MONDAY, OCTOBER 18, 2010
VOL. 1, NO. 10 FREE
SUTHERLAND ASBILL & BRENNAN LLP www.sutherland.com
“Shaking things
up in state and
local tax”
FORECAST
Political winds
shifting, leaving
the atmosphere
unsettled.
Sutherland
Events in Neighboring Southern States May
Foreshadow Changes to Come
Within the last month, Tennessee and
North Carolina have replaced the heads of
their respective Departments of Revenue.
On September 20, Charles Trost was sworn
in as the new Tennessee Commissioner of
Revenue. Mr. Trost was a partner at a Nash-
ville law rm, and takes over for outgoing
Commissioner Reagan Farr. In Tennessee,
the Commissioner is appointed by the gov-
ernor, and there are four months left in the
term of the outgoing governor.
Change is also occurring on the other side
of the Appalachian mountains, as Ken Lay
(no, not that Ken Lay, the other Ken Lay)
is stepping down as North Carolina Secre-
tary of Revenue. Governor Beverly Perdue
has appointed outgoing State Senator David
Hoyle as the replacement. Mr. Hoyle is the
former co-chairman of the North Carolina
Senate Finance Committee and has been a
signicant force in rewriting the tax laws of
that state. Governor Perdue’s term will end
in 2013.
These two changes may be the rst of
many changes for state taxing authorities.
In 2010, 37 states will elect governors. New
governors may bring new tax policy. Fur-
thermore, in many states, the governor ap-
points the head of the state’s taxing author-
ity, so there may be many new Secretaries,
Commissioners, and Directors of Revenue.
Taxpayers can expect to see some signicant
changes not only in state law and policy, but
also in enforcement and collection practices.
In what was beginning to seem
like an unlikely event, the Michigan
Legislature nally passed a nearly
year-old bill that will allow for a
limited amnesty period, from May
15, 2011, to June 30, 2011. While
the Senate passed the original
amnesty bill in 2009, there was no
further movement of the bill until
September 2010, when the House
and Senate nally agreed that the
bill could help close Michigan’s
$484 million budget gap—without
raising taxes. Governor Jennifer
Granholm approved Senate Bill 884
on October 5. The amnesty program
is projected to bring in $61.8 million
of additional revenue.
Unlike other recent amnesty
programs, Michigan’s program is
relatively simple. Taxpayers that
participate in the program will
receive a waiver of all penalties
(civil and criminal) for taxes paid
through the program. The Bill does
not state whether taxpayers will be
required to waive their right to seek
a refund of liabilities paid under
the program. Nor does it indicate
whether post-amnesty penalties
will apply to taxpayers who do
not participate in the program. In
order to qualify for Michigan’s
amnesty program, taxpayers
must le a written request for a
waiver on a form provided by the
Department, and meet the following
requirements:
• Have an outstanding Michigan
tax liability (except for taxes
due after the close of the 2009
calendar year). The Bill does not
specify the types of taxes eligible
for the amnesty program;
Michigan Gears Up for
2011 Amnesty
Continued on Page 2
Despite the overwhelming business
opposition to “throwout” sales factor ap-
portionment rules and New Jersey’s re-
cent repeal of its “throwout” rule, Maine is
now bucking the trend and adopting a new
“throwout” rule. Effective for 2010 and sub-
sequent years, Maine adopted the Finnigan
methodology for computing the sales fac-
tor for a combined return and to replace its
“throwback” rule with the “throwout” rule.
Under the new Finnigan methodology
of Code Me. R. 810 for determining the nu-
merator of the sales factor in a combined re-
port, “total sales of the taxpayer” in Maine
now includes sales of the taxpayer and sales
of any other entity included in a combined
return, regardless of whether those entities
themselves have nexus with Maine. The
adoption of Finnigan applies to both uni-
tary groups that have elected to le a single
combined return and those that le separate
returns utilizing combined apportionment.
If separate returns are led, each taxpayer’s
return will include in the numerator of the
sales factor its own Maine sourced sales as
well as a portion of the Maine sourced sales
of those entities in the unitary group that do
not have nexus with Maine.
The new “throwout” rule in Code Me.
R. 801 requires taxpayers to exclude from
the sales factor denominator those sales of
tangible personal property shipped to cus-
tomers within a state in which the taxpayer
is not taxable. Notably, sales are thrown out
of the sales factor regardless of whether they
are shipped or delivered from Maine. The
“throwout” rule applies in the context of
a combined return as well but – under the
Throw Out the Throwback: Maine
Replaces “Throwback” with “Throwout”
and Adopts Finnigan
Continued on Page 2
