Our income tax practice is led by the former 15 year tax partner in charge of the KPMG state and local tax practice in the Pacific Southwest. We have substantial experience with state income tax planning, compliance and financial reporting, including:
- State income/franchise refund tax analysis
- Voluntary Disclosure Agreement (“VDA”) negotiation
- RAR Reporting
- State income/franchise audit defense
- FIN 48 reserve analysis and reduction
State Income Tax Refund Analysis
We review previously filed state income tax returns to identify refund opportunities, including:
- Apportionment alternatives
- State tax credits
- Tax base determination (business versus non-business income)
- Filing methodology (unitary, separate, and consolidated)
We take ownership for the entire process from identifying the opportunity, documentation and audit representation.
Voluntary Disclosure Agreement Negotiation
States are aggressively looking for jurisdiction to impose tax on out of state companies. This is reflected in state statutory changes to expand nexus/ doing business statutes and numerous judicial decisions involving what level of contact is sufficient for a state to impose income tax (and sales tax collection).
These evolving standards of filing often put companies in a position where they have state tax exposure. This may create significant FIN 48 liability since there is no statute of limitations, and interest and penalties must be accrued on the FIN 48 reserve.
Pursuing a voluntary disclosure agreement (“VDA”) provides the following benefits:
- Limited look-back for prior years
- Penalty and sometimes interest waiver (e.g. Texas)
- FIN 48 reserve elimination and potential benefit from reversal
- Tax savings may result from favorable changes in rates between jurisdiction or differences in apportionment (e.g. Finnegan versus Joyce)
- Non-disclosure of taxpayer to other states
RAR reporting for State Compliance
We provide cost effective assistance with preparing state tax compliance filings for IRS RAR federal audit adjustments. Many states leave statutes open and impose penalties if deadlines are not met to report federal changes. We have experience with all state reporting rules to rapidly help you comply with state reporting requirements. This can be a time consuming tasks for organizations and personnel who have not regularly worked in this area. We will leverage our experience to efficiently and cost-effectively complete your RAR tax compliance filings.
The cost of our service is often recovered through interest savings from reporting federal changes more quickly than might be achieved with internal personnel who may already be fully committed with other responsibilities.
State Income Tax Audit Defense
We assist companies with state and local income tax audits. We provide respectful effective representation consistent with your oversight and objectives.
We assist companies with establishing and analyzing state tax FIN 48 reserves. With frequent legislative changes and judicial decisions, significant analysis is required to evaluate each state, business activities, and legal entities for FIN 48 implications.
There are also planning opportunities to reduce FIN 48 reserves by taking steps to reduce exposure (e.g. VDA’s). This may have a benefit to the effective tax rate and increase to income reversal of reserves.