Tax News

CCH (cch.taxgroup.com) reports:

  The protections of P.L. 86-272 would be expanded and a physical presence nexus standard would be codified for business activity taxes, under legislation introduced in the U.S. House of Representatives on February 7, 2008. The Business Activity Tax Simplification Act of 2008 was introduced by Reps. Rick Boucher, D-Va., and Bob Goodlatte, R-Va., and referred to the Judiciary Committee. It is similar to legislation introduced in previous sessions of Congress. An identical bill (S. 1726) was introduced in the U.S. Senate on June 28, 2007. (TAXDAY, 2007/07/02, S.1) The Senate bill was referred to the Finance Committee, where it is still pending. No action has been taken on the Senate bill.

  Nexus standard: The legislation would prohibit a state from imposing a business activity tax (BAT) on any taxpayer, unless the taxpayer has a physical presence in the state for 15 days or more during the year. Presence in a state "to conduct limited or transient business activity" would not establish physical presence.

  P.L. 86-272: The legislation also would extend the protections of P.L. 86-272 to all business activity taxes, not just net income taxes as is currently the case. Furthermore, it would include in protected activity solicitations with respect to any sale or transaction approved and fulfilled outside the state, including transactions involving intangible property and services. Currently, P.L. 86-272 only applies to solicitations for sales of tangible personal property. Finally, protected activity would include furnishing information, covering events, or gathering information in a state when the information is used or disseminated from outside the state, and include activities related to the purchase of goods or services in a state if the final decision to purchase is made outside the state.

  Subscribers to CCH Tax Research NetWork can view the bill.

H.R. 5267, as introduced in the U.S. House of Representatives on February 7, 2008.