Recent SALT Developments Rick Strohmaier, Partner Grant Thornton LLP

Recent SALT developments Income/franchise tax Sales tax nexus Unclaimed property

Income/franchise tax Apportionment Multistate Tax Commission adopted amendments to Model General Allocation and Apportionment Regulations Most changes reflect shift to market-based sourcing for sales other than sales of TPP Provides detailed sourcing rules Montana enacted legislation adopting market-based sourcing and throwout rule Tax years beginning after Dec. 31, 2017 Connecticut Department of Revenue Services issued guidance on single sales factor apportionment and market-based sourcing Detailed market-based sourcing provisions with many examples

Income/franchise tax Apportionment (cont'd) Tennessee enacted single sales factor apportionment election for certain manufacturing businesses Tax years beginning on or after Jan. 1, 2017 In Genentech, Massachusetts Supreme Judicial Court rejected claim that single sales factor apportionment formula for manufacturers violates Commerce Clause California FTB issued two Technical Advice Memoranda to clarify certain matters for apportioning taxpayers TAM 2017-02: Apportioning net recognized built-in gains for purposes of computing S corporation built-in gains tax TAM 2017-03: Application of IRC Sections 382 to 384 (corporate ownership changes) for California apportionment purposes

Income/franchise tax Tax reform Minnesota omnibus tax bill Financial institution apportionment rules apply to broader scope of entities Exemption for insurance companies narrowed Certain insurance companies must be included in combined reports New York budget bill closes tax loopholes, extends top personal income tax rate for two years Non-captive RIC/REIT provisions Treatment of disregarded entities for tax credit purposes Sales of partnership assets subject to IRC Section 1060 Kansas legislature, overriding a veto, enacted legislation that increases personal income tax rates and repeals exemption for non-wage business income

Sales tax nexus Indiana, North Dakota and Wyoming have recently enacted bright-line nexus (anti-Quill) laws for remote sellers Required to collect sales tax if more than $100,000 in sales or at least 200 separate transactions in state during a calendar year Indiana and Wyoming: Effective July 1, 2017 North Dakota: Contingent on U.S. Supreme Court overturning Quill In Wayfair, South Dakota circuit court held law challenging Quill's physical presence requirement is unconstitutional First time a court has considered constitutionality of legislation that disregards physical presence requirement for sales tax Massachusetts DOR has announced bright-line sales tax nexus standard for remote Internet vendors Effective July 1, 2017, over $500,000 in sales and at least 100 transactions in state

Sales tax nexus (cont'd) In American Catalog Mailers, Tennessee chancery court granted order prohibiting enforcement of bright-line nexus rule Out-of-state dealers with annual sales in state greater than $500,000 Minnesota omnibus tax bill extends nexus to marketplace providers Entities that facilitate sales for retailer by listing or advertising in any forum and collecting and transmitting payment to retailer Effective on earlier of (1) July 1, 2019; or (2) Quill overturned Colorado DOR entered into settlement agreement for remote seller notice and reporting requirements Non-collecting retailers must provide: (1) notice to purchasers they may be subject to sales tax; (2) annual summary of sales to purchasers; and (3) annual customer information report to DOR Enacted in 2010, but suspended due to protracted litigation Will begin enforcing July 1, 2017

Unclaimed property In February 2017, Delaware enacted historic overhaul of unclaimed property law Enacted partially in response to U.S. District Court ruling in Temple-Inland Certain audit procedures violated substantive due process Technique used to estimate holder's Delaware unclaimed property liability subjected taxpayer to liability imposed by multiple jurisdictions Adopted many concepts and provisions of 2016 Revised Uniform Unclaimed Property Act Certain holders under audit may be able to enter a voluntary disclosure program or expedite the audit

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Presenter Contact Information Rick Strohmaier, Tax Partner State and Local Tax Grant Thornton LLP 171 N. Clark Street, Suite 200 Chicago, IL 60601 D: (312) 602-8528 rick.strohmaier@us.gt.com

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