Tax Function of the Future: State and local tax predictions: Audit and controversy

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Audit and controversy

With the expected increases in state budget shortfalls, audit activity will intensify as states seek to bring in more revenue. Lack of guidance on federal tax provisions as well as uncertainties within state tax law will lead to:

  • An increase in litigation on significant issues rather than resolving at the audit level;
  • Economic nexus being found constitutional by the US Supreme Court;  
  • States substantially increasing their focus on pass through entities and their partners; and
  • New legislation resulting in auditors taking more aggressive approaches and requesting detailed documentation.

These changes will likely create an undue burden on taxpayers to support their state tax positions and may subject taxpayers to the hazards of litigation when challenged with aggressive state tax assessments.

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Audit and controversy

Tax Function of the Future — State Tax Predictions - Audit & controversy - Analyzing your records


Hear what our state and local tax leaders are saying about key state trends and predictions

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What's taxable?

Tax Function of the Future — State Tax Predictions - Audit & controversy - what's taxable?

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Income/Franchise Tax

Tax Function of the Future — State Tax Predictions - Audit & controversy - Income/Franchise Tax 

What changes are expected to impact your business?

The following audit and controversy changes may impact your business:

  • Resolving state tax controversies through litigation
  • Burdensome document requests to substantiate positions
  • Increased scrutiny and audits on pass-through entities and their partners/members
  • Aggressively exercising UDITPA 18-type powers to adjust income and apportionment
  • Recharacterization of debt as equity
  • Consolidation of taxes under audit.
Audit and controversy
Audit and controversy

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We can help you transform risk and compliance into business benefit and stakeholder confidence. Together we take your teams further than compliance, understanding the complex intersection of your business and the regulatory tax environment to uncover opportunities for competitive advantage. We work with you to redesign, redefine and redeploy the state tax function as a force for driving trust and value through greater transparency.

To learn more about PwC’s State and Local Tax services visit http://www.pwc.com/us/en/state-local-tax.html

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

George Famalett

George Famalett

Partner, National Indirect Tax Leader, PwC US

Jack Kramer

Jack Kramer

National State Income/Franchise Leader, PwC US

Janet Gagliano

Janet Gagliano

National Abandoned and Unclaimed Property Leader, PwC US

Tom Geppel

Tom Geppel

National Employment Tax Leader, PwC US

Brian Rebhun

Brian Rebhun

Asset Management Tax Leader, PwC US

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