BarbriSFCourseDetails

Course Details

This course 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, and demonstrate various tests for distinguishing income.

Faculty

Description

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.

Listen as our panel provides a thorough and practical guide to identifying allocable nonbusiness income for state income tax purposes.

Outline

  1. Allocation vs. apportionment principles
  2. Determining business income
    • Transactional test
    • Functional test
    • Multistate Tax Commission definition
    • Other tests and standards
  3. State tests
  4. Characterization of specific types of income
  5. Domicile questions

Benefits

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

NASBA Details

Learning Objectives

After completing this course, you will be able to:

  • Recognize income scenarios that can be classified as nonbusiness and allocated rather than apportioned
  • Determine how to apply the transactional and the functional tests to determine whether income can be treated as nonbusiness
  • Identify which states follow MTC or other standards
  • Determine tax positions to allocate income as nonbusiness

Strafford Publications, Inc. 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 Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.