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MTC to Hold Public Hearings on Finnigan, P.L. 86-272 Projects

Posted on Apr. 24, 2020

The Multistate Tax Commission’s Executive Committee has voted for public hearings on the alternative Finnigan apportionment model language project and the draft revisions to guidance on P.L. 86-272 addressing internet transactions.

The committee voted April 23 to send the projects to separate public hearings but did not set a date for either hearing.

The project developing the Finnigan model language, which is based largely on Utah’s application of the apportionment approach, has been two years in the making. Michael Mazerov of the Center on Budget and Policy Priorities asked the MTC's Uniformity Committee in 2018 to consider providing Finnigan language to accompany the MTC’s model combined reporting statute for states choosing to adopt the approach. 

The draft Finnigan approach alone is 18 pages long. However, during the course of the project, MTC staff also produced a Joyce-Finnigan briefing book and a white paper on the mechanics for and limitations on the sharing of net operating losses among a combined group’s members under the two approaches. 

One day earlier, when states on the Uniformity Committee voted on whether to approve the Finnigan draft for the Executive Committee’s consideration, Montana voted no. Explanations for any state’s vote at this stage are not typically part of the roll call process. The Montana Department of Revenue repealed the state’s Joyce administrative rule and adopted a Finnigan approach effective January 1, 2018; the state's change in determining apportionable receipts from a unitary group was caused in part by the rise of economic presence issues.

After the U.S. Supreme Court decided South Dakota v. Wayfair Inc., the Uniformity Committee questioned whether the decision has implications for income tax nexus and for P.L. 86-272 purposes. A work group then spent a year deliberating whether and how to update the MTC’s national guidance on P.L. 86-272 to address internet activities. The draft revised statement on P.L. 86-272 includes a new section devoted to internet activities and 11 factual scenarios.

At the Uniformity Committee level, no state members voted against forwarding the P.L. 86-272 draft revisions to the Executive Committee, although Maryland, North Dakota, and Washington abstained from casting a vote. Washington had also abstained from voting on whether to forward the draft Finnigan language to the Executive Committee.

The Executive Committee also approved proposed bylaw changes that would allow the MTC to hold its annual business meeting “exclusively by telephone, videoconference, or similar technological means.” The MTC’s 2020 annual business meeting and conference is scheduled to take place July 27–30 in Little Rock, Arkansas, but there is time for the organization to take steps to make the proceedings virtual. 

Several states' representatives on the Executive Committee informally indicated that even if travel restrictions caused by the COVID-19 pandemic are lifted in time for the annual conference, their revenue agencies likely will not have the resources to send more than one or two people.

“I get a pretty strong sense that a technologically enabled meeting is going to be pretty important,” said MTC Executive Director Greg Matson.

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