(This measure has not been amended since it was introduced. The summary has been expanded because action occurred on the measure.)
Business Activity Tax Simplification Act of 2011 - Expands the prohibition against state taxation of interstate commerce to include: (1) taxation of out-of-state sales transactions involving all forms of property, including intangible personal property and services (currently, only sales of tangible personal property are protected); and (2) all other business activity taxes in addition to net income taxes. Exempts from state taxation persons who enter a state merely to furnish information to customers and affiliates, to cover news or other events, or to gather information in the state.
Sets forth jurisdictional standards for states in imposing, assessing, or collecting a net income tax or other business activity tax on interstate activities. Defines "physical presence in a state" as: (1) being an individual physically in a state or assigning one or more employees to be in a state, (2) using the services of an agent to establish or maintain the market in a state, and (3) leasing or owning tangible personal or real property in a state (excluding the leasing or licensing of computer software). Excludes from the definition of "physical presence" presence in a state for less than 15 days in a taxable year or presence in a state to conduct limited or transient business activity.
Provides that this Act shall not be construed to modify or affect any state business activity tax on a partnership, an S corporation or limited liability company, or a trust or estate that has a physical presence in the state or to supersede the authority of a state to enact a law or bring a law enforcement action against persons or entities engaged in illegal activity or sham transactions.
Sets forth a rule for computing the net income tax or other business activity tax liability of an affiliated group.
Makes this Act applicable to taxable periods beginning on or after January 1, 2012.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1439 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 1439
To regulate certain State taxation of interstate commerce, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 8, 2011
Mr. Goodlatte (for himself, Mr. Scott of Virginia, Mr. Duncan of South
Carolina, and Ms. Jackson Lee of Texas) introduced the following bill;
which was referred to the Committee on the Judiciary
_______________________________________________________________________
A BILL
To regulate certain State taxation of interstate commerce, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Business Activity Tax Simplification
Act of 2011''.
SEC. 2. MODERNIZATION OF PUBLIC LAW 86-272.
(a) Solicitations With Respect to Sales and Transactions of Other
Than Tangible Personal Property.--Section 101 of the Act entitled ``An
Act relating to the power of the States to impose net income taxes on
income derived from interstate commerce, and authorizing studies by
congressional committees of matters pertaining thereto'', approved
September 14, 1959 (15 U.S.C. 381 et seq.), is amended--
(1) in section (a), by striking ``either, or both,'' and
inserting ``any one or more'';
(2) in subsection (a)(1), by striking ``by such person''
and all that follows and inserting ``(which are sent outside
the State for approval or rejection) or customers by such
person, or his representative, in such State for sales or
transactions, which are--
``(A) in the case of tangible personal property,
filled by shipment or delivery from a point outside the
State; and
``(B) in the case of all other forms of property,
services, and other transactions, fulfilled or
distributed from a point outside the State;'';
(3) in subsection (a)(2), by striking the period at the end
and inserting a semicolon;
(4) in subsection (a), by adding at the end the following
new paragraphs:
``(3) the furnishing of information to customers or
affiliates in such State, or the coverage of events or other
gathering of information in such State by such person, or his
representative, which information is used or disseminated from
a point outside the State; and
``(4) those business activities directly related to such
person's potential or actual purchase of goods or services
within the State if the final decision to purchase is made
outside the State.'';
(5) by striking subsection (c) and inserting the following
new subsection:
``(c) For purposes of subsection (a) of this section, a person
shall not be considered to have engaged in business activities within a
State during any taxable year merely--
``(1) by reason of sales or transactions in such State, the
solicitation of orders for sales or transactions in such State,
the furnishing of information to customers or affiliates in
such State, or the coverage of events or other gathering of
information in such State, on behalf of such person by one or
more independent contractors;
``(2) by reason of the maintenance of an office in such
State by one or more independent contractors whose activities
on behalf of such person in such State are limited to making
sales or fulfilling transactions, soliciting order for sales or
transactions, the furnishing of information to customers or
affiliates, and/or the coverage of events or other gathering of
information; or
``(3) by reason of the furnishing of information to an
independent contractor by such person ancillary to the
solicitation of orders or transactions by the independent
contractor on behalf of such person.''; and
(6) in subsection (d)(1)--
(A) by inserting ``or fulfilling transactions''
after ``selling''; and
(B) by striking ``the sale of, tangible personal
property'' and inserting ``a sale or transaction,
furnishing information, or covering events, or
otherwise gathering information''.
(b) Application of Prohibitions to Other Business Activity Taxes.--
Title I of the Act entitled ``An Act relating to the power of the
States to impose net income taxes on income derived from interstate
commerce, and authorizing studies by congressional committees of
matters pertaining thereto'', approved September 14, 1959 (15 U.S.C.
381 et seq.), is amended by adding at the end the following:
``Sec. 105. For taxable periods beginning on or after January 1,
2012, the prohibitions of section 101 that apply with respect to net
income taxes shall also apply with respect to each other business
activity tax, as defined in section 5(a)(2) of the Business Activity
Tax Simplification Act of 2011. A State or political subdivision
thereof may not assess or collect any tax which by reason of this
section the State or political subdivision may not impose.''.
SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE AND LOCAL NET INCOME
TAXES AND OTHER BUSINESS ACTIVITY TAXES.
(a) In General.--No taxing authority of a State shall have power to
impose, assess, or collect a net income tax or other business activity
tax on any person relating to such person's activities in interstate
commerce unless such person has a physical presence in the State during
the taxable period with respect to which the tax is imposed.
(b) Requirements for Physical Presence.--
(1) In general.--For purposes of subsection (a), a person
has a physical presence in a State only if such person's
business activities in the State include any of the following
during such person's taxable year:
(A) Being an individual physically in the State, or
assigning one or more employees to be in the State.
(B) Using the services of an agent (excluding an
employee) to establish or maintain the market in the
State, if such agent does not perform business services
in the State for any other person during such taxable
year.
(C) The leasing or owning of tangible personal
property or of real property in the State.
(2) De minimis physical presence.--For purposes of this
section, the term ``physical presence'' shall not include--
(A) presence in a State for less than 15 days in a
taxable year (or a greater number of days if provided
by State law); or
(B) presence in a State to conduct limited or
transient business activity.
(c) Taxable Periods Not Consisting of a Year.--If the taxable
period for which the tax is imposed is not a year, then any
requirements expressed in days for establishing physical presence under
this Act shall be adjusted pro rata accordingly.
(d) Minimum Jurisdictional Standard.--This section provides for
minimum jurisdictional standards and shall not be construed to modify,
affect, or supersede the authority of a State or any other provision of
Federal law allowing persons to conduct greater activities without the
imposition of tax jurisdiction.
(e) Exceptions.--
(1) Domestic business entities and individuals domiciled
in, or residents of, the state.--Subsection (a) does not apply
with respect to--
(A) a person (other than an individual) that is
incorporated or formed under the laws of the State (or
domiciled in the State) in which the tax is imposed; or
(B) an individual who is domiciled in, or a
resident of, the State in which the tax is imposed.
(2) Taxation of partners and similar persons.--This section
shall not be construed to modify or affect any State business
activity tax liability of an owner or beneficiary of an entity
that is a partnership, an S corporation (as defined in section
1361 of the Internal Revenue Code of 1986), a limited liability
company (classified as a partnership for Federal income tax
purposes), a trust, an estate, or any other similar entity, if
the entity has a physical presence in the State in which the
tax is imposed.
(3) Preservation of authority.--This section shall not be
construed to modify, affect, or supersede the authority of a
State to enact a law and bring an enforcement action under such
law or existing law against a person or persons or an entity or
entities, including but not limited to related persons or
entities, that is or are engaged in an illegal activity, a sham
transaction, or an actual abuse in its or their business
activities in order to ensure a proper reflection of its or
their tax liabilities, nor shall it supersede the authority of
a State to require combined reporting.
SEC. 4. GROUP RETURNS.
If, in computing the net income tax or other business activity tax
liability of a person for a taxable year, the net income or other
economic results of affiliated persons is taken into account, the
portion of such combined or consolidated net income or other economic
results that may be subject to tax by the State shall be computed using
the methodology that is generally applicable to businesses conducting
similar business activities and, if that generally applicable
methodology employs an apportionment formula, the denominator or
denominators of that formula shall include the aggregate factors of all
persons whose net income or other economic results are included in such
combined or consolidated net income or other economic results and the
numerator or numerators shall include the factors attributable to the
state of only those persons that are themselves subject to taxation by
the State pursuant to the provisions of this Act and subject to all
other legal constraints on State taxation of interstate or foreign
commerce.
SEC. 5. DEFINITIONS AND EFFECTIVE DATE.
(a) Definitions.--For purposes of this Act:
(1) Net income tax.--The term ``net income tax'' has the
meaning given that term for the purposes of the Act entitled
``An Act relating to the power of the States to impose net
income taxes on income derived from interstate commerce, and
authorizing studies by congressional committees of matters
pertaining thereto'', approved September 14, 1959 (15 U.S.C.
381 et seq.).
(2) Other business activity tax.--
(A) In general.--The term ``other business activity
tax'' means any tax in the nature of a net income tax
or tax measured by the amount of, or economic results
of, business or related activity conducted in the
State.
(B) Exclusion.--The term ``other business activity
tax'' does not include a sales tax, a use tax, or a
similar transaction tax, imposed on the sale or
acquisition of goods or services, whether or not
denominated a tax imposed on the privilege of doing
business.
(3) Person.--The term ``person'' has the meaning given such
term by section 1 of title 1 of the United States Code. Each
corporation that is a member of a group of affiliated
corporations, whether unitary or not, is itself a separate
``person.''
(4) State.--The term ``State'' means any of the several
States, the District of Columbia, or any territory or
possession of the United States, or any political subdivision
of any of the foregoing.
(5) Tangible personal property.--For purposes of section
3(b)(1)(C), the leasing or owning of tangible personal property
does not include the leasing or licensing of computer software.
(b) Effective Date.--This Act shall apply with respect to taxable
periods beginning on or after January 1, 2012.
<all>
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E674-675)
Referred to the House Committee on the Judiciary.
Referred to the Subcommittee on Courts, Commercial and Administrative Law.
Subcommittee Hearings Held.
Subcommittee on Courts, Commercial and Administrative Law Discharged.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported by Voice Vote.
Reported by the Committee on Judiciary. H. Rept. 112-257.
Reported by the Committee on Judiciary. H. Rept. 112-257.
Placed on the Union Calendar, Calendar No. 173.
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