NEW YORK, NY — Arthur Rosen, a tax partner in McDermott Will & Emery's New York office, will testify before the House Judiciary Committee's Subcommittee on Commercial and Administrative Law on Thursday, May 13. Mr. Rosen will appear as an expert on state and local taxation on behalf of the Coalition for Rational and Fair Taxation (CRAFT) during the subcommittee's legislative hearing on H.R. 3220, the Business Activity Tax Simplification Act. CRAFT is a diverse coalition of some of America’s major corporations involved in interstate commerce, including technology companies, broadcasters, interstate direct retailers, publishers, financial services businesses, traditional manufacturers, and multistate entertainment and service businesses.
H.R. 3220 is important federal legislation that would require businesses to have a physical presence in a state before that state could impose direct taxes on the business. The bill would also modernize the current federal jurisdictional standard (P.L. 86-272).
"The underlying principle of this legislation is that states and localities that provide benefits and protections to a business, like education, roads, fire and police protection, water, sewer, etc., should be the ones who receive the benefit of that business' taxes, rather than a remote state that provides no services to the business," commented Mr. Rosen. "By imposing a physical presence standard for business activity taxes, H.R. 3220 ensures that state tax impositions are appropriately borne only by those businesses that receive such benefits and protection from the taxing state."
Under H.R. 3220, physical presence is defined as leasing or owning real or tangible property in the state or assigning one or more employees in the state for more than 21 days, with exceptions for certain qualitatively de minimis activities and property. This test basically codifies the majority view among state courts and tribunals that the Constitution requires a business to have a physical presence in a state before that business can be subjected to a state's business activity tax.
Mr. Rosen focuses his practice on tax planning and litigation relating to state and local tax matters for corporations, partnerships and individuals. He was formerly the deputy counsel of the New York State Department of Taxation and Finance as well as counsel to the Governor's Temporary Sales Tax Commission and tax counsel to the New York State Senate Tax Committee. Mr. Rosen is a fellow of the American College of Tax Counsel. In the area of lobbying, he has represented various business interests in the context of state and local tax legislation as well as tax regulations and tax policy.