State Tax Matters The power of knowing. May 7, 2021 In this issue: Administrative: Georgia: New Law Revises Judicial Standard of Deference Accorded to Non-Regulatory DOR Actions ............................................................................................................................ 2 Income/Franchise: Arkansas: New Law Says Nonresident Income is Allocated Based on Where Employee Performs Work ...................................................................................................................... 3 Income/Franchise: Arkansas: ALJ Addresses Acquiring Entity’s NOL Computation in Post-Merger Context ......... 4 Income/Franchise: California FTB Says Returns May Be Prepared Using Current Market- Sourcing Rule, Not Draft .................................................................................................................................... 5 Income/Franchise: Indiana: New Law Updates State Conformity to Internal Revenue Code; DOR Provides Updated Guidance ...................................................................................................................... 6 Income/Franchise: Indiana: New Law Addresses State Reporting of Partnership Final Federal Tax Adjustments 6 Income/Franchise: Kansas: New Law Addresses Treatment of GILTI and §163(j) and Extends NOL Carryforward Period .................................................................................................................................. 7 Income/Franchise: Maine: State High Court Rejects Claim that Disallowed Loss Carryover Lead to Invalid Taxation ..................................................................................................................................... 8 Income/Franchise: Massachusetts DOR Issues Personal Income Tax Guidance on Pandemic- Related Telecommuting .................................................................................................................................... 9 State Tax Matters Page 1 of 20 Copyright © 2021 Deloitte Development LLC May 7, 2021 All rights reserved. Income/Franchise: New York: Comments on Updated Draft Proposed Corporation Franchise Tax Rules are Due by August 2 ........................................................................................................................ 10 Income/Franchise: New York City: Investment Management Company Owes GCT on Gains Derived from Sale of LLC Interest .................................................................................................................... 12 Income/Franchise: Ohio: Judge Dismisses Lawsuit Involving Pandemic-Related Telecommuting and Local Income Taxes ................................................................................................................................... 13 Gross Receipts/Other Miscellaneous: Oregon: Proposed Permanent Corporate Activity Tax Rule Addresses Unitary Group Filing ............................................................................................................... 14 Sales/Use: Kansas: New Law Imposes Economic Nexus on Some Remote Sellers and Marketplace Facilitators 15 Sales/Use: West Virginia: New Law Creates Exemption for Machinery & Equipment Rental Among Commonly Owned Entities ................................................................................................................. 16 Sales/Use: Wisconsin DOR Issues Guidance and Reminders on State Tax Treatment of Virtual Currency Transactions ..................................................................................................................................... 16 Multistate Tax Alerts ............................................................................................................................................. 17 Administrative: Georgia: New Law Revises Judicial Standard of Deference Accorded to Non- Regulatory DOR Actions S.B. 185, signed by gov. 4/29/21. New law modifies the judicial standard of deference accorded to non- regulatory actions of the Georgia Department of Revenue (Department) – generally requiring that all questions of tax law decided by a court or the Georgia Tax Tribunal be made without any deference to any determination or interpretation made by the Department, with the exception of the judicial standard of deference accorded to rules/regulations promulgated by the Department. Specifically, the bill amends Ga. Code Ann. §§ 48-2-18(c), 48-2-35(c)(7), 48-2-59(e), and 50-13A-14(a) and provides that: URL: https://www.legis.ga.gov/legislation/59714 • All questions of law decided by a court or the Georgia Tax Tribunal, including interpretations of constitutional, statutory, and regulatory provisions, shall be made without any deference to any determination or interpretation, whether written or unwritten, that may have been made by the Department; • This new “no deference” requirement has no effect on the judicial standard of deference accorded to rules promulgated pursuant to the Georgia Administrative Procedure Act; and • This new law applies to all proceedings commenced before the Georgia Tax Tribunal or a superior court of the State of Georgia on or after its effective date (i.e., April 29, 2021). State Tax Matters Page 2 of 20 Copyright © 2021 Deloitte Development LLC May 7, 2021 All rights reserved. See forthcoming Multistate Tax Alert for more details on these law changes, and please contact us with any questions in the meantime. — John Paek (Atlanta) Joe Garrett (Birmingham) Principal Managing Director Deloitte Tax LLP Deloitte Tax LLP [email protected] [email protected] Kent Clay (Charlotte) Cari Sorsa (Atlanta) Managing Director Senior Manager Deloitte Tax LLP Deloitte Tax LLP [email protected] [email protected] Doug Nagode (Atlanta) Stephen Crane (Denver) Managing Director Managing Director Deloitte Tax LLP Deloitte Tax LLP [email protected] [email protected] Income/Franchise: Arkansas: New Law Says Nonresident Income is Allocated Based on Where Employee Performs Work S.B. 484, signed by gov. 4/29/21. Attempting to “clarify” that nonresident income is allocated based on where the employee is located when performing the work associated with the income, new law provides that, applicable for tax years beginning on or after January 1, 2021, a nonresident individual who is paid a salary, lump sum payment, or any other form of payment that encompasses work performed both inside and outside of Arkansas “shall pay Arkansas income tax only on the portion of the individual’s income that reasonably can be allocated to work performed in Arkansas.” The legislation states that “a nonresident individual performs work in Arkansas when that individual is physically located in Arkansas when performing the work.” URL: https://www.arkleg.state.ar.us/Bills/Detail?id=sb484 The new law also expands the definition of an Arkansas “employer” for income tax withholding purposes to include “a person doing business in or deriving income from sources outside this state who has control of the payment of wages to an individual for services performed within this state.” Other changes in the law include revisions to current law that provides a tax credit for individual income tax owed to other states – stating that income from property located or business transacted in another state does not include work performed in Arkansas. Please contact us with any questions. State Tax Matters Page 3 of 20 Copyright © 2021 Deloitte Development LLC May 7, 2021 All rights reserved. — Scott Bedunah (Dallas) Joe Garrett (Birmingham) Senior Manager Managing Director Deloitte Tax LLP Deloitte Tax LLP [email protected] [email protected] Gregory Bergmann (Chicago) Crissy Williams (Dallas) Partner Senior Manager Deloitte Tax LLP Deloitte Tax LLP [email protected] [email protected] Olivia Schulte (Washington, DC) John Volk (Dallas) Manager Manager Deloitte Tax LLP Deloitte Tax LLP [email protected] [email protected] Income/Franchise: Arkansas: ALJ Addresses Acquiring Entity’s NOL Computation in Post-Merger Context Docket No. 21-070, Ark. Dep’t of Fin. & Admin. (4/27/21). In a case involving computation of net operating losses (NOLs) from an acquired corporation post-merger, an administrative law judge held that pursuant to Ark. Code Ann. section 26-51-427(3) as in effect for the prior tax years at issue, the acquiring corporation must compute “total income” as delineated in Arkansas Corporate Income Tax Rule 1.26-51-427(3)(C) – which provides that the amount of NOL that may be claimed is computed by multiplying the ratio of the acquired corporation’s assets to all assets by “total income” – based on its total income apportioned to Arkansas rather than its total multistate income. In doing so, the judge reasoned that applying the taxpayer’s proposed methodology to utilize “total multistate income” in this calculation “would use the total income apportioned to Arkansas earned by all the assets of the succeeding corporation (including those not located within Arkansas), not just the apportioned income associated with the preceding company’s Arkansas assets” in seeming contradiction to applicable Arkansas statutes and rules. Accordingly, the judge sustained the Arkansas Department of Finance and Administration’s underlying tax assessment, noting that the taxpayer failed to meet its burden of proving entitlement to the total amount of its claimed NOL deduction by a preponderance of the evidence. Please contact us with any questions. URL: https://www.ark.org/dfa-act896/index.php/api/document/download/21-070.pdf