Due to the current impact and the likelihood that states will consider legislation and agency guidance addressing federal tax reform implications for state business taxes, a united, effective, nationwide advocacy effort is needed to ensure the issues are consistently addressed on a multi-state basis. In preparation for anticipated ramifications, a multi-state coalition will need to consider the subjects summarized below.
How Legal Experts Can Help You:
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Formation of a coalition of companies and industry trade organizations dedicated to proactively addressing state tax issues raised by federal tax reform on a nationwide basis
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Identify and track, in real time, proposed state legislative and regulatory responses to federal tax reform
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Analyze proposed state reforms and develop substantive amendments and comments
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Develop and implement advocacy campaigns to secure favorable legislative and regulatory outcomes, including
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Preparation of all advocacy collateral
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Organization of on the ground advocacy, including retaining in-state advocates where needed
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Activating allied organizations to ensure broad support
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Provide support concerning the proper reporting of state responses to federal tax reform on company financial statements
Coalition Goals:
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Prevent state legislation expanding tax base through decoupling from federal deductions
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Support state legislation adopting comprehensive federal reform conformity, with appropriate deviations
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Identify and remedy Commerce Clause issues
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Encourage states revenue department to publish guidance on issues such as definitional questions, apportionment approaches and problems with different group calculations
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Identify and act on opportunities to address related issues through state responses to federal reform
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Prepare to address potential nexus changes in response to South Dakota v. Wayfair
Potential Issues:
Deferred foreign earnings transition tax:
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Inclusion at state level in year one
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States decoupling from deduction
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Apportionment issues
GILTI and FDII:
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Inclusion in state taxable income
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States decoupling from deduction
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Apportionment issues
100% Expensing:
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States decoupling from deduction
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What depreciation regime to use if state decouples
Interest Expense Limitation:
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Failure to decouple could lead to a tax increase
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Interaction with state addbacks
NOL Limitations:
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Advocating for state changes in situations where the 80% NOL limitation automatically impacts state tax liability
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Need to guard against states affirmatively imposing an 80% limitation
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Potential for advocating that states enact unlimited carryforward period
BEAT:
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Need to guard against states mimicking this alternative minimum tax