While details of the plan have not been released, he did indicate that the proposal would expand sales taxes on services, including on lobbyists. The Governor indicated that the “package” would be sent to legislators today.
The Jones Walker SALT Team understands that if passed, the proposed changes to the current sales tax code would be significant and would expand the sales tax base to transactions that the state has never taxed. Anyone with business interests in the state should pay close attention to the detail of the proposed legislation when published.
The Jones Walker LLP State and Local Tax Team is back in Houston, TX with a day-long program on Thursday, October 3, 2024, titled Jones Walker: Viva Las Vegas! What happens in Vegas, stays in Vegas – but taxes follow you everywhere.This state and local tax seminar will provide practical and solution-focused tax guidance to help businesses navigate through high-stakes legal developments and regulations so you have the better hand and get to keep your winnings.
First, you will be guided through the steps of a state and local tax protest so you are not rolling the dice on what to do next. Then, you will have all the information you need to make a smart bet with legislative and administrative updates. Are you thinking of playing some video poker? Next, its time for a session on software and taxation of services. Join us at lunch featuring a moderated panel of key state tax administrators from Louisiana and Texas. The administrators will provide their perspective on recent tax developments.
Ray Langenberg, Special Counsel for Tax Litigation, Texas Comptroller of Public Accounts
Richard Nelson, Secretary, Louisiana Department of Revenue
Patrick J. Reynolds, President & Executive Director, Council on State Taxation
Arthur Parham, Moderator, General Tax Advisor – Entergy (Retired)
Next, it’s time for some Vegas Jeopardy! with an interactive game addressing sales/use, income/franchise, and national tax updates. Finally, for the jackpot we will discuss recent SALT hot topics and Q&A.
When: Thursday, October 3 | 8:00 am – 5:30 pm
Where: Four Seasons Hotel Houston | 1300 Lamar St | Houston, TX 77010-3017
Fee: $150 per registrant Company group rate: $150 for first registrant, $100 for each subsequent registrant
This program is intended for tax professionals with starter to advanced state & local tax experience and those doing business in Louisiana, Mississippi, Alabama, and along the Gulf Coast. Program not open to tax collectors. An application for accreditation of this activity has been submitted to the Mandatory Continuing Legal Education Committee of the Louisiana Supreme Court and is pending. An application for accreditation of this activity has been submitted to the MCLE Committee of the State Bar of Texas and is pending. The full program has been recommended for 9.25 hours of Texas CPE.
Although on August 1 we reported that a special session to address the pending “fiscal cliff” and tax reform in Louisiana was unlikely in 2024, and the deadline to get any constitutional changes on the November election ballot has passed, it appears there is growing momentum to convene a special session later this year to address that cliff and to pursue significant tax reform. Any constitutional changes from this session would then be on the ballot ahead of the regular legislative session in 2025. We have heard that a wide variety of changes to the tax code are being discussed, and could see changes to exclusions, exemptions, deductions, and credits in many different areas potentially including longstanding programs and those provided for in the Louisiana Constitution, in order to balance the state’s budget. If you have any business interests in Louisiana, you will want to follow closely as the legislature and Executive Branch seek to close the impending revenue gap. A view into what may be considered can be found in HB 641 from the 2023 Regular Session.
In Loper Bright Enterprises v. Raimondo, the US Supreme Court overturned the 40-year-old Chevron doctrine, which instructed courts to defer to any reasonable agency interpretation of an ambiguous law. This move has led many in the state and local tax community to consider the potential impact on state agencies authorized with administering revenue statutes.
Although Loper Bright‘s exact impact on deference to state tax authorities is unclear, taxpayers will point to the case in their challenges against state actions. We’re already seeing this at the federal level with a taxpayer appeal in US Tax Court regarding the IRS’s enforcement of Section 482 of the tax code.
Regardless of the outcome in that federal case, transfer pricing is a particularly important topic when considering judicial deference to administrative actions at the state level. Loper Bright resurrected Skidmore deference, under which the weight afforded to agency determinations depends on the thoroughness of the agency’s consideration, the validity of the agency’s reasoning, and the determination’s consistency with earlier and later pronouncements from the agency.
State courts aren’t bound by Loper Bright or the now-resurrected Skidmore standard. But under the Skidmore standard, most state transfer pricing determinations that we have seen shouldn’t be afforded any deference.
Most separate reporting states have adopted a statute that tracks the language in Section 482, yet certain tax departments haven’t adopted regulations interpreting the statute or otherwise evidenced any “thoughtful consideration” of their approaches to transfer pricing.
State tax departments tend to be inconsistent with their enforcement of transfer pricing provisions. Compounding that concern, most states also appear to acknowledge they lack robust transfer pricing capabilities. This can lead states to rely on forced combination, addback statutes, or results-driven transfer pricing analysis that, in most cases, deserves little deference under the Skidmore standard or any other rational standard.
Due to lack of capabilities within tax departments, multiple states have hired outside consultants to aide in transfer pricing audits. New Jersey raised eyebrows last month when it requested bids for an outside transfer pricing consultant five years after it adopted combined reporting. (However, after the request was publicized, Division leadership eased taxpayer concerns and stated that the Division doesn’t have an interest in challenging federal transfer pricing reports concerning cross-border transactions, especially those that have been scrutinized by the IRS. The request for bids was intended to allow the Division to wrap up its pre-combination audits.) It raises the question of whether tax departments should be afforded deference at all when a private party, rather than the agency, is the transfer pricing “expert.”
Loper Bright may have addressed the federal Administrative Procedure Act, but the case is simply the biggest development in a trend away from providing too much discretion to state tax agencies. Many states have already rejected Chevron-style deference legislatively, but other state agencies have seen their regulatory discretion constrained by courts.
It might be fair to ask, for instance, whether the Arkansas Department of Finance and Administration won a battle but lost a war in American Honda Motor v. Walther. The DFA prevailed regarding the characterization of income earned on the sale of credits as business income, but the Arkansas Supreme Court also ruled the DFA’s interpretation of the state’s Tax Procedure Act is de novo and that even the presumption of correctness doesn’t attach to a final assessment or determination of the secretary in a trial de novo or an appeal.
We suspect other state “interpretations” of their statutes will be similarly disregarded as taxpayers capably defend their transfer pricing studies in courts where states lack competing studies or evidentiary support for their disregard of taxpayers’ documentation.
Transfer pricing may be ripe for the next iteration of challenging state authority and holding state actions accountable in courts. The Loper Bright court overruled deference to reasonable federal agency regulations. State courts can devise their own deference standards, but one would think agency actions that undermine the standard statutory method of calculating income should face an uphill battle when it comes to deference.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Reproduced with permission. Published August 20, 2024. Copyright 2024 Bloomberg Industry Group 800-372-1033.
There is a strong market in the transferability of IRA credits. However, be careful as there could be some unexpected state tax implications.
To fuel the market for IRA credits, proposed Treasury regulations provide that the purchaser will not recognize gain on its use of the credit for federal income tax purposes (which is not the case for all credits). However, in the weeds of state tax there is a trap for the unwary: Not all states will follow this federal relief provision, and some states may try to tax gain on the use of a purchased IRA credit.
With the impending sunset of alcohol related tax provisions, the beer and liquor lobbies have begun sparring over the proper policies going forward, as each industry spotlights their needs and while disputing their competitor’s position. At the center of the fight is the taxability of seltzers and other ready to drink cocktails, as these drinks are frequently produced by liquor distillers but still treated as malt beverages for tax purposes.
The beer industry contends the liquor industry is trying to use the tax code to give canned cocktails an advantage over beer, while the spirits industry has accused beer makers of trying to curb sales of canned cocktails.
Great analysis by my colleague, Katie Quinn, on New Jersey’s request for quotes for transfer pricing consultants.
New Jersey transitioned to combined reporting, why do they anticipate a need for transfer pricing assistance moving forward?
Quinn said the timing of the notice was curious because New Jersey switched to combined reporting, which requires related entities to file one tax return that reflects their income and losses, in 2019. If the division wants to scrutinize transfer pricing studies, that signals that it may not accept a federal transfer pricing review that a taxpayer may have received from the IRS that involved its federal consolidated group, she said.
As we look towards Fall, cooler weather and the start of football season, another annual event is about to kick off – the opening of the Louisiana Parish Property tax assessment rolls.
This is the time for taxpayers to meet with assessors and discuss the assessment of their moveable (personal) and immovable (real) and present any evidence to support an adjustment. The dates can be found here.
Meeting with the assessor and offering any evidence to support your valuation is a necessary step in the process if a taxpayer wants to challenge the assessment. The link, above, also provides the hearing date for the local Board of Review who hear all initial appeals.
A recent bill comprehensively overhauled how Mississippi applies its sales tax to oil and gas activities and related equipment. The Department of Revenue recently issued a notice explaining the changes and the newly adopted rates.
Effective July 1, 2024, the 3.5% Mississippi contractor’s tax no longer applies to drilling, redrilling, completing, or working over an oil or gas well.
