corporate tax update: what every corporate counsel needs to know
TRANSCRIPT
CORPORATE TAX UPDATE:
What Every Corporate Counsel
Needs to Know
October 2015 / For Discussion Purposes Only
Eric Ryan – International Tax Of Counsel, DLA Piper, Silicon Valley
Hugh Goodwin – State Tax Partner, DLA Piper, Silicon Valley
Chris Kotarba – International Tax Associate, DLA Piper, Silicon Valley
*This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter.
Agenda
Business tax environment
Effective tax rate issues
Recently proposed legislation
Bipartisan framework
Inversions
Current issues in state and local taxation
October 2015 Corporate Tax Update 2
BUSINESS TAX ENVIRONMENT
October 2015 Corporate Tax Update 3
US international tax system
Since Japan lowered its rate in 2011, the US now has the highest
statutory corporate tax rate among all OECD members
Most OECD members have gradually reduced rates, year after year
US is also one of the few remaining OECD members with a worldwide
(WW) tax system (but has a Foreign Tax Credit mechanism)
Others include Chile, Ireland, Israel, Korea and Mexico
Most OECD members now use a territorial system (generally not taxing
foreign profits)
Highest corporate tax rate + WW tax system = US may also have the
highest average effective tax rate (ETR) of any OECD member
Notwithstanding, US companies are at the forefront of criticism for
inappropriate use of low tax/no tax countries and structures
Offshore earnings are effectively locked out of the US
October 2015 Corporate Tax Update 4
US tax system v. OECD members
October 2015 Corporate Tax Update 5
OECD members with territorial systems
October 2015 Corporate Tax Update 6
US MNEs – offshore earnings
October 2015 Corporate Tax Update 7
EFFECTIVE TAX RATE ISSUES
October 2015 Corporate Tax Update 8
ETR in general
Cash ETR – The simple ratio of current WW taxes paid, divided by the
WW aggregate pre-tax operating income
Used to assess alternative legal entity / tax structures
Confidential, but often can be reverse-engineered from all US GAAP
disclosures
US GAAP ETR – The ratio of WW current tax expense as accrued for US
GAAP purposes, divided by WW pre-tax operating income
Includes any tax reserves (FIN 48/ASC 740) for potential tax exposures
Includes any reversals of prior reserves, or new events
Non-US earnings subject to APB 23 assertion
NOLs may not give rise to any tax benefit (valuation allowance)
Comprises a significant responsibility for the tax department/CFO; high
interaction with audit firm
Publicly disclosed on annual 10-K and quarterly 10-Q
October 2015 Corporate Tax Update 9
Multi-tier offshore structure:
cash ETR
Assume 50% of revenues from
US customers, 50% from ROW
Assume operating income
generally follows revenues, but
ROW profits split:
30% IP Co
10% Ireland Distribution Sub
10% to Italy (and other)
Marketing Subs
Cash tax rate:
$50 × 40% = $20
$30 × 0% = $0
10% × 12.5% = $1.25
10% × 27.5% = $2.75
Total = $24 / $100 = 24%
October 2015 Corporate Tax Update
Digital Co
(Delaware)
IPCo
(Irish
Nonresident)
S&M Provider
(Italy)
Cost-Plus
Service Fee
Servers
OpCo
(Ireland
Resident)
Non-US
Subscribers
Users
Engineers /
Servers
$
US
Subscribers
$
US IP
ROW IP
Royalty
CSA
10
Example of international structuring
alternatives
October 2015 Corporate Tax Update 11
Comparison of tax cost
-
20,000
40,000
60,000
80,000
100,000
120,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Comparison of Tax Cost
Status Quo IP Migration (Two-Tier) IP Migration (Single-Tier)
12 Corporate Tax Update October 2015
Multi-tier offshore structure:
US GAAP
Assume FIN 48 reserve for US
taxes on 10% of IPCo
40% × $10 = $4
Assume FIN 48 reserve for Italy
of 5%
5% × 27.5% = $1.4
Assume APB 23 assertion of
100% offshore earnings
permanently reinvested
No additional adjustment
US GAAP ETR
24 + 4 + 1.4 = 29.4%
October 2015 Corporate Tax Update
Digital Co
(Delaware)
IPCo
(Irish
Nonresident)
S&M Provider
(Italy)
Cost-Plus
Service Fee
Servers
OpCo
(Ireland
Resident)
Non-US
Subscribers
Users
Engineers /
Servers
$
US
Subscribers
$
US IP
ROW IP
Royalty
CSA
13
US GAAP ETR issues
APB 23 assertion – Some companies permanently reinvest all earnings,
some none, some a portion (e.g., 75%)
Modest amount of documentation required to support assertion
Will assertion change if the US tax law changes?
Changes to current year ETR due to prior year items
Natural events, such as FIN 48 reserves being released as SOL expires
Changes in current events, such as court case decisions impacting prior
year positions, third party events
Errors
Errors – even if ETR is decreased – can lead to a material weakness or a
restatement
October 2015 Corporate Tax Update 14
US GAAP ETR issues
Material weakness
Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5
defines a material weakness: “A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the company’s
annual or interim financial statements will not be prevented or detected on a
timely basis”
Restatement
SEC Staff Accounting Bulletin (SAB) Topic 1M provides guidance on assessing
materiality and includes examples of situations in which a quantitatively small
misstatement might actually be considered material (e.g., if the misstatement
masks a change in earnings or other trends; hides a failure to meet analyst
consensus expectations; concerns a significant segment or portion of the
company’s business; has the effect of increasing management’s compensation;
involves concealment of an unlawful transaction)
The SAB topic also presents the SEC’s staff view that each misstatement must
be considered separately and then aggregated with other misstatements when
determining whether adjustments are required
October 2015 Corporate Tax Update 15
Tax-related material weaknesses and
restatements
October 2015 Corporate Tax Update 16
Senior Manager Material Weaknesses Senior Manager Restatements
Material weaknesses and restatements in SEC filings from 1/1/11 – 12/31/11
Accounting for Income Tax (General)
16%
Deferred Taxes 34%
Valuation Allowances/
NOLs 20%
Foreign Taxes 4% State Taxes
5%
Acquisition/ Disposal
5%
Uncertain Tax
Positions 4%
Other 12%
Lack of Review
21%
Personnel (lack of / not
trained) 15%
General Procedure /
Process 16%
Improper Treatment / Recording
14%
Lack of Documentation
7%
Non-routine Transactions
3% Period End Process
3%
Inadequate Reconciliation
3%
Systems / Technology
2%
Other 16%
Income tax accounting:
deferred taxes
Basis difference
Book basis vs. tax basis
Generates a future benefit or liability
Examples:
Temporary differences
Reserves, accruals, depreciation, amortization, etc.
Net operating loss carry-forwards
Credit carry-forwards
Can be both timing and permanent differences
October 2015 Corporate Tax Update 17
Income tax accounting:
valuation allowance
Contra-asset concept
Netted against deferred tax asset
Requirements
More likely than not assessment
Positive and negative evidence
Reversal of taxable timing differences (i.e., DTL)
Carryback opportunities
3-year trailing cumulative profit/loss history
Future forecasted profit/loss
Tax planning opportunities
October 2015 Corporate Tax Update 18
Income tax accounting – Calculation
October 2015 Corporate Tax Update 19
TAX EXPENSE CURRENT TAX PAYABLE DEFERRED TAX CALCULATION
Profits Before Tax -
Permanent Differences:
Meals & Entertainment 200
Manufacturing Deduction (100)
Tax Exempt Interest (100)
Subpart F Income 300
Section 162M Limitation 200
Temporary Differences: Beg. Bal. CY Change End. Bal.
Bad Debt Reserve 200 Bad Debt - 200 200
Inventory Reserve 400 Inventory - 400 400
Accruals 300 Accruals - 300 300
Depreciation (100) Deprec. - (100) (100)
Amortization 400 Amort. - 400 400
Capitalized Section 174 (600) Cap. 174 - (600) (600)
Equity Compensation - Book 500 Equity - 500 500
Equity Compensation - Tax - Equity - - -
Taxable Income 1,600 NOL - - -
Net Operating Loss Deduction - Valuation - (1,100) (1,100)
Net Taxable Income 1,600 Subtotal - - -
Current Tax Payable 435 Tax Rate 35% Tax Rate 35% 35% 35%
Tax Liability 560 Total - - -
Deferred Tax - Foreign Tax Credits (50) FTC - - -
R&D Tax Credits (75) R&D - - -
Tax Expense 435 Net Tax Liability 435 Net Total - - -
Tax expense = current tax payable + deferred taxes TAX EXPENSE CURRENT TAX PAYABLE DEFERRED TAX CALCULATION
Profits Before Tax -
Permanent Differences:
Meals & Entertainment 200
Manufacturing Deduction (100)
Tax Exempt Interest (100)
Subpart F Income 300
Section 162M Limitation 200
Temporary Differences: Beg. Bal. CY Change End. Bal.
Bad Debt Reserve 200 Bad Debt - 200 200
Inventory Reserve 400 Inventory - 400 400
Accruals 300 Accruals - 300 300
Depreciation (100) Deprec. - (100) (100)
Amortization 400 Amort. - 400 400
Capitalized Section 174 (600) Cap. 174 - (600) (600)
Equity Compensation - Book 500 Equity - 500 500
Equity Compensation - Tax - Equity - - -
Taxable Income 1,600 NOL - - -
Net Operating Loss Deduction - Valuation - (1,100) (1,100)
Net Taxable Income 1,600 Subtotal - - -
Current Tax Payable 435 Tax Rate 35% Tax Rate 35% 35% 35%
Tax Liability 560 Total - - -
Deferred Tax - Foreign Tax Credits (50) FTC - - -
R&D Tax Credits (75) R&D - - -
Tax Expense 435 Net Tax Liability 435 Net Total - - -
Income tax accounting:
tax reserves
Uncertain tax positions
Concept of unrecognized tax benefits
Recognition threshold
Presumption: full information to tax authority
Based solely on technical merits
More likely than not assessment
If yes, move on to measurement
Measurement
Consider all relevant facts
More likely than not on settlement $$
Interest and penalties
October 2015 Corporate Tax Update 20
RECENTLY PROPOSED
LEGISLATION
October 2015 Corporate Tax Update 21
Bipartisan framework
In July 2015 before summer recess, Senate Finance Committee released
81-page bipartisan framework report for international tax reform
5 recommendations:
A. Territorial system
B. Innovation box
C. Base erosion
D. Interest expense limitations
E. Repatriation holiday
22 October 2015 Corporate Tax Update
Territorial system
End the lockout effect
28 out of 34 OECD members and every G7 country except US have pure
or hybrid territorial system:
October 2015 Corporate Tax Update 23
Territorial system
Camp – 95% of dividends (foreign-source portion only) by foreign corps
to US corporate shareholders (10% or more) are excluded
At proposed 25% statutory rate, results in 1.25% ETR
Credits not allowed for foreign taxes paid/accrued; indirect credit repealed
6-month holding period requirement
Parent must reduce basis in foreign sub by amount of exempt dividend
Territorial system supported by Bush but not Trump
Foreign branches? Either:
Treat similar to foreign subs by allowing earnings to qualify for exemption;
or
Subject earnings to immediate US tax as under current law
24 October 2015 Corporate Tax Update
Repatriation holiday
Sponsor Rate Mandatory Install-
ments
Credits
Allowed
Highway
Trust Fund
Conditions
/ Limits
2004 Jobs
Act
5.25% No No Yes “Temporary
economic
stimulus”
“Domestic
investment
plan” /
$500M cap
Camp (R) 8.75% /
3.5%1
Yes 8 years Yes Yes None
Boxer (D) /
Paul (R)
6.5% No 5 years Uncertain Yes R&D,
p’ships and
acqs; no
inversions
Obama (D) 14% Yes 5 years Yes Yes None
Hagan (D) /
McCain (R)
8.75%,
5.25%2
No Uncertain Uncertain Yes $75k per
each FT job
Bush (R) ≤8.75% Yes 10 years Uncertain Uncertain None
Trump (R) 10% Yes Uncertain Likely Uncertain None
25
1 Lower rate on “non-cash” holdings 2 If expand payroll by 10%
October 2015 Corporate Tax Update
Base erosion
Camp Option C
Carrot: US parents currently taxed on their foreign intangible income and
their foreign subs’ foreign base company intangible income (FBCII) at
reduced 15% rate
FBCII defined as excess of sub’s gross income over 10% of sub’s adjusted
basis in depreciable tangible property
Stick: Exception for FII/FBCII subject to foreign tax at less than 13.5%
ETR, currently taxed at full corporate tax rate
Income from property sold for use/consumption/disposition in US also
taxed at full corporate tax rate
26 October 2015 Corporate Tax Update
Innovation box
July 2015 Boustany (R-LA) / Neal (D-MA) Discussion Draft
Other countries with innovation boxes: UK, Ireland, Belgium, Netherlands,
Luxembourg, Hungary, Spain Italy and China
Switzerland currently adopting license box
“Qualified IP” (broad) – patents, inventions, formulae, processes,
designs, patterns and know-how (and property produced using such IP),
as well as other types of IP, like computer software
Nexus standard:
“Innovation Box Profit” = (Qualified IP gross receipts – COGS and
expenses) × fraction of budget spent on US R&D
Innovation Box Profit subject to only 10% tax rate
Other boxes range from 5-14%
Overseas IP permitted to be brought back to US in non-taxable event
October 2015 Corporate Tax Update 27
Federal corporate tax rate
0%
5%
10%
15%
20%
25%
30%
35%
40%
Current Baucus(D)
Obama(D)
Rubio (R) /Lee (R),
Camp (R),Nunes (R)
Wyden (D)/ Coats (R)
Bush (R) Trump (R)
October 2015 Corporate Tax Update 28
INVERSIONS
October 2015 Corporate Tax Update 29
What is an inversion?
In the international tax context, an inversion originally was a transaction whereby a US publicly held corporation changed its country of incorporation to a non-US country, such as Bermuda
Bermuda has no income tax Bermuda has no anti-deferral rules US tax law was changed to eliminate tax benefits from such a simple
transaction
Now, generally an inversion is generally thought of as a transaction in which a domestic corporation is acquired by a foreign corporation – and avoids the negative US tax consequences. The foreign corporation either acquires the assets or equity of the domestic target
Some or all of the shareholders of the domestic target may become shareholders of the new foreign parent (typically UK, Ireland, Netherlands or Switzerland)
New foreign parent can use US company’s name Can potentially retain US headquarters Can retain public listing on stock exchange and US GAAP
October 2015 Corporate Tax Update 30
Illustrative transaction
October 2015 Corporate Tax Update 31
Final Structure Inversion Transaction
UK Parent
Foreign Subs
Shareholders
USCo
Issues new
shares
US Merger Sub Merger
USCo
Foreign Subs
Original Structure
Shareholders
USCo
Foreign Subs
Shareholders
UK Parent
Why invert?
October 2015 Corporate Tax Update 32
Final Structure
USCo
Foreign Subs
Shareholders
Foreign Parent
Inversion on its own does not entirely escape the US tax net There is still a US company in the structure, subject to 35% tax
If foreign IP (and the associated profit entitlement) is owned by a
foreign IP holding company, the foreign IP holding company would still
be under USCo, so foreign profits must be repatriated through the US
company
Foreign Subs are still subject to US anti-deferral rules
But there are new opportunities to drive tax efficiencies Foreign cash can be loaned directly to Foreign Parent and “hop” over
US tax
New foreign IP, foreign ventures and foreign subs can be directly
under Foreign Parent
Furthermore, profits repatriated to some countries (e.g., UK) may
qualify for the participation exemption, in which case those profits
permanently escape corporate taxation at the parent level
May be opportunities to reduce US taxable income through
intercompany debt
Depending on the US exit costs, Foreign Subs and foreign IP under
USCo could be transferred to Foreign Parent
Loan
Loan
USCo
shareholders’
ownership in
Foreign Parent
USCo
shareholders’ tax USCo’s tax
Foreign incorporation
respected?
USCo directors and
officers’ tax
≤ 50% None None Yes, Foreign Parent is not
taxed as a US corp None
> 50% - < 60% Gain in shares of
USCo is taxable Inversion gain1 Yes, Foreign Parent is not
taxed as a US corp None
≥ 60% - < 80% Gain in shares of
USCo is taxable Inversion gain2 Yes, Foreign Parent is not
taxed as a US corp
15% excise tax on equity
comp
≥ 80% None None
No, Foreign Parent is
taxed as a US corp (as if
nothing happened)3
None
1 USCo generally includes income/gain recognized by reason of the transfer of stock or other properties (including the license of
IP) of the expatriated entity during a 10-year period beginning with the first acquisition of property. Can be offset by USCo’s NOLs
and credits
2 If the new group has “substantial business activities” in Foreign Parent’s jurisdiction (i.e., pursuant to a “safe harbor”, 25% of the
new group’s employees, assets and income are located in Foreign Parent’s jurisdiction), then no USCo level tax should be due.
On the other hand, if the new group does not have a substantial business activities in Foreign Co’s jurisdiction, then inversion gain
applies without reduction for any tax credits or NOL carry-forward amounts
3 Possible “substantial business activities” exception
Identity of shareholding and
tax result
October 2015 Corporate Tax Update 33
Failed inversion
October 2015 Corporate Tax Update 34
Failed Inversion: Foreign Parent is
a deemed US Corporation
UK Parent
Foreign Subs
Shareholders
USCo
Issues new
shares
US Merger Sub Merger
Assume shareholders of a US
company form a new UK company
(without substantial business
activities in the UK) and contribute
the US company in exchange for
all of the UK shares
1. This is an acquisition of
substantially all of the properties of
a US company
2. There are no substantial business
activities in the UK
3. Former shareholders of the US
company own 100% of the UK
company
After this unilateral inversion, the
UK Parent is treated as a US
corporation for US tax purposes
Business combinations
The recent trend has been to use strategic business combinations as an
opportunity to invert
If a US company and a foreign company combine, and the foreign
company would comprise greater than 20% of the value of the combined
company, the US company may invert in connection with the
combination
October 2015 Corporate Tax Update 35
October 2015 Corporate Tax Update 36
Successful inversion
Successful Inversion: Anti-
inversion rules do not apply
New UK Parent
Foreign Subs
Shareholders
USCo
55%
US Merger Sub Merger
Shareholders
45%
UK PLC
Assume a US company is contributed to a
new UK company and a UK company is
contributed to the new UK company. The
new UK company does not have substantial
business activities in the UK. Former
shareholders of the US company receive
55% of the new UK company
This is an acquisition of substantially
all of the properties of a US company
There are no substantial business
activities in the UK
But former shareholders of the US
company only own 55% of the new UK
company
After this business combination, anti-
inversion rules do not apply
BUT NOTE: If the threshold were reduced to
less than 50% under the recent legislative
proposal, this would be a failed inversion
Foreign Subs
Treasury’s response
October 2015 Corporate Tax Update 37
On September 22, 2014, Treasury issued guidance (Notice 2014-52) to try to further limit inversion transactions
The guidance introduced new rules to (1) make it more difficult for a US company to invert and (2) make it more difficult for successfully inverted companies to take advantage of their new status as foreign corporations
Making it more difficult to invert: the percentage owned by the former shareholders of the domestic target
The new rules would exclude certain passive assets of Foreign Parent that are intended to “stuff” Foreign Parent, and would challenge certain “skinny down” pre-inversion distributions and pre-inversion spin offs by the domestic target
Making it more difficult to reap post-inversion benefits
Treat certain “hopscotch” loans from Foreign Subs to Foreign Parent as loans to USCo (potentially implicating the deemed dividend rules under the anti-deferral rules)
Limit the ability to decontrol Foreign Subs
Limits transactions that may repatriate earnings from Foreign Subs to Foreign Parent (bypassing USCo)
Still available, but on discussion list: debt pushdowns to US from foreign parent
CURRENT ISSUES IN
STATE AND LOCAL
TAXATION
October 2015 Corporate Tax Update 38
Current issues in state and local taxation
Sales tax on digital goods and online services
Resales
Multiple points of use
New York combined reporting for unitary businesses
Chicago lease tax
Others
Update on Marketplace Fairness Act
Taxation of technology transfer agreements in California
Shift to market based sales factors for income tax apportionment
San Francisco gross receipts tax
Update on MTC sales factor cases
Illinois whistleblower
October 2015 Corporate Tax Update 39
Sales tax on digital goods and
online services
States response to eroding sales tax base
Tax base extended to tax online service transactions
Software downloads
Remotely accessed software
Some exemptions (California – no tax on electronic transfers, New Jersey
– downloaded software for business use)
Recent California proposals to extend tax to services
October 2015 Corporate Tax Update 40
Sales tax on digital goods and
online services
Example: services taxable in Washington state
“Digital automated services” means with certain state exceptions, “any
service transferred electronically that uses one or more software
applications”
The “sale of prewritten computer software to a consumer, regardless of the
method of delivery to the end user”
Services not taxable in Washington state
“Data processing services,” defined as a “primarily automated service. . .
where the primary object of the service is the systematic performance of
operations by the service provider on data supplied in whole or in part by
the customer to extract the required information. . .or to convert the data to
usable information”
Washington approach likely to be followed by other states
October 2015 Corporate Tax Update 41
Sales tax on digital goods and
online services – resales
Digital automated services cannot be resold for incorporation into certain
other taxable services but are instead considered “consumed” by the
purchaser. DAS therefore is taxable in certain business to business
transactions
Washington courts, however, provide that intermediate services that are
integral and an “inseparable component” of an end user service, are not
taxable
See Washington case law
October 2015 Corporate Tax Update 42
Sales tax on digital goods and online
services – multiple points of use
Where are digital goods or online services provided?
Where are digital goods or online services delivered?
What is the location of customer personnel who use or access the goods
or services?
What if information is unknown to the vendor?
Vendor should attempt to maintain accurate books and records.
October 2015 Corporate Tax Update 43
New York combined reporting for
unitary businesses
New York combined reporting effective 1-1-15
Combined reporting requirements
Corporations connected by majority ownership
Corporations must be engaged in unitary business
Unitary business parameters not defined. California law likely to be
relevant
Prior combination standard was distortion or substantial intercorporate
transactions
Lack of clear standards increases the possibility of inconsistent audit
positions based on largest revenue benefit to the state
New York City also employing unitary combined reporting
October 2015 Corporate Tax Update 44
Chicago lease tax
Recently issued rulings by the City of Chicago extend the personal
property lease tax (9%) to “applications available to a customer through
access to a provider’s computer and its software”
The city’s Department of Finance interprets access to computer
applications as extending to “cloud computing, cloud services, hosted
environment, software as a service, platform as a service, or
infrastructure as a service,” including situations where a customer “uses
the computer and its software to input, modify or retrieve data or
information”
Taxable event occurs at “the location of the terminal or other device by
which a user accesses the computer”
Vendor tax collection obligation still requires nexus with Chicago
As a result of taxpayer complaints and lawsuit threats, implementation
has been pushed back to January 1, 2016
October 2015 Corporate Tax Update 45
Other current state and
local tax issues
Other Issues
Update on Marketplace Fairness Act
Taxation of technology transfer agreements in California
Shift to market-based sales factors for income tax apportionment
San Francisco gross receipts tax
Update on MTC sales factor cases
Illinois whistleblower
October 2015 Corporate Tax Update 46
PRESENTERS
October 2015 Corporate Tax Update 47
48
Eric Ryan concentrates in international tax planning, transfer pricing, post merger
integration of legal entities, and operations and tax controversy.
Eric has over 25 years of experience, both as a tax partner advisor and an internal
corporate tax director, on key international tax structuring issues. His clients are
primarily in the high technology industry, including software, hardware, semiconductors
and life sciences companies.
Eric's experience includes advising clients in choice of location for their operations;
conducting direct negotiations for tax holidays in countries such as Switzerland,
Singapore and others; advising on intercompany arrangements that minimize Subpart
F and similar tax issues; and advising on intercompany economic terms that seek to
maximize profits in appropriate jurisdictions. He advises on the use of holding
companies, the valuation of transfer of tangible and intangible property, and the
establishment of cost-sharing operations. Eric is experienced in developments of
advice pricing agreements (APA’s) and intercompany debt and equity.
Eric is a Pro Bono Coordinator for the East Palo Alto office.
ENGAGEMENT HIGHLIGHTS
On behalf of the Government of the United States Virgin Islands, Eric worked to obtain
the favorable guidance from the US Treasury and Internal Revenue Service ultimately
contained within Notice 2006-76, relating to the qualification of certain e-commerce
business models for income tax exemptions in the USVI.
Eric Ryan Of Counsel
Co-Chair, Transfer Pricing
Practice
T: +1 650 833 2118
F: +1 650 687 1192
2000 University Avenue
East Palo Alto, CA 94303-2214
United States
Eric Ryan
48 October 2015 Corporate Tax Update
49
Hugh Goodwin concentrates in state and local tax including taxation of e-commerce
transactions.
He is experienced in tax planning and tax controversy representation throughout the
audit and appeal process in sales and use tax matters, including the taxation of
services, click-through nexus and attributional and affiliate nexus. A significant amount
of Mr. Goodwin’s practice involves developing strategies for e-commerce businesses
regarding the application of state tax laws to software as a service and other cloud
computing products.
Recent Matters
Assisted telecom clients with Universal Service Fund analysis regarding proper treatment of
bundled data, text and calling charges
Represented client providing E9-1-1 emergency service technology to wireless carriers, in state
sales tax dispute
Advised wireless telecommunications service provider on proper application of local California
municipal telecommunications taxes to state mandated public utility contribution fund charges
Revised existing operational structure to minimize sales and use tax collection obligations for
company engaged in e-commerce marketplace transactions
Developed legal analysis and strategy to support sales and use tax nexus position of nationwide
consumer equipment seller engaged in online and in-store transactions
Assisted California equipment wholesaler with structure of distributor/reseller arrangements to
minimize state sales tax collection obligations
Obtained a favorable settlement in a $2 million California tax dispute regarding the unitary nature
of a taxpayer’s commercial technology and government contracting businesses
Hugh Goodwin Partner
T: +1 650 833 2262
F: +1 650 687 1174
2000 University Avenue
East Palo Alto, CA 94303-2214
United States
Hugh Goodwin
49 October 2015 Corporate Tax Update
50
Chris Kotarba is an International Tax associate in DLA Piper’s Silicon Valley
office. His practice consists primarily of international tax planning and
transfer pricing. He has helped numerous technology, pharmaceutical and
medical device companies expand globally in a tax-efficient manner.
Chris has co-published an article on taxpayer-initiated transfer pricing
adjustments and a chapter in Taxation of International Partnerships (IFBD
2014).
Chris received his J.D. from Columbia Law School and an LL.M. in Taxation
from New York University School of Law. At Columbia, he was Managing
Editor of the Journal of Transnational Law and interned in the Large and
Mid-Size Business (now the Large Business and International) division of
the Office of the Chief Counsel to the IRS. At NYU, he was awarded the
William Duffy Memorial Scholarship by the New York Chapter of the Tax
Executives Institute.
Chris is a member of the San Francisco Foreign Tax Club and Co-Chair of
the Bay Area Young Tax Lawyers.
Chris Kotarba Associate
T: +1 650 833 2156
F: +1 650 687 9356
2000 University Avenue
East Palo Alto, CA 94303-2214
United States
Chris Kotarba
50 October 2015 Corporate Tax Update