How Will States Tax Global Income?


         Ever since Federal Tax Law was changed by the Tax Cuts and Jobs Act (TCJA) the states have been struggling to catch up. This is true in many ways, but one way is in how they tax global income. The TCJA created the title Global Intangible Low-Taxed Income (GILTI). This is applied to the act of taking income from things like patents or trademarks and sending it to a foreign corporation controlled by the original US based business. This foreign corporation would be in a low tax country and allow for more profits to be shielded from taxation. How have states adjusted to this form of tax avoidance?

          While this strategy has been around for a long time, the GILTI category under Section 951A has been the best effort so far at discouraging that kind of behavior from businesses. With that said, most states have done very little to follow up with their own guidance. That might be because they have very little in the way of international commerce within their borders. However, California has one of the biggest economies in the world and it does not tax GILTI at all. New York state taxes a small amount, whereas New York City can potentially tax a large percentage. Now there is a lot of uncertainty around a potentially large source of income. That will change in the next few months as different groups will lobby to get their best ideas put in place. If you are based in the United States and do business in other countries, there will be new rules for you soon.

Comments

Post a Comment

Popular posts from this blog

Early Results from Focused Efforts on High Income Tax Cheats

            Over the past year, the Internal Revenue Service ( IRS ) has used funding from the Inflation Reduction Act on audit activities for those who earn more than $1 million and have more than $250,000 in tax debt. In that time, the IRS collected $1 billion from the group that met these criteria. The increase in funding will allow for other goals to be reached as well.           More staff has been added and technology is being updated to provide better service to all taxpayers in the coming years. The IRS will now expand its enforcement activity to include complex partnerships, large corporations, and high-income high wealth individuals who do not file tax returns. In recent years the IRS was not consistent with enforcing tax rules in this area and had fallen behind in the ways some had gotten around their tax responsibilities. These new initiatives look to bridge that gap. If you are in need of t...
Read more

Protect Yourself from Threats

            When it comes to data security threats, the challenges never end. The tactics that criminals use continue to change, but there are some basic things to keep in mind. When it comes to mass email messages or texts, the goal is to get someone to click on a link to steal information or download malware. This is phishing or smishing. An update to this scam is called clone phishing. In this variation, a real email is copied and sent to the recipient again. This time it has an attachment with malicious software or a link to a website designed to steal your personal information.           We can never be too sure how the attack will present itself, but we can be prepared with security measures to protect ourselves. Stop and be aware of warning signs. Unexpected messages with urgent tones telling you to click or download something should be examined closely. Getting a repeated message from a trusted source w...
Read more

The IRS Focuses on High Income Tax Cheats

             The Internal Revenue Service ( IRS ) continues to focus on applying the tax laws with accuracy and fairness. With that in mind, they have announced that they are restarting a program that focuses on individuals who did not file returns from 2017 to 2021 and had at least $400,000 in income. They have identified at least 125,000 cases of people who are not in compliance.           The non-filer letters will be going out every week to start the process of filing returns, collecting taxes, interest, and penalties. The basis of these letters comes from information through Forms W2, 1099 and others. Those who receive letters of this nature need to take quick action. The enforcement actions in this program are stronger than usual. That makes it critical that those who receive these letters go to a qualified tax professional . The IRS can be made aware of qualifying deductions and credits that can ch...
Read more