State Tax

Income Taxes: The Distinction Between Business and Non-Business Income (Portfolio 1140)

  • This Portfolio examines the various ways in which states determine whether income is classified as business or nonbusiness income.

Description

Bloomberg Tax Portfolio, Income Taxes: The Distinction Between Business and Non-Business Income, examines the various ways in which states determine whether income is classified as business or non-business income.

Currently, a significant amount of disagreement exists between taxpayers and state taxing authorities over what income may be apportioned under the federal Constitution, and what income constitutes business income under the Uniform Division of Income for Tax Purposes Act (UDITPA). The U.S. Supreme Court’s decisions in ASARCO, Inc. v. Idaho State Tax Commission, Container Corp. of America v. Franchise Tax Board, and Allied–Signal, Inc. v. Director, Division of Taxation have made the constitutional issues more, rather than less uncertain. In addition, almost all of the states that have a corporate income or franchise tax or both, experience great difficulty in applying the UDITPA’s definition of business income or a similar variant thereof.

The Portfolio attempts to present the varied approaches used by the states in characterizing income as either business or non-business in an organized fashion.

The Portfolio also focuses on the U.S. Supreme Court’s decisions which apply to all taxing states, as well as the UDITPA definitions of apportionable (business) and allocable (non-business) income.

Table of Contents

1140.01. Introduction
1140.02. History Of The Distinction Between Business And Non-Business Income
1140.03. Constitutional Limitations On Apportionable Income
1140.04. Apportionable And Allocable Income
1140.05. Allocation Of Non-Business Income Under UDITPA and Non UDITPA Statutes
1140.06. The Characterization of Specific Types of Income
1140.07. Commercial Domicile
1140.08. Combined Versus Separate Returns

Crawford_Roy
Roy Crawford
Counsel
McDermott Will & Emery LLP
Russell Uzes
Russell Uzes
PricewaterhouseCoopers LLP
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