Sutherland Salt Shaker -- Vol. 2, No. 9, November 2011

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In This Issue:

Waiving the Baton: Louisiana Court of Appeal Rules No Nexus for Passive Limited Partner; Virginia Taxpayer Fails to Follow Procedure: Must Add Back (At Least for Now); Indiana Combination Is Last Resort; Massachusetts Appellate Tax Board Applies Wicked Mad Scrutiny to Taxpayer’s Intercompany Interest Expense; These Cases Tried to Go to the U.S. Supreme Court, But the Court Said “No…No…Oh?”; Who Lost the Remote?: Virginia Disallowed Losses and Combined Reporting; MORE “and” LESS Unclaimed Property: North Carolina’s Grab for More Information and Delaware’s Shrinking Look Back Period; Nexus? Who said Anything about Nexus?: A Summary of the Federal Nexus Bills; Giving Taxpayers the Business on the FTB’s Application of the Factor-Presence Nexus Provision; and New York Attempts to Take Taxpayer Out Behind the (Kell)Woodshed.

Excerpt from Waiving the Baton: Louisiana Court of Appeal Rules No

Nexus for Passive Limited Partner:

The Louisiana Court of Appeal recently ruled that a corporation’s passive ownership interest in a limited partnership doing business in Louisiana is not sufficient to create Louisiana corporate franchise tax nexus. Utelcom, Inc. v. Bridges, Dkt. No. 535,407 (Division “D”, Ct. App., First Dist., Sept. 12, 2011). The court held that because capital contributed to a limited partnership is no longer owned or used by the contributing partner, an ownership interest in the partnership does not create franchise tax nexus.

The Louisiana Department of Revenue issued a corporate franchise tax assessment against two out-of-state corporate limited partners. The limited partnership was engaged in the business of long-distance telecommunications in Louisiana. The Department asserted that the corporations were subject to tax because they acted in unison with the general partner to conduct business through the limited partners’ capital contributions. The trial court upheld the assessment based on a Louisiana regulation, which provided that mere ownership of property in Louisiana through a partnership creates franchise tax nexus over an out-of-state corporation.

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