PORTFOLIO

State Taxation of Corporate Income From Intangibles (Portfolio 1190)

Be a trusted advisor to your clients with Bloomberg BNA Tax Portfolios. In this Portfolio, our expert authors analyze the federal constitutional and state statutory rules governing state taxation of corporate income from intangibles. 

Price: $400 Print

GET MORE WITH THE FULL PORTFOLIO LIBRARY

This Portfolio is part of the Premier State Tax Library, a comprehensive resource including more than 70 state tax Portfolios, practice tools, primary sources and timely news.

FREE TRIAL

DESCRIPTION

The State Taxation of Corporate Income From Intangibles Portfolio has two goals: to untangle some of the more complex issues raised in this area and to provide a framework for sensibly resolving these issues in the future.

The Portfolio also addresses other topics that are currently being debated by practitioners, administrators, and commentators. These topics include apportionability and fair apportionment, with particular emphasis on factor representation. 

In attempting to provide a framework for the future, the Portfolio suggests various apportionment methods, with considerable attention to apportioning income on the basis of the intangible asset's operational link to the corporation's business. 


Buy State Taxation of Corporate Income From Intangibles (Portfolio 1190) now


AUTHORS

WALTER HELLERSTEIN

Walter Hellerstein is a Professor of Law at the University of Georgia School of Law and a partner in the firm of Sutherland, Asbill & Brennan. He has written and practiced extensively in the state tax field. Walter is the author of State and Local Taxation of Natural Resources in the Federal System: Legal, Economic, and Political Perspectives (American Bar Association Section of Taxation 1986), co–author with Jerome R. Hellerstein of State Taxation, Vols. I & II, and State and Local Taxation (West Publishing Co.), and the author of numerous law review articles on state taxation that have appeared in The Michigan Law Review, The University of Chicago Law Review, The Supreme Court Review, The Tax Lawyer, The Journal of Taxation, The National Tax Journal, The Tax Law Review, the Virginia Law Review, and other journals. Walter has spoken widely on state tax topics at conferences sponsored by Georgetown University Law Center, New York University Law School, the National Tax Association, the Heart of America Tax Institute, and other organizations. He is a member of the District of Columbia, Illinois, and New York bars.

 

Credentials / Graduate of Harvard College; J.D., University of Chicago Law School, where he served as Editor–in–Chief of the University of Chicago Law Review.

 


TABLE OF CONTENTS

Detailed Analysis

1190.01. INTRODUCTION

1190.02. STATE TAXATION OF CORPORATE INCOME: GENERAL PRINCIPLES

Introductory Material

A. Federal Constitutional Restraints on State Taxation of Corporate Income

1. The Unitary Business Principle

2. Fair Apportionment

B. The Statutory Framework Governing State Taxation of Corporate Income

1. The Distinction Between Allocable and Apportionable Income

2. The Apportionment Formula

1190.03. STATE TAXATION OF CORPORATE INCOME FROM INTANGIBLES: GENERAL PRINCIPLES

A. Federal Constitutional Restraints on State Taxation of Corporate Income from Intangibles

1. The Unitary Business Principle

a. The Property Tax Cases

b. The Income Tax Cases

(1) Mobil Oil Corp. v. Commissioner of Taxes

(2) ASARCO, Inc. v. Idaho State Tax Commission

(3) F. W. Woolworth Co. v. Taxation and Revenue Department

(4) Container Corporation of America v. Franchise Tax Board

2. Fair Apportionment

B. The State Statutory Framework Governing State Taxation of Corporate Income From Intangibles

1. Historical Background

2. The Current Framework

a. Allocable and Apportionable Income from Intangibles

b. Apportionment of Income from Intangibles

1190.04. STATE TAXATION OF CORPORATE INCOME FROM INTANGIBLES: CURRENT CONTROVERSIES

A. Apportionability

1. Allied-Signal v. Director, Division of Taxation

a. The Facts and Proceedings Below

b. The Supreme Court's Opinion

(1) The Rejection of Payor-Payee Unity as an Essential Precondition to Apportionability of Intangible Income

(2) The Adoption of an Apportionability Standard Based on Whether the Intangible Asset Serves an "Operational" Function

c. Allied-Signal: "The Road Not Taken"

(1) Ownership as the Linchpin of Apportionability of Corporate Income from Intangibles

(a) Form Versus Substance

(b) Fair Apportionment

(c) The Impact on the Existing Structure of State Taxation of Corporate Income from Intangibles

(2) Ownership as the Linchpin of Apportionability of all Income

(a) Misattribution of Income

(b) Increased Judicial Monitoring of State Tax Apportionment

(3) The Merits of the Commercial Domicile Rule for Assigning Income from Nonunitary Intangible Assets

2. Allied-Signal v. Commissioner of Finance

a. Taxing Intangible Income by Reference to the Payor's or "Investee's"Activities in the State

b. Can Taxing Corporate Income from Intangibles by Reference to the Investee's Activities in the State Pass Constitutional Muster after Allied-Signal?

c. Should Intangible Income Be Taxed on Basis of Investee's Activities?

B. Fair Apportionment

1. Factor Representation

a. Intangible Income Apportionable on the Basis of Payor-Payee Unity

(1) Implementing Factor Representation Based on Payor-Payee Unity

b. Intangible Income Apportioned on the Basis of an Operational Connection with the Taxpayer's Business

(1) Implementing Factor Representation when Apportionability of Intangible Income is Based on the Operational Function Served by the Intangible

(a) Property Factor

(b) Sales Factor

(c) Reconciling the Apportionability and the Fair Apportionment Analyses

c. Intangible Income Apportioned on the Basis of the Investee's Activities in the Taxing State

d. State Court Decisions Addressed to Factor Representation

(1) The Right to Factor Representation when Payor–Payee Unity is the Predicate for the Apportionability of Intangible Income

(2) The Right to Factor Representation When the Operational Function Served by the Intangible Asset is the Predicate for the Apportionability of Intangible Income

2. Combined Reporting

1190.05. STATE TAXATION OF CORPORATE INCOME FROM INTANGIBLES: A FRAMEWORK FOR THE FUTURE

Introductory Material

A. Recapitulation

B. Apportioning Intangible Income: A Roadmap for the Future

1. Income Apportionable on the Basis of Payor-Payee Unity

2. Income Apportionable on the Basis of the Operational Connection of the Intangible Asset to the Corporation's Business

a. Dividends

b. Interest

c. Capital Gains

d. Royalties from Patents, Copyrights, and Similar Intangibles

e. Franchise Fees

3. Partnership Income

4. Income of Holding Companies

1190.06. CONCLUSION


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 SITUS OF ALLOCABLE NONBUSINESS INTANGIBLE INCOME

Bibliography

Bibliography