Ninth Annual Domestic Tax Conference. 24 April 2014 New York City

Transcription

1 Ninth Annual Domestic Tax Conference 24 April 2014 New York City

2 Legislative, regulatory and judicial income tax developments Key states

3 IRS Circular 230 disclosure Any US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice. Page 3

4 Disclaimer EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US. This presentation is 2014 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party. Views expressed in this presentation are not necessarily those of Ernst & Young LLP. Page 4

5 Today s presenters Michele Raber Karen Ryan Michael Vigil Ed Villa Page 5

6 Agenda State of California State of New York State of New Jersey State of Massachusetts State of Connecticut Hot topics Page 6

7 State of California Page 7

8 State of California agenda Income/franchise tax developments Current state summary of major items from the last few years Recent legislative, regulatory and judicial developments California EZ repeal and replacement Like-kind exchange Intercompany transaction regulations Gillette, Harley-Davidson, Comcast Sales and use tax developments Nortel and Lucent Property tax developments Elk Hills San Francisco gross receipts tax Page 8

9 Income/franchise tax Current state Economic nexus provisions Single sales factor (elective for ; mandatory for 2013) Consider Multistate Tax Commission/impact of Gillette decision Market sourcing (tied to single sales factor) Complicated regulations for services and intangibles cascading rules Finnigan Net operating losses (NOLs) (suspensions, new 20-year carry-forward period, partial carryback years) Credits (assignments, Enterprise Zone repeal, California Competes Credit GoBiz ) Page 9

10 Legislative developments EZ repeal and replacement A.B. 93 and S.B. 90 (enacted 11 July 2013) New Tools for A New Economy Allows the existing Enterprise Zone program to expire on 31 December 2013 and replaces it with: Sales and use tax exemption for manufacturing and biotech equipment and similar purchases, effective 1 July 2014 through 1 July 2022 Scaled-back hiring credit under the corporate and individual income taxes, for employment in specified geographic areas, available from 1 January 2014 through 1 January 2021 Effective 1 January 2014, the California Competes Recruitment and Retention Fund is by the Governor s Office of Business and Economic Development (GO-Biz) to assist in retaining existing and attracting new business activity in the state Page 10

11 Legislative developments EZ repeal clarification bills A.B. 106 (enacted 26 September 2013) Provides that taxpayers may apply for EZ hiring credit vouchers after 31 December 2013 but requires all vouchers be issued no later than 1 January 2015 Clarifies that the EZ hiring tax credits may be issued only for employees hired on or before 31 December 2013 Clarifies that the 10-year carryforward period begins with tax year 2014 for tax credits generated prior to 1 January 2014 and carried into the 2014 tax year S.B. 100 (enacted 26 September 2013) Modify provisions that allow a credit against the income/franchise tax equal to the amount of sales or use tax paid or incurred by a qualified taxpayer for purchases of qualified property made before 1 January 2014 Page 11

12 Legislative developments Like-kind exchange A.B. 92 (enacted 18 June 2013) Requires annual information return with respect to certain IRC 1031 taxdeferred exchanges Information return due for the year of exchange and each subsequent tax year until the deferred gain is recognized Applies to California property exchanged for non-california property Applies to exchanges occurring on or after 1 January 2014 Allows the Franchise Tax Board (FTB) to accelerate deferred tax with taxpayer s failure to file both information return and income/franchise tax return Provides taxpayers the right to protest and appeal from proposed tax Allows FTB to determine the content of the information return without any public input by exempting this determination from California s administrative procedures Page 12

13 Legislative developments Other Corporate income/franchise tax Film credits A.B (enacted 4 October 2013) qualified corporate taxpayer allowed to use the film credit to reduce its regular income tax beyond the tentative minimum tax, retroactively effective for taxable years beginning on or after 1 January 2011 Property tax Parcel tax Personal income tax Cutler fix A.B (enacted 4 October 2013) Cutler fix allows taxpayers to continue to exclude up to 50% of the gain from small business stock held for five years or more, effective for taxable years beginning on or after 1 January 2008 and before 1 January 2013 Status of the legislative majority Page 13

14 Revised intercompany transaction regulations approved California Code Regs. tit. 18, (amendments approved 8 January 2014) favorable changes to intercompany transaction regulation: Federal consolidated return rules generally not followed in California; intercompany transaction rules are the exception Conforms to the Treas. Reg as of 1 April 2012 (v. 17 Mar 1997) Improvements to the Deferred Intercompany Stock Account (DISA) rules: What s a DISA? a deferred California gain created when a member of a combined reporting group receives a non-dividend distribution in excess of basis Tiered distributions relief solves the multiple DISA problem for the same transaction as it tiers up through the combined reporting group Biggest change DISA can be cured; DISA reduced by subsequent capital contributions Annual DISA reporting requirements expanded to include DISA balances reduced/eliminated by capital contributions M&A guidance traps for the unwary: brother-sister mergers are OK; subsidiary into parent is not OK and DISA is triggered Redemption added as a disposition triggering DISA gain recognition Retroactive effective date to tax years beginning with 2001 or elect pro forma application only Page 14

15 Judicial developments MTC election Gillette (Cal. App. Ct. 2 October 2012) taxpayers are entitled to elect to use the Compact s evenly weighted three-factor formula in lieu of the California statutorily mandated three-factor doubleweighted sales factor apportionment formula. The Compact is a valid compact that California as a signatory state is bound by until the state withdraws from the Compact. The 1993 law change mandating the use of the double-weighted sales factor did not repeal the Compact election. The California Supreme Court granted review (16 January 2013). The question remains as to whether a 2012 law change repealing the Compact is valid because it was not passed by a two-thirds majority vote. Page 15

16 Judicial developments Nexus Harley-Davidson, Inc. (Cal. Superior Ct. 1 May 2013) nexus was created for out-of-state special purpose entities securitizing loans to California customers based on the in-state activities of related entities that served as their agents in California. Unity and Business Income Comcast (Cal. Superior Ct. 6 March 2014) Comcast And QVC Not Unitary; Termination Fee Is Business Income on 6 March the Court held that Comcast and QVC Inc. did not form a unitary business during 1998 and 1999 for California income tax purposes and that a merger termination fee received by Comcast in 1999 was apportionable business income that should have been reported. Page 16

17 Judicial developments Research and development (R&D) credits Appeal of Pacific Coast Building Products, Inc. (Cal. SBE 25 February 2014) (not to be citied as precedent) the California State Board of Equalization (SBE) ruled that the taxpayer is entitled to R&D credits for improvements to its manufacturing processes. Although this decision cannot be citied as precedent, it provides further insight into the SBE's consideration of the types of evidence it accepts as opposed to the disallowance of R&D credit claims by the California Franchise Tax Board (FTB) for lack of documentation. Page 17

18 Other rulings and notices Chief Counsel Ruling Sales of products ultimately destined for another state but shipped to a third-party public warehouse in California for temporary storage pending shipment in the same form as received to the ultimate destination state are not considered sales within California. FTB guidance on the treatment of the Texas Margin Tax FTB Notice FTB Notice is withdrawn (regarding eligibility for an other state tax credit or a deduction for California income and franchise tax purposes). TAM TAM should no longer be relied upon (regarding availability of the other state tax credit for S Corporation shareholders for the revised Texas Franchise Tax cost of goods sold method, the Ohio Commercial Activity Tax and the Michigan Business Tax). Page 18

19 Sales and use tax developments Technology and software: Lucent Technologies, Inc. (Cal. Superior Ct., Los Angeles County, 27 September 2013) software licensed by a technology company is exempt from sales and use tax as a matter of law. The Court relied on the decision in Nortel Networks, in which the California Court of Appeal held that software licensed to operate switching equipment was exempt from sales tax under the state's Technology Transfer Agreement statute, because it was copyrighted, contained a patented process and enabled the licensee to copy the software and make and sell products embodying the patents and copyright. Rate changes Proposition 30 (voter approved 6 November 2012) increases the state s sales tax rate by 0.25%, effective 1 January 2013 through 31 December Page 19

20 Property tax developments Elk Hills Power (Cal. Sup. Ct. 12 August 2013) the Court held that: Assessors must deduct value of intangible assets in determining value under a replacement cost method for property tax valuation purposes. Not all intangible rights have a quantifiable fair value that must be deducted from a business s unitary value in determining property tax values under an income approach. Thus, the value of emission reduction credits (ERCs) necessary to operate the power plant could not be added as a site-specific adjustment to the replacement cost of the plant, but the value of the ERCs did not have to be deducted in applying the income approach to valuation. Page 20

21 San Francisco gross receipts tax (GRT) Gross receipts tax Generally imposed on gross receipts of persons engaged in business in the city (SFBTR Sec. 953(a)) Gross receipts broadly defined Phased in over the next five years, replacing the 1.5% payroll tax* Other bases for tax: Administrative offices Based on total payroll expense attributable to the city Business license fees Levied annually $75 $35,000 based on fund class and gross receipts *During the first four years of the GRT structure, the payroll tax will continue to be levied, though it will be phased out in direct proportion to the phase in amount of the GRT. For , this will result in a hybrid tax. Beginning in 2018, taxpayers will be subject only to the GRT. Page 21

22 State of New York Corporate tax reform FY budget Page 22

23 Corporate tax reform Highlights Budget bills (A8559D/S6359D) signed 31 March 2014 Corporate tax reform generally effective 1 January 2015 (reduction in rate in 2016, phaseout of the capital base 2021, and changes affected qualified manufacturers 2014) Repeal of Article 32 (Bank Franchise Tax) and merger into a modified Article 9-A (Corporate Franchise Tax) Elimination of subsidiary capital and related provisions Reduction in tax rate from 7.1% to 6.5% (effective 1 January 2016) Adoption of an economic nexus standard Customer-based sourcing and qualified financial instruments (QFI) 8% election Changes related to pre & post reform pre- and post-reform NOLs Combined reporting rules adopt a full water s edge unitary combined filing Financial Services Investment Tax Credit (FS ITC) retained Increase in the Metropolitan Transportation Business Tax (MTA) surcharge rate and change to determination of business carried on in Metropolitan Commuter Transportation District (MCTD) Page 23

24 Corporate tax reform Unification and nexus Repeal of Article 32 Bank Tax and its merger into a modified Article 9-A Corporate Franchise Tax Economic nexus standard expansion of the economic nexus standards already in place for credit card companies to tax any corporation, domestic or foreign, that derives receipts from activities in the state. An alien corporation is not deemed to be doing business, employing capital, owning or leasing property, or maintaining an office in New York if its activities are limited to (a) investing in stocks and securities for its own account or (b) investing or trading in commodities for its own account or any combination of (a) and (b) Alien corporations, not otherwise treated as domestic corporations, with no effectively connected income will not be subject to tax Repeal of Fulfillment Services Exemption Provision Under 209.2(f) Page 24

25 Corporate tax reform Tax bases and rates Article 9-A taxpayers taxed on the greater of their: Business income base (formerly entire net income base ) Tax rate: Effective 1/1/16 reduction in the corporate tax rate from 7.1% to 6.5% (qualified NY manufacturers subject to 0% tax rate effective 1/1/14) Business capital base (formerly business & investment capital base) Capped at $350,000 for qualified New York manufacturers and $5 million for all other taxpayers Phased out in 2021 Fixed dollar minimum (rates have changed) MTA surcharge Rate of 25.6% for tax years after 1 January 2015 (1.82% = 7.1% x 25.6%) Applied to tax before credits Commissioner required to review and may adjust on annual basis after 2015 Other alternative tax bases that are repealed include: Subsidiary capital tax, minimum taxable income base and the Article 32 alternative base. Page 25

26 Corporate tax reform Net income base Business income base specifics Definition: entire net income (ENI) minus investment income and other exempt income Starting point for alien corporation not otherwise treated as domestic is effectively connected income (ECI) Eliminated from current ENI base modifications Investment income Continues to be income from investment capital Investment capital definition: investments in stock that are held by the taxpayers for more than six consecutive months, but not held for the sale to customers in the regular course of business Net of interest deductions: direct or indirect tracing or alternative election to use 40% safe harbor provisions Other exempt income Definition: sum of exempt controlled foreign corporation income (IRC 951(a)) and exempt unitary corporation dividends Net of interest expense: direct or indirect tracing or 40% safe harbor Page 26

27 Corporate tax reform Combined reporting Combined reporting eliminates the substantial intercorporate transaction (SIT) test and now requires: Ownership test: a more than 50% stock direct/indirect ownership test Unitary business (no definition) Combined group includes all unitary: Domestic corporations meeting the ownership test Alien corporations meeting the ownership test and deemed domestic Alien corporations with ECI that meet the ownership test Captive insurers, captive real estate investment trusts (REITs), and captive regulated investment companies (RICs) Combined group does not include cross article companies (i.e., Articles 9 or 33), non-captive REITs and RIC, S corporations, and certain corporate limited partners. Irrevocable election can be made for seven years (automatically renewed). Page 27

28 Corporate tax reform NOLs NOLs New NOL conversion subtraction for pre-reform year NOLs A subtraction pool to be created using NOL carryforwards not utilized by the end of the base year (2014) Taxpayers able to deduct 1/10 of the pool per year plus any carryforwards from prior years (carryforwards are not limited by the 1/10 rule) Available for use up to the tax year beginning 1 January 2036 Election available to deduct not more than 50% of pool in 2015 and 2016 Reduces the tax on business income to the higher of the capital base tax or the fixed dollar minimum tax New NOL deduction for post-reform years (beginning on or after 1 January 2015) No federal source year or amount limitation 20-year carryforward and 3-year carryback Maximum allowed: the amount that reduces business income tax to the higher of the capital base tax or the fixed dollar minimum tax Page 28

29 Corporate tax reform Apportionment Single sales factor (SSF) Receipts from services or other business receipts sourced based on location of the customer. Taxpayers must consider the hierarchy provisions: Benefit received in the state Delivery destination Apportionment fraction for such receipts within the state determined for the preceding taxable year Apportionment fraction in the current taxable year for those receipts that can be sourced using the hierarchy method Taxpayers must exercise due diligence under each prescribed sourcing method before proceeding to the next sourcing method. The taxpayer must base its determination on information known to it or information known upon reasonable inquiry New rules for QFIs Customer sourcing or 8% method: Taxpayer can use either the customer sourcing rules or elect to apportion to New York 8% of the net income from QFIs. If elected all income from QFIs is treated as business income and apportioned at 8% Page 29

30 Corporate tax reform Manufacturer-specific changes Qualified New York manufacturers A taxpayer that during the taxable year is principally engaged in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing A taxpayer of a combined group: principally engaged in a manufacturing activity if during the taxable year, more than 50% of its gross receipts are from the sale of goods produced by such activities A manufacturer that has manufacturing property in New York and either the adjusted basis of the property at the close of the tax year is at least $1 million, or all of its real and personal property is located in New York A taxpayer or a combined group that does not satisfy the principally engaged test if it employs at least 2,500 employees in manufacturing in New York and has manufacturing property in the state whose adjusted basis is at $100 million Page 30

31 Corporate tax reform Manufacturer-specific changes Manufacturer s credit: tax credit equal to 20% of the real property tax paid during the taxable years in which they had real property used in manufacturing (only refundable for personal income tax purposes) Elimination of tax on business income for qualified New York manufacturers : reduction in the business income tax rate from 5.9% to 0% (2014) Reduction in the tax on capital: 2016 through 2020 rate reduction phaseout with a full phaseout in 2021 Page 31

32 Corporate tax reform Other Other noteworthy items: The financial services investment tax credit has been. New York City conformity is pending, but the Gramm-Leach-Bliley transitional provisions has been extended for two years. Governor Cuomo signed legislation on 31 March 2014 making this a Q1 event for calendar year taxpayers. Page 32

33 Contacts For financial institutions, please contact: Karen Ryan Ernst & Young LLP For general/non-financial institutions, please contact: David Schmutter Ernst & Young LLP Bill Korman Ernst & Young LLP Page 33

34 State of New Jersey Page 34

35 New Jersey Lorillard Licensing Co., LLC v. Director (Tax Ct., 9 August 2013) Facts Traditional intangible holding company structure licensing trademarks and trade names to related party (e.g., Lanco) Conclusion The state cannot apply two different nexus standards: Economic nexus for subjectivity to tax (Lanco, 2006) A higher threshold for throwout (Whirlpool, 2011) Implications Must lack the jurisdiction to tax for throw-out to apply constitutionally The Division has appealed the bench ruling and subsequent amplification Potential broader application for audit settlement as well as ASC consideration Page 35

36 New Jersey Village Super Market of PA, Inc. v. Director (Tax Ct., 23 October 2013) Conclusion VSPA, unlike the decision in the BIS case, has a substantial unitary connection with NJLP. Implications GP interest 1% 16% VS INC INC VSNJ NJLP On audit, the Division has generally respected the BIS decision. The Village decision further validates the BIS decision as a viable position to contain nexus. Consideration of business purpose. VSPA LP interest 84% 99% Facts Administrative Service Center Joint cash management agreement Cooperative agreement with ultimate shareholders Overlap of board members and executive management Village Super Market of PA's (VSPA) mailing address and records kept in New Jersey Similar operating model before and after reorganization Page 36

37 New Jersey Whirlpool Properties, Inc. v. Director Facts Continuation of Whirlpool Case (2011 NJ Sup. Ct. decision); however, this is an economic nexus case MI corporation with no physical presence in New Jersey; licensed brand name to its parent, Whirlpool Corp., a New Jersey taxpayer Royalty fee paid quarterly based on units produced; not based on sales Conclusion All motions were thrown out; trial set for spring 2014 Implications: Judge s statement in dismissing motions: New Jersey may tax intangible income resulting from transactions taking place in New Jersey such as percentage of sales of trademarked goods. Lanco does not stand for the proposition that New Jersey may tax intangible income from transactions occurring outside the state. The Court possibly looking at whether a portion of the royalty paid is an embedded royalty based on sales Page 37

38 United Parcel Service v. Director (App. Div., 7 March 2013) Facts This is a continuation of a 2009 Tax Court case dealing with imputed interest, sourcing and penalties. Several matters were resolved between both parties in the interim; however, the Director is appealing the Tax Court s decision to waive amnesty and late payment penalty. Conclusion The Appellate Division agreed with the Tax Court s decision to waive both penalties. The taxpayer had reasonable cause, as imputation of interest had not yet been argued in the courts and the amnesty penalty was instituted retroactively in Implications Under audit, taxpayers should consider the arguments in UPS to determine if a position exists to have additional penalties waived. Page 38

39 New Jersey Continued controversy surrounding service income sourcing rules Status of market-based regulations New Jersey Administrative Code 18: Two Special Voluntary Disclosure Initiatives announced 1) Embedded Intangible Companies and 2) Partnership and Non-Resident Withholding March 15 May 15 Limited look-back and full penalty abatement Page 39

40 New Jersey Inside New Jersey s controversy playbook Limited chapters of Division s audit manual to be released New notices Treasury has required the Division to rewrite more than 300 notices in plain language Audit hot spots Sourcing Related-party transactions add-backs and exceptions Worldwide income Page 40

41 State of Massachusetts Page 41

42 Working draft basis regulation Working Draft 830 CMR : Sourcing of Sales other than Tangible Personal Property Provide for a reasonable approximation methodology Provide a throw-out rule for sales other than sales of tangible personal property Provide specific rules for applying basis adjustments to eliminate the effect of federal bonus depreciation on gains and losses on depreciable property Provide specific rules for intercompany transactions Provide comments through 1 May 2014 Page 42

43 Sourcing of sales for sales factor purposes For tax years beginning before 1 January 2014 Receipts from licensing intangible property Receipts from all other sales other than sales of tangible personal property Income-producing activity test Direct costs of performance No throw-out but throwback only for sales of tangible personal property Page 43

44 Sourcing of sales for sales factor purposes For tax years beginning on or after 1 January 2014 No change regarding receipts from the license of intangible property Receipts from the sale of services Receipts from the rental, lease or license of real property Receipts from the rental, lease or license of tangible personal property Receipts from the sale of intangible property (note that there is a separate rule for sales of goodwill) Page 44

45 Massachusetts nexus Allied Domecq Spirits and Wines USA, Inc. The Massachusetts Appellate Tax Board (ATB) disregarded the tax consequences of the transfer of certain employees from an in-state subsidiary to its out-of-state parent. In applying the sham transaction doctrine, the ATB found that the transfer of employees had no valid business purpose other than tax avoidance. Generally, courts have applied the sham transaction doctrine to intercompany transactions involving a related-party payment. In this instance, the ATB used the doctrine to make a nexus determination. Page 45

46 Massachusetts intercompany transactions Sysco Corp. (Mass. App. Ct., 30 April 2013) (unpublished) Holding Issue Cash transfers between a parent company and its subsidiaries made pursuant to a cash management system did not constitute true indebtedness and, therefore, were not loans that the parent could deduct from income when computing its corporate excise tax. Did the parent intend to repay the cash transfers? If so, the distribution would have been deemed a loan. The court applied the multifactor analysis set forth in New York Times Sales Inc. v. Comm r, 40 Mass. App. Ct. 749 (1996). Factors considered Amounts transferred were limited in any manner. Amounts were intended to remain with the parent to fulfill corporate purposes. Notes or other evidence of indebtedness existed. Transferred amounts were secure. Subsidiary requested repayment. Repayment schedule existed and was attempted. Page 46

47 Massachusetts intercompany transactions Kimberly-Clark Corp. (Mass. App. Ct., 11 January 2013) Cash management system Facts: cash swept daily from the taxpayer s subsidiaries; the taxpayer paid subsidiaries expenses from a single pool; the taxpayer recorded each cash installment (and related interest at arm s-length rate) as a payable but did not return cash in excess of the amount required to pay the expenses (i.e., taxpayer = net borrower ). Holding: add-back of interest deductions was appropriate; a technically compliant interest rate was not enough to prove the loans created true debt, when considered with the absence of security provisions and the taxpayer s failure to repay the loans. Royalty expenses Facts: the taxpayer transferred patents and trademarks to a newly created subsidiary; the taxpayer paid royalty payments for the use of the intangibles. Holding: tax avoidance was a principal purpose of the transactions and the taxpayer did not carry its burden of proving that the expense add-backs were unreasonable ; a significant consideration was that the royalty payments were returned to the taxpayer via the cash management system. Page 47

48 Massachusetts cost of performance (COP) Comm r of Rev. v. AT&T Corp., 11-P-1462 (Mass Ct. of App. 2012) The operational approach was applied to COP. Calls originated in, but were terminated outside, Massachusetts. It was found that the taxpayer s income-producing activity was the operation of its long-distance telecommunications network, and not each individual long-distance transmission placed by a customer. Accordingly, the COP that should be used to determine the sales factor numerator are the costs of operating the long-distance network. Department of Revenue released TIR on sourcing implications post- AT&T case. TIR provides that appropriateness of transactional or operational approach depends on particular facts and circumstances. Page 48

49 State of Connecticut Page 49

50 Nexus trends administrative developments Connecticut In a 19 December 2013 announcement, the Department of Revenue Services revoked its guidance on the effect of Quill (Special Notice 92(19)) and does not plan to issue further guidance regarding the case s application to the state s sales and use tax collection requirements. Page 50

51 Hot topics Page 51

52 2014 trends Decrease the corporate and individual income tax rate Nexus expansion beyond physical presence bright line and economic nexus Continued move toward single sales factor apportionment formula and market-based sourcing Targeted tax incentives Repeal recently enacted sales/use tax on businessto-business services business personal property tax relief Page 52

53 States reaction to judicial decisions Click-through nexus cases, with different results Amazon.com and Overstock.com (NY), Performance Marketing (IL) Bills introduced in CO, HI, IN, SC, TN MTC compact apportionment election Judicial challenges in CA (Gillette), MI (IBM), TX (Graphic Packaging), OR (Health Net) and MN (Kimberly-Clark) Decoupling legislation enacted in CA, DC, MN, OR, SD, UT Alternative apportionment and burden of proof MS (Equifax) (HB 799 Equifax fix legislation), TN (Vodafone) Related-party add-back VA Laws 2014 (H.B. 5001, 1 st Special Sess.) retroactively amends related party add-back exceptions to address challenges to statute (Wendy s, pending litigation in Kohl s) Page 53

54 Hot topics nexus Minimum contacts within the state Constitutional issues Cases Due Process and Commerce Clause Gore Enterprise Holdings, Inc. (Maryland) Amazon.com and Overstock.com (New York) LL Bean (Ohio) Southwestern Bell Telephone (Missouri) Barnesandnoble.com (New Mexico) Walden (US Supreme Court) Daimler AG (US Supreme Court) Page 54

55 Thank you! Page 55

56 Ninth Annual Domestic Tax Conference 24 April 2014 New York City