Intra-Company Cash Transfers Ripe for State Coffers

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Che Odom

Aug. 4 — States, looking for sources of revenue, may look into treating the movement of cash at a parent as debt and imputing interest to collect tax.

“A lot of times, the cash comes into the operating company, and it’s swept into a central bank account,” Rob Porcelli, a state and local tax partner at PricewaterhouseCoopers LLP, said Aug. 4 during the Advanced State and Local Tax Institute at the Georgetown University Law Center.

Though on the books it may appear as a debt to the parent company, “the question is whether that is true debt,” he added.

While many states, including Massachusetts and New York, say such transfer of cash isn't true debt, New Jersey takes the opposite approach and imputes interest. And that interest is used to collect tax on a loan that doesn’t pay interest or pays very little interest.

“Other states are going to look at that, too,” Porcelli said.

New Jersey is the worst tax state in the U.S. for traders, according to a CPA who authored a treatise on the subject (see related story, this issue).

To contact the reporter on this story: Che Odom in Washington at

To contact the editor responsible for this story: Ryan Tuck at

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