TWIST - May 3, 2021

Welcome to TWIST for the week of May 3rd, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up today, we have two developments from Arkansas. In the first, the Arkansas Supreme Court held that a taxpayer qualified for a sales and use tax exemption that applies to the sale of machinery and equipment used directly in manufacturing articles of commerce if such equipment is purchased for a new facility or to expand an existing facility. In reaching this conclusion, the court rejected the Department’s assertion that an article of commerce does not include custom items prepared for specific customers.

In the second development, an ALJ for the Office of Hearings and Appeals concluded that partnership income allocated to another state had to be added back in computing a corporate taxpayer’s Arkansas net operating loss.

The New York City Tax Appeals Tribunal recently sustained a City General Corporation Tax assessment on capital gain from the sale of a partnership interest. Although the taxpayer argued it lacked nexus with the City, the Tribunal disagreed, concluding that the capital gain was included in the corporate partner’s entire net income because it was derived from the sale of the LLC that conducted business activity in the City.

In legislative news, House Bill 7059, which was recently approved by the Florida legislature, generally adopts the IRC as of January 1, 2021 applicable retroactive to that date. However, certain provisions of the CARES Act and the Consolidated Appropriations Act are not adopted for Florida corporate income tax purposes.

Washington State Senate Bill 5096, which was sent to the Governor on April 26, 2021, imposes a new excise tax on the sale or exchange of long-term capital assets effective January 1, 2022. Only Individuals would be subject to the tax, which would be imposed at a rate of 7 percent of an individual’s Washington capital gains. In computing Washington capital gain, a standard deduction of $250,000 for both individuals and joint filers would be allowed.