Minimize Corporate Income Tax with Alternative Apportionment

A state’s “one size fits all” apportionment formula may not be equitable in determining which part of a multi-state company’s income should be considered for tax purposes.

If your company feels victimized by a three-factored, weighted apportionment formula that’s unfair to your company’s unique circumstances, your tax staff and attorneys should seek permission to use an alternative formula or separate accounting.

Recently, for example, a national company with no physical presence in Oregon successfully proved that the three-factor apportionment formula overemphasized its real estate and interest income -- and unconstitutionally subjected too much of its revenue to Oregon tax.

But making a compelling case that a state’s standard formula distorts the true impact of your sales, property or payroll requires careful strategizing. You must present concise data that supports your argument – and comply with each state’s specific procedures. Find out more about the ins and outs of this complex issue during this program.

Learn from our panel of veteran tax pros and tax counsel who have successfully petitioned for alternative apportionment formulas.

David Gutowski, Dechert Law, Philadelphia, is a member of the firm's state tax group. His practice includes sales and use and corporate tax appeals.

Brian Pedersen, Managing Director, Tax Advisory Services, Alvarez & Marsal, Seattle, has 20 years of experience advising clients on multi-state income tax, sales and use tax, and property tax matters.

Lee Ann Steinberg, Vice President of Tax, Pediatrix Medical Group, Sunrise, FL, has extensive experience in the area of corporate tax. One of Pediatrix's business units successfully appealed to use a different apportionment approach in Alaska, and she is working to apply similar methodology in other states.

Tracy Williams, Partner, Foley & Lardner, Chicago, focuses on the taxation of multistate and multinational businesses. She regularly advises publicly-traded clients on state and local tax matters involved in business combinations, acquisitions and dispositions.

• Which states are least likely to grant alternative apportionment requests?
• What key information should you gather for a distortion case?
• What is the most effective way to present your report?
• How do you ensure that you provide just the right amount of information – not too little or too much?
• What procedures do you have to follow before each request?
• How could your success in winning a new formula backfire?

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