Jurisdiction and Nexus: Constitutional limitations on state powers to tax interstate business and their effect on state income tax nexus standards. Protected solicitation and de minimis activities under Public Law 86-272. Attributional and economic nexus. Potential effect of the Wayfair decision. Consequences of selling through the Internet, employees or independent contractors; advertising, delivering, owning or leasing property in a state; having employees work from home. Dealing effectively with nexus questionnaires. Nexus standards for franchise, privilege, other non-income taxes and service companies.

Unitary and Separate Accounting: Unitary, combined, consolidated and separate returns: When does the state or the taxpayer have the right to choose? Limitations on the states’ ability to force unitary combination. Tests for determining when a business is unitary after Container and how they may be turned into planning opportunities for the astute tax practitioner.

Business and Nonbusiness Income: The business/nonbusiness distinction as interpreted by UDITPA, Multistate Tax Compact and other states. The latest on the transactional versus functional tests. State taxation of capital gains, dividends, interest, rents, royalties after ASARCO/Woolworth, Allied-Signal and MeadWestvaco. Factor representation and adjustment opportunities.

The Tax Base & Conformity Issues: Areas of state taxation impacted by U.S. federal income tax reform in the Tax Cuts and Jobs Act of 2017, the CARES Act of 2020, the Consolidated Appropriations Act, 2021 and the Inflation Reduction Act of 2022. Common state tax modifications and the effect of federal consolidated return regulations on the state income tax base. Planning and refund opportunities.

Pass-Through Entities: State taxation of pass-through entities and their owners. Types of entities used. Conformity, nexus, unitary, apportionment and tax base issues. Planning opportunities.

Ethics and Managing the State Tax Function: Structuring the state tax planning, compliance and audit activities to maximize effectiveness while complying with personal ethical standards and those set by the AICPA, ABA, local state CPA societies and bar associations. Consideration of Sarbanes-Oxley, ASC 740 (FIN 48) and other developments that have made ethics a more important part of the state tax practice. Ethical issues related to working from home and the use of technology in managing the state income tax function. Procedures for filing refund claims, amending returns, and responding to notices.

The Property Factor: Determining the relevant property and the timing of its inclusion — tangible, intangible, real and personal. Capitalizing leasehold interests. Using original cost, net book value, basis or fair market value to measure the property factor. Impact of depreciation strategies on, and the role of inventories in, the formula. Situs issues. Treatment of specialized industries.

The Payroll Factor: Examining the scope of the payroll factor — wages, salaries and other personal service compensation. Treatment of management fees, partnership reimbursements, outside contractors, leased or shared employees, specialized industries. Ascertaining the place where services are performed — defining “incidental services” and “base of operations.” Using the cash versus accrual method.

The Sales Factor: Differences in sales factor weighting. Type of receipts included and the proper sourcing method to apply, including traditional cost of performance and the newer market source rules. Treatment of returns, allowances, installment and occasional sales, discounts; services, rents, royalties, investment income, other intangibles. Throwback, throwout and dock sales.

Current Developments: Current administrative, court and legislative developments on such critical interstate tax topics as: how to identify discriminatory state tax statutes; limitations on the applicability of NOLs; challenges to the increasing use of economic nexus standards for income tax purposes and the potential effect of the Wayfair decision; how states are defining the unitary concept and business/nonbusiness distinction; apportionment sourcing issues for services and other industries; procedural traps for the unwary. Planning and refund opportunities.

State and Multistate Tax Audits: The audit process – from information requests and extensions of the statute to the final conference. Ethical considerations. Dealing with the consequences of centralized versus decentralized records. Handling a Multistate Tax Commission audit. Conducting audits in an electronic environment.

Problems Session: Practical application of the concepts presented.