state tax matters - january 8, 2021 - deloitte united states...proposal with written comments on it...

State Tax Matters Page 1 of 22 Copyright © 2021 Deloitte Development LLC January 8, 2021 All rights reserved.

In this issue: Administrative: Kentucky: Adopted Administrative Rules Reflect Newly Recreated Board of Tax Appeals .......... 2

Income/Franchise: California FTB Posts 20-Day Notice for Draft Proposed Rule Changes on Alternative Apportionment ............................................................................................................................... 4

Income/Franchise: California FTB Notice Addresses Elections to Change Accounting Periods or Methods .......... 5

Income/Franchise: California FTB Chief Counsel Rulings Address Sourcing of Tangible Personal Property .......... 6

Income/Franchise: Colorado Governor Issues Executive Order on Voter-Approved Corporate Income Tax Rate Reduction ............................................................................................................................................ 7

Income/Franchise: Delaware: City of Wilmington Addresses Pandemic-Related Telecommuting for Earned Income Tax and Head Tax Purposes .................................................................................................................. 7

Income/Franchise: Delaware: Trial Court Holds in Taxpayer’s Favor that NOL Limitation Policy is Invalid ........... 8

Income/Franchise: Indiana DOR Addresses State Impact of Federal CARES Act Provisions Involving NOLs .......... 9

Income/Franchise: Louisiana: Gains from Sale of LLC Interest are Deemed Includable in Sales Factor Denominator .................................................................................................................................................... 10

Income/Franchise: Louisiana: Interest Earned on Contracts Sourced In-State but Contracts are Sourced Out-of-State ....................................................................................................................................... 11

State Tax Matters The power of knowing. January 8, 2021


Income/Franchise: Massachusetts: Signed Budget Bill Addresses State Treatment of Federal Partnership Audit Regime Changes ................................................................................................................. 11

Income/Franchise: New Hampshire Department of Revenue Administration Announces that BPT and BET Rates Remain the Same .............................................................................................................. 12

Income/Franchise: New York Department of Taxation and Finance Posts Proposed Rule Review with Comments Due March 7 .......................................................................................................................... 13

Income/Franchise: North Carolina DOR Addresses Classification of Gain from Sale of Minority Limited Partnership Interest ............................................................................................................................ 14

Income/Franchise: Ohio: City of Columbus Addresses Pandemic-Related Telecommuting for Local Income Tax Purposes .............................................................................................................................. 14

Income/Franchise: Oregon: Adopted Rules Address Unitary Relationships and Treatment of Federal Partnership Audits ........................................................................................................................................... 15

Income/Franchise: Pennsylvania: Philadelphia DOR Updates Pandemic-Related Telecommuting Guidance for Wage Tax Purposes .................................................................................................................... 16

Income/Franchise: Texas Comptroller Adopts Amendments to Franchise Tax Apportionment Rules on Sourcing ............................................................................................................................................ 17

Income/Franchise: West Virginia: City of Charleston Addresses Pandemic-Related Telecommuting for User Fee Purposes...................................................................................................................................... 17

Sales/Use/Indirect: Streamlined Sales Tax Governing Board Amends SSUTA by Revising Amnesty Qualifications ................................................................................................................................................... 18

Sales/Use/Indirect: Illinois DOR Adopts New Set of Retailers’ Occupation Tax Rules on Remote Retailers ........ 19

Sales/Use/Indirect: Missouri: State High Court Says Business Rented TPP Rather than Sold Nontaxable Services ........................................................................................................................................ 20

Sales/Use/Indirect: Texas Comptroller Posts Implementation Guidance Involving Remote Sellers and Marketplaces ................................................................................................................................. 20

Multistate Tax Alerts ............................................................................................................................................. 21

Administrative: Kentucky: Adopted Administrative Rules Reflect Newly Recreated Board of Tax Appeals Permanent Regulations sections 802 KAR 1:010; 802 KAR 2:010; 802 KAR 3:010, Ky. Public Protection Cabinet (1/1/21). The Kentucky Public Protection Cabinet issued permanent administrative rules reflecting Kentucky Governor Andy Beshear’s signed executive order from 2020 that abolishes the “Kentucky Claims Commission”

https://apps.legislature.ky.gov/law/kar/registers/47Ky_R_2020-21/07_Jan.pdf


and creates the “Office of Claims and Appeals,” which includes the Kentucky Board of Tax Appeals, the Kentucky Board of Claims, and the Kentucky Crime Victims Compensation Board [see Executive Order 2020-708, and State Tax Matters, Issue 2020-36, for more details on the signed executive order]. The regulations include new procedures under the recreated Kentucky Board of Tax Appeals “to seamlessly continue service to the taxpayers of the Commonwealth and not impede current appeals, or create an additional backlog of appeals.” Among other changes, regarding representation in proceedings before the Kentucky Board of Tax Appeals, the rules provide: URL: https://apps.legislature.ky.gov/law/kar/registers/47Ky_R_2020-21/07_Jan.pdf URL: http://kycc.ky.gov/Documents/Executive%20Order%202020-708%20-%20Reorganization%20of%20Claims%20Commission.pdf URL: https://newsletters.usdbriefs.com/2020/Tax/STM/200911_1.html

“(1) If the appeal is by an individual, the individual may proceed without an attorney or engage counsel to provide representation. (2) An individual who is not an attorney shall not be permitted to represent any other individual or legal entity who is a party to an appeal. (3) In accordance with Supreme Court Rule 3.020, if the appealing party is a corporation, joint venture, partnership, LLC, estate, or any entity other than an individual as identified in subsection (1) of this section, the entity shall be represented by an attorney on all matters before the board, including the filing of the appeal. (4) An attorney licensed to practice in another state, but not the Commonwealth of Kentucky, shall be permitted to represent a party before the board if the attorney complies with Supreme Court Rule 3.030(2).”

Please contact us with any questions. — Amber Rutherford (Nashville)

Senior Manager Deloitte Tax LLP [email protected]

Joe Garrett (Birmingham) Managing Director Deloitte Tax LLP [email protected]

Brian Hickey (Cincinnati) Managing Director Deloitte Tax LLP [email protected]

John Paek (Atlanta) Principal Deloitte Tax LLP [email protected]

http://kycc.ky.gov/Documents/Executive%20Order%202020-708%20-%20Reorganization%20of%20Claims%20Commission.pdfhttp://kycc.ky.gov/Documents/Executive%20Order%202020-708%20-%20Reorganization%20of%20Claims%20Commission.pdfhttps://newsletters.usdbriefs.com/2020/Tax/STM/200911_1.html


Income/Franchise: California FTB Posts 20-Day Notice for Draft Proposed Rule Changes on Alternative Apportionment Draft Proposed Amended California Code of Regulations, Title 18, Section 25137(d), Cal. FTB (12/29/20); Twenty-Day Notice of Proposed Amendments, Cal. FTB (12/29/20). The California Franchise Tax Board (FTB) issued i) additional draft proposed regulatory amendments regarding its alternative apportionment method petition procedures, and ii) announced a twenty-day notice period for eliciting comments on its newly revised proposal with written comments on it due by January 18, 2021. Following the close of this twenty-day comment period, the FTB staff explains that it intends to present the revised draft proposed regulation language to the three-member FTB and request permission to proceed with California’s formal Administrative Procedures Act (APA) regulatory process. According to the FTB, among other changes, the latest revisions include: URL: https://www.ftb.ca.gov/tax-pros/law/regulatory-activity/12292020-proposed-amendments-20-day-notice.pdf URL: https://www.ftb.ca.gov/tax-pros/law/regulatory-activity/12292020-20-day-notice.pdf

• Retaining the previously deleted language “consideration of said petitions by the Board shall be in open session at a regularly-scheduled meeting” to “make clear that petitions will be held in open session;”

• Adding language to “specify that a taxpayer will receive notification of the petition and the briefing schedule either sixty (60) calendar days from the date of the petition, or sixty (60) calendar days from the date of FTB staff’s determination if a determination was not previously made, whichever occurs later;” and

• Modifying the time allowed for opening and reply presentations specified in California Code of Regulations, Title 18, section 25137(d)(3)(A) from thirty minutes for opening presentations and fifteen minutes for taxpayer’s reply presentation to twenty minutes for opening presentations and ten minutes for taxpayer’s reply presentation.

Note that many of these latest revisions were made in response to comments made at the FTB’s fourth interested parties meeting (IPM), which addressed proposed language for this regulation on August 11, 2020 [see State Tax Matters, Issue 2020-29, for more details on the fourth IPM]. Please contact us with any related questions. URL: https://newsletters.usdbriefs.com/2020/Tax/STM/200724_1.html — Christopher Campbell (Los Angeles)

Principal Deloitte Tax LLP [email protected]

Kathy Freeman (Sacramento) Managing Director Deloitte Tax LLP [email protected]

https://www.ftb.ca.gov/tax-pros/law/regulatory-activity/12292020-proposed-amendments-20-day-notice.pdfhttps://www.ftb.ca.gov/tax-pros/law/regulatory-activity/12292020-20-day-notice.pdfhttps://newsletters.usdbriefs.com/2020/Tax/STM/200724_1.html


Jairaj Guleria (San Jose) Partner Deloitte Tax LLP [email protected]

Shirley Wei (Los Angeles) Senior Manager Deloitte Tax LLP [email protected]

Income/Franchise: California FTB Notice Addresses Elections to Change Accounting Periods or Methods FTB Notice 2020-04, Cal. FTB (12/30/20). A recently issued California Franchise Tax Board (FTB) notice (FTB Notice 2020-04) provides some guidance to taxpayers on the manner in which an election to change an accounting period or method is to be filed with the FTB, addressing instances of “deemed California consent,” “different California elections,” and “automatic California consent.” For deemed California consent, FTB Notice 2020-04 explains that if a taxpayer submits a request to change an accounting period or method for federal tax purposes and the Internal Revenue Service approves the request, “the change will apply for California purposes without any action by the taxpayer, as long as California has conformed to the underlying law which is being applied.” In such cases, taxpayers must submit to the FTB a copy of the approved federal election along with the original California tax return for the taxable year in which the change is in effect. However, the FTB warns that “a request approved by the Internal Revenue Service for a change of accounting period or method that is not permitted under California law will not be allowed for California tax purposes.” URL: https://www.ftb.ca.gov/tax-pros/law/ftb-notices/2020-04.pdf For different California elections, FTB Notice 2020-04 explains that if a California taxpayer i) cannot rely on a federally-approved request to change an accounting period or method, ii) desires to obtain a change different from the federal change, or iii) desires a change for California tax purposes only, “a completed federal Form 3115, Application for Change in Accounting Method, or federal Form 1128, Application to Adopt, Change, or Retain a Tax Year, should be submitted to the FTB” by a specified due date as provided in the notice. FTB Notice 2020-04 also explains that with respect to a request to change an accounting period or method for California tax purposes only, “the FTB shall grant automatic consent provided that the change would be eligible for automatic consent by the Internal Revenue Service and California has conformed to the applicable Internal Revenue Code sections which provide for the underlying accounting period or method being applied for or relied upon.” FTB Notice 2020-04 supersedes FTB Notice 2000-8, issued on November 7, 2000, as corrected by FTB Notice 2001-02. Please contact us with any questions. — Roburt Waldow (Minneapolis)



https://www.ftb.ca.gov/tax-pros/law/ftb-notices/2020-04.pdf



Income/Franchise: California FTB Chief Counsel Rulings Address Sourcing of Tangible Personal Property Chief Counsel Ruling No. 2020-01; Chief Counsel Ruling No. 2020-02, Cal. FTB (12/23/20). Two Chief Counsel Rulings (CCRs) issued by the California Franchise Tax Board (FTB) late in 2020 address the sourcing of sales of tangible personal property (TPP) for state corporate income tax purposes under two different factual scenarios – one involving receipts from intercompany sales between affiliates of the same combined reporting group, and the other involving TPP delivery to a consolidation warehouse to be prepared for resale. In the former, FTB tax counsel determined that for taxable years beginning on January 1, 2020, and onward, certain receipts generated from sales of TPP by one affiliate to another in California, both of which are members of the same combined reporting group, are not taken into account in the apportionable income and apportionment factor during the year of sale between such members pursuant to California Code of Regulations, title 18, section 25106.5-1. In the later, FTB tax counsel held that for taxable years beginning on January 1, 2020, and onward, certain sales of TPP that are delivered at the consolidation warehouse and prepared for resale are not assigned to California under state law. Please contact us with any questions. URL: https://www.ftb.ca.gov/tax-pros/law/chief-counsel-rulings/2020-01.pdf URL: https://www.ftb.ca.gov/tax-pros/law/chief-counsel-rulings/2020-02.pdf — Christopher Campbell (Los Angeles)



Jairaj Guleria (San Jose) Partner Deloitte Tax LLP [email protected]


https://www.ftb.ca.gov/tax-pros/law/chief-counsel-rulings/2020-01.pdfhttps://www.ftb.ca.gov/tax-pros/law/chief-counsel-rulings/2020-02.pdf


Income/Franchise: Colorado Governor Issues Executive Order on Voter-Approved Corporate Income Tax Rate Reduction Executive Order No. D 2020 302: Proclamation Declaration of Vote on Proposition 116 – State Income Tax Rate Reduction, Colo. Office of the Governor (12/31/20); Proposition 116, approved by voters 11/3/20. Colorado Governor Jared Polis issued a proclamation declaration of voter-approved ballot measure “Proposition 116” from the November 3, 2020 election which, for tax years commencing on or after January 1, 2020, lowers the tax rate for both state corporate and individual income taxes from 4.63% to 4.55%. According to the voter-approved ballot measure, Proposition 116 takes effect upon Governor Polis’ proclamation. Please contact us with any questions. URL: https://www.colorado.gov/governor/sites/default/files/inline-files/D%202020%20302%20Amendment%20116.pdf URL: https://www.sos.state.co.us/pubs/elections/Initiatives/ballot/contacts/2020.html — Greg McClure (Denver)

Managing Director Deloitte Tax LLP [email protected]

Lance Williams (Denver) Managing Director Deloitte Tax LLP [email protected]

Sarah Laszlo (Denver) Senior Manager Deloitte Tax LLP [email protected]

Income/Franchise: Delaware: City of Wilmington Addresses Pandemic-Related Telecommuting for Earned Income Tax and Head Tax Purposes Memo: Interpretation of Earned Income Tax Regulations for Tax Years 2020 and 2021, City of Wilmington, Delaware (11/30/20). Responding to the COVID-19 pandemic, a solicitor from the City of Wilmington, Delaware (City) issued a memorandum to “Employers and Employees of Businesses within the City limits,” addressing the impact on remote workplaces for employees of companies doing business in the City for City earned income tax and head tax purposes. The memo explains that nonresident employees who work for City-based businesses are responsible for paying the City’s earned income tax based on the portion of work performed and rendered within the City limits, and that the City interprets “performed” as work done within the physical limits of the City while services “rendered” is work performed on behalf of the City-based employer, “regardless of the employee’s location inside or outside the City.” In this respect, the memo provides that “employees whose official work locations are within the City limits are considered for all intents

https://www.colorado.gov/governor/sites/default/files/inline-files/D%202020%20302%20Amendment%20116.pdfhttps://www.colorado.gov/governor/sites/default/files/inline-files/D%202020%20302%20Amendment%20116.pdfhttps://www.sos.state.co.us/pubs/elections/Initiatives/ballot/contacts/2020.htmlhttps://www.wilmingtonde.gov/home/showpublisheddocument?id=9785


and purposes subject to wage tax UNLESS the employer certifies that the employee did not provide or render services to the employer’s location within the City limits during the emergency order in the 2020 tax year.” URL: https://www.wilmingtonde.gov/home/showpublisheddocument?id=9785 Moreover, the memo explains that once the pandemic-related declaration of emergency is lifted, “employees who continue to work from home will do so at the employer’s convenience” and are “still subject to the wage tax unless the employer certifies that the employee has permanently ceased providing services or rendering services to the employer’s location within the City limits” – and that “the same holds true for the head tax.” The memo generally explains that employers domiciled in the City “and to which the employee’s work location is documented at the same location” must pay City head tax on employees of five or more. Please contact us with any questions. — Kenn Stoops (Philadelphia)


Stacy Ip-Mo (Philadelphia) Senior Manager Deloitte Tax LLP [email protected]

Bob Kovach (Pittsburgh) Senior Manager Deloitte Tax LLP [email protected]

John Damin (Philadelphia) Senior Manager Deloitte Tax LLP [email protected]

Income/Franchise: Delaware: Trial Court Holds in Taxpayer’s Favor that NOL Limitation Policy is Invalid Case No. N19C-08-093 JRJ, Del. Super. Ct. (12/17/20). A Delaware trial court (Court) granted summary judgment in favor of a taxpayer that challenged the validity of the Delaware Division of Revenue’s net operating loss (NOL) limitation policy as it applies to certain entities filing separate-company Delaware corporate income tax returns but which file as part of a consolidated corporate income tax return for federal income tax purposes. The Court generally explains that, under federal income tax law, corporations may join with groups of affiliated corporations to file consolidated income tax returns with the Internal Revenue Service, and such consolidated return groups may claim consolidated NOL deductions. However, in Delaware, group members must file separate-company income tax returns with the Division, and if a member claims a separate-company NOL deduction, the Division limits it to the amount of the consolidated NOL deduction that the member’s group claimed on its consolidated income tax return. While the Court reasoned that this NOL limitation policy was consistent with Delaware statutes and did not discriminate against interstate commerce in violation of the US Constitution’s Commerce Clause, it held for the taxpayer that such policy violated the Delaware Constitution’s Uniformity Clause by dividing a single group of taxpayers (i.e., Delaware corporate taxpayers) into two groups on the basis of their federal filing status (i.e., consolidated filers versus separate

https://courts.delaware.gov/Opinions/Download.aspx?id=314620


filers) and then applying a limitation to one group but not the other – thus invalidly creating two classes of Delaware corporate taxpayers. Accordingly, the Court held that the Division improperly limited the amount of the NOL that the taxpayer could claim for Delaware income tax return purposes to the amount of the consolidated filing group’s consolidated NOL for the tax years at issue. Please contact us with any questions. URL: https://courts.delaware.gov/Opinions/Download.aspx?id=314620 — Kenn Stoops (Philadelphia)





Income/Franchise: Indiana DOR Addresses State Impact of Federal CARES Act Provisions Involving NOLs Coronavirus Information: COVID-19 FAQs, Ind. Dept. of Rev. (updated 12/20). Responding to the COVID-19 pandemic and changes to Internal Revenue Code (IRC) section 172 involving net operating loss (NOL) deductions as enacted under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act (i.e., P.L. 116-136), the Indiana Department of Revenue (Department) addresses the resulting state impact to 2020 Indiana income tax returns. In doing so, the Department explains that because Indiana generally conforms to the IRC as in effect on January 1, 2020, “Indiana will continue to follow the pre-2020 treatment of excess business losses.” Accordingly, “the excess loss would be disallowed” for Indiana corporate income tax purposes but also would be available as an NOL carryforward starting in the year after loss. The Department notes that in the 2018 state legislative session, Indiana decoupled from the federal Tax Cuts and Jobs Act of 2017’s (i.e., P.L. 115-97) changes to the treatment of NOLs for Indiana income tax purposes, and that Indiana retains the previous treatment of NOLs “which allows these losses to be used against 100% of Indiana adjusted gross income in a given year for a period of up to 20 years.” In addition, the Department states that Indiana has specifically decoupled from any carryback allowance otherwise permitted under federal law. Please contact us with any questions. URL: https://www.in.gov/dor/7078.htm

https://www.in.gov/dor/7078.htm


— Amanda Suasnabar (Indianapolis) Managing Director Deloitte Tax LLP [email protected]

Tom Engle (St. Louis) Manager Deloitte Tax LLP [email protected]


Income/Franchise: Louisiana: Gains from Sale of LLC Interest are Deemed Includable in Sales Factor Denominator Case No. 2019 CA 1574, La. Ct. App. (12/30/20). A Louisiana Court of Appeal (Court) affirmed a Louisiana Board of Tax Appeals ruling from 2018, which held that a taxpayer’s gains derived from the sale of its interest in a limited liability company (LLC) were properly included in its sales factor denominator for state corporate income tax purposes as “other gross apportionable income” – reasoning that Louisiana’s applicable apportionment statutes were not drafted with the intent to exclude sales not made in the regular course of business from “other gross apportionable income” and from the denominator of the sales factor. The Court additionally explained that a clause contained in a Louisiana administrative regulation which adds that “[s]ales not made in the regular course of business are not included in the formula provided by R.S. 47:287.95( F)” impermissibly expands the scope of Louisiana statutes because it is “contrary to the clear wording of La. R.S. 47:287.95(F) as well as the legislative history excluding similar language from La. R.S. 47:287.95.” Please contact us with any questions. URL: https://www.la-fcca.org/opiniongrid/opinionpdf/2019%20CA%201574%20Decision%20Appeal.pdf — Robert Topp (Houston)


Michael Matthys (Houston) Senior Manager Deloitte Tax LLP [email protected]

Grace Taylor (Houston) Manager Deloitte Tax LLP [email protected]

https://www.la-fcca.org/opiniongrid/opinionpdf/2019%20CA%201574%20Decision%20Appeal.pdf


Income/Franchise: Louisiana: Interest Earned on Contracts Sourced In-State but Contracts are Sourced Out-of-State Case Nos. 9748D, 9749D, 9750D, La. Bd. of Tax App. (12/10/20). In a case involving a financing institution that acquires, owns, and services retail installment contracts (“RICs”) from dealers who sell vehicles to their customers on credit, the Louisiana Board of Tax Appeals (Board) held that, based on prior state case law, interest paid to the financing institution from the RICs generated in Louisiana from vehicle sales must be included in its sales factor numerator while the value of the RICs themselves must be attributed outside of Louisiana in computing its property factor for state franchise tax purposes. In doing so, the Board reasoned that i) the interest at issue is “interest received on customers’ notes and accounts” and thus should be attributed to Louisiana under applicable state statutes because the vehicle customers are located in Louisiana; and ii) the underlying RICs themselves should be attributed to California given the facts at hand “under either the business situs test (the situs of the notes) or in the absence of a situs for the notes, the commercial domicile test, which in either case results in the value of the notes being sourced in California.” Please contact us with any questions. URL: http://labta.louisiana.gov/pdfs/Toyota%20Motor%20Credit%20Corporation%20v.%20Robinson,%20BTA%20Docket%20No.%209748D%20cw%209749D,%209750D%20(La.%20Bd.%20Tax%20App.%2012-09-20).pdf — Robert Topp (Houston)


Michael Matthys (Houston) Senior Manager Deloitte Tax LLP [email protected]


Income/Franchise: Massachusetts: Signed Budget Bill Addresses State Treatment of Federal Partnership Audit Regime Changes H.5164, signed by gov. 12/11/20; FY2021 Budget Summary, Office of Governor Charlie Baker (12/11/20); Press Release: Governor Baker Signs Fiscal Year 2021 Budget and Proposes Additional Resources for Small Businesses, Education, and Police Oversight, Office of Governor Charlie Baker (12/11/20). Recently signed budget bill legislation includes provisions addressing how Massachusetts will respond to certain changes in the federal partnership audit and adjustment process. Specifically, the new law alters the process by which some partnerships report federal tax adjustments to the Massachusetts Department of Revenue (Department) in

http://labta.louisiana.gov/pdfs/Toyota%20Motor%20Credit%20Corporation%20v.%20Robinson,%20BTA%20Docket%20No.%209748D%20cw%209749D,%209750D%20(La.%20Bd.%20Tax%20App.%2012-09-20).pdfhttps://malegislature.gov/Bills/191/H5164https://budget.digital.mass.gov/summary/fy21/https://www.mass.gov/news/governor-baker-signs-fiscal-year-2021-budget-and-proposes-additional-resources-for-smallhttps://www.mass.gov/news/governor-baker-signs-fiscal-year-2021-budget-and-proposes-additional-resources-for-smallhttps://www.mass.gov/news/governor-baker-signs-fiscal-year-2021-budget-and-proposes-additional-resources-for-small


response to changes in the federal partnership audit and adjustment process under the federal 2015 Bipartisan Budget Act – including updated procedures and filing deadlines for reporting certain partnership-level adjustments that result from federal tax changes and other changes to federal taxable income to the Department, as well as for paying any associated taxes due. The bill also explains that the Department “may promulgate regulations and issue other guidance to implement or explain” these new provisions, and that such regulations or other guidance, if promulgated, should seek to “prevent the omission or duplication of state tax due as the result of a partnership-level audit and to account for differences between federal and state law.” Please contact us with any questions. URL: https://malegislature.gov/Bills/191/H5164 URL: https://budget.digital.mass.gov/summary/fy21/ URL: https://www.mass.gov/news/governor-baker-signs-fiscal-year-2021-budget-and-proposes-additional-resources-for-small — Bob Carleo (Boston)


Alexis Morrison-Howe (Boston) Principal Deloitte Tax LLP [email protected]

Ian Gilbert (Boston) Senior Manager Deloitte Tax LLP [email protected]

Tyler Greaves (Boston) Manager Deloitte Tax LLP [email protected]

Income/Franchise: New Hampshire Department of Revenue Administration Announces that BPT and BET Rates Remain the Same Technical Information Release (TIR) 2020-006, N.H. Dept. of Rev. Admin. (12/29/20). The New Hampshire Department of Revenue Administration released a bulletin announcing that pursuant to legislation enacted in 2019 [see H.B. 4 (2019) and State Tax Matters, Issue 2019-39, for more details on these law changes] that establishes certain applicable tax rates under the state business profits tax (BPT) and state business enterprise tax (BET) and which includes conditional potential tax rate changes (i.e., possible rate increases or rate decreases) if specified state general and education trust fund revenue thresholds are met or not met, New Hampshire’s BPT rate will remain at 7.7% and the BET rate will remain at 0.6% for taxable periods ending on or after December 31, 2021. Please contact us with any questions. URL: https://www.revenue.nh.gov/tirs/documents/2020-006.pdf URL: http://gencourt.state.nh.us/bill_status/bill_status.aspx?lsr=1124&sy=2019&txtsessionyear=2019&txtbillnumber=hb4&sortoption= URL: http://newsletters.usdbriefs.com/2019/Tax/STM/191004_6.html

https://www.revenue.nh.gov/tirs/documents/2020-006.pdfhttp://gencourt.state.nh.us/bill_status/bill_status.aspx?lsr=1124&sy=2019&txtsessionyear=2019&txtbillnumber=hb4&sortoption=http://newsletters.usdbriefs.com/2019/Tax/STM/191004_6.html


— Bob Carleo (Boston) Managing Director Deloitte Tax LLP [email protected]

Liz Jankowski (Boston) Senior Manager Deloitte Tax LLP [email protected]

Income/Franchise: New York Department of Taxation and Finance Posts Proposed Rule Review with Comments Due March 7 2021 Proposed Rule Review, N.Y. Dept. of Tax. & Fin. (12/22/20). As part of New York’s administrative rule review process as required under section 207 of the State Administrative Procedure Act, the New York Department of Taxation and Finance (Department) recently announced that it intends to review certain listed individual income, corporate income, sales and use, property, and excise taxes rules during 2021, and invites written comments on the continuation or modification of these rules by March 7, 2021 “in order to assist the Department in the required review.” Among other tax technical topics and procedural aspects, such rules involve: URL: https://www.tax.ny.gov/rulemaker/fiveyearrev.htm#Item12

1. The filing of combined reports as well as technical amendments to the combined filings made by real estate investment trusts (REITs) and regulated investment companies (RICs);

2. Tax return preparers; 3. Computation of the Article 9-A business corporation franchise tax for corporations that are partners in

partnerships or that are members of limited liability companies that are treated as partnerships under Article 9-A;

4. The definition of a New York reportable transaction and the disclosure requirements for participation in a New York reportable transaction; and

5. New York source income of nonresidents and part-year residents from stock options, stock appreciation rights and restricted stock.

Please contact us with any questions. — Don Roveto (New York)

Partner Deloitte Tax LLP [email protected]

Jack Trachtenberg (New York) Principal Deloitte Tax LLP [email protected]

Mary Jo Brady (Jericho) Senior Manager Deloitte Tax LLP [email protected]

Joshua Ridiker (New York) Senior Manager Deloitte Tax LLP [email protected]

https://www.tax.ny.gov/rulemaker/fiveyearrev.htm#Item12


Income/Franchise: North Carolina DOR Addresses Classification of Gain from Sale of Minority Limited Partnership Interest Important Notice: Corporate Tax – Secretary Announces That New Statute Abrogated Prior Final Agency Decision, N.C. Dept. of Rev. (12/31/20). The North Carolina Department of Revenue (Department) recently issued a notice addressing legislation enacted in 2017 (S.L. 2017-204) – which amended N.C. Gen. Stat. section 105-130.4(a) to clarify that the definition of “apportionable income” means all income under the US Constitution, including income that arises from transactions and activities in the regular course of business, or tangible and intangible property if the acquisition, management, employment, development, or disposition of the property is or was related to the operation of the taxpayer’s trade or business – announcing that as a result of this law change, it has determined that Final Agency Decision No. 09 REV 5669 (issued April 2011) is “no longer the correct application” of N.C. Gen. Stat. section 105-130.4 and accordingly it will no longer follow it for transactions occurring after December 31, 2020. Instead, the Department explains that it will apply N.C. Gen. Stat. section 105-130.4, as amended by S.L. 2017-204, “to evaluate what items constitute apportionable income.” In Final Agency Decision No. 09 REV 5669, the Department previously held that the gain from the sale of an out-of-state taxpayer’s minority limited partnership interest constituted non-apportionable income that was allocable to the taxpayer’s state of commercial domicile and therefore not subject to North Carolina’s corporate income tax. Please contact us with any questions. URL: https://files.nc.gov/ncdor/documents/files/Important-Notice-Agency-Decision-on-Apportionable-Income_0.pdf — Art Tilley (Charlotte)




Emily Dean Kenemer (Charlotte) Manager Deloitte Tax LLP [email protected]

Income/Franchise: Ohio: City of Columbus Addresses Pandemic-Related Telecommuting for Local Income Tax Purposes Updates for Columbus Employers, City of Columbus, Ohio, Office of the City Auditor, Income Tax Division (4/14/20). Responding to the COVID-19 pandemic and Ohio legislation enacted in 2020 [see H.B. 197 (2020) for details on this new law], the City of Columbus, Ohio (City), Office of the City Auditor, Income Tax Division

https://files.nc.gov/ncdor/documents/files/Important-Notice-Agency-Decision-on-Apportionable-Income_0.pdfhttps://files.nc.gov/ncdor/documents/files/Important-Notice-Agency-Decision-on-Apportionable-Income_0.pdfhttps://www.columbus.gov/WorkArea/DownloadAsset.aspx?id=2147514921https://www.legislature.ohio.gov/legislation/legislation-documents?id=GA133-HB-197


(Division), issued a statement explaining that Ohio state law (i.e., H.B. 197 (2020)) treats employees who report to a temporary worksite during the COVID-19 emergency period as working at their principal place of work, and thus employees working from home during the pandemic (or within 30 days after the emergency is lifted by the Ohio Governor) are considered to be working in their principal place of work for Ohio municipal income tax withholding purposes. Accordingly, the Division concludes that, for example, “an employer is only required to withhold city tax to Columbus for an employee who normally works in Columbus but is working from their home in Dublin during the COVID-19 emergency, even if that employee works from home for more than 20 days.” Please contact us with any questions. URL: https://www.columbus.gov/WorkArea/DownloadAsset.aspx?id=2147514921 URL: https://www.legislature.ohio.gov/legislation/legislation-documents?id=GA133-HB-197 — Dave Adler (Columbus)


Courtney Clark (Columbus) Partner Deloitte Tax LLP [email protected]

Matt Culp (Columbus) Manager Deloitte Tax LLP [email protected]

Paige Fitzwater (Columbus) Manager Deloitte Tax LLP [email protected]

Income/Franchise: Oregon: Adopted Rules Address Unitary Relationships and Treatment of Federal Partnership Audits Amended OAR section 150-317-0510; New OAR section 150-314-0733, New OAR section 150-316-0043, Or. Dept. of Rev. (12/23/20). The Oregon Department of Revenue amended an administrative rule to modify the common ownership and control percentage for affiliates in a unitary group for Oregon corporate excise (income) tax purposes. Specifically, the revised rule modifies the provisions of Or. Admin. Rule section 150-317-0510(10) by changing “more than 80 percent” to “more than 50 percent” common ownership and control necessary to establish a unitary relationship between any two corporations. Moreover, a recently adopted new rule helps implement legislation enacted in 2019 [see H.B. 2101 (2019) for more details on this 2019 legislation] that establishes state partnership and partner audit procedures to conform with certain changes in the federal partnership audit and adjustment process pursuant to the federal 2015 Bipartisan Budget Act. Specifically, the new rule provides some guidance for the treatment of partnership adjustments stemming from federal partnership audits when an Oregon election is made under Or. Rev. Stat. section 314.733(4), which allows an audited partnership to make an election to pay at the partnership level. Another newly adopted rule provides guidance on the qualified business income reduced tax rate. These amended and new rules all became effective as of January 1, 2021. Please contact us with any questions. URL: https://secure.sos.state.or.us/oard/viewReceiptPDF.action?filingRsn=46534 URL: https://secure.sos.state.or.us/oard/viewReceiptPDF.action?filingRsn=46547

https://secure.sos.state.or.us/oard/viewReceiptPDF.action?filingRsn=46534https://secure.sos.state.or.us/oard/viewReceiptPDF.action?filingRsn=46547https://secure.sos.state.or.us/oard/viewReceiptPDF.action?filingRsn=46538https://olis.leg.state.or.us/liz/2019R1/Measures/Overview/HB2101


URL: https://secure.sos.state.or.us/oard/viewReceiptPDF.action?filingRsn=46538 URL: https://olis.leg.state.or.us/liz/2019R1/Measures/Overview/HB2101 — Scott Schiefelbein (Portland)


Sara Clear (Minneapolis) Manager Deloitte Tax LLP [email protected]

Income/Franchise: Pennsylvania: Philadelphia DOR Updates Pandemic-Related Telecommuting Guidance for Wage Tax Purposes Philadelphia Wage Tax Q&A applicable to COVID-19 policies, City of Philadelphia Dept. of Rev. (12/20). Following its November 2020 pandemic-related guidance addressing nonresident employees working from home outside the City of Philadelphia (City) for City wage tax purposes [see “Wage Tax policy guidance for non-resident employees” (11/5/20) for details], the City Department of Revenue released additional guidance on the subject in the form of some answers to frequently asked questions (FAQs). The FAQs consider to what extent a nonresident employee’s compensation is treated as compensation for services performed in the City and thus subject to City wage tax withholding under several factual scenarios – including varying employer “work-from-home” and/or “return-to-office” policies, the taxation of employee bonuses and dividends, and retail store temporary closures. Please contact us with any questions. URL: https://www.phila.gov/media/20201217081650/Philadelphia-Wage-Tax-QA-2020-December.pdf URL: https://www.phila.gov/media/20201105092132/Wage-Tax-non-resident-COVID-19-guidance-110520.pdf — Kenn Stoops (Philadelphia)





https://www.phila.gov/media/20201217081650/Philadelphia-Wage-Tax-QA-2020-December.pdfhttps://www.phila.gov/media/20201105092132/Wage-Tax-non-resident-COVID-19-guidance-110520.pdfhttps://www.phila.gov/media/20201105092132/Wage-Tax-non-resident-COVID-19-guidance-110520.pdf


Income/Franchise: Texas Comptroller Adopts Amendments to Franchise Tax Apportionment Rules on Sourcing Amended 34 Tex. Admin. Code § 3.591, Tex. Comptroller (1/4/21). The Texas Comptroller of Public Accounts recently filed adopted rule amendments with the Office of the Texas Secretary of State that incorporate numerous changes to apportionment rules surrounding the Texas franchise tax as contained within title 34 of the Texas Administrative Code (TAC) § 3.591, including changes to sourcing methodologies that address internet hosting services, software as a service (SaaS), software delivered via tangible media, advertising, loan servicing, regulated investment company (RIC) services and receipts derived from the sale of capital assets and investments. The amendments are scheduled to be published in the January 15, 2021 issue of the Texas Register. URL: https://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=8&p_dir=&p_rloc=387463&p_tloc=&p_ploc=&pg=1&p_reg=387463&ti=34&pt=1&ch=3&rl=591&issue=01/15/2021 See previously issued Multistate Tax Alert for details on these rule changes as proposed in November 2020, and please contact us with any questions. URL: https://www2.deloitte.com/us/en/pages/tax/articles/texas-comptroller-proposes-amendments-to-franchise-tax-apportionment-rules.html?id=us:2em:3na:stm:awa:tax:010820&sfid=7011O0000038lK6QAI — Robert Topp (Houston)


Lauren Bogue Rothman (Houston) Senior Manager Deloitte Tax LLP [email protected]


Income/Franchise: West Virginia: City of Charleston Addresses Pandemic-Related Telecommuting for User Fee Purposes City Collector Opinion: City Service Fee (“User Fee”) and Covid-19 Work Related Relocation, City of Charleston, W. Va., Office of the City Collector (4/14/20). Responding to the COVID-19 pandemic, the City of Charleston, West Virginia (City), Office of the City Collector (City Collector) issued a statement to employers subject to the City’s service fee (i.e., “user fee”), explaining that an employee “shall be considered employed so long as the employee remains on the current payroll of an employer deriving compensation and the employee has not

https://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=8&p_dir=&p_rloc=387463&p_tloc=&p_ploc=&pg=1&p_reg=387463&ti=34&pt=1&ch=3&rl=591&issue=01/15/2021https://www2.deloitte.com/us/en/pages/tax/articles/texas-comptroller-proposes-amendments-to-franchise-tax-apportionment-rules.html?id=us:2em:3na:stm:awa:tax:010820&sfid=7011O0000038lK6QAIhttps://www.charlestonwv.gov/documents/covid-19-city-user-fee-statement-tue-04142020-1447


been permanently assigned to an office or place of business” outside the City for City user fee purposes. Accordingly, the statement provides that such employees “who are working from home or on paid leave” are still considered employed by a location within the City and have not been permanently assigned to an outside location – reasoning that the City-located employer continues to receive the benefits of City services. Therefore, in these instances, the City Collector concludes that employers should continue the withholding and remitting of the City user fee on such employees. “Conversely, Charleston residents who are temporarily working from home who are employed by employers located outside the City should NOT have the User Fee withheld,” as “these employees are only temporarily and involuntarily conducting business from their homes within the City for an employer who is located outside the City.” Please contact us with any questions. URL: https://www.charlestonwv.gov/documents/covid-19-city-user-fee-statement-tue-04142020-1447 — Joe Carr (McLean)



Louisa Matthews (Pittsburgh) Managing Director Deloitte Tax LLP [email protected]

Meredith Harper (Birmingham) Senior Manager Deloitte Tax LLP [email protected]

Ashley Higgins (McLean) Senior Manager Deloitte Tax LLP [email protected]

Sales/Use/Indirect: Streamlined Sales Tax Governing Board Amends SSUTA by Revising Amnesty Qualifications Amended Section 402.A.1 of the Streamlined Sales and Use Tax Agreement (SUTA), Streamlined Sales Tax Governing Board (12/18/20). The Streamlined Sales Tax (SST) Governing Board has agreed to amend certain Streamlined Sales and Use Tax Agreement (SSUTA) amnesty-related provisions “so that a seller can only get amnesty as long as the seller agrees to register in the other SST full member states where that seller has sales.” The changes are intended to “make the amnesty qualifications consistent with the effect of amnesty provisions first enacted in SST” – that is, the qualifications prior to the post-Wayfair SSUTA changes allowing remote sellers to choose which states to register under the centralized registration system provided in Article IV of the SSUTA. Under the SSUTA, member states generally are required to provide amnesty for the first twelve months after the date the state becomes a full-member state. Please contact us with any questions. URL: https://www.streamlinedsalestax.org/docs/default-source/amendments/2020-amendments/amnesty-section-402.docx?sfvrsn=6c0460a_6

https://www.streamlinedsalestax.org/docs/default-source/amendments/2020-amendments/amnesty-section-402.docx?sfvrsn=6c0460a_6


— Inna Volfson (Boston) Senior Manager Deloitte Tax LLP [email protected]

Rick Heller (Parsippany) Managing Director Deloitte Tax LLP [email protected]

Sales/Use/Indirect: Illinois DOR Adopts New Set of Retailers’ Occupation Tax Rules on Remote Retailers 86 Ill. Admin. Code sections 131.101; 131.105; 131.107; 131.110; 131.115; 131.120; 131.125; 131.130; 131.135; 131.140; 131.145; 131.150; 131.155; 131.160; 131.165; 131.170; 131.175, 131.180, Ill. Dept. of Rev. (1/1/21). The Illinois Department of Revenue (Department) recently adopted a new set of administrative rules [see State Tax Matters, Issue 2020-48, for details on these rules as last proposed] reflecting Illinois legislation enacted in 2019 [see S.B. 690 (2019) and S.B. 689 (2019), and previously issued Multistate Tax Alert, for more details on these bills, as well as S.B. 119 (2019), a subsequently enacted clarification bill] that amended the Illinois “Retailers’ Occupation Tax” (ROT) to implement a series of structural changes to Illinois sales tax laws requiring “remote retailers” to collect and remit state and local ROTs. The adopted rules reflect new law providing that remote retailers may contract with certified service providers (CSPs) to perform their tax remittance functions, and that remote retailers also may use certified automated systems to calculate and remit their own taxes. The Department’s new rules reflect that beginning January 1, 2021, marketplace facilitators must remit state and local ROTs on sales made over the marketplace on their own sales and sales made on behalf of marketplace sellers. Additionally, various sourcing rules applicable to facilitated marketplace sales and a marketplace facilitator’s own sales are addressed. Note that the adopted rules include a “Leveling the Playing Field Retailer Flowchart,” and the Department’s “Resource Page for the ‘Leveling the Playing Field for Illinois Retail Act’“ has been updated with additional materials (e.g., Informational Bulletin FY 2021-02-A, which addresses what types of sales are excluded from the tax remittance threshold determination for marketplace facilitators), too. Please contact us with any questions. URL: https://www2.illinois.gov/rev/research/legalinformation/regs/Pages/Part131.aspx URL: https://newsletters.usdbriefs.com/2020/Tax/STM/201204_10.html URL: http://www.ilga.gov/legislation/billstatus.asp?DocNum=690&GAID=15&GA=101&DocTypeID=SB&LegID=116627&SessionID=108 URL: http://www.ilga.gov/legislation/billstatus.asp?DocNum=0689&GAID=15&GA=101&DocTypeID=SB&LegID=116626&SessionID=108&SpecSess= URL: https://www2.deloitte.com/us/en/pages/tax/articles/illinois-legislature-adopts-substantial-changes-to-tax-laws.html?id=us:2em:3na:stm:awa:tax:010820&sfid=7011O0000038lK6QAI URL: http://www.ilga.gov/legislation/billstatus.asp?DocNum=0119&GAID=15&GA=101&DocTypeID=SB&LegID=115182&SessionID=108&SpecSess= URL: https://www2.illinois.gov/rev/research/legalinformation/regs/Documents/part131/131-illustA.pdf URL: https://www2.illinois.gov/rev/research/taxinformation/sales/Pages/Level-the-Playing-Field.aspx

https://www2.illinois.gov/rev/research/legalinformation/regs/Pages/Part131.aspxhttps://www2.illinois.gov/rev/research/legalinformation/regs/Pages/Part131.aspxhttps://newsletters.usdbriefs.com/2020/Tax/STM/201204_10.htmlhttps://newsletters.usdbriefs.com/2020/Tax/STM/201204_10.htmlhttp://www.ilga.gov/legislation/billstatus.asp?DocNum=690&GAID=15&GA=101&DocTypeID=SB&LegID=116627&SessionID=108http://www.ilga.gov/legislation/billstatus.asp?DocNum=0689&GAID=15&GA=101&DocTypeID=SB&LegID=116626&SessionID=108&SpecSess=https://www2.deloitte.com/us/en/pages/tax/articles/illinois-legislature-adopts-substantial-changes-to-tax-laws.html?id=us:2em:3na:stm:awa:tax:010820&sfid=7011O0000038lK6QAIhttp://www.ilga.gov/legislation/billstatus.asp?DocNum=0119&GAID=15&GA=101&DocTypeID=SB&LegID=115182&SessionID=108&SpecSess=https://www2.illinois.gov/rev/research/legalinformation/regs/Documents/part131/131-illustA.pdfhttps://www2.illinois.gov/rev/research/legalinformation/regs/Documents/part131/131-illustA.pdfhttps://www2.illinois.gov/rev/research/taxinformation/sales/Pages/Level-the-Playing-Field.aspxhttps://www2.illinois.gov/rev/research/publications/bulletins/Documents/2021/FY2021-02-A.pdf


URL: https://www2.illinois.gov/rev/research/publications/bulletins/Documents/2021/FY2021-02-A.pdf — Mary Pat Kohberger (Chicago)


Robyn Staros (Chicago) Managing Director Deloitte Tax LLP [email protected]

Sales/Use/Indirect: Missouri: State High Court Says Business Rented TPP Rather than Sold Nontaxable Services Case No. SC98444, Mo. (12/22/20). The Missouri Supreme Court (Court) affirmed a Missouri Administrative Hearing Commission decision to hold that a business engaged in providing its customers with portable toilets and related services was subject to state sales and use tax on these transactions because they constituted taxable portable toilet rentals, rather than nontaxable waste removal services. In doing so, the Court reasoned that the business generally holds itself out as a portable toilet rental service and that without providing the actual portable toilets to its customers, the business “has no service to provide.” While the business did not dispute that the portable toilets constitute tangible personal property, it unsuccessfully argued that its customers were in fact seeking nontaxable waste removal services under a “true object” analysis – so that any receipts attributable to providing the portable toilet devices should be excluded from the definition of taxable receipts as part of the overall provided nontaxable services. Commenting on this taxpayer argument, the Court stated that the plain language of the applicable statute “is clear and resolves this dispute without having to resort to the ‘true object’ test.” Please contact us with any questions. URL: https://www.courts.mo.gov/file/SC/Opinion_SC98444.pdf — Jeff Maxwell (Denver)


Collin Koenig (Kansas City) Manager Deloitte Tax LLP [email protected]

Sales/Use/Indirect: Texas Comptroller Posts Implementation Guidance Involving Remote Sellers and Marketplaces Remote Sellers and Marketplace Frequently Asked Questions, Tex. Comptroller of Public Accounts (12/20). The Texas Comptroller of Public Accounts (Comptroller) has posted some answers to frequently asked questions (FAQs) involving post-Wayfair Texas sale and use tax collection and remittance, document maintenance responsibilities, and audit-related exposure for remote sellers, marketplace providers and marketplace sellers

https://www.courts.mo.gov/file/SC/Opinion_SC98444.pdfhttps://comptroller.texas.gov/taxes/sales/remote-sellers-marketplace-faq.php


under existing state law. In doing so, the Comptroller explains that “no special form or language is required by marketplace providers to notify marketplace sellers that the provider is collecting and remitting tax for Texas.” Such notification can be part of the terms of use or any other agreement between the marketplace provider and seller and does not need to be a separate document that the provider issues to all sellers. Moreover, the Comptroller cautions that the marketplace provider is subject to audit for all transactions on the marketplace, and that the marketplace seller “may also be audited and subject to liability for any deficiencies resulting from incorrect or insufficient information they provided to the marketplace provider.” The FAQs also address application of Texas’ single local use tax rate option for some remote sellers. Please contact us with any questions. URL: https://comptroller.texas.gov/taxes/sales/remote-sellers-marketplace-faq.php — Robin Robinson (Austin)


Michele Rodriguez (Houston) Senior Manager Deloitte Tax LLP [email protected]

Chris Blackwell (Austin) Manager Deloitte Tax LLP [email protected]

Multistate Tax Alerts Throughout the week, we highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. Read the recent alerts below or visit the archive. Archive: http://www2.deloitte.com/us/en/pages/tax/articles/multistate-tax-alert-archive0.html?id=us:2em:3na:stm:awa:tax No new alerts were issued this period. Be sure to refer to the archives to ensure that you are up to date on the most recent releases.

http://www2.deloitte.com/us/en/pages/tax/articles/multistate-tax-alert-archive0.html?id=us:2em:3na:stm:awa:tax


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