H. R. 1439
To regulate certain State taxation of interstate commerce, and for
IN THE HOUSE OF REPRESENTATIVES
April 8, 2011
Mr. GOODLATTE (for himself, Mr. SCOTT of Virginia, Mr. DUNCAN of South Carolina,
and Ms. JACKSON LEE of Texas) introduced the following bill; which was referred
to the Committee on the Judiciary
To regulate certain State taxation of interstate commerce, and for
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Business Activity Tax Simplification Act of
SEC. 2. MODERNIZATION OF PUBLIC LAW 86-272.
(a) Solicitations With Respect to Sales and Transactions of Other Than Tangible
Personal Property- Section 101 of the Act entitled `An Act relating to the
power of the States to impose net income taxes on income derived from interstate
commerce, and authorizing studies by congressional committees of matters pertaining
thereto', approved September 14, 1959 (15 U.S.C. 381 et seq.), is amended--
(1) in section (a), by striking `either, or both,' and inserting `any one
(2) in subsection (a)(1), by striking `by such person' and all that follows
and inserting `(which are sent outside the State for approval or rejection)
or customers by such person, or his representative, in such State for sales
or transactions, which are--
`(A) in the case of tangible personal property, filled by shipment or
delivery from a point outside the State; and
`(B) in the case of all other forms of property, services, and other transactions,
fulfilled or distributed from a point outside the State;';
(3) in subsection (a)(2), by striking the period at the end and inserting
(4) in subsection (a), by adding at the end the following new paragraphs:
`(3) the furnishing of information to customers or affiliates in such State,
or the coverage of events or other gathering of information in such State
by such person, or his representative, which information is used or disseminated
from a point outside the State; and
`(4) those business activities directly related to such person's potential
or actual purchase of goods or services within the State if the final decision
to purchase is made outside the State.';
(5) by striking subsection (c) and inserting the following new subsection:
`(c) For purposes of subsection (a) of this section, a person shall not be
considered to have engaged in business activities within a State during any
taxable year merely--
`(1) by reason of sales or transactions in such State, the solicitation
of orders for sales or transactions in such State, the furnishing of information
to customers or affiliates in such State, or the coverage of events or other
gathering of information in such State, on behalf of such person by one
or more independent contractors;
`(2) by reason of the maintenance of an office in such State by one or more
independent contractors whose activities on behalf of such person in such
State are limited to making sales or fulfilling transactions, soliciting
order for sales or transactions, the furnishing of information to customers
or affiliates, and/or the coverage of events or other gathering of information;
`(3) by reason of the furnishing of information to an independent contractor
by such person ancillary to the solicitation of orders or transactions by
the independent contractor on behalf of such person.'; and
(6) in subsection (d)(1)--
(A) by inserting `or fulfilling transactions' after `selling'; and
(B) by striking `the sale of, tangible personal property' and inserting
`a sale or transaction, furnishing information, or covering events, or
otherwise gathering information'.
(b) Application of Prohibitions to Other Business Activity Taxes- Title I
of the Act entitled `An Act relating to the power of the States to impose
net income taxes on income derived from interstate commerce, and authorizing
studies by congressional committees of matters pertaining thereto', approved
September 14, 1959 (15 U.S.C. 381 et seq.), is amended by adding at the end
`Sec. 105. For taxable periods beginning on or after January 1, 2012, the
prohibitions of section 101 that apply with respect to net income taxes shall
also apply with respect to each other business activity tax, as defined in
section 5(a)(2) of the Business Activity Tax Simplification Act of 2011. A
State or political subdivision thereof may not assess or collect any tax which
by reason of this section the State or political subdivision may not impose.'.
SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE AND LOCAL NET INCOME TAXES
AND OTHER BUSINESS ACTIVITY TAXES.
(a) In General- No taxing authority of a State shall have power to impose,
assess, or collect a net income tax or other business activity tax on any
person relating to such person's activities in interstate commerce unless
such person has a physical presence in the State during the taxable period
with respect to which the tax is imposed.
(b) Requirements for Physical Presence-
(1) IN GENERAL- For purposes of subsection (a), a person has a physical
presence in a State only if such person's business activities in the State
include any of the following during such person's taxable year:
(A) Being an individual physically in the State, or assigning one or more
employees to be in the State.
(B) Using the services of an agent (excluding an employee) to establish
or maintain the market in the State, if such agent does not perform business
services in the State for any other person during such taxable year.
(C) The leasing or owning of tangible personal property or of real property
in the State.
(2) DE MINIMIS PHYSICAL PRESENCE- For purposes of this section, the term
`physical presence' shall not include--
(A) presence in a State for less than 15 days in a taxable year (or a
greater number of days if provided by State law); or
(B) presence in a State to conduct limited or transient business activity.
(c) Taxable Periods Not Consisting of a Year- If the taxable period for which
the tax is imposed is not a year, then any requirements expressed in days
for establishing physical presence under this Act shall be adjusted pro rata
(d) Minimum Jurisdictional Standard- This section provides for minimum jurisdictional
standards and shall not be construed to modify, affect, or supersede the authority
of a State or any other provision of Federal law allowing persons to conduct
greater activities without the imposition of tax jurisdiction.
(1) DOMESTIC BUSINESS ENTITIES AND INDIVIDUALS DOMICILED IN, OR RESIDENTS
OF, THE STATE- Subsection (a) does not apply with respect to--
(A) a person (other than an individual) that is incorporated or formed
under the laws of the State (or domiciled in the State) in which the tax
is imposed; or
(B) an individual who is domiciled in, or a resident of, the State in
which the tax is imposed.
(2) TAXATION OF PARTNERS AND SIMILAR PERSONS- This section shall not be
construed to modify or affect any State business activity tax liability
of an owner or beneficiary of an entity that is a partnership, an S corporation
(as defined in section 1361 of the Internal Revenue Code of 1986), a limited
liability company (classified as a partnership for Federal income tax purposes),
a trust, an estate, or any other similar entity, if the entity has a physical
presence in the State in which the tax is imposed.
(3) PRESERVATION OF AUTHORITY- This section shall not be construed to modify,
affect, or supersede the authority of a State to enact a law and bring an
enforcement action under such law or existing law against a person or persons
or an entity or entities, including but not limited to related persons or
entities, that is or are engaged in an illegal activity, a sham transaction,
or an actual abuse in its or their business activities in order to ensure
a proper reflection of its or their tax liabilities, nor shall it supersede
the authority of a State to require combined reporting.
SEC. 4. 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.
SEC. 5. DEFINITIONS AND EFFECTIVE DATE.
(a) Definitions- For purposes of this Act:
(1) NET INCOME TAX- The term `net income tax' has the meaning given that
term for the purposes of the Act entitled `An Act relating to the power
of the States to impose net income taxes on income derived from interstate
commerce, and authorizing studies by congressional committees of matters
pertaining thereto', approved September 14, 1959 (15 U.S.C. 381 et seq.).
(2) OTHER BUSINESS ACTIVITY TAX-
(A) IN GENERAL- The term `other business activity tax' means any tax in
the nature of a net income tax or tax measured by the amount of, or economic
results of, business or related activity conducted in the State.
(B) EXCLUSION- The term `other business activity tax' does not include
a sales tax, a use tax, or a similar transaction tax, imposed on the sale
or acquisition of goods or services, whether or not denominated a tax
imposed on the privilege of doing business.
(3) PERSON- The term `person' has the meaning given such term by section
1 of title 1 of the United States Code. Each corporation that is a member
of a group of affiliated corporations, whether unitary or not, is itself
a separate `person.'
(4) STATE- The term `State' means any of the several States, the District
of Columbia, or any territory or possession of the United States, or any
political subdivision of any of the foregoing.
(5) TANGIBLE PERSONAL PROPERTY- For purposes of section 3(b)(1)(C), the
leasing or owning of tangible personal property does not include the leasing
or licensing of computer software.
(b) Effective Date- This Act shall apply with respect to taxable periods beginning
on or after January 1, 2012.