Corporate Taxes

Since the early 1980s, there has been a plethora of recommendations about how to reduce the tax gap. Many changes have been enacted, yet the gap grows. Proposals requiring additional information reporting or withholding are usually overlooked despite evidence that these techniques result in a low tax gap for wage earners. However, a significant information reporting rule was enacted in 2008. Its enactment though, seems to be more a result of its revenue potential than its role in a comprehensive tax gap reduction strategy.

Below, we'll review… more

The package of six tax increases that passed in the Budget Conference Committee this week includes two described as loophole closers. Who can argue against closing a loophole? Unfortunately, the two provisions proposed to be changed aren't loopholes.

A loophole is the ability to use a rule in an unintended way. It may be due to poor wording or an incomplete definition in the law. For example, assume a state has a lower property tax rate for agricultural land to help farmers. However, the definition of… more

PL 86-272 provides that if the only in-state activities a business has is the solicitation of orders for tangible personal property that is approved and filled from outside the state, the state may not impose a net income tax on the business. States set the rules, within due process and commerce clause constraints of the U.S. Constitution, for businesses that sell services or intangibles.

States tend to take broad approaches. A 2007 Illinois Department of Revenue ruling notes that… more

In recent years, concern over declining corporate tax collections, aggressive tax planning and state revenue needs have led a few states to consider and even enact a gross receipts tax (GRT) on companies that do businesses within its borders. On the surface, a GRT is simple since it allows no deductions. The broad base allows for a very low rate that can make the tax more palatable. Further, all businesses are typically subject to the GRT, with the result that… more

Recent tax reform efforts in Ohio, Texas and Michigan have led to an increase in the number of states imposing gross receipts taxes (GRT). Let's take a closer look at GRT and some important legal issues surrounding it.

The Multistate Tax Compact defines a GRT as "a tax, other than a sales tax, which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which no… more

Politicians don't like to talk about taxes except to brag about cutting them. But with California's widening budget deficit threatening deep cuts in education and other public services, it's difficult to avoid discussions about raising taxes.

Unfortunately, what's likely to be lost in the upcoming partisan melee over whether new taxes are needed to close the $16-billion gap is an equally important tax issue -- California's aging and often unfair tax system needs to be overhauled.

The goal of tax… more

Public Law 86-272, addressing circumstances under which a multistate business may owe state income taxes, was enacted as a stopgap measure on September 14, 1959. For the past several years, efforts to reform this law have raised issues similar to those of 1959. This article provides a brief history and the issues surrounding PL 86-272 and poses the question -- when the 50th anniversary milestone is reached, will PL 86-272 be in its historic form or a new form (and… more

Last week, a bill was proposed by a majority of Assemly Democrats to impose extra taxes on oil companies to help prevent pink slips for teachers. A March 12 vote, mostly along party lines, failed to garner the required two-thirds majority for passage of a tax increase.

But Assembly Speaker Fabian Núñez has said he does not plan to give up on the idea.

Despite the importance of not laying off teachers, failure to pass was a good result. The bill, ABX3… more

S corporations now account for two-thirds of U.S. corporate tax returns (see NTA report) and while designed for simplicity, they’ve become increasingly complex and harder for regulators to standardize and monitor.

As the number of small businesses has exploded, the number of S corporations formed has more than quadrupled since the last review (of 1984 returns) while the number with assets exceeding $10 million has increased 10-fold. Today’s S corporations are not necessarily small, and not necessarily easy to classify… more

Two great concerns leading to calls for tax reform are (1) that changes in the world economy are reducing the likelihood that the U.S. will be assured of a dominant role and (2) inordinate complexity that leads to disrespect for the tax system, economic inefficiencies and increased costs of tax compliance. Yet, despite numerous calls for tax reform, the major changes we have seen to the system recently have actually increased its complexity. Examples include the addition of Schedule M-3… more