Legal Alert: MTC's Annual Meeting Update: Financial Institution Apportionment; Sales Tax Model Nexus Statute


During the Multistate Tax Commission’s (MTC) Annual Conference and Committee Meetings in San Diego on July 22, 2013, the Income and Franchise Tax Uniformity Subcommittee (I/F Subcommittee) discussed its effort to redesign the financial institution apportionment rules. In addition, the Sales and Use Tax Uniformity Subcommittee (S/U Subcommittee) will move forward in drafting a model nexus statute.

SINAA No More -

Since 2007, the MTC’s Financial Institutions Working Group has examined whether the MTC’s special financial institution apportionment regulations, which were adopted in 1994 in a cooperative effort between financial institutions, MTC member states and some non-MTC member states, are still the best method to apportion income. Under the existing MTC rules, loans are sourced for property factor purposes based on where the preponderance of the substantive contacts relating to a loan has occurred. This process considers five factors: solicitation, investigation, negotiation, approval and administration of the loan (the aptly named SINAA test). The Working Group considered the sourcing of loans and the viability of the SINAA test that is provided under existing MTC rules. The Working Group conveyed to the I/F Subcommittee that states believe the existing SINAA test—as well as the variations that have been proposed to the group — are too subjective to effectively administer. States expressed the view that there is not appropriate documentation available to audit compliance with the SINAA test and that auditors do not have the requisite knowledge to review compliance with it.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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