Increasing Shareholder Value for ABC Company

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Overview

• Revenues Business Taxes
• Federal Legislative Activity
• State Legislative Activity

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State Year-End Balances As a Percentage of
General Fund Expenditures (Source NCSL)
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Percentage Change in FY 2006 Revenue
GrowthEstimated vs. Actual (Source NCSL)
49 states reporting.
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Projected Percentage Changes in Revenue and
Appropriations FY 2007 (Source NCSL)
49 states reporting.
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Net State Tax ChangesBy Year of Enactment,
1997-2006 (Source NCSL)
44 states reporting for FY 2006.
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Total Tax and Nontax Revenuesin billions of
dollars (Source NCSL)
44 states reporting for FY 2006.
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State Structural Deficits in FY 2007, FY 2008
and Beyond (Source NCSL)
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Longer-Term Fiscal Pressures

• K-12 education
• Medicaid
• Pension obligations OPEB
• Infrastructure

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Total State Local Business Taxes

• Nationwide, businesses paid 497 billion in
  state-local taxes in FY05
• Businesses paid 44 percent of total taxes
  collected by state and local governments
• State local business taxes up by 25 - over
  100 billion between FY02 and FY05

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Federal Legislation on State Taxation

• Authorizing State Tax Incentives after Cuno
• Nexus for Business Activity Taxes PL 86-272
• Streamlined Sales Tax Legislation
• Withholding for Nonresident Employees
• State Taxation of Retirement Income
• Internet, Telecom, Pipelines

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State Legislative Trends

• Gross Receipts Taxes
• Related Party Expense Addback (anti-PIC)
• Unitary Combined Reporting
• Sales Factor Trends
• Tax Shelter Disclosure
• SSTP, Property Tax Reform, Telecom Reform

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Gross Receipts Taxes Next Big Thing?

• History
• Washington
• West Virginia (repealed 1987)
• Indiana (repealed 2002)
• Today
• New Jersey (sunsets after 7/1/2006)
• Kentucky
• Ohio
• Texas

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Gross Receipts Taxes Next Big Thing?

• Tomorrow ?
• Illinois
• Michigan
• IN, WV, NC
• Concerns
• COST Policy Position Survey Results
• Joint COST / Tax Foundation Study

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Anti-PIC State of the States
WA
ME
ND
MT
OR
VT
MN
NH
ID
WI
SD
MA
MI
NY
WY
CT
RI
PA
IA
NE
NV
NJ
OH
IN
IL
UT
DE
CA
WV
CO
MD DC
VA
KS
MO
KY
NC
TN
OK
AZ
NM
SC
AR
GA
AL
MS
AK
TX
LA
FL
Key Not applicable (e.g., unitary or no corporate
income tax) Anti-PIC statute (SC-Geoffrey TN-No
addback if disclosed) Anti-PIC legislation
considered bin 2004 or 2005 or 2006 but not
enacted (as of September)
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Trends in Expense Addback Proposals

• Scope Royalties, interest, management fees?
• Safe Harbors
• Expansion of Sec. 482-type Powers
• MTC Model Language

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Unitary Combined Reporting

• Vermont
• Kentucky AMC Nexus Consolidated
• Ohio CAT Consolidated or Combined
• Texas Margins Tax Unitary Combined
• MTC Model Statute Tax Havens

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Increased Sales Factor Recent Activity
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Tax Shelter Disclosure

• Enactments (in order of adoption)
• California (2004)
• Illinois (2005)
• New York (2005)
• Connecticut (2005)
• Minnesota (2005)
• Massachusetts (2005)
• Utah (2006)
• West Virginia (2006)
• MTC Model Statute 51-State Spreadsheet

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Other Issues

• SSTP
• Property Tax Reform
• Real Property (ID, SC, TX)
• Business Personal Property (CT, KS, ME)
• TABOR
• Telecom Taxation

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Questions?

• Joseph R. Crosby
• 202/484-5225
• jcrosby_at_statetax.org