State Income Tax Reporting for Non-U.S. Entities

Post Wayfair, numerous states have enacted bright-line nexus requirements that are often satisfied when an express amount of sales or number of transactions is met or surpassed. Similarly, many states believe that nexus is created when a business is doing business or is deriving any income from the state. These thresholds usually replace the physical presence requirement in a state and are separate from applicable federal filing requirements.

U.S. income tax treaties with other countries do not govern state taxation. These agreements often incorporate permanent establishment guidelines to determine whether an entity is subject to federal tax. Some states do not tax treaty-protected income, other states clearly reserve the right to tax treaty-protected income, while still others do not directly address the application of U.S. income tax treaties to income in their state.

That being said, not knowing how a state's income and local tax rules apply to non-U.S. entities can result in substantial penalties for noncompliance. SALT professionals working with multinational companies need to understand how states tax foreign businesses.

Our panel will review state requirements for taxing inbound foreign income.

Listen as our panel of SALT experts explains state nexus determinations and the impact of U.S. income tax treaties on state income and reporting requirements, and provides examples of the application of these rules in specific states.

1. State taxation for non-U.S. corporations: introduction
2. Nexus determinations
3. Determining state taxable income
4. Effectively connected income
5. Income tax treaties
6. Filing methods
7. Structuring
8. State-specific guidelines
   1. California
   2. New York
   3. Pennsylvania
   4. Other states
9. Other considerations

The panel will review these and other critical issues:

• The impact of U.S. income tax treaties on state taxation of non-U.S. corporate income
• How state nexus rules are applied to taxation and reporting requirements of foreign inbound income
• The interaction of federal permanent establishment rules with state nexus requirements
• Application of P.L. 86-272 to non-U.S. entities
• Selecting appropriate filing methods including separate, unitary-combined and water's-edge requirements

Learning Objectives

After completing this course, you will be able to:

• Identify state nexus requirements in specific states
• Determine how state nexus requirements apply to income earned by non-U.S. corporations
• Decide how states embrace U.S. income tax treaties
• Ascertain key differences between state and federal taxation of non-U.S. entities

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).