07 April 2017 Law firm clients: California FTB legal ruling on treatment of taxes paid to another state, affecting law firm partners for tax years beginning on or after January 1, 2016 As we conveyed to our law firm clients recently (Tax Alert 2017-386), the California Franchise Tax Board (FTB) has issued much anticipated guidance on the California Other State Tax Credit (OSTC) and allowable deductions for taxes paid to other states, affecting law firm partners applicable for tax years beginning on or after January 1, 2016. In FTB Legal Ruling 2017-01 (issued Feb. 22, 2017, by the Legal Division of the FTB), the FTB explains general OSTC and deduction rules and the FTB's process for determining whether the tax paid to another state qualifies for an OSTC or deduction. The ruling provides guidance on whether the other state tax is characterized on the entire potential tax base and whether this characterization of the tax applies universally for all taxpayers. The guidance also walks through various examples, including whether a taxpayer may claim an OSTC or deduction for the Texas franchise tax, the Tennessee franchise and excise taxes, and the New York City Metropolitan Commuter Transportation Mobility Tax, among others. A new Tax Alert (2017-596) provides details. Document ID: 2017-0606 |
