state tax notes (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. Volume 80, Number 1 April 4, 2016 Working With New York’s New Combined Reporting Rules New York Corporate Tax Reform: An Investment Fund Perspective Ohio’s Business Income Deduction: Boon or Boondoggle? How Mississippi ‘Invented’ the Sales Tax If I Were a Rich Man Evolutionary Nexus For more State Tax Notes content, please visit www.taxnotes.com. (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. For more State Tax Notes content, please visit www.taxnotes.com. CONTENTS (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. state tax notes™ Volume 80 Number 1 ON THE COVER Florida 33 Working With New York’s 14 Governor Courts Yale University New Combined Reporting Rules To Relocate New York Corporate Tax Reform: 41 Georgia An Investment Fund Perspective 15 Lawmakers Fail to Agree on 47 Ohio’s Business Income Deduction: Income Tax Cuts Before Session Ends Boon or Boondoggle? 51 How Mississippi ‘Invented’ the Sales Tax Indiana 57 If I Were a Rich Man 16 Governor Approves Bill Calling for Study Of Combined Reporting 59 Evolutionary Nexus Iowa Cover photo: iqoncept/Bigstock.com 17 State’s Reduced Job Creation Credits Would Offset Biochemical Credits FROM THE EDITOR Kansas 5 The Wonder Years 18 Legislature Leaves New Revenue by Jéanne Rauch-Zender Out of Latest School Funding Bill STATE TAX NEWS AND ANALYSIS Kentucky Featured News 19 Senate Committee Considers Local Option Sales Tax Bill 7 Unclaimed Property Statute Not a Ponzi Scheme, Oklahoma Supreme Court Holds Louisiana by Stephanie Cumings 19 State Businesses and DOR Scramble 8 Quill Continues to Shape Field To Comply With Sales Tax Changes Of State Taxation by Amy Hamilton Maine Alaska 20 Taxwriters Reject Repeal of Exemption For Conservation Lands 10 Governor Pushes Legislators To Move Forward With Tax Bills Maryland California 21 Manufacturing Tax Credit Bills Stall In Committee 11 Administering Marijuana Taxes Could Be Unduly Burdensome, BOE Says Massachusetts 12 Ruling Could Exempt Tax Ballot Initiatives From Two-Thirds Rule 22 State Appoints New DOR Commissioner 22 State Releases Final Reg Connecticut On Fantasy Sports Websites 13 Sales Tax Exemptions Cost State Billions In Revenue, Group Says State Tax Notes, April 4, 2016 3 For more State Tax Notes content, please visit www.taxnotes.com. Mississippi SALT FROM THE SWING STATE (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. 23 House Appropriations Chair to Be 47 Ohio’s Business Income Deduction: State’s Next DOR Chief Boon or Boondoggle? by Mark A. Engel Missouri 24 Kansas City Pushes for Revival STATE TAX MERRY-GO-ROUND Of Missouri Film Incentives 51 How Mississippi ‘Invented’ the Sales Tax by Billy Hamilton Multistate & Federal 24 Minnesota Joins Trend of States THE POLITICS OF STATE TAXATION Proposing Tax Haven Legislation 57 If I Were a Rich Man 26 Refund Interest Rate Bill by David Brunori Sent to Governor THE SALT BOX 27 States Largely Ignored in Federal Tax Reform Plans, Panel Says 59 Evolutionary Nexus by Roxanne Bland Nevada 28 State Approves $9 Million in Tax Breaks VIEWPOINT For Hyperloop Project 63 A Property Tax Book Worth Reading by David Brunori New York 28 New York City’s First Taxpayer Advocate TAX HUMOR Stepping Down 65 State Tax Auditors Descend on Corporations With Novel Conclusions Oregon by Arthur R. Rosen 29 Initiative Would Privatize Liquor 67 Tax Agency Reminds Taxpayers: Distribution, Cut State Revenues ‘Make Up Your Damned Minds’ by Billy Hamilton Washington 68 Kranz Rookie Card Fetches $500 on eBay 30 DOR Can’t Ignore Its Own Rules, by Doug Sheppard COST Argues 70 State Quotes of Note West Virginia 71 CALENDAR 31 Higher Taxes Could Ease State’s Budget Shortfall, Report Says IN THE WORKS IN THE TRENCHES 9 A look ahead to planned commentary and analysis 33 Working With New York’s New Combined Reporting Rules by Peter L. Faber CROSSWORD PUZZLE 74 April 2016 Tax VIEWPOINT Crossword Puzzle by Myles Mellor 41 New York Corporate Tax Reform: An Investment Fund Perspective by Dale Y. Kim 4 State Tax Notes, April 4, 2016 For more State Tax Notes content, please visit www.taxnotes.com. FROM THE EDITOR (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. state tax notes™ The Wonder Years by Jéanne Rauch-Zender Decades of research have demonstrated what happens to children during the critically important early years impacts not only their future success, but also the future economic strength and well-being of our communities and our state. — Samuel J. Meisels, Buffett Early Childhood Institute, University of Nebraska Nebraskans are shedding light on an issue that is critical to every state — investment in early childhood care and education. The state ranked the issue second among its educational priorities, just behind public schools, in a statewide survey conducted by Gallup and the University of Nebraska’s Buffett Early Childhood Institute. While the survey didn’t specifi- cally address taxes, it addressed funding, finding that nearly all the residents surveyed want more taxes, private funding, and business support to improve early childhood care and What happens to education in the state. children during The institute studies the first eight years of children’s lives, with a focus on children living the critically in poverty or with developmental challenges, in an effort to prepare them for school. important early Although experts argue that the most formative years of life — when we acquire language years impacts the skills, form relationships for the first time, build character, and develop cognitive skills — are future economic from birth to age 8, most Nebraska residents think the state is not doing enough to ensure that strength and early childhood care and education are available and affordable to every family in the state. well-being of our Experts argue that without that preparation, children will continue to miss out on the state. opportunities and experiences afforded to their financially secure and socially stable class- mates. According to the institute, 42 percent of children in Nebraska grow up in poverty. Its goal is to be a voice for them. Statewide partnerships between universities, schools, governments, businesses, and citizens are needed to assist in eliminating this gap among children in Nebraska. Commentary Highlights On p. 33, Peter Faber of McDermott Will & Emery examines New York’s new combined reporting rules as presented in statutes, frequently asked questions from the Department of Taxation and Finance, and draft regulations. Mark Engel of Bricker & Eckler LLP discusses the effect of Ohio’s myriad income tax changes over the past decade on business taxpayers, focusing on the small business deduction and its effect on the private sector (p. 47). On p. 57, Deputy Publisher David Brunori discusses taxing the rich, as well as recent developments concerning tax incentives. Roxanne Bland addresses the advancement of nexus, as states continue to explore every possible way to raise the revenue needed to provide services to their residents (p. 59). ✰ State Tax Notes, April 4, 2016 5 For more State Tax Notes content, please visit www.taxnotes.com. state tax notes (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. Copyright 2016, Tax Analysts ISSN 1057-8404 President and Publisher: Christopher Bergin Deputy Publisher: David Brunori Editor in Chief: Jeremy Scott Editor in Chief: Cara Griffith Deputy Editor in Chief: Chuck O’Toole Editor: Jéanne Rauch-Zender Chief Correspondent: Amy Hamilton Deputy Editor: Jennifer Carr Reporters: Brian Bardwell, Stephanie Cumings, Jennifer DePaul, Paul Jones, Maria Koklanaris, Eric Yauch Commentary Editors: Sonya Harmon Holtar, Doug Sheppard Managing Editor: Russell A. Cox III Copy Chief: Betsy Sherman Assistant Editor: Quintin J. Simmons Editorial Staff: Zachary Abate, Monica Anderson, Joe Aquino, Contributing Editor: Roxanne Bland Julie Brienza, Amanda Chan, Patrice Gay, Eben Halberstam, James Hebblethwaite, Mick Heller, Andrew Hellerstein, Chief Economist: Martin A. Sullivan Sarah Karney, Jenny Nguyen, Jessica Pritchett, Kristen Rethy, Tom Rowe, Bill Rozday, Andy Sheets, Aimee Smith, Acquisitions Editor: Jasper Smith Taraneh Taghizadeh, Emily Vanderweide, Shannon Yen Associate Acquisitions Editor: Steph Tomlinson Production Director: Stephanie Wynn State Tax Today Editor: Henry J. Reske Production Manager: Michelle Smith Production Staff: Gary Aquino, José Carrasquillo, News Editors: Mark Abbott, Donnabel C. Blazejewski, Stephanie Hench Isabel Church, Paul Doster, Diana Duvall, Nikki Ebert, Alice Haar, Donna Katac, Kathryn Norseth, Soledad Olivera, Associate Editor: Jennifer Throm William Patterson, Nayareh Rooholamini, Debbie Sittnick, Faith Smalls, Kindra Thomas, Steve Torregrossa, Editorial Assistants: Marco Guzman, Melanie Simon, Mary-Elise Sheets Tiffany Volanakis CUSTOMER SERVICE SUBSCRIPTIONS, ADDRESS CHANGES: FREQUENCY: State Tax Notes is published 800.955.2444 Change of address notices, subscriptions, 51 weeks of the year by Tax Analysts. 703.533.4400* and requests for back issues should be Canada: 800.955.3444 sent to the Customer Service Department, DELIVERY: State Tax Notes is delivered U.K.: 800.89.8901 Tax Analysts, 400 S. 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