Stacey Roberts with TaxOps and Michael Cataldo with Cataldo Tax Law present business vs. nonbusiness income for purposes of determining multistate allocation vs. apportionment, CPE sponsored by Strafford.
January 19, 2023 | 11:00 – 12:50 am MT | 1:00 – 2:50 pm ET
A live 110-minute CPE webinar with interactive Q&A
Learn the latest state sales tax strategies, thresholds, and compliance obligations in response to the U.S. Supreme Court condoning a state’s right to collect tax on remote sellers in South Dakota v. Wayfair Inc. Listen as our panel of sales tax experts explains what triggers nexus, the interplay of income and sales tax, and managing sales tax audits post-Wayfair.
To minimize their company’s multistate tax liabilities, tax advisers and professionals should identify opportunities to allocate nonbusiness income to lower-tax jurisdictions rather than apportion income among the states in which the firm does business.
Many state statutes require companies to allocate nonbusiness income to the company’s domicile. However, some states apply different definitions of nonbusiness income.
The definition of business income is generally based on two tests: the transactional test and the functional test. Business income includes revenue derived from the regular course of the taxpayer’s trade or business and income from property integral to the taxpayer’s regular business or trade. Nonbusiness income is generally all other income.
There is significant disagreement among taxpayers and state taxing authorities on what constitutes allocable income. Tax advisers must grasp and apply the relevant tests to avoid penalties and identify opportunities to mitigate state income tax.
Michael J. Cataldo, Shareholder at Cataldo Tax Law and Stacey L. Roberts, CPA, State and Local Tax Director at TaxOps, will provide SALT tax advisers with a thorough and practical guide to distinguishing between business and nonbusiness income for purposes of determining multistate allocation vs. apportionment. The panel will discuss distinctions between business income which must be apportioned and allocable (nonbusiness) income, detail states that vary from general rules, demonstrate various tests for distinguishing income, and outline possible tax advantages to structuring nonbusiness income by domicile.
- Allocation vs. apportionment principles
- Determining business income (Transactional test, Functional test, Multistate Tax Commission definition, Other tests and standards)
- State tests
- Characterization of specific types of income
- Domicile questions
The panel will discuss these and other issues:
- Dividend, interest, capital gains, and royalty income as business vs. nonbusiness income
- Income from partnership interests owned by a corporation
- Classification of rents
- State trends in following or deviating from UDITPA principles
About the Presenters
Stacey L. Roberts, CPA
State and Local Tax Director
Ms. Roberts has been making SALT less taxing for thousands of businesses over the last 25 years. As a director of the SALTovation team at TaxOps, she is at the table-and in the weeds-helping guide dynamic businesses through compliance and strategic planning that minimizes risk and strengthens tax positions. She entered accounting with Andersen Worldwide/Andersen LLP, where she honed her state and local tax experience. She added stints at KPMG and Deloitte before moving in-house with a Fortune 500 company, managing State and Local Tax Administration. Before joining TaxOps, she led the national SALT practice at a regional firm. Stacey is a member of the Colorado Legislative Task Force Concerning Tax Policy and a frequent speaker and author on SALT issues for industry and professional organizations, including the Journal of State Taxation, Strafford Publishing, and more.
Michael J. Cataldo
Cataldo Tax Law
Mr. Cataldo represents corporate and individual clients in state and local tax controversies across the country during audits, administrative appeals, litigation and settlement. He also provides state and local tax planning and transactional advice. His practice focuses primarily on state and local corporate income and franchise tax, sales and use tax, real property transfer tax, personal income tax and gross receipts tax imposed by jurisdictions throughout the country. He regularly represents and advises clients from a broad range of industries on issues such as nexus, apportionment, business/non-business income, unitary combined reporting, and the taxability and sourcing of transactions for sales and use taxes.