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H.R.1439 - Business Activity Tax Simplification Act of 2011
To regulate certain State taxation of interstate commerce, and for other purposes.
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Mr. GOODLATTE (for himself, Mr. SCOTT of Virginia, Mr. DUNCAN of South Carolina, and Ms. JACKSON LEE of Texas) introduced the following bill; which was referred to the Committee on the JudiciaryCommentsClose CommentsPermalink
Additional sponsors: Mr. THOMPSON of Mississippi, Mr. DUNCAN of Tennessee, Mr. HASTINGS of Florida, Mr. JOHNSON of Georgia, Mr. COBLE, Mr. JORDAN, Mr. SENSENBRENNER, Mr. CHABOT, and Mr. DANIEL E. LUNGREN of CaliforniaCommentsClose CommentsPermalink
SECTION 1. SHORT TITLE.
SEC. 2. MODERNIZATION OF PUBLIC LAW 86-272.
(a) Solicitations With Respect to Sales and Transactions of Other Than Tangible Personal Property- Section 101 of the Act entitled ‘An Act relating to the power of the States to impose net income taxes on income derived from interstate commerce, and authorizing studies by congressional committees of matters pertaining thereto’, approved September 14, 1959 (
(2) in subsection (a)(1), by striking ‘by such person’ and all that follows and inserting ‘(which are sent outside the State for approval or rejection) or customers by such person, or his representative, in such State for sales or transactions, which are--CommentsClose CommentsPermalink
‘(3) the furnishing of information to customers or affiliates in such State, or the coverage of events or other gathering of information in such State by such person, or his representative, which information is used or disseminated from a point outside the State; andCommentsClose CommentsPermalink
‘(4) those business activities directly related to such person’s potential or actual purchase of goods or services within the State if the final decision to purchase is made outside the State.’;CommentsClose CommentsPermalink
‘(c) For purposes of subsection (a) of this section, a person shall not be considered to have engaged in business activities within a State during any taxable year merely--CommentsClose CommentsPermalink
‘(1) by reason of sales or transactions in such State, the solicitation of orders for sales or transactions in such State, the furnishing of information to customers or affiliates in such State, or the coverage of events or other gathering of information in such State, on behalf of such person by one or more independent contractors;CommentsClose CommentsPermalink
‘(2) by reason of the maintenance of an office in such State by one or more independent contractors whose activities on behalf of such person in such State are limited to making sales or fulfilling transactions, soliciting order for sales or transactions, the furnishing of information to customers or affiliates, and/or the coverage of events or other gathering of information; orCommentsClose CommentsPermalink
‘(3) by reason of the furnishing of information to an independent contractor by such person ancillary to the solicitation of orders or transactions by the independent contractor on behalf of such person.’; andCommentsClose CommentsPermalink
(B) by striking ‘the sale of, tangible personal property’ and inserting ‘a sale or transaction, furnishing information, or covering events, or otherwise gathering information’.CommentsClose CommentsPermalink
(b) Application of Prohibitions to Other Business Activity Taxes- Title I of the Act entitled ‘An Act relating to the power of the States to impose net income taxes on income derived from interstate commerce, and authorizing studies by congressional committees of matters pertaining thereto’, approved September 14, 1959 (
‘Sec. 105. For taxable periods beginning on or after January 1, 2012, the prohibitions of section 101 that apply with respect to net income taxes shall also apply with respect to each other business activity tax, as defined in section 5(a)(2) of the Business Activity Tax Simplification Act of 2011. A State or political subdivision thereof may not assess or collect any tax which by reason of this section the State or political subdivision may not impose.’.CommentsClose CommentsPermalink
SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE AND LOCAL NET INCOME TAXES AND OTHER BUSINESS ACTIVITY TAXES.
(a) In General- No taxing authority of a State shall have power to impose, assess, or collect a net income tax or other business activity tax on any person relating to such person’s activities in interstate commerce unless such person has a physical presence in the State during the taxable period with respect to which the tax is imposed.CommentsClose CommentsPermalink
(1) IN GENERAL- For purposes of subsection (a), a person has a physical presence in a State only if such person’s business activities in the State include any of the following during such person’s taxable year:CommentsClose CommentsPermalink
(B) Using the services of an agent (excluding an employee) to establish or maintain the market in the State, if such agent does not perform business services in the State for any other person during such taxable year.CommentsClose CommentsPermalink
(c) Taxable Periods Not Consisting of a Year- If the taxable period for which the tax is imposed is not a year, then any requirements expressed in days for establishing physical presence under this Act shall be adjusted pro rata accordingly.CommentsClose CommentsPermalink
(d) Minimum Jurisdictional Standard- This section provides for minimum jurisdictional standards and shall not be construed to modify, affect, or supersede the authority of a State or any other provision of Federal law allowing persons to conduct greater activities without the imposition of tax jurisdiction.CommentsClose CommentsPermalink
(2) TAXATION OF PARTNERS AND SIMILAR PERSONS- This section shall not be construed to modify or affect any State business activity tax liability of an owner or beneficiary of an entity that is a partnership, an S corporation (as defined in section 1361 of the Internal Revenue Code of 1986), a limited liability company (classified as a partnership for Federal income tax purposes), a trust, an estate, or any other similar entity, if the entity has a physical presence in the State in which the tax is imposed.CommentsClose CommentsPermalink
(3) PRESERVATION OF AUTHORITY- This section shall not be construed to modify, affect, or supersede the authority of a State to enact a law and bring an enforcement action under such law or existing law against a person or persons or an entity or entities, including but not limited to related persons or entities, that is or are engaged in an illegal activity, a sham transaction, or an actual abuse in its or their business activities in order to ensure a proper reflection of its or their tax liabilities, nor shall it supersede the authority of a State to require combined reporting.CommentsClose CommentsPermalink
SEC. 4. GROUP RETURNS.
If, in computing the net income tax or other business activity tax liability of a person for a taxable year, the net income or other economic results of affiliated persons is taken into account, the portion of such combined or consolidated net income or other economic results that may be subject to tax by the State shall be computed using the methodology that is generally applicable to businesses conducting similar business activities and, if that generally applicable methodology employs an apportionment formula, the denominator or denominators of that formula shall include the aggregate factors of all persons whose net income or other economic results are included in such combined or consolidated net income or other economic results and the numerator or numerators shall include the factors attributable to the state of only those persons that are themselves subject to taxation by the State pursuant to the provisions of this Act and subject to all other legal constraints on State taxation of interstate or foreign commerce.CommentsClose CommentsPermalink
SEC. 5. DEFINITIONS AND EFFECTIVE DATE.
(1) NET INCOME TAX- The term ‘net income tax’ has the meaning given that term for the purposes of the Act entitled ‘An Act relating to the power of the States to impose net income taxes on income derived from interstate commerce, and authorizing studies by congressional committees of matters pertaining thereto’, approved September 14, 1959 (
(A) IN GENERAL- The term ‘other business activity tax’ means any tax in the nature of a net income tax or tax measured by the amount of, or economic results of, business or related activity conducted in the State.CommentsClose CommentsPermalink
(B) EXCLUSION- The term ‘other business activity tax’ does not include a sales tax, a use tax, or a similar transaction tax, imposed on the sale or acquisition of goods or services, whether or not denominated a tax imposed on the privilege of doing business.CommentsClose CommentsPermalink
(3) PERSON- The term ‘person’ has the meaning given such term by section 1 of title 1 of the United States Code. Each corporation that is a member of a group of affiliated corporations, whether unitary or not, is itself a separate ‘person.’CommentsClose CommentsPermalink
(4) STATE- The term ‘State’ means any of the several States, the District of Columbia, or any territory or possession of the United States, or any political subdivision of any of the foregoing.CommentsClose CommentsPermalink
(5) TANGIBLE PERSONAL PROPERTY- For purposes of section 3(b)(1)(C), the leasing or owning of tangible personal property does not include the leasing or licensing of computer software.CommentsClose CommentsPermalink