Bloomberg 2017 Survey of State Tax Departments

Taxpayers are always trying to obtain certainty regarding their tax issues. Unfortunately, it is not possible to achieve 100% certainty when the facts are complex and the state's rules are grey. Consequently, the taxpayer and adviser generally review all binding authority (statutes, regulations, cases, etc.) and unbinding authority (informal guidance, etc.) to develop support for a tax position. This is why we have the lovely 'levels of assurance' such as the 'realistic possibility of success' (33%), 'substantial authority' (40%), or 'more likely than not' (> 50%).

Taxpayers are commonly balancing risk and the amount of dollars to spend to chase down this elusive certainty.  Accordingly, taxpayers are trying to attain the most cost-effective and practical solution that reduces risk to an acceptable level. Thus, other factors (business, legal, financial) may determine how much effort is taken to support a specific tax position, resulting in some taxpayers choosing to default to paying more tax to avoid risk.

Bloomberg recently released its 2017 Survey of State Tax Departments. Now in its 17th year, Bloomberg BNA’s 2017 Survey of State Tax Departments clarifies each state’s position on the gray areas related to the income taxation of corporations and pass-through entities, as well as to the sales and use taxation, with an emphasis on nexus policies. 

This year, new survey questions for the following topics include:

• Disposition of pass-through entity interest,
• Nexus standard applied to non-U.S. entities, and
• Factor presence nexus standard.

The survey also features 40 new questions, plus a new sales tax category on the sharing economy. 

CAUTION

Surveys like this provide great insight into how a state will treat certain issues and fact patterns. The problem is that many answers provided by the state may not be based on actual statutes and regulations or court rulings. The answers may be based on internal policy or simply be an interpretation of a grey area (right or wrong). Regardless of the basis, the states' answers help a company formulate a conclusion.

Get your free copy here.

Suits, Birthday Reflections & Pursuing Life

First off, I would like to thank every one for the 'happy birthday' messages I received over the last few days. I really appreciate it. I turned 'double 4' or 44. I can't believe it. Mid-forties.

Each birthday, especially as you get older, causes you to reflect on what you have accomplished, how short life is, and what you still want to accomplish. Career wise, I have worked in almost every type of environment as a tax / state tax consultant. I have been self-employed the past 3 1/2 years. I have enjoyed working on my own - the money and the freedom have been great. Recently, I have been missing some things about working at a firm or corporate tax department - the teamwork and working together to solve problems and create opportunities.

My favorite tv show is "Suits." Lately, I have been binge watching the first 3 seasons. I still enjoy watching it over and over. I know it is a tv show, but I enjoy the fast pace, the creative problem solving, having to look at a problem from different angles to arrive at a solution that works. Albeit, in the show, the methods or solutions are not always legal or ethical.

I have been doing a lot of soul searching lately about my next career move, where my practice should focus, should I join a firm, etc. With getting older, we have no guarantee of tomorrow. We have to go for what we really want to do. We cannot go through the motions. We cannot waste time or days or months. We must pursue what we feel called to do. What we were made to do.

Looking back over my career, the times at which I felt the most 'alive' were when I was fixing or preventing a problem - controversy work. I call it 'research' with a purpose. Digging to find support for a position, to reduce an assessment. I want to focus on fixing and preventing state tax problems. I am a creative problem solver. That was what I was meant to do.

I get bored easily. I don't like wasting time on frivolous matters. I don't have time to waste. Life is too short. I have goals to accomplish. 

Even at home, I love fixing and preventing problems. I will kill myself to get a large project done in a day. I don't like dragging things out. If I have a 'honey do' list, I will move like a machine to get things done. I don't like incompleteness.

I leave you with a quote - "you can' keep doing the same thing over and over, and expect a different result." Also, if you want something, you have to take action and pursue it. 

I ask you, what do you really want to do? Are you pursuing it?

DO 'DEEP WORK' AND GET RESULTS

Are you doing 'deep work'? 

Meaning, are you digging into the facts and state tax authority to find what is essential? To find true cash tax savings? To identify, quantify and mitigate risk?

We are all bombarded with the 'fire drill' of the day - compliance or reactive, last-minute advice needed for a transaction. Perhaps a notice or audit assessment out of the blue with a tight deadline. Some of us respond to e-mail constantly.

It's time to do deep work.

To do the projects that others don’t want to do or have time to do. To dig into court cases, rulings, statutes, regulations, audit assessments, transactions, etc. to identify opportunities, risks and tax policy that should be challenged.

To work with tax professionals, and legislators to learn their perspective and shed light on areas that are grey.

To help reduce the unintended consequences of legislation and problems caused by actions taken or the lack thereof.

After we do deep work, we need to turn that ‘deep work’ into intelligence and tools that are practical. To communicate the application of complicated state tax authority into easy to understand terminology which allows clients to make informed decisions and act.

It is too easy to be reactive in life and at work. I seek to live and work proactively, and lead my clients to do so as well. I believe extraordinary efforts are directly determined by how narrow you can make your focus. I also believe in every set of facts or law, something essential is hidden.

I don't just want to be the best at what I do. I want to find the best way to do it.

State tax professionals solve problems through technical arguments, experience, negotiation and contacts. My role is to make it easier.

State taxes are deceptively simple and endlessly complicated. Let's do deep work and get results.

Louisiana's Gross Receipts Tax Proposal - So Good (NOT)

I just finished reading a post by Nicole Kaeding at The Tax Foundation about how confusing and bad the Louisiana Gross Receipts Tax proposal is. I couldn't agree more.

Why do states continually try to raise revenue by making tax calculations more complex which end up producing unintended consequences or unconstitutional tax regimes?

Many answers are possible, but I digress. Back to Louisiana's gross receipts tax proposal.

I had noticed that Louisiana proposed a gross receipts tax, but hadn't drilled down into the details. When I read Nicole's article, I couldn't believe what I was reading. I particularly love the flow chart she provides which shows the complex tax structure under HB628.

As the corporate income tax becomes less of a revenue source, will more states adopt something similar? I hope not, but as history tells us, states like to play copycat.

Here is a link to another post Nicole wrote which discusses what states currently employ gross receipts taxes and other states considering such a tax. 

FREE WEBINAR TOMORROW: STRATEGIC PLANNING FOR STATE NOLS

I will be co-presenting a FREE Bloomberg BNA webinar tomorrow on state net operating losses. I hope you can make it! Sign up here.

Some of the questions we will attempt to answer are:

• Is strategic planning for state net operating losses possible? 
• Do we care about federal NOLs?
• How are state NOLs determined and how can we plan?
• How does group reporting change everything and how can we plan?
• State IRC. Sec. 382 limitations - do they exist?
• How will federal tax reform impact state NOLs?

We will also cover some crazy state NOL rules.

Please join me.

Welcome to SALT CRASHERS! (Home Depot & DIY Meets State Tax)

"You can do it.  We can help."  "More saving. More doing."  These are slogans of the Home Depot home improvement company, but I think they may apply to the state tax consulting industry as well.

"DIY" or "Do It Yourself" has become a popular home improvement network (I think a spin-off of HGTV).  Shows such as, House Crashers, Yard Crashers, etc. come to your house and re-do your yard or house, but you do alot of the work while they direct and support you with a lot of additional workers, etc.  It is a coordinated team effort.  Does this approach sound similar to how you use outside consultants? 

I know some companies may hire outside consultants and totally hand-it off to them to do.  They don't have the expertise in-house and/or don't have the time to spend on the issue.  That is why they are hiring outside consultants.  

Other companies are more "Do It Your-selfers" or "DIYs."  They like to do things themselves and use consultants as an add-on or supplement on an as-needed basis.  However, if you have ever watched Yard Crashers or House Crashers, you may notice that having these outside experts come to the house shaves projects and YEARS off the homeowner's to-do list.  Meaning, the homeowner may have never completed the project without the help of these outside experts.  The homeowner also may have never thought of the ideas (i.e., landscaping plan, remodeling plan, the placement, the fixtures, etc.) for their house or yard.

Therefore, when asking yourself, what kind of person or company am I?  Am I a DIY or do I want to hand-it off?  Also ask yourself, what could I be missing?  Are there ideas and expertise that I could utilize to not only save my company money, but create a more tax-efficient structure?  

Trust me.  I am a DIY.  I like doing things myself.  However, even I have had to learn that I don't always know everything (shocker, I know).  Others can help with their ideas and expertise.  

Just remember, you can always do some things yourself, you just don't have to go it ALL alone.

Truly, in the SALT world, "you can do it," and "we can help" do seem to apply.  SALT consultants can provide "more saving and more doing."  

What kind of company are you?  

How do you prefer to work with outside consultants, and why?