Client Services / Tax / State & Local Tax

State & Local Tax

McDermott Will & Emery has one of the largest and most diversified state and local tax practices in the United States. The unique strength of our State and Local Tax Group is a product of the depth and breadth of our technical abilities combined with the experience and ardor of our advocacy and negotiation skills. We serve the needs of our clients regardless of the jurisdiction, issue, or procedural stage involved. With offices located across the United States, our State and Local Tax Group is uniquely positioned to advise and represent multi-state businesses on virtually any state and local tax matter, including structural and transactional planning, administrative and judicial resolution of controversies, and legislative initiatives and lobbying.

Our principal focus is to identify and develop solutions for our client’s particular tax concerns. As one of the United States’ largest state and local tax practices, we strive to maintain a specific knowledge of changing state statutes, regulations and case law in order to enhance our ability to serve you.

Our resources are available in either a principal or supplemental capacity. We are prepared to work closely with your staff, general or business attorneys, accountants and other advisors in resolving your problems or in planning to minimize future state tax problems and liabilities. We are also able to draw upon our many state contacts to assist you quickly and reasonably.

Planning

Our State and Local Tax Group provides planning services relating to existing business relationships and practices (structural planning) as well as to specific, contemplated transactions (transactional planning).

Structural Planning

State and local taxes are a growing burden and concern to multi-state businesses. State and local tax laws and the revenue departments that enforce them are increasingly sophisticated and active in their efforts to raise additional revenue from taxpayers. At the same time, however, the very laws that are designed to generate state and local tax revenues often offer opportunities for clients seeking to minimize their state and local tax liabilities.

We assist clients in developing and implementing strategies to achieve their state and local tax minimization. By working with the client’s staff, our attorneys review business operations, legal entity structures, and reporting methods to determine where proactive changes can be made to better the client’s state and local tax situation.

Transactional Planning

One set of tax costs that is often overlooked when planning transactions, especially mergers and acquisitions that are tax-free for federal income tax purposes, is the imposition of state and local taxes (such as sales and real estate transfer taxes) on the transaction itself as well as the prospective taxability after the transaction is completed. While the transactional and prospective state and local tax costs of a contemplated transaction have the potential to be quite significant, the cost of restructuring a transaction to minimize or even avoid such tax burdens is often minimal.

We review proposed acquisitions and divestitures of assets, business operations and business entities to assist our clients in identifying and minimizing the state and local tax implications. Our attorneys can often suggest ways of restructuring contemplated acquisitions to minimize the state and local tax implications of the transaction without altering the intended federal income tax consequences or business purposes underlying the transaction.

Controversy

Our State and Local Tax Group provides controversy services to represent the interests of our clients against state and local taxing authorities by defending against improper assessments, prosecuting refund claims, and vindicating rights to classifications, elections and filing statuses.

Administrative Resolution

Most state and local tax controversies can be settled at the audit or administrative review level once the facts and circumstances of the client’s situation are effectively communicated to the taxing authority. Accordingly, we emphasize resolving controversies for our clients through negotiated settlements to minimize the costs to the client and the time necessary to resolve the matter.

We assist clients in the administrative resolution of state and local tax controversies by providing a thorough knowledge of the law and the positions and policies of the state and local taxing authorities, maintaining working relationships with key taxing authority decision-makers throughout the country, and possessing a well-known ability to litigate any unresolved issues successfully.

Litigation

While we emphasize negotiated settlements, we have successfully litigated a wide range of important tax questions in many states. Among the issues that our attorneys have litigated are unitary and worldwide combined reporting questions, constitutional limitations on state taxation of interstate commerce, the constitutionality of services taxes, the constitutionality of state tax incentives, the handling of net operating losses, and the proper treatment of foreign income. Our attorneys successfully represented the taxpayers in the landmark ASARCO, Woolworth, and Quill cases before the United States Supreme Court. Our attorneys have appeared before the courts or administrative agencies of every state.

Legislative Initiatives and Lobbying

Although traditional legal avenues, such as planning, settlement and litigation are often the best courses of action to achieve the desired results for our clients, in some instances these avenues are either unavailable or foreclosed under existing law or regulations. In those instances in which the desired result for a client or coalition of clients cannot be otherwise achieved, we offer legislative and lobbying initiatives to help achieve the desired results.

We offer various legislative services to our clients including monitoring of specific issues and legislative initiatives, preparing legislative proposals, drafting legislation, and communicating proposals to the legislative decision-makers. We have successfully presented our clients’ legislative agendas before various state legislatures and the U.S. Congress to obtain the results that only a change in law can provide.

We draw on our technical skills and political acumen and contacts to provide clients with the ability to have their interests represented in the legislative process. Sometimes the desired legislative result is the status quo and we provide our clients with timely information on new legislative developments as well as the highest level of advocacy to prevent hostile legislative initiatives from being passed.

Substantive Areas

Our State and Local Tax Group represents clients on diverse issues ranging from corporate income tax nexus and apportionment to minimizing real estate transfer taxes. We provide our clients with resolutions to both commonly occurring issues, such as those arising from nexus surveys and highly technical and specialized issues, such as those involving the taxability of the insurance, banking and utility industries.

Corporate Income/Franchise Taxes

Among the many areas in which we have successfully resolved issues for our clients are taxable nexus, apportionment of multi-state income, combined reporting, alternatives to the general business corporation classification, the application of Public Law 86-272 and defining the boundaries of a unitary business.

Sales and Use Taxes

We regularly advise clients on issues including taxable nexus; the appropriate characterization of various goods, services and transactions; the entitlement to statutory exemptions; and the entitlement to tax-exempt status.

Insurance Premium Taxes

We have extensive experience advising insurance companies on state premium tax issues and representing those companies before state authorities. We address all aspects of premium taxation including the proper computation of the premium tax base, retaliatory taxes, taxation of premiums from annuities, surplus lines and reinsurance arrangements, and questions regarding the scope of state "in lieu" provisions.

Other Taxes

Some of the less common areas in which we have successfully resolved issues for our clients involve real estate transfer taxes, mortgage recording taxes, commercial rent and occupancy taxes, utility and telecommunications taxes, document and stamp taxes, intangible personal property taxes, personal income taxes, tobacco taxes, fuel use taxes, liquor taxes, hotel occupancy taxes and highway use taxes.

e-business

In the context of internet and e-commerce tax issues, our tax attorneys are acknowledged and respected across the United States as being on the cutting edge. In large part, this is due to a number of our tax attorneys having extensive experience in state and local tax matters specifically relating to telecommunications, direct marketing, financial services and intellectual property. Our Tax Department has been providing substantial guidance and counsel to numerous clients in connection with pending and potential e-business tax issues arising under current law. In addition, we have been extremely active in attempting to shape future law through work on the National Tax Association’s Electronic Commerce Tax Project’s Steering Committee, dedicated participation in the activities of the Federal Advisory Commission on Electronic Commerce, active involvement with the Streamlined Sales Tax Project, and representation of a coalition of major corporations in an effort to ensure that the United States Congress considers certain important aspects of tax policy when it determines how e-business transactions and businesses should be taxed. We have also advised both employers and employees in the different nexus and allocation issues presented by telecommuting.

Unclaimed Property

States are increasingly aggressive in attempting to identify and enforce the escheat of amounts due but unpaid to suppliers, customers and employees. We have assisted clients on unclaimed property matters throughout the United States, including by representation at audit, identification of the types of property that may be subject to escheat and structuring of business relationships to reduce the significance of future unclaimed property issues.

Contacts

Tax Client Services

McDermott Will & Emery

McDermott Will and Emery