State tax developments affecting law firms

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2017 Federal Tax Act Limitations & State Workarounds

The 2017 federal tax act virtually eliminates the deductibility of state income taxes for individual partners on their federal income tax returns. This has prompted some states to rethink their tax laws in order to come up with workarounds aimed at negating the impact of the federal legislation.This news alert provides additional insight on various state responses to date which may affect your firm.

More States Enact Legislation on Market-based Sourcing & Single Sales Factor

States continue to adopt market-based sourcing of income with a single sales factor apportionment.

In April 2018, Maryland’s governor signed legislation that phases in single sales factor apportionment over a five-year period beginning with the 2018 tax year. Click here for further insight and PwC’s discussion on Maryland.

In June 2018, Colorado enacted legislation that, effective for tax year beginning on or after January 1, 2019, requires market-based sourcing of income from the sale of services for corporate taxpayers; income will be apportioned based on where the income-producing activity is used or delivered. Pass-through entities may elect the market-based sourcing of income starting January 1, 2019 but it is not mandatory.

In July 2018, New Jersey’s governor signed three significant tax bills that made a number of corporate income tax changes, and raised the gross income tax rate on taxpayers with income over $5 million to 10.75%.

How PwC can help

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Karen LoDico

Tax Partner, PwC US

Gary M. Pogharian

Partner, PwC US

Carole Symonds

Partner, Law Firm Services Tax Leader, PwC US

Gregg Sincoff

Tax Managing Director, PwC US

Nancy Regan

Tax Director, PwC US

Ran Wei

Director, PwC US

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