The Multistate Tax Commission (MTC) held its spring meetings in Albuquerque, New Mexico on April 19 through 22. The Uniformity Committee meeting took place on April 20 – some highlights from the meeting are included below.  

• General Uniformity Updates: MTC staff acknowledged the recent attention given to the MTC’s updated statement on P.L. 86-272. Specifically, staff cited to various negative comments in the tax press regarding the breadth of the MTC’s updated statement and the impact it was likely to have on small businesses. MCT staff sought to remind attendees that the MTC has had a factor present standard model for over two decades, which states could use to protect small businesses that may be negatively impacted by the updated statement.  
• Updates on Digital Goods Project: MTC staff noted they have engaged (and continue to engage) in discussions with government, business representatives, and the Streamlined Sales Tax Board to obtain feedback on the Digital Goods Project. Next steps for the Digital Goods Project include:
  • Finalize stakeholder discussions;
  • Outline issues for a whitepaper as per Committee motion;
  • Solicit potential workgroup members after the August meeting;
  • Continue monitoring Streamlined’s activities;
  • Continue developing information and resources on project page;
  • Survey the market, including tracking products and their evolution and noting ways in which products may be defined;
  • Summarize and analyze policy considerations;
  • Distill and prioritize issues; and,
  • Consider the particular problems of a product-by-product approach compared to a more general imposition with related policy-based exemptions.
• State Roundtable: The states in attendance provided updates on significant legislative and regulatory issues. Of note was California’s update, during which Laurie McElhatton (Franchise Tax Board (FTB)) discussed the state’s recent release of TAM 2022-01. TAM 2022-1 “updates” California’s guidance regarding P.L 87-272, incorporating the MTC’s updated P.L. 86-272 statement. McElhatton noted the FTB also intends to amend Publication 1050 to include the MTC’s entire updated statement, and suggested that other states should consider following the FTB’s path of adopting the MTC’s P.L. 86-272 guidance. 
• New Business: During the last session of the day, Eversheds Sutherland partner Nikki Dobay led an industry panel discussion, which requested the Uniformity Committee to engage in a project focused on the creation of a universal power of attorney (POA) form.  The request was well received – MTC staff committed to working with industry representatives to research state POA requirements. In addition, MTC staff emphasized the importance of reviewing its model statues and regulations, noting that it would utilize the Standing Subcommittee to monitor and vet review of models going forward.
• Partnership Updates: The Committee focused a significant amount of time on the taxation of partnerships. Specifically, the MTC discussed centralized partnership audits, state pass through entity taxation, and its own project on state taxation of partnerships. 
  • MTC CPAR Model. MTC staff estimates that roughly half of the states with income taxes have adopted the MTC’s centralized partnership audit regime (CPAR) model legislation.
  • Pass Through Entity Taxes. MTC staff noted that the widespread adoption of state pass through entity tax schemes (i.e., the SALT cap workaround) was one of the biggest state and local tax topics in 2021, and acknowledged the lack of uniformity amongst the states in this area. Uncertainty surrounding pass through entity state taxation is apparent to practitioners. As an example, it is unclear whether states will provide a personal income tax credit to offset taxes paid by pass through entity owners to other states.
  • MTC Project on State Partnership Taxation. The presentation started with an update on pass-through entity taxation at the federal level by Richard Prisinzan (Director of Policy (Penn Wharton Budget Model)). MTC Staff also discussed the development of general Subchapter K training sessions. During the meeting, MTC Staff communicated that proposed next steps include finalizing the white paper, and drafting a model rule for sourcing income of investment partnerships (particularly based on Alabama’s scheme).

Eversheds Sutherland attorneys will continue to attend all meetings and provide timely updates.

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