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Leighanne Scott Weighs in on the Top State & Local Tax Cases of 2019

December 20, 2019, Law360

From the U.S. Supreme Court finding that a trust lacked sufficient contacts to be taxed by North Carolina, to a California appellate court upholding the state’s combined reporting regime, 2019 was a busy year for state and local tax cases.

Here, Law360 looks at the most influential state and local tax cases from 2019 and their impact going into the new year.

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Deere & Company v. Wisconsin Department of Revenue

Wisconsin’s Tax Appeals Commission handed Deere & Co. a win by determining in August that the company is entitled to a dividends-received deduction from a Luxembourg affiliate that elected to be treated as a corporation for federal tax purposes.

The Wisconsin Revenue Department had determined franchise tax was due as a result of the distributions because, among other arguments, the department said the Luxembourg company wasn't a corporation, meaning the dividends-received deduction did not apply to its distributions. The Tax Appeals Commission, however, noted the Wisconsin definition of a corporation includes entities treated as a corporation for tax purposes under federal law.

. . . .

Leighanne Scott, leader of Caplin & Drysdale Chtd.’s state and local tax practice group, said the case highlighted how states have faced challenges in enforcing rules typically drafted when the corporate form was more common, as opposed to the partnership structures more widely used now. Scott added that the department has appealed to the state’s circuit court and had sent notices to other taxpayers with facts similar to Deere & Co.

“Given that the favorable ruling by the commission had larger consequences outside of Deere for the department, this was likely a contributing factor in its decision to appeal,” Scott said, adding that until the circuit court’s decision, expected in 2020, comes down, the long-term impact of the case is unknown.

For the full article, please visit Law360.

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