Multistate Income Tax

Overview

Course objective

The overriding course objective is for the participant to gain the skills necessary to understand and prepare multistate corporate returns. To that end, the course covers when a business must file a state’s return, modifications to taxable income, apportionment and allocation of state taxable income, and combined or “unitary” filing. The goal is to enable the participant to identify issues such that proper tax planning and preparation are ensured.

Introduction

Forty-seven states and the District of Columbia impose some type of income or franchise tax on corporations. Nevada, South Dakota, and Wyoming do not impose corporate income taxes, although South Dakota does have a franchise tax on financial institutions. Although they do not have a corporate income tax, Ohio, Texas, and Washington do have a gross receipts tax, called the Commercial Activity Tax (CAT) in Ohio, the Texas Margin Tax (TMT) in Texas, and the Business and Occupation Tax (B&O) in Washington. Most other states “piggyback” off federal taxable income. Unfortunately, while the concepts of dividing a company’s taxable income among the states in which it is doing business are few in number, the application and methods of applying those concepts are varied and often contradictory.

The state approach to taxing multinational corporations differs from the federal approach. The latter generally uses a “separate accounting” approach that requires that income be allocated to a specific jurisdiction ...