Multistate Voluntary Disclosure Program?

Are you aware that a taxpayer with potential tax liability in multiple states could negotiate a settlement using a uniform procedure coordinated through the National Nexus Program of the Multistate Tax Commission (MTC)?

According to the MTC, this service is to encourage taxpayers to start filing and paying taxes in states where taxpayers have substantial nexus. The MTC believes this process is faster, more efficient, and less costly for taxpayers who have potential tax exposure in more than one state. There is no charge for participation in the program.

The program generally allows taxpayers to file a voluntary disclosure agreement for tax types such as sales/use tax, and income/franchise tax (including the Hawaii GET and Washington B&O tax). 

Prior contact between a state and the taxpayer for a specific tax type disqualifies the taxpayer from participation in the program for that tax type. "Contact" includes filing a tax return, paying tax, or receiving an inquiry from the state regarding the tax type. 

Once a taxpayer enters the program, the taxpayer is required to file returns, pay the tax due, and register with the state. In return, the state waives penalties for the duration of the look-back period. Interest is still due on unpaid tax obligations during the look-back period, unless waived by the state.

The look-back period includes the number of prior tax years, and the incomplete current tax year for which taxes and interest will be due and paid under the agreement. The look-back period is determined by the state and specified in the agreement. The look-back period is generally three or four years.

The MTC claims that it keeps the identity of the taxpayer confidential during the process. The MTC only discloses the taxpayer's identity to a state after the taxpayer has entered into an agreement with the state. 

The MTC also claims that it does not disclose the agreement or any of its terms to any other state.

An applicant is not required to disclose any information that would reveal its identity prior to the execution of an agreement.

For more details on the program, go here.

Were you aware of the MTC's Multistate Voluntary Disclosure Program?

Have you used the MTC's Multistate Voluntary Disclosure Program?

If yes, was it a good experience? Pros and cons?

Leave a comment or e-mail me at strahle@leveragesalt.com.

DO YOU NEED STATE TAX AMNESTY OR VALIDATION?

AMNESTY

The Council on State Taxation (COST) has updated its schedule of 2016 State Tax Amnesty programs. See here.

If you would like more information about amnesty programs versus voluntary disclosure programs, check out some of my previous posts.

VALIDATION

On a separate note, I am always trying to think of unique ways I can help companies and accounting/law firms avoid and resolve controversy. To that end, I have started a new service called RESALT.

RESALT is my second-opinion service where I review research and conclusions made by others (i.e., you, your staff or consultants). This gives you another 'set of eyes' and peace of mind when taking a position or deciding to move forward or not. 

I conduct this service at flat fee per project or per month. I review the facts, research and conclusions already reached. I then conduct additional research to validate or dispute conclusions. I provide you with a written validation, or dispute of the conclusions along with citations to my research for support.

Go here to learn more.

Helping Tax Departments Become The HERO

I recently had lunch with a leader of a tax department, and as we were talking, it struck me as to the many challenges tax departments face. 

Challenges may include:

1. Finding the right people (level of experience, personality, culture fit)
2. Knowing how many people the tax department needs to provide value
3. Justifying and getting approval for how many people the tax department needs
4. Determining how to structure the tax department (by tax type, by company, by some other mix)
5. Getting buy-in from other company departments to obtain information at the right time, and complete special projects to provide value (i.e., implementing smart ideas that reduce taxes without creating a high level of controversy risk, and positively impacting other business functions (i.e., finding ideas that align with business objectives))
6. Outlining and determining the best process for compliance, audits, provision and planning functions
7. Implementing and utilizing the right-fit software and technology solutions
8. Managing external consultants and determining which ideas to use and which ideas to ignore
9. Not getting stuck in the 'analysis paralysis' zone
10. Not 'dying by meeting'
11. Doing more with less

These are just a few of the challenges. I know there are more. Tell me by leaving a comment or send me an e-mail at strahle@leveragesalt.com.

Key Points
The point is, tax departments must keep moving forward. They must feel like they are providing value and are respected within the company. Compliance cannot be the only thing.

Also, people within the tax department will always know more about the company than external consultants. Consequently, regardless of the pre-packed or customized planning ideas - some that may be risky, or some that, as they would say, are 'low-hanging' fruit - the company must follow their own risk compass. 

External consultants should not act like the hero. They should help tax departments become the hero.

Time for State Taxes to Be REWRITTEN

Sometimes we get so caught up in the litigation and proposed legislation that we don't stop to ask whether we should even be going in this direction. Perhaps we are getting the wrong answers because we are asking the wrong questions. It's time for state taxes to be rewritten. For politics to get out of the way. 

I read an article this week, written by Michael J. Bologna and edited by Ryan Tuck for Bloomberg BNA regarding state tax policy (entitled, "Kill Corporate Income Tax, Seek Low Rates"; requires a subscription to BBNA to access). The focus of the article were comments made at the August 10th National Conference of State Legislatures program in Chicago by William Fox, a professor of economics at the University of Tennessee, and Therese J. McGuire, a professor of strategy at the Kellogg School of Management at Northwestern University.

Overall, I agree with their comments about what a fair tax system should look like, and how the current state tax regimes are complex, unfair and inefficient. The current taxing schemes cause compliance burdens for taxpayers, administration burdens for state governments, and inconsistent revenue.

If the ideal tax structure contains low rates, broad bases and simplicity, then why do states keep making their tax systems more complex? 

States continually run into budget problems and resource constraints, yet the tax systems are not adjusted to make it possible for revenue departments to operate efficiently and effectively.

Politics makes it almost impossible for tax structures to change to fit modern economies. For example, when will all services become subject to sales tax by all states? How will states tax digital and remote sales without enacting unconstitutional taxes?

If corporate income taxes only account for approximately 8% of all state taxes collected, then why is so much effort and litigation expended by both taxpayers and governments?

States keep enacting state tax schemes that favor in-state taxpayers such as single sales factor apportionment, market-based souring, unitary combined reporting and digital sales tax laws, when the simple solution is to widen the tax base and lower the rates. This may actually cause more companies to move into a state. It would more than likely decrease the compliance burden and potential for audit controversies.

Will and should more states consider replacing their corporate income tax with a gross receipts tax similar to the Ohio Commercial Activities Tax or the Washington Business and Occupation Tax? 

Like a person that creates his own problems and then spends his life complaining about them, that's what state taxes have become. We can't expect a different result if we keep doing the same thing. It's time to get off the merry-go-round.

What's your favorite State Tax Conference (CPE)?

Here are a few SALT conferences I think are good.

Sales Tax Institute (http://www.salestaxinstitute.com) from my friend, Diane Yetter. The Institute offers live in person 3 day classes – Basics of Sales Tax and Advanced Sales Tax Workshop. These are highly rated and differ from the larger offers as they are much more intimate and provide an excellent learning opportunity. The Institute also offers monthly webinars that are not a sales pitch, but provide in depth educational content. They also have a self study online class with another coming soon.

Georgetown Advanced SALT Institute - https://www.law.georgetown.edu/continuing-legal-education/programs/cle/state-and-local-tax-institute/

Paul Hartman - http://www.hartmansaltforum.org/conference_registration

IPT has several - https://www.ipt.org/

NYU SALT conference - http://sps.nyu.edu/academics/departments/finance-tax-and-law/conferences-events/institute-on-state-and-local-taxation.html

Interstate Tax Corporation - http://www.interstatetaxcorp.com/seminars.htm

University of Milwaukee-Wisconsin SALT certificate program - https://uwm.edu/business/research/centers-institutes/deloitte-center-for-multistate-taxation/

DMA puts on several - https://www.dmainc.com/

COST and TEI have several, but only industry tax professionals are allowed to attend. 

http://www.cost.org/

https://www.tei.org/Pages/default.aspx

I would also look at the Big 4 firm websites (Deloitte, PwC, EY, KPMG), Grant Thornton, RSM, and BDO. They put on seminars and several webinars throughout the year. You can sign up for the e-mail list to be notified of free webinars.

What's your favorite? 

If yours isn't listed above, comment or send me an e-mail at strahle@leveragesalt.com.

What did you learn at the Georgetown Advanced SALT Conference?

If you attended the Georgetown Advanced State and Local Tax Institute this week, please leave a comment or send me an e-mail at strahle@leveragesalt.com to voice what you learned or what your key takeaways were.

Let's work together to fight the struggle for clarity.