer 1995).

(49) Central National-Gottesman v. Dir., Div. of Tax'n, N.J. Tax Ct., No. 13010-93 (3/28/95).

(50) Conoco, Inc. v. New Mexico Tax'n and Rev. Dep't, N.M. Ct. of Apps., No. 15,372 (5/1/95).

(51) In the Matter of the Petitions of U.S. Trust Corp., N.Y.C. Tax Apps. Trib., Admin. Law Judge Div., TAT(H)93-204(BT), TAT(H)93-205(BT), TAT(H)93-804(BT) (12/14/95).

(52) In the Matter of the Petition of The New York Times Company, N.Y. Div. of Tax Apps., Tax Apps. Trin., DTA No. 809776 (8/10/95).

(53) Christopher L. Doyle, TSB-A-95(11)C, N.Y. Comm'r of Tax'n and Fin. (7/26/95).

(54) In re Petition of Express, Inc., N.Y. Div. of Tax Apps., Admin. Law Judge Unit, No. 812330, 812331, 812332 and 812334 (9/14/95).

(55) Ruling of Comm'r, P.D. 94-368, Va. Dep't o Tax'n (12/12/94).

(56) Amendment Regarding Classification of Income as Business or Nonbusiness (April 1995).

(57) Appeal of Cullinet Software, Inc., SBE, No. 95-SBE-002 (5/4/95).

(58) Fairmont Hotel, SBE, No. 95-SBE-004 (6/29/95).

(59) National Realty and Investment Co., 494 NE2d 924 (1986).

(60) The Kroger Co. v. Dep't of Rev. of the State of Ill., Ill. Cir. Ct., Cook County, No. 94-L-50413 (4/13/95).

(61) Western Natural Gas Co. v. McDonald, 446 P2d 781 (1968).

(62) In the Matter of the Appeal of Chief Industries, Inc., 875 P2d 278 (Kan. Sup. Ct., 1994).

(63) Hercules, Inc. v. Comptroller of the Treasury, Md. Tax Ct., No. 5109 (1/3/95).

(64) In the Matter of the Petition of re British Land (Maryland) Inc. v. Tax Apps. Trib., N.Y. Ct. of Apps., No. 21 (2/16/95).

(65) In re USX Corp. v. Roger W. Tracy, Tax Comm'r of Ohio, Ohio Bd. of Tax Apps., No. 92-H-1479 and 92-H-1480 (2/3/95), vacated 2/24/95.

(66) Caterpillar, Inc. v. Sharp, Tex. Dist. Ct., 299th Jud'l Dist., No. 93-11176 (3/23/95).
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Title Annotation:state and local taxation; part 1
Author:Mathews, R. Kelly
Publication:The Tax Adviser
Date:Apr 1, 1996
Words:6161
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