TWIST - June 15, 2020

Welcome to TWIST for the week of June 15. This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

The first development for this week is a case from the Mississippi Supreme Court addressing whether the capital of single-member LLCs were included in their owner’s franchise tax base.  The taxpayer was a corporation that owned several single-member LLCs doing business in Mississippi.  The taxpayer filed amended franchise tax returns excluding the capital of its single-member LLCs from the franchise tax base on the basis that the LLCs were not corporations subject to the franchise tax.  The Court, agreeing with the Department of Revenue, held that as a single member of subsidiary LLCs doing business in Mississippi, the taxpayer could not exclude the capital of the single-members LLCs from its franchise tax base.

In a case out of Maine, the Supreme Judicial Court addressed whether gain from the sale of a pizza business should be sourced using an alternative apportionment formula.   The taxpayer sold its frozen pizza business and argued that gain from the sale should be apportioned using the Maine sales factor of only the pizza business and not of the taxpayer’s entire unitary business.  The Maine Supreme Judicial Court held that the taxpayer was not entitled to use alternative apportionment, noting that the pizza business was clearly part of the taxpayer’s overall unitary business and that applying alternative apportionment to a segment of a unitary business is inconsistent with one of the core principles justifying the use of a sales factor formula to apportion the income of a unitary business.

A South Carolina Administrative Law Court Judge recently held that a taxpayer’s protest of an assessment was untimely. The taxpayer argued its consistent challenges receiving mail delivered by the postal service and overly restrictive spam filters resulted in its failure to respond in a timely manner and therefore there was good cause to remove the assessment. The Administrative Law Court disagreed, noting that the taxpayer was required to ensure the Department had the means— including a good address—to communicate with the taxpayer and that the taxpayer had failed to make meaningful attempts to remedy the post office and email issues

In other news, the Michigan Department of Treasury finalized a notice addressing the computation of the section 163(j) limitation for purposes of the Michigan Corporate Income Tax. The notice covers how the 163(j) limitation should be computed given the differences between the federal consolidated filing group and the Michigan unitary business group.

Finally, in COVID-19-related news, the Michigan Department of Treasury also issued guidance reminding employees that if an employer is located in a Michigan City that imposes a city income tax, the wages of a nonresident who telecommutes from home are not subject to tax by the City. Treasury has also updated its NOL carryback refund request form in light of the CARES Act for Individual Income Tax filers. The Oregon Department of Revenue has adopted temporary Corporate Activity Tax or CAT rule that allows penalty waivers for taxpayers making a good faith effort to comply the 2020 tax year CAT installment payments. And, the New York City Department of Taxation and Finance sent out an important notice announcing that individuals and fiduciaries should treat the 6/15 estimated payment as the 1^st installment for the 2020 tax year and the 7/15 estimated payment, which was originally due on April 15, but was extended due to COVID-19, as the 2^nd installment payment for the 2020 tax year

Thank you for listening and stay well.

To read about recent state and local tax guidance on extensions in response to COVID-19, bookmark KPMG TaxNewsFlash-United States to stay current as more guidance is regularly released.

Welcome to TWIST for the week of June 15. This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

The first development for this week is a case from the Mississippi Supreme Court addressing whether the capital of single-member LLCs were included in their owner’s franchise tax base.  The taxpayer was a corporation that owned several single-member LLCs doing business in Mississippi.  The taxpayer filed amended franchise tax returns excluding the capital of its single-member LLCs from the franchise tax base on the basis that the LLCs were not corporations subject to the franchise tax.  The Court, agreeing with the Department of Revenue, held that as a single member of subsidiary LLCs doing business in Mississippi, the taxpayer could not exclude the capital of the single-members LLCs from its franchise tax base.

In a case out of Maine, the Supreme Judicial Court addressed whether gain from the sale of a pizza business should be sourced using an alternative apportionment formula.   The taxpayer sold its frozen pizza business and argued that gain from the sale should be apportioned using the Maine sales factor of only the pizza business and not of the taxpayer’s entire unitary business.  The Maine Supreme Judicial Court held that the taxpayer was not entitled to use alternative apportionment, noting that the pizza business was clearly part of the taxpayer’s overall unitary business and that applying alternative apportionment to a segment of a unitary business is inconsistent with one of the core principles justifying the use of a sales factor formula to apportion the income of a unitary business.

A South Carolina Administrative Law Court Judge recently held that a taxpayer’s protest of an assessment was untimely. The taxpayer argued its consistent challenges receiving mail delivered by the postal service and overly restrictive spam filters resulted in its failure to respond in a timely manner and therefore there was good cause to remove the assessment. The Administrative Law Court disagreed, noting that the taxpayer was required to ensure the Department had the means— including a good address—to communicate with the taxpayer and that the taxpayer had failed to make meaningful attempts to remedy the post office and email issues

In other news, the Michigan Department of Treasury finalized a notice addressing the computation of the section 163(j) limitation for purposes of the Michigan Corporate Income Tax. The notice covers how the 163(j) limitation should be computed given the differences between the federal consolidated filing group and the Michigan unitary business group.

Finally, in COVID-19-related news, the Michigan Department of Treasury also issued guidance reminding employees that if an employer is located in a Michigan City that imposes a city income tax, the wages of a nonresident who telecommutes from home are not subject to tax by the City. Treasury has also updated its NOL carryback refund request form in light of the CARES Act for Individual Income Tax filers. The Oregon Department of Revenue has adopted temporary Corporate Activity Tax or CAT rule that allows penalty waivers for taxpayers making a good faith effort to comply the 2020 tax year CAT installment payments. And, the New York City Department of Taxation and Finance sent out an important notice announcing that individuals and fiduciaries should treat the 6/15 estimated payment as the 1^st installment for the 2020 tax year and the 7/15 estimated payment, which was originally due on April 15, but was extended due to COVID-19, as the 2^nd installment payment for the 2020 tax year

Thank you for listening and stay well.

To read about recent state and local tax guidance on extensions in response to COVID-19, please click here and bookmark KPMG TaxNewsFlash-United States to stay current as more guidance is regularly released.