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Maximizing the Other State Income Tax Credit: Defining Net Income Tax, Qualifying Local Taxes, Recent Legislation

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, July 26, 2023

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This webinar will explain what is a net income tax in certain states and, therefore, eligible for the individual income tax other state credit. Our panel of SALT professionals will point out local taxes that are occasionally overlooked that qualify for this credit, requirements for the credit in specific states, and recent developments nationwide that impact this valuable tax-saving credit.

Description

The other state credit is a tax credit, as opposed to a deduction. Although this is a frequently taken credit, it is often not given due consideration. States offer the credit to eliminate double taxation of residents whose income is taxed in other states. Key to determining the credit is the definition of a net income tax. Most states specifically identify which taxes qualify and which do not. California, for example, states that the Texas franchise tax is not a net income tax because it taxes gross, as opposed to net, income.

Certain jurisdictional taxes can qualify as a net income tax and should not be overlooked. Whether or not jurisdictional taxes qualify must be considered on a state-by-state basis. New York City's Unincorporated Business Tax (UBT) can qualify as a net income tax. An appeal in the Mather case is currently under consideration in California. Mather was denied refund credits for other state taxes, including New York City's UBT and the metropolitan commuter transportation mobility tax. Mather argues that the taxes paid are indeed net income taxes and credit worthy. SALT practitioners must be aware of the latest developments affecting the other state credit and understand how to maximize this credit for individual income taxpayers.

Listen as our panel of state and local tax experts examines other state credit eligibility requirements for multi-jurisdictional in various states.

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Outline

  1. What is a net income tax?
    1. Defined
    2. What is not
    3. City, local, and jurisdictional taxes
  2. Specific state requirements
    1. California
    2. New York
    3. Other states
  3. Relevant cases

Benefits

The panel will cover these and other critical issues:

  • How net income tax is defined in specific states
  • Which jurisdicitonal taxes qualify for the other state credit in most states
  • The status of the Mather case in California
  • Maximizing the other state credit for multistate taxpayers

Faculty

Tourian, Ted
Ted Tourian
SALT Manager
BDO USA

Mr. Tourian is currently an experienced manager at BDO specializing in state and local tax. Prior to BDO, he was the...  |  Read More

Yoak, John
John Yoak
Senior Manager, State and Local Tax
BDO USA

Mr. Yoak concentrates on income and franchise tax, sales and use tax, and other business activity tax matters impacting...  |  Read More

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