TWIST - August 23, 2021

Welcome to TWIST for the week of August 23, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up this week, the Colorado Department of Revenue updated comprehensive guidance addressing the state’s conformity to the CARES Act and other federal COVID-19 relief acts. The guidance not only addresses Colorado’s conformity to the federal provisions for both corporations and individuals, but also provides information on computing the new subtraction intended to offset the loss of the CARES Act-created tax benefits related to IRC section 163(j) and (Qualified Improvement Property) QIP in prior years. To compute the subtraction, which applies for income tax years beginning on or after January 1, 2021 but before January 1, 2022,  a corporation must calculate the difference between reported Colorado taxable income and the amount Colorado taxable income would have been reported had the CARES Act 163(j) and QIP provisions applied.

In other news, the North Carolina Department of Revenue determined in a private letter ruling that receipts from the sale of asset management services provided to pension plans, institutional investors, university endowments, retail investors, SEC-registered and non-SEC-registered funds should be sourced using rules generally applicable to business customers.

Finally, in Texas, we have an update on the franchise tax Sirius XM litigation. Four amicus briefs have been filed to date urging the Texas Supreme Court to hear the case. Recall, the appeals court held that the receipts-producing end product act associated with providing satellite radio service was the taxpayer activating a customer’s chip set in their satellite-enabled radio. In the court’s view, this activity occurred where the customer’s radio was located, which was likely the customer’s residence where the car was located. This test has since been incorporated into a revised Texas regulation addressing apportionment for franchise tax purposes and therefore there is considerable interest in this litigation.

Thank you for listening to TWIST and stay well.