The Erosion of P.L. 86-272 as States Follow the MTC Interpretation of Activities Establishing Income Tax Nexus

The Erosion of P.L. 86-272 as States Follow the MTC Interpretation of Activities Establishing Income Tax Nexus

For over 65 years, Public Law 86-272 has prevented states from imposing income tax nexus on out-of-state businesses whose activities are limited to the solicitation of orders for tangible personal property. Although e-commerce and other digital services postdate the federal law, Public Law 86-272 has remained the foundational rule for determining income tax nexus.

In recent years, however, the protections of Public Law 86-272 have eroded, as various states have attempted to assert income tax nexus on out-of-state taxpayers. The Multistate Tax Commission (MTC) has developed a model statement to provide guidance specifically for internet activities conducted by sellers. As states begin to adopt this interpretation, taxpayers are often surprised to discover they now have income tax nexus in a state where they have no physical presence.

Additionally, while not protected by Public Law 86-272, service providers have become a major target for states seeking to assert nexus on out-of-state taxpayers. States have enacted bright-line nexus standards and other economic nexus regulations to impose income tax nexus on service providers with no physical presence in the state.

LEARNING OBJECTIVES:
In this session, we will discuss the impact of the MTC’s revised statement regarding its interpretation of Public Law 86-272 as it relates to internet activities, as well as other state regulations—such as bright-line nexus—that impose income tax nexus on both sellers of tangible personal property and providers of services.

MEET THE SPEAKER:

Tim Clancy, CPA

State and Local Tax Services Practice Leader  
Windham Brannon

Tim serves as the State and Local Tax Services Practice Leader for Windham Brannon. With more than 30 years of experience in the state income and franchise tax field, he has assisted clients in multiple industries, ranging from large public companies to smaller, closely-held operations.

Tim has extensive experience in proactive state tax minimization services. His experience includes assisting taxpayers with not only the development and design of effective state tax planning but managing the implementation of the restructuring of the clients’ operations. He has also worked closely with clients providing consultative services that ensured the maintenance of the tax benefits derived. Tim also has significant experience managing state tax refund reviews; conducting due diligence reviews related to restructuring transactions, including acquisitions, divestitures and mergers; conducting nexus reviews; negotiating voluntary disclosure agreements to minimize liabilities and exposures; state income tax audits and outsourcing.

Tim’s experience encompasses various organizational structures including C corporations, S corporations, limited liability companies, and partnerships. He has provided services to a broad client base including taxpayers in the services, real estate, manufacturing, distribution, and retail industries.

Each year the Chair of The Georgia Society of CPAs (GSCPA) recognizes a distinguished member who has demonstrated dedicated service to GSCPA and the accounting profession. In 2021, Tim was presented with the 2021 Distinguished Member Award for his support and expertise for the GSCPA advocacy program as they navigated Georgia’s legislative session.

Tim graduated from the University of Akron in Ohio with a Masters in Taxation. He is a member of the American Institute of Certified Public Accountants, the Georgia Society of Certified Public Accounts and the Florida Institute of Certified Public Accountants.

CPE/CPD: 1 hour

Field of Study: Taxation
Program Level: Update
Format: Group Internet (Webinar)

AGN International – Americas, LLC is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org

Texas CPAs: AGN International – Americas, LLC is also registered with the Texas State Board of Public Accountancy. (Sponsor ID: 010173)