State Tax Snapshot: COST Supports MTC Hearing Officer Pomp’s Suggested Apportionment Revisions

The MTC announced in March that they would not be accepting the recommendations of MTC Hearing Officer Richard Pomp. In response, the Council on State Taxation (COST) circulated an e-mail on April 25 outlining its support for Pomp’s proposed changes to the apportionment provisions of the Multistate Tax Compact (Article IV, section 18).

In its e-mail , COST said that it supports procedural safeguards such as those recommended by Pomp, and that the four proposed changes put forward by Pomp were “pragmatic solutions” that represent a “broad consensus” from the tax community. Pomp engaged in “a lengthy period of consultation with experts from government, industry, practitioner, and academic ranks,” COST noted. Also, COST surveyed its members and found that there was general support for Pomp’s suggestions.

The four changes recommended by Pomp and supported by COST are:

  • imposing the burden of proof for alternative apportionment on the party requesting the alternative apportionment, with the same standard applying to taxpayers and tax administrators;
  • excusing taxpayers from penalties if a tax administrator imposes an alternative method of apportionment, when the taxpayer otherwise followed the statutory apportionment method;
  • prohibiting the retroactive revocation of prior approval of a taxpayer’s alternative apportionment method; and
  • requiring tax administrators to adopt regulations outlining any alternative apportionment which will apply to a specific industry or to a transaction affecting taxpayers in general.

 COST’s e-mail further noted that the issue of alternative apportionment has been addressed at nearly every recent national or regional state and local tax conference.  Furthermore, the issue of alternative apportionment has been in the news and the courts, making Pomp’s comments timely and highly visible within the tax community.

Again calling upon the importance of procedural safeguards, COST’s e-mail urged the MTC to reconsider its rejection of Pomp’s report, and look for at least “a nugget worth incorporating” into the proposed amendments.

By Melissa Fernley

Follow me on Twitter: @mafernley

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