Overview
Diann Smith told a tax roundtable in Washington that, although formulary apportionment has often been proposed as a replacement for the arm’s-length standard to tax multinational company profits at the international level, the method is problematic because it uses a decades-old economic model to apportion income. For example, Ms. Smith said, most states generally use a property factor that includes only real and tangible property but not intangible property, despite its growing importance in today’s economy.
