It is important for the well-rounded tax lawyer to be exposed to state and local taxes and their relationship to the Federal income tax, among other levies. U.S. federalism reflects a system of disparate Federal, as well as state and local tax (SALT) laws. Frequently the tax and administrative burdens of multijurisdictional taxpayers are higher at the subnational level than the national level of government. As business enterprises expand operations into additional States and nations, complex multistate tax issues frequently arise whose resolution requires specialized training.
Adding to this challenge is that SALT lawyers work in an environment of complex, nonuniform and ever changing tax laws. Similar to the environment encountered by lawyers working on a transnational basis, SALT lawyers frequently need to consider a multitude of different types of taxes. Moreover, even when dealing with the same type of tax, the legislative, judicial and executive pronouncements can be different from one taxing jurisdiction to the next. Additionally, different areas of the law can be implicated depending upon the State taxing issues at hand.
This course is designed as a survey course for those students not pursuing a SALT Certificate in conjunction with their LL.M. in Taxation, Executive LL.M. in Taxation, or MSL Program. As a survey course, it balances available time versus level-of-detail tensions by substituting a lesser detailed review for a greater number of multistate and multitax subnational matters that routinely confront lawyers who advise multijurisdictional enterprises, be they proprietary or non-proprietary, incorporated or unincorporated, for the more detailed explorations of these topics found in the SALT Certificate curriculum. This course is not open to students enrolled in the SALT Certificate Program.
As a foundation for learning, the course begins by first introducing the student to the dynamics and taxonomy of SALT, and why (out of necessity) the study of subnational taxes must vary from the “classic” pedagogy of most LL.M. – Tax programs that have come to focus and build on a study of the differing subchapters of the Internal Revenue Code. It demonstrates how easy a trap it is for one to fail to minimize tax and related compliance burdens, and inversely fail to maximize related opportunities, by not carefully and simultaneously considering both the national and subnational consequences of business transactions and operations.
Next, the course explores important subnational topics not encountered in the study of federal corporate income taxes, such as federal limitations on the powers of subnational governments to tax. Here, among other things, Federal laws under both the direct and indirect aspects of the Commerce Clause will be summarized, along with the U.S. Supreme Court’s contemporary standards used to limiting subnational taxes pursuant the First Amendment Clause, Equal Protection Clause, Privileges and Immunities Clause, Import-Export Clauses, Duty of Tonnage Clause, Supremacy Clause, and Due Process Clause.
Moving beyond Federal limitations, various State level Constitutional restraints are noted as well, and used to illustrate why subnational taxing regimes have evolved in such a diverse manner from region-to-region. Explored will be why (unlike the Federal government) the States rely much more heavily on a wide range of different types of taxes and fees to raise their needed revenues.
SALT issues unique to the use of the following types of taxes will be explored: income based taxes; sales and use taxes; ad valorem taxes; unemployment taxes; withholding taxes; transfer taxes; capital stock (net worth based) taxes; excise taxes; and, other taxes to illustrate the diversity of subnational levies and how they can be of critical importance to select industries and their advisors, e.g., such as the insurance industry (premium and retaliatory taxes); the natural resource industry (severance taxes); the communication industry (telecommunication taxes); and, the health care industry (hospital and medical provider taxes).
In addition to overviewing key taxes, the course will introduce the student to other important topics that routinely engage multijurisdictional enterprises, including: unclaimed property (“escheat”) audits; statutory and negotiated tax and non-tax incentives; and, the nonuniform taxing and sourcing rules that face unincorporated multijurisdictional enterprises and their owners that choose to operate through partnerships, limited liability companies, S Corporations or joint ventures.
To close the course, the student will be presented with a case study and a comparative law analysis that will provide them insight into analytical approaches employed by interdisciplinary tax teams made-up of international, federal and subnational tax specialists assigned to deal with enterprise restructurings. Selecting from one of several illustrative corporate transactions (e.g., IRC §§ 351, 332, and 338 transactions), the potential outcomes of local country, U.S. Federal and U.S. SALT laws will be discussed, along with questions that test the balancing of federalist tensions, optimal transactional and financing structures, and related burdens on protected commerce within and without the U.S.