Could Wayfair affect income taxes too? The Supreme Court’s June decision in the Wayfair case expanded the ability of states to require retailers to collect sales taxes on online transactions. But on Friday, banking giant Wells Fargo announced that in response to the ruling it was taking a $481 million charge to reflect its increase in state income tax reserves. The Wall Street Journal reports (paywall) that the bank’s chief financial officer believes that after Wayfair, states may consider some of the bank’s affiliated entities to be subject to state income taxes even if they aren’t physically present in their jurisdiction. The Journal reported that Wells would have missed its consensus earnings target even without the tax reserve.
New Hampshire Governor Sununu wants to protect his state's retailers from Wayfair. His administration has drafted a bill that would require all states to notify New Hampshire’s attorney general of their intent to collect sales taxes from a New Hampshire business. The state would have 90 days to review and approve the request, open an investigation, or bring legal action to stop the tax from being collected. Says John Formella, counsel to Governor Sununu: “One of the things that we’re going to see in the coming years is that if Congress doesn’t act, the law will develop gradually through omission. Part of the point of this statute is to allow the Department of Justice to take a leading role.” New Hampshire is one of five states with no sales tax of its own.
Obama-era anti-abuse rules slashed corporate inversions. TPC’s Steve Rosenthal shows how the Obama Administration’s curbs on corporate inversions and earnings stripping did the job. Corporate inversions allow a US company to reduce taxes by moving its headquarters to a non-US mailing address where the corporate tax rate is lower. Earnings stripping allow firms to reduce US tax liability by appearing to borrow from its foreign parent. The US Department of Commerce finds that “newly inverted US corporations accounted for a significant share of foreign direct investment in 2015 (20 percent), but not in 2016 or 2017.”
The Tax Cuts and Jobs Act’s corporate rate cuts may reduce affordable housing. The Urban Institute’s Corianne Scally, Amanda Gold, and Nicole DuBois explain how the TCJA’s 21 percent corporate tax rate reduces the financial incentive for firms to invest in Low-Income Housing Tax Credits. Since 1987 the credit produced or preserved roughly 2.3 million units of affordable housing for eligible low-income households. But “LIHTC has performed poorly when investment interest wanes, and industry sources have estimated that LIHTC production could decline by 235,000 units over the next 10 years.”
A California city with a budget surplus will vote on tax increases in November. Voters in Adelanto will consider two new tax hikes to boost public safety and infrastructure. One would OK a 1 percent gas tax to fund a San Bernardino County sheriff’s deputy. Another would allow the city to tax all parcels $25 a year to pay for street improvements, new roads, and sidewalks. Even tough Adelanto has $1.1 million surplus in a $20.6 million budget, city leaders say the taxes are small enough to be manageable but big enough to fund important priorities.
Iran says tax revenues climbed over 14 percent in the past fiscal year. That brings taxes to $26.6 billion, or 8 percent of Gross Domestic Product. The Head of National Tax Administration said revenues should rise to 11 percent by 2021. Iran’s President Hassan Rouhani wants to collect its tax revenue more systematically and reduce the government’s dependency on oil.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
