In recent years, as state budgets have rapidly expanded and traditional revenue sources have withered, taxpayers have encountered aggressive enforcement of the income tax laws at the state level. Whether a state implements a corporate income tax, franchise tax, business and occupation tax or commercial activity tax, and whether the tax is based on gross receipts or net income, Faegre Baker Daniels professionals are on the forefront of state tax planning and controversy.
State Income Tax Planning
State income tax planning requires a thorough knowledge of the variations in nexus standards, apportionment and allocation factors, and the distinction between business and nonbusiness income. Our tax attorneys have extensive experience in state income tax planning and minimization for multistate and multinational companies. Relying on our knowledge of the similarities and differences between various state tax structures, we advise clients on the relocation or expansion of their business to another state. We counsel our clients on the tax-efficient structuring of potential mergers, acquisitions and dispositions, and we walk our clients through the tax implications of bankruptcies and reorganizations. Because our attorneys engage in both tax planning and litigation, we are able to anticipate tax issues before they arise.
State Income Tax Controversy & Litigation
Our tax professionals bring decades of skillful advocacy to every litigation scenario. We have represented clients at every procedural stage, from audits and administrative appeals to litigation before tax, appellate and supreme courts. Regardless of the jurisdiction, issue or procedural stage, our enthusiasm and expertise help our clients favorably resolve their tax disputes.
Several of our attorneys have more than 30 years of experience advocating for clients on the state level. As a result of that long history, our attorneys have successfully litigated a broad array of issues, including:
- One of the only taxpayer victories in the nation against state application of the economic substance doctrine and rejecting the notion that a taxpayer's intent in a transaction supersedes statutory language.
- A ruling that a divestiture of an entire division was nonbusiness income because the sale was for the benefit of competitors, and thus the sale did not constitute an integral part of the taxpayer's business.
- A ruling that a taxpayer was entitled to exclude its distributive share of a wholly-owned foreign subsidiary's net income because the subsidiary did not become a domestic entity when it elected to be classified as a partnership for federal income tax purposes.
- A ruling that the Indiana Department of Revenue could not mandate the filing of a combined return without first using all other available methods to fairly reflect income derived from Indiana sources.