Income and Franchise Tax Strategy and Planning

State Income and Franchise Tax – Finding Refunds

The Firm has generated millions in refunds for taxpayers in state income/franchise tax refund projects. The service is non-intrusive— we only need access to state income tax returns, and we normally conduct the work on your premises.

We analyze previously filed state income and franchise tax returns to determine if any taxes have been overpaid. We focus on apportionment, state tax credits, law changes, court cases and tax base issues. In addition to evaluating refund opportunities, we attempt to identify exposure areas. Our role is that of an advisor. We will only file refund claims that the client wishes to pursue after a full discussion of the attendant opportunities and risks. Our policy with respect to offsetting exposure sets the firm apart from some of the larger state and local tax firms in the United States. We note that some of these firms will insist in filing refund claims in the face of exposure, without taking any responsibility for the net negative impact of their work.

Our service includes all aspects of the refund process, from identifying the claim, providing technical authority for the claim, obtaining client authorization to file preparing the claim and following up with the state to ensure the refund is processed.

State Income & Franchise Tax Planning

It is our experience that corporate evolution often causes companies to have a sub-optimal structure from a state tax standpoint. It is the objective of state tax planning to create the optimal state tax structure that is consistent with business operations. One of the most significant changes in this regard is ASC 740-10. Most companies face a new landscape, where traditional “base shifting” – or planning for separate filing state liabilities through the use of intercompany charges such as royalties, management fees and interest – is no longer effective. Even if states have not initiated audits, ASC 740-10 typically requires the company to book a reserve for uncertainty – leaving little or no benefit for “traditional” planning structures.

Our goal with planning after ASC 740-10 is to create state tax planning that is “multitax/multistate,” i.e., plans that will generate savings of other taxes rather than just income tax and will generate savings from several different jurisdictions. Effective tax planning requires an in-depth understanding of a company’s tax posture. Accordingly, we normally propose to do a planning project in conjunction with a refund analysis since the analysis provides us the opportunity to closely examine a company’s state tax position.

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