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As
the production and distribution of energy enters a deregulated
environment companies may begin establishing a taxable presence
in multiple states. The companies may become subject to income
taxation on their activities within multiple northeastern states.
The companies' net income will be divided among the states where
taxable presence exists bases on three factors, namely , sales
(receipts), payroll and property.
The
standard apportionment factors utilized by most states in their
corporate or business income tax statutes are those established
under the Uniform Division of Income For Tax Purposes Act (UDITPA)
and are geared toward the mercantile industry. Many states have
modified the standard language for various industries to reflect
the variety of facts and circumstances often found in non-mercantile
business.
Recognizing
the uniqueness of the energy industry , the Northeastern States
Tax Officials Association's (NESTOA) Corporate Tax Working Group
recommended the formation of a subcommittee to the Commissioners
and Directors of Revenue of the member states. The purpose of
the subcommittee would be to to develop a model uniform apportionment
formula andnexus standard for possible use by the member states.
The use of a uniform approach would minimize the potential for
double taxation of income and simplify the administration of income
taxation for both thr industry and the state taxing agencies.
The
Commissioners and Directors of the Revenue authorized the establishment
of the subcommittee in September 1999.
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