Controversy & Litigation
We find that we often can provide the greatest value by overseeing a client’s issues across multiple state and local jurisdictions. We are prepared to coordinate a client’s multistate audit, appeals and litigation strategy with an eye toward the varying positions taken by other jurisdictions, differences in each jurisdiction’s applicable tax laws and diverse administrative practices and forum considerations. Client issues with respect to which we have served as multistate counsel include business/nonbusiness income, apportionment methodologies, composition of the unitary group and nexus.
We typically handle our clients’ initial administrative appeals and any subsequent court actions. The fact that we are able to assist our clients at both levels ensures the best possible settlement. When our lawyers, who are prepared to take the case to the next level, make a strong argument at the administrative stage, the taxing authorities have every incentive to settle the case favorably at an early stage. If we are unable to resolve the matter favorably, we will pursue the appeal vigorously.
A sample list of our recent engagements demonstrates the breadth of our controversy practice by both the type of taxes and the jurisdictions:
Alabama – obtained a very favorable settlement for a large financial institution against an assessment of approximately $50 million for disallowance of their various intangible holding companies and their captive REIT.
California – successfully negotiated a favorable settlement with the FTB Settlement Bureau for a large manufacturer on refund claims filed with respect to inclusion of treasury function gross receipts in the taxpayer’s sales factor denominator.
Connecticut – successfully litigated an appeal before the Supreme Court involving the computation of the taxpayer’s intercompany business expense.
District of Columbia – litigated a tax refund claim in the D.C. Superior Court regarding the Office of Tax and Revenue’s characterization of gain from the sale and liquidation of a discrete line of business as business income subject to apportionment, instead of nonbusiness income subject to allocation outside of the District.
Georgia – briefed and argued dozens of cases at the Court of Appeals and Supreme Court involving income, sales and use, and property taxes. Handled dozens of trial court and administrative appeals involving a variety of issues—apportionment, business versus nonbusiness income, sales and use tax exemptions, property tax exemptions and valuation of property for property tax purposes.
Maryland – obtained a court of appeals decision reversing a trial court finding of use tax collection nexus based on agency. Also handled a matter before the Court of Appeals regarding whether a subsidiary had nexus based solely on its unitary relationship with an affiliate.
Massachusetts – appealed to the appellate tax board regarding the denial of interest expense, the applicability of the “throw-back” rule and the add-back of interest.
Minnesota – representing a consumer goods manufacturer and retailer in litigation before the Minnesota Tax Court that involves interpretation of whether certain activities constitute solicitation of sales and/or protected activities under P.L. 86-272.
Mississippi – serve as lead counsel in a case of first impression pending before the Mississippi Supreme Court. The Mississippi taxing authority deviated from the standard apportionment formula required by its regulation, and instead assessed the taxpayer for corporate income tax purposes using an "alternative apportionment" method. The taxpayer is asking the Supreme Court to hold that the Superior Court should have decided the case under the de novo standard of review, rather than an arbitrary and capricious standard, and should have placed the burden of proof on the state to sustain its invoking of alternative apportionment.
New York – litigated an appeal before the court of appeals regarding the add-back of interest for purposes of computing the corporate franchise tax. Represented numerous clients before the state and the city in forced combination appeals.
North Carolina – served as lead counsel in the United States Supreme Court case that found the state intangible tax to be unconstitutional, as well as in multiple other cases in the state Supreme Court, Court of Appeals and trial courts involving business versus non-business income and the assessment of intellectual property holding companies and captive REITs.
Pennsylvania – currently handling an appeal before the Pennsylvania Supreme Court regarding the applicability of Public Law 86-272, as well as multiple matters in the commonwealth court regarding factor apportionment, computation of gross receipts taxes, business versus nonbusiness income for income tax purposes, and the inclusion of income exempted by a treaty with a foreign country.
Tennessee – won major appellate cases for taxpayers regarding the definition under Tennessee law of taxable services in the information processing industry. We also handled an issue of first impression regarding the taxation of vendor tooling for property tax purposes.
Texas – appealed to the comptroller of public accounts regarding the reclassification of intercompany debt as equity and whether certain services should be included in the purchase price of data processing services for sales and use taxes.
In addition to the states mentioned above, we currently have pending or have concluded appeals or disputes in the following states: Colorado, Florida, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Michigan, Minnesota, New Hampshire, New Jersey, North Dakota, Ohio, Oregon, South Carolina, Utah, Vermont, Washington and Wisconsin.