Reed Smith's State Tax Group’s California team consists of lawyers engaged in cutting-edge cases involving apportionment (such as alternative apportionment issues and cost of performance), the treatment of dividends, the taxation of REITs, the taxation of banks and financial corporations, and the calculation and preservation of various deductions and credits, such as Enterprise Zone (EZ) credits and research credits. Our California attorneys are also involved in the regulatory process, often commenting on proposed regulations and providing testimony concerning regulatory and policy efforts.
On the sales tax side, our California lawyers are engaged in litigation involving the taxation of software and bundled transactions, and also sales tax issues that affect particular industries, such as technology and sharing economy companies. In addition, our team is currently representing several major retailers that have been targeted by plaintiffs' lawyers in putative class actions in connection with various issues involving sales tax. For these matters, we combine our well-known state tax technical skills and relationships with our litigation skills and resources. Finally, throughout the state, we are involved in local tax issues, such as transfer tax, property tax, and business taxes.
Here is a brief summary of a few of the California issues and opportunities we are working on for our clients:
Foreign Dividends
Water’s-edge filers are entitled to eliminate dividends, preserve interest deductions, and get factor representation for dividends received from foreign subsidiaries.
Sales Tax on Software
Companies that paid sales or use tax on purchases of software may be entitled to a refund of tax they paid—even if the software is canned and even if it was delivered on tangible media.
Apportionment
Our lawyers have experience with California’s written and unwritten apportionment rules and policies. Our experience ranges from sourcing receipts from services; excluding property from the property factor; and developing creative approaches to apportionment under section 25137, which is California’s version of UDITPA § 18.
Enterprise Zones
Our lawyers have experience unlocking the benefit of EZ credits. For example, we are working on projects to aggregate all of our client’s subsidiaries into a single “taxpayer,” and to aggregate all of our client’s zones into a single zone. This avoids trapping EZ credits in silos.
Net Operating Losses (NOLs)
Our lawyers have experience maximizing the value of tax attributes, such as net operating losses. For example, we are working with clients to extend by four years NOLs that were suspended in 2008-2011—setting aside the artificial and extra-statutory limitations under Legal Ruling 2011-04.
California State Tax Intelligence
As part of our full service for clients with California tax issues, we have a unique, fully searchable database of unpublished authority, including decisions of the California State Board of Equalization, unpublished trial court decisions, and unpublished legal briefs. We also maintain regular and direct lines of communication with high-level state officials involved in all areas of California taxation.
