AGENDA

SALT Special Interest Group

Thursday, July 15th 1:00 pm EST/NY

1. PILOT agreement and TN franchise tax

1. PILOT stands for Payment In Lieu Of Tax and is a form of tax incentive used to support development in the state of Tennessee. In a PILOT agreement, a company transfers "title" of the property to the IDB (Investment Development Board) and then "leases" the property back to the company.  The "lease" payment is referred to as the "PILOT" payment.  Since the property is legally "owned" by the IDB, it is exempt from property taxes. Since the company no longer "owns" the property (the IDB does), it can elect to exclude the book value from its franchise tax base (net assets).  Instead, the taxpayer can elect to treat the PILOT payments as "rent paid" to calculate the franchise tax base of the property.  
2. Case Study:

1. A company purchased a facility cite for manufacturing business in TN for $10M
2. All funds were through capital contribution, no liabilities on the books.
3. The company signed a 5-year PILOT agreement paying $1 rent every year
   3. Questions:

    

4. What is the TN franchise tax base after the PILOT agreement?
5. Is the company allowed to take depreciation on the facility at both federal and state level?

2. Market-based sourcing multistate allocation for non-filing states

1. Should you use market-based souring when you are only filing in one state?
2. What happens to the sales to non-filing states or foreign countries? “state tax free?”
3. Should you allocate Cost+ income from foreign parent company?

3. Pass-through companies state nexus and sourcing

1. Are physical presence still required for state nexus?
2. Does the economic nexus rule apply to pass-through entities?
3. Does your state have special sourcing rules for pass-through entities?