State Tax Policy Update

Transcription

1 State Tax Policy Update Broadband Tax Institute October 17, 2017 Moderator Jamie Fenwick Charter Communications Speakers Ellen Berenholz Comcast Corp. Deborah Bierbaum AT&T Annabelle Canning Capitol Tax Partners Todd Lard Eversheds Sutherland (US) LLP

2 Learning Objectives Understand the current state budget outlook Gain knowledge of current federal legislation impacting state taxes Understand and gain knowledge of recent state tax legislative trends 2

3 Agenda State Budget Outlook Federal Legislation Impacting State Taxes State Tax Legislative Trends Video Services Taxes GRTs and Major Reform Market Sourcing CEO Pay Ratio Taxes Property Tax Daily Remittance Sales Tax Proposals Remote Seller Collection Disaster Relief Broadband Incentives 3

4 State Budget Outlook

5 33* States Face Revenue Shortfalls in Fiscal Year 2017 and 2018 * TX & FL Will likely change with hurricane rebuild spend 5

6 Federal Bills that Impact States

7 Federal-State Tax Legislative Outlook Comprehensive Federal Tax Reform Impact to states and localities Tax reform related to State/local taxes Possible elimination of state and local tax deduction Tax-exempt treatment of municipal bonds Impact of state income tax conformity to Federal income tax Fiscal Implications to State and local tax revenues Scope of Tax Reform Package Impact of Using Reconciliation Possible trade-offs Other issues?? Impact of Natural Disasters Priorities of the Broadband Industry 7

8 Will Congress Address Remote Sales Tax Collection in 115 th Congress? Federal Bills House No Regulation without Representation Act (H.R. 2887) Sponsors: Reps. Sensenbrenner, Goodlatte Remote Transactions Parity Act (H.R. 2193) Sponsors: Reps. Noem/Conyers House Judiciary Regulatory Reform Subcommittee Hearing: Problem of States Regulating Beyond their Borders and H.R Senate Marketplace Fairness Act (S. 976) Sponsors: Sens. Enzi/Durbin/Alexander/Heitkamp State Activity State legislation related to nexus and remote sales tax collection State litigation regarding state nexus bills South Dakota decision Supreme Court action? What does it all mean? 8

9 State Self-Help Remote Sales 77 bills in about 3/4 th of states to pressure remote sellers Expanded Pressure Economic Nexus - Legislative/judicial challenges to existing rules, seeking US Supreme Court reversal of physicalpresence rule of Quill South Dakota v. Wayfair, Inc. (Sept. 13, 2017) Expanded Affiliate Nexus Click Through Nexus Use Tax Reporting Marketplace Collection Enacted in MN & WA Proposed in 8 other states 9

10 Other Federal-State Tax Legislation Federal-State Tax Bills Mobile Workforce State Income Tax Simplification Act (H.R. 1393/S. 540) Passed the House (6/20/17) Hearing in Senate Committee on Small Business and Entrepreneurship Sponsors: House Reps. Bishop/Johnson; Senate Sen. Thune/Brown (54 co-sponsors) Digital Goods and Services Tax Fairness Act Not yet introduced Sponsors: House Reps. Lamar Smith/Cohen; Senate Sens. Thune/Wyden Business Activity Tax Simplification Act Many provisions incorporated into Rep. Sensenbrenner bill No Regulation Without Representation Act (H.R. 2887) End Discriminatory State Taxes for Automobile Renters Act (H.R. 2024/S. 1159) Other bills (e.g., VoIP sourcing)?? State and Local Government Groups NCSL State and local tax task force 10

11 Digital Goods and Services Tax Fairness Act Goals of Broadband Industry Tax Parity Increased certainty and clarity regarding taxation who, what, where Consistency with ITFA Prohibit Multiple Taxation Definition of Customer Tax Address Sourcing rules Impact of expanded sourcing rule on issue of nexus and taxability of digital goods/services Prohibit Discriminatory Taxation Definition of Video Service What services will be protected as digital service What are comparison goods/services for purposes of determining whether a tax is discriminatory? Definition of Tax what taxes will be covered by discriminatory comparison 11

12 State Tax Legislative Trends

13 Video Taxes Prohibition against local taxes on OTT AZ, CA, FL Attempts to tax OTT AL, LA, OK, WV Attempts to tax all video services OH, IL ITFA Overlay Electronic Commerce protected from discriminatory tax 13

14 2017 Gross Receipts Tax Proposals Oregon s 2016 Ballot Initiative IP28 / Measure 97 Oregon voters rejected initiative (IP 28) to impose a 2.5 percent gross receipts tax on Oregon C corporations with sales exceeding $25 million Legislators proposed a 0.07 percent gross receipts tax Portland City Council considering 1 percent GRT on businesses with national sales over $1 billion, $500,000 in sales in Portland Louisiana Gov. proposes an Ohio CAT like GRT West Virginia Ohio CAT -like GRT being discussed Oklahoma - Ohio CAT -like GRT being studied 14

15 State Restructuring (Reform) States to Watch for Major Tax Proposals: Oregon: Tax Havens, Gross Receipts Tax? Washington: Carbon Tax, Gross Receipts Tax? Louisiana: Gross Receipts Tax? Combination? Texas: The end of the Margins tax? West Virginia: New consumption tax? CAT? North Carolina: Continued rate cutting Kansas: Veto of pass-through exemption repeal 15

16 Sales Factor: Market-Based Sourcing for Services (2017) OR & MT Market-based sourcing in 2018 MO Market-based sourcing for single-sales factor election AZ An election is available to phase-in market-based sourcing for multistate service providers No income-based tax IPA/COP (AK, HI) Benefit/Market (DC) Service Performed in State (%) IPA/Market/Other FL IPA/COP rule is not supported by a statute; thus, the rule is invalid, and Florida should be interpreted as a market-based sourcing state NOTE: Different sourcing rules may apply to intangibles 16

17 CEO Pay Ratio Taxes Impose a surtax based on CEO-to-median employee wage ratio as determined for purposes of SEC filing requirements under Dodd- Frank (not implemented) Enacted Portland, OR (2016) nation s first Proposed CT (H.B. 6373, H.B. 6101) IL (H.B. 3335, S.B. 1563) MA (S.B. 1555) MN (H.F. 65) RI (H.B. 5141, S.B. 318) San Francisco (no language yet) Federal - Stop CEO Excess Pay Act (S Sen. Gillibrand D- NY) 17

18 Property Taxes Montana Interim Committee to review the fairness of taxpayers centrally assessed Oregon Deferred billing credits Tennessee HB Changed the classification of telecom property from public utility to industrial and commercial property 18

19 Daily Sales Tax Remittance Concept to establish real-time sales tax collection; would require vendors and payment processors to remit sales tax from purchases on a daily basis Connecticut, proposed in 2016 with HB 5636, again in 2017 with SB 1057 and Substitute SB 1047 SB 1057/SB 1047 would allow the Commissioner of Revenue Services to enter into agreements with payment processors to remit sales tax on behalf of retailers Massachusetts FY 2018 Budget, HB 1, third-party payment processors to remit sales tax on behalf of vendors with more than 50 employees DoR is working with industry on analysis of the issues surrounding establishment of the program. 19

20 Disaster Relief 20

21 Communications Equipment Exemption 21

22 Communications Equipment Exemption 22

23 Property Tax Broadband Equipment Exemptions WA OR NV CA ID UT AZ MT WY CO NM ND SD NE KS OK TX MN IA MO WI IL NY MI PA OH IN WV VA KY TN NC AR LA SC MS AL GA VT NH MA CT NJ DE MD ME RI AK FL HI Income Tax Credit for Capital Investment Property Tax Broadband Exemption 23

24 Jamie S. Fenwick VP, Strategic Tax Charter Communications Bios Jamie Fenwick is VP, Strategic Tax for Charter Communications where she is responsible for tax policy matters for state and local taxes, including income, sales, property and telecommunications taxes, in addition to income and sales tax audits. Before joining Charter (formerly Time Warner Cable), Jamie was a Senior Manager in KPMG s State and Local Tax practice where she was responsible for state and local income tax consulting for clients in a variety of industries. As part of a rotational assignment with KPMG s Washington National Tax Practice, Jamie developed and taught several courses on state income and franchise taxation and large project management. She co-authored State Taxation of Pass-through Entities and Their Owners. Jamie has a Master of Accounting and a Bachelor of Science in Business Administration from the University of North Carolina, Chapel Hill and is a North Carolina Certified Public Accountant. Todd A. Lard Partner Eversheds Sutherland (US) Brad Lard is a Partner at Eversheds Sutherland (US) where he is a nationally known state tax lawyer with significant experience and insight into state tax policy, digital economy and communications tax issues, Todd Lard advises Fortune 500 companies on state and local tax. Todd provides clients with strategic tax planning and solutions to state tax controversy matters, and advocates at the state and federal levels regarding state tax policy and legislative issues. Todd returned to Eversheds Sutherland (US) in 2013 after spending five years as Vice President and General Counsel at the Council On State Taxation (COST). His work there included legislative, administrative and judicial advocacy on complex state and local tax issues for multistate corporations, including nexus, jurisdiction, discriminatory taxation and apportionment. He testified before government authorities and filed amicus briefs at the U.S. Supreme Court and state appellate courts advocating fair and nondiscriminatory taxation of multistate corporations. In his previous tenure with the firm, Todd was an integral member of Eversheds Sutherland (US)'s State and Local Tax (SALT) practice. His work focused on state and local tax planning and controversy, and he worked significantly with cable and communications clients on their rapidly evolving products and resulting tax issues. Before joining Eversheds Sutherland (US), Todd served as a Tax Research Manager for Nextel Communications and worked in the Washington National Tax Office of KPMG, where he advised on the tax consequences of various transactions implicating corporation income, sales, use and other taxes. 24

25 Q&A