Tax Controversy

For more than 25 years, clients have trusted Alston & Bird to handle their state tax disputes and to litigate state tax cases across the country. It is one reason why we were named “Law Firm of the Year” in Tax Law in the 2020 edition of U.S. News – Best Lawyers “Best Law Firms.” We try tax cases on a regular, if not daily, basis. Many of the cases we have managed were favorably resolved by settlement without having to try the case, but we have and will litigate the case when necessary. We are well-versed in alternative dispute resolution, employing both mediation and arbitration when in the best interest of our client.

Our clients find that we often provide the greatest value by overseeing their issues across multiple state and local jurisdictions. We coordinate multistate audits, 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. We serve multistate counsel on issues of business/nonbusiness income, apportionment methodologies, composition of the unitary group, and nexus.

We assist at all levels and typically handle cases from initial administrative appeals through subsequent court actions. When our lawyers make a strong argument at the administrative stage, the taxing authorities have every incentive to settle the case. If we are unable to resolve the matter favorably, we vigorously pursue the appeal.

• We have handled hundreds of administrative appeals, trial actions, and appellate cases in more than 30 different states.
• We have handled more than 50 state tax trials and numerous matters in the appellate courts.
• Alabama – obtained a favorable settlement for a large financial institution against an assessment of approximately $50 million for disallowance of its various intangible holding companies and its captive REIT.
• California – 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 – litigated an appeal before the Connecticut 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 state 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 – serves 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 U.S. 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 nonbusiness income and the assessment of intellectual property holding companies and captive REITs.
• Pennsylvania – handling an appeal before the Pennsylvania Supreme Court regarding the applicability of P.L. 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.