Presentation on theme: "Market-Based Apportionment"— Presentation transcript:
1 Market-Based Apportionment Nick NiemannMcGrath North Mullin & Kratz, PC LLOOmaha, NE
2 Apportionment Nationally Sale of TPPSale of ServicesInitially3 factorsPropertyPayrollSalesTrendSingle factorSome combination of 1-3 factorsSingle, double or triple weightingInitiallyCost of PerformanceCliff (All-or-Nothing)TrendPercentageMarket-State
5 Sales Factor: Sourcing of Services 200720092007Effective20142003200920092011Phase-In201020112005COP – Cliff (All-or-Nothing)COP - PercentageMarket-sourcing approachNo Income TaxOtherNote: Year shown = States enacting market-state in past 10 years.
6 Nebraska’s Apportionment Rule History TPPServices1967: 3 factor1987: Single factor (Sales)LB 772: Phase In ( )LB 775: Immediate for Nebraska incentive package1967: COP – Cliff2012 Single factor (Sales)- LB 872: Market-State(Eff )
8 Nebraska Market-State Rules Sale of Intangibles:Treasury Function: Loan:Credit Card:Lease or License of TPP: . . .Sale, Lease or License of Real Property:Other Sales:Telecom Companies:Location of UseExtent of ManagementLocation of Security or Debtor’s AddressBilling AddressProperty LocationExtent of NE Business ActivityKeep COP - Cliff
9 Market-State for Services - Tax Perspective - ProsConsIn-state service providersAvoid >100% taxationNo tax penalty for engaging in a serviceLess TPP v. Service controversiesLess “Income-producing activity” controversiesNo more COP interpretation issuesIncreases taxable jurisdictions for out-of-state service providersMore nexus enforcementMultiple Market Based Sourcing testsRetaining / obtaining user or customer informationBenefits receivedCost of complianceIntroduces new sourcing interpretation issues
10 Market-State for Services - Economic Development Perspective - ProsConsNo tax penalty for having jobs and capital investment in the taxing StatePuts emphasis on exporting services (and importing revenue) using in-State employees and capital investmentCertain in-State companies may prefer COP – Cliff if results in -0- taxMay cause some out-of-state service providers to not make services available to in-State customers
11 Market-Based Apportionment Nick NiemannThank You
12 Nick Niemann Partner - McGrath North Law Firm Member - American & Nebraska Bar Association- American Institute & Nebraska Society of CPA’s- Council On State Taxation (Practitioner)Creighton - College of Business 1978 (Summa Cum Laude)- School of Law 1981 (Magna Cum Laude)- Adjunct Faculty – State TaxBest Lawyers In America (Tax Law and Litigation & Controversy – Tax)Principal designer and drafter of most of Nebraska’s economic development tax incentive programs (e.g., 1987’s LB775 Employment and Investment Growth Act and 2005’s LB312 Nebraska Advantage Programs, the Nebraska capital gains exclusion and the single factor corporate apportionment formula).Nick works with company tax department personnel and their outside CPA firms and/or legal counsel, to address site selection, state tax planning opportunities, tax audits and appeals, refund claims and appeals, and tax and other incentives.Contact Info: Website:(402)Nick’s partner, Matt Ottemann, of McGrath North assisted in the creation of this presentation.
13 Market-Based Apportionment Presentation Disclaimer This presentation should not be considered as legal, tax, business or financial advice. This presentation is designed to provide information about the subject matter covered. It is provided with the understanding that while the speaker/author is a practicing state tax and incentive advisor, neither he nor his firm has been engaged by the attendee/reader to render legal or other professional services (unless a specific engagement agreement has been executed). If legal advice or other expert assistance is required by the attendee/reader, the services of a competent professional should be sought.Circular 230 DisclosureThe following statement is required by the U.S. Treasury Department Regulations: Any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed here.