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KPMG reports: Iowa, North Carolina, Pennsylvania

KPMG reports: Iowa, North Carolina, Pennsylvania

KPMG’s This Week in State Tax—produced weekly by KPMG’s State and Local Tax practice—focuses on recent state and local tax developments.

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  • Iowa: The Department of Revenue issued revised guidance reflecting recently enacted legislation adopting an exclusion for “global intangible low-taxed income” (GILTI). Under the revised law, corporate taxpayers are allowed an exclusion for the amount included in income under IRC section 951A net of the IRC section 250 deduction.  The exclusion applies retroactively to tax years beginning on or after January 1, 2019. Read an August 2020 report

  • North Carolina: The Department of Revenue announced a voluntary initiative to expedite the resolution of corporate intercompany pricing issues. The initiative begins August 1, 2020, and generally concludes by December 1, 2020. Taxpayers must agree in writing by September 15, 2020, to participate in the initiative and must provide all required transfer pricing, tax, and financial information and documentation to the Department of Revenue by October 16, 2020. After the Department of Revenue reviews the relevant documentation, it will propose an adjustment and the taxpayer will have 15 days to accept the proposal. Assuming the parties reach an agreement, the Department of Revenue will waive penalties for any agreed upon issue. Read an August 2020 report

  • Pennsylvania: A state appellate court upheld the Department of Revenue’s benefits-received, market-based interpretation of the cost of performance method for sourcing sales of services—a position that was in effect for the tax year at issue. The Department of Revenue and the taxpayer agreed, but the Commonwealth’s Attorney General argued for a different interpretation of the law and asserted that the Department of Revenue’s position was not entitled to deference. The appeals court agreed with the Department of Revenue, noting that because the statute was ambiguous, it needed to defer to the expertise of the Department of Revenue. Both parties stipulated that the Department of Revenue’s interpretation had been consistently enforced for many years. The court found that the legislature acquiesced to that interpretation when it amended the law in 2013 to clarify the application of the benefits-received method. In conclusion, the court determined that the Department of Revenue’s interpretation was consistent with the legislative intent of the statute, and the taxpayer was accordingly entitled to a refund. Read an August 2020 report

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