In addition to highlighting the epic milestone of this temporary/stopgap legislation, this site provides background on P.L. 86-272 and links to information about current efforts to update and reform this rule dealing with state taxation of multistate businesses.
The issues surrounding updating and reforming this nexus provision are complex and hearings and discussions have occurred over the past few years.
| (for the 60th anniversary) - please post comments there. Thank you! | PL 86-272 History | Legislative Proposals | Other Proposals |
| Commentary - Business | Commentary - Government | Court Decisions and Income Tax Nexus Updates |
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| Economic Nexus (what are states doing to fill void where PL 86-272 does not apply? |
Sales Tax Affiliate Nexus Website | ||
See the on this topic - please post a comment.
., 505 US 214 (1992) - "solicitation"
, AICPA Corporate Taxation Insider, by Annette Nellen (3/27/08)
The 50th Anniversary of Stopgap Legislation, State Tax Notes, 9/21/09
- Business Activity Tax Simplification Act of 2011
Something new - one significant change in H.R. 1439 versus earlier bills (such as H.R. 1083, 111th Congress) is the following provision requiring use of the "Joyce" rule for group returns:
"If, in computing the net income tax or other business activity tax liability of a person for a taxable year, the net income or other economic results of affiliated persons is taken into account, the portion of such combined or consolidated net income or other economic results that may be subject to tax by the State shall be computed using the methodology that is generally applicable to businesses conducting similar business activities and, if that generally applicable methodology employs an apportionment formula, the denominator or denominators of that formula shall include the aggregate factors of all persons whose net income or other economic results are included in such combined or consolidated net income or other economic results and the numerator or numerators shall include the factors attributable to the state of only those persons that are themselves subject to taxation by the State pursuant to the provisions of this Act and subject to all other legal constraints on State taxation of interstate or foreign commerce." [Section 4 of H.R. 1439]
Remarks of Congressman Goodlatte in Congressional Record 4//8/11
House Judiciary Committee hearing of 4/13/11 -
7/7/11 in committee to approve
7/7/11 committee
Summary/observations from:
- opposing H.R. 1439
111th Congress
House Judiciary Committee hearing of 2/4/2010 - State Taxation - The Role of Congress in Defining Nexus -
House Judiciary Committee nearing of 5/6/10 - - not a nexus issue, but if Congress would step forward to mandate uniform apportionment, it might also be more likely to provide an update to PL 86-272
Remarks of Congressman Boucher (2/7/08)
in House Judiciary Committee (6/24/08)
Hearing from the Government Printing Office
House Small Business Committee or 2/14/08 - Business Activity Taxes and their Impact on Small Businesses
Hearing of Committee on the Judiciary (9/27/05) from GPO
Passed in House Judiciary Committee on 6/28/06
Senate Finance Committee of 7/25/06 - How Much Should Borders Matter? Tax Jurisdiction in the New Economy
Congressional Research Service report (RL32297) (6/30/06)
Congressman Goodlatte's remarks on introduction of HR 3220
House Judiciary Committee (5/13/04)
Economic nexus - without a federal update to PL 86-272 to have a national standard that applies to more than sales of tangible personal property, the states are taking a fairly broad approach known as "economic nexus." Some states have articulated dollar amounts for the standard ("factor presence" approach) and others are following an approach that any business generating effort creates nexus
Economic Nexus - a listing of selected state activity to use an economic nexus standard when PL 86-272 does not apply - click here. [needs updating, particularly in light of the Wayfair decision of 2018]
Multistate Tax Commission (MTC)
Information from the federal - final report (4/00) - see report pages 21-22
National Governor's Association ()
(2/26/14)
(6/24/08)
Center on Budget and Policy Priorities () - by Michael Mazerov
(4/13/11) by Michael Mazarov
"," (12/22/05)
"," (11/30/05)
AICPA Corporate Taxation Insider, by Annette Nellen, 6/26/08
CRS, (6/08)
(S Ct. WV 2006)
Northwestern Cement v. Minn., (1959)
Wisconsin v. J.C. Penney Co., (1940)
GAO report of 1982 (GAO/GGD-82-38) - - a detailed study of state practices and issues. It concludes that the best reform would be greater uniformity among the states and suggests that Congress must take action to achieve uniformity.
General Conclusions: "If past performance can be used to predict future action, it seems unlikely that States will achieve a reasonable degree of uniformity in the near future. It is also unlikely that the issues will be resolved in the courts, especially those issues involving broad policy questions, for the courts can treat the issues only on a case-by-case basis. The issues need resolving, and only the Congress appears capable of striking the needed balance between the States' right to tax and the Federal interest in interstate and international tax policy issues arising from State taxation."
See the on this topic.
This page last revised on November 13, 2022.
Any views and opinions expressed in this page are strictly those of Professor Annette Nellen. The contents of this page have not been reviewed or approved by San Jose State University