Weekly Round-Up: Contemplating a World Without the Multistate Tax Compact or MTC

Taxpayers face a fair amount of complexity in deciding whether to make the Multistate Tax Compact election on a state tax return, Brian Murphy, Giles Sutton, Jamie C. Yesnowitz, Dale Busacker, and Chuck Jones, all with Grant Thornton's State and Local Tax practice, write in this week's issue of the Weekly State Tax Report.

However, five years down the road, in a world without the Compact and the Multistate Tax Commission, taxpayers would not be able to prospectively make a Compact election in any state, the authors predict. But retroactive elections to open tax years still would be a matter of concern, especially for taxpayers that have extended state tax audits in historic Compact states. Assuming that the Compact election is allowed in some form, taxpayers will be forced to think about a number of unexplored issues that come with making the election, they write.

In such an environment, taxpayers would continue to evaluate which states and tax years would be the optimal ones in which to retroactively make the Compact election, the authors explain. Following that determination, taxpayers would need to examine how to actually make a retroactive election that will be respected by state tax authorities, they said.

A couple of states already have provided guidance in this area. Following the California Court of Appeal's decision in Gillette, the California Franchise Tax Board immediately released guidance concerning the filing of protective refund claims to make the Compact election, the authors write. Oregon has done the same. One would expect that if Gillette is decided in favor of the taxpayer and allows for retroactive elections, a number of other Compact states would follow suit in providing guidance on the intricacies of the election process, given that the Compact says very little about how it should be done, according to the authors.

The complete article on the impact of Gillette and other Compact litigation on the viability of the Compact and the Multistate Tax Commission, and on taxpayers looking for multistate clarity on Compact issues, can be read here.

In other developments…

States Expand Sales Tax Holidays Beyond Back-to-School Items , by Stateline, the Daily News Service of the Pew Charitable Trusts.

Michigan: Taxpayers may not elect to apportion income based on MTC three-factor formula , by PwC

Four Steps to Moving State Sales Taxes Into the 21st Century , by the Center on Budget and Policy Priorities

Compiled by Priya D. Nair

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