TWIST - September 20, 2021

Welcome to TWIST for the week of September 20th, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up, in corporate income tax news, the Florida Department of Revenue announced that the state’s corporate income tax rate has been reduced to 3.535 percent for tax years beginning on or after January 1, 2021, but before January 1, 2022. The rate is currently scheduled to return to 5.5 percent beginning in 2022. 

In Pennsylvania, the commonwealth court rejected a taxpayer’s claim for a corporate net income tax refund related to tax paid for the 2014 tax year when the taxpayer’s use of NOLs was limited by the 25 percent NOL cap. Recall in the 2017 Nextel case, the flat dollar cap was struck down as violating the state’s Uniformity Clause, but the percentage NOL cap remained intact. The taxpayer essentially argued that because the Department did not go back and assess taxpayers who benefitted from the flat dollar cap, the “only suitable remedy” to cure the Department's “discriminatory application” of the percentage cap was to provide it a refund. The court rejected the taxpayer’s position, holding that the Nextel decision applied prospectively only and the taxpayer correctly calculated its tax for the 2014 year at issue.

A federal court in Nevada recently dismissed the City of Reno’s lawsuit against Netflix and Hulu alleging that they had failed to pay local franchise fees. The City of Reno filed a class action lawsuit in federal court against Netflix and Hulu alleging that the businesses were “video service providers” under Nevada’s Video Service Law and were therefore required to pay local franchise fees. The federal district court agreed with Netflix and Hulu that they were not video service providers and therefore the case was dismissed.

Finally, the California Office of Tax Appeals declined to refund a taxpayer sales taxes owed after the taxpayer collected too little tax from customers. The taxpayer, relying on erroneous information posted on California Department of Tax and Fee Administration’s website, thought the California partial sales tax exemption for farming equipment was more than it actually was for the tax period at issue. Although the CDTFA conceded that its website was outdated, it had taken steps to inform businesses of the change, including issuing a notice. The Office of Tax Appeals concluded there was simply no legal basis for relieving or refunding the tax under these circumstances. 

Thank you for listening to TWIST and stay well.