Businesses operating across multiple states, or even remotely, face growing complexity and risk in state and local tax matters. State tax authorities increasingly share information, which can lead to coordinated or sequential audits. These state and local tax audits and examinations can trigger assessment of significant tax, interest and penalties across states. An experienced state and local tax controversy attorney can help assess risk, develop responsive positions on tax technical issues, and negotiate with the taxing authority to resolve the controversy.

Common Sate & Local Tax Controversy Issues

• Nexus determinations (authority to tax)
• Apportionment formula disputes (division of income among tax jurisdictions)
• Income sourcing
• Separate versus Combined reporting issues
• Elections (worldwide, water’s edge, etc.)
• Residency determinations for individuals

State & Local Tax Controversy Defense Process & Strategy

Resolving multi-state disputes often requires coordination across several jurisdictions and alignment with federal tax positions. Below are some key considerations for effective defense of state and local tax controversies.

• Consider engaging experienced state and local tax controversy counsel as soon as possible.
• Consider Voluntary Disclosure Agreement (VDA) processes (if eligible).
• Don’t ignore tax department correspondence, be proactive, meet deadlines or obtain extensions.
• Carefully evaluate state or local tax statutes, regulations, and administrative guidance, along with facts, circumstances and issues to assess risk and develop a controversy management strategy.
• Develop tax technical and factual support for contested positions and limit audit scope / expansion.
• Prepare responses and supporting documentation and respond to IDRs.
• Obtain audit closure confirmation, negotiate (settlement, repayment plan, penalty abatement, etc.), or prepare for any available appeals.

Contact an experienced state and local tax controversy attorney

Nick Eusanio

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