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Income Taxes: Special Problems Formulary Apportionment (Portfolio 1180)

Be a trusted advisor to your clients with Bloomberg BNA Tax Portfolios. In this Portfolio, our expert authors focus on advanced apportionment principles and special problems. 

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DESCRIPTION

The Income Taxes: Special Problems in Formulary Apportionment Portfolio includes a review of constitutional principles and focuses on distortion in the apportionment of income. It is not intended to be an exhaustive review of basic state apportionment principles. Rather, references are made to the laws of certain jurisdictions for illustrative purposes. As with all state taxation, relevant statutes, regulations, administrative decisions and case law should be consulted for specific guidance.


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AUTHORS

BOBBY L. BURGNER, ESQ.

Bobby L. Burgner is Tax Counsel and Director of State and Local Taxes for General Electric Company in Atlanta, Georgia. Prior to joining GE, he was a partner and Southeast Region Director of State and Local Services with Arthur Andersen & Co. in Atlanta, Georgia. He is a CPA and attorney, and has been appointed a member of both the AICPA and ABA committees on state and local taxation. From 1989 through 1995 Bobby resided in Atlanta, where he headed the state and local tax practice for Arthur Andersen in the Southeast Region. In 1995, he joined General Electric Company as Tax Counsel and Director of State and Local Taxes. Bobby is a regular speaker, covering issues such as multistate taxation, utility and telecommunications, and state taxation of international business transactions for various tax and industry groups, including the Tax Executives Institute, the Federation of Tax Administrators, the Institute of Property Taxation, and ITAA. He has contributed to the International Tax Journal, the Tax Adviser, the Journal of State Taxation, the Property Tax Journal, the Georgetown Institute on State and Local Taxation, the National Institute on State and Local Taxation, the Bulletin for International Fiscal Documentation, the Interstate Tax Report, Revenue Administration, the Journal of Equipment Lease Financing, and numerous other publications.

 

Credentials / Bobby graduated from the University of West Florida (B.A. accounting; Phi Kappa Phi; magna cum laude) and Georgetown University Law Center (J.D.; magna cum laude; Order of the Coif; Sewell Key Award). While attending Georgetown, he served as state tax manager for MCI Communications Corporation, and later as state tax manager in the national tax office of another national accounting firm. 



TABLE OF CONTENTS

Portfolio Description

Authors

Description

Detailed Analysis

1180.01. INTRODUCTION & OVERVIEW

1180.02. PURPOSE AND COMMON METHODS OF APPORTIONMENT

Introductory Material

A. Receipts

B. Property

C. Payroll

1180.03. CONSTITUTIONAL REQUIREMENTS

Introductory Material

A. Internal and External Consistency

1180.04. REVISING THE APPORTIONMENT FORMULA

Introductory Material

A. Filing Returns Adopting Alternative Methods Consistent With Ethical Guidelines Of The Return Preparer

B. Petition for a Change in Method

C. Change During Audit Initiated By Taxpayer Or Tax Administrator

1180.05. MEASURING AND PROVING DISTORTION

Introductory Material

A. Reference to Other Factors or the Tax Base

B. Reference to Other Jurisdictions

C. Separate Accounting

D. Multiple Taxation

E. Alternative Formula

F. Burden of Proof/Calculation of Measurement

1180.06. COMBINED & CONSOLIDATED REPORTING

Introductory Material

A. Combination of Disparately Profitable Businesses

B. Receipts Factor/Jurisdictional Issue

C. Combination of General and Specialized Corporations

1. Forced Combination of General and Specialized Corporations

2. Statutory Preclusion/Unusual Combinations for General and Specialized Corporations

D. Intercompany Transactions

E. Elective Combination

1180.07. FACTORS THAT DO NOT FAIRLY REPRESENT BUSINESS ACTIVITY

Introductory Material

A. Condition Precedent/Earning the Right to Apportion

1. Value Added Tax Base

2. Activities of Corporate Officers

3. Higher Apportionment Standard

B. Receipts

1. Reflection of Unusual Sales Transactions in Receipts Factor

2. Dock Sales Transactions

3. Sales of Tangible Personal Property vs. Sales of Services

C. Property

1. Property Used by the Taxpayer

2. Safe Harbor Leased Property

3. Property not Producing Income

4. Property not in Taxing Jurisdiction

D. Payroll

1. Wages Paid Outside the State

E. "Unusual" Business Income

F. Timing & Order of Calculation Issues

1180.08. ATTRIBUTIONAL APPORTIONMENT

Introductory Material

A. Flow-through Entities

1. Combination of Factors and Income

2. Apportionment at Flow-through Entity Level

3. Ignore Flow-through Entity Factors

B. Factor Relief or Representation

1. Modern Analytical Approach

2. Factor Representation Constitutionally Required

3. Factor Representation Used to Cure Defective Tax Base

C. Apportionment by Reference to Payor's Factors


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 Uniform Division of Income for Tax Purposes Act - Annotated

Worksheet 2 Multistate Tax Commission Regulations - Excerpts

Worksheet 3 HANS REES' SONS, INC. v. NORTH CAROLINA 283 U. S. 123 (1931)

Opinion

Worksheet 4 MOORMAN MANUFACTURING CO. v. BAIR, DIRECTOR OF REVENUE OF IOWA 437 U.S. 267 (1978)

Opinion

Worksheet 5 CONTAINER CORPORATION OF AMERICA v. FRANCHISE TAX BOARD 463 U.S. 159 (1983)

Opinion

Worksheet 6 TRINOVA CORPORATION v. MICHIGAN DEPARTMENT OF TREASURY 498 U.S. 358 (1983)

Opinion

Worksheet 7 McDONNELL DOUGLAS CORPORATION v. FRANCHISE TAX BOARD, 26 Cal. App. 4th 1789, 33 Cal. Rptr. 2d 129 (Cal. Ct. App. 1994)

Opinion

Worksheet 8 IN RE BRITISH LAND (MARYLAND) INC. V. TAX APPEALS TRIBUNAL OF THE STATE OF NEW YORK ET AL., 647 N.E.2d 1280 (N.Y. 1995)

Opinion

Bibliography

Bibliography