California: New Law Makes Techical Corrections to Perviously Enacted Single Sales Factor Law

A.B. 1546, signed by Governor on 10/11/2009. New law enacts technical correction language to the State's 2009-2010 budget legislation that was enacted in February 2009, clarifying that the State's single sales factor election is available for tax years beginning on or after January 1, 2011. In the original version of the law, an ambiguity in the language led some to potentially interpret the provision as offering the election beginning in 2009, with mandatory single sales factor apportionment in 2011.

Kentucky - Nonresident corporate limited partner has nexus.

Revenue Cabintet v. Asworth Corporation, HT-Form Inc. and D Aviation Services, Inc. Ky Ct. App (11/20/09) The Kentucky Court of Appeals affirmed a circuit court's previous ruling, agreeing that an out-of-state corporation had acquired nexus in Kentucky soley due to its investment in a pass-through entit as a 99% limited partner. The court agreed that the corporate limited partner had acquired nexus with the State through the partnership that did business within the State, as Kentucky recognizes the flow-through nautre of partnerships and accordingly, imposes state inocme tax upon partners rather than upon the partnership itself. The court also agreed that the corproation's derivation of income from a partnership doing business within and outside the State satisifed the Commerce Clause substantial nexus test, as well as Due Process Clause minimum contacts requirement.

North Carolina - New Law Imposes A 3% Corporate Income Tax Surtax

Effective for taxable years beginning on or after January 1, 2009, a new law imposes corporate income tax surtax equal to 3% of the corporate income tax payable by the corporate taxpayer for the taxable year. This surtax is in addition to the regular corporate income tax owed, and is due at the time prescribed for filing a corporate income tax return. The law also imposes a graduated surtax on individual income taxpayers, which is similarly effective for taxable years beginning on or after January 1, 2009, and set to expire for taxable years beginning on or after January 1, 2011. In addition, the law generally updates state corporate and individual income tax conformity with the Internal Revenue Code (IRC) as in effect on May 1, 2009 (previously, May 1, 2008), with some exceptions, effective for taxable years beginning on or after January 1, 2008. However, "any amendments to the IRC enacted after May 1, 2008, that increase North Carolina taxable income for the 2008 taxable year become effective for taxable years beginning on or after January 1, 2009." Effective for taxable years beginning on or after January 1, 2009, the law decouples from select federal income tax provisions, including the deferral of recognition of income from discharge of certain business indebtedness as enacted by the federal American Recovery and Reinvestment Act of 2009 under IRC Sec. 108(i). The law also partially decouples from certain IRC §168(k) and IRC §168(n) bonus depreciation provisions.