Stats
Actions
Tags
From tax-prep
Contains verified cross-state apportionment formula comparison (UDITPA three-factor, single sales factor, market-based vs cost-of-performance sourcing, throwback/throwout rules, Joyce vs Finnigan), federal conformity matrix (rolling/static/selective conformity, state modification patterns for Section 163(j), GILTI, Section 174 R&E, bonus depreciation, state NOL rules), and multistate nexus evaluation framework (economic/factor presence, affiliate/attributional nexus, P.L. 86-272 internet activity analysis per MTC 2021 revised statement). Multistate SALT, combined reporting, unitary business principle, water's edge election, voluntary disclosure agreements, state tax credits, apportionment planning. Consult when determining which apportionment formula a state applies, comparing state conformity treatment of a specific federal provision across filing states, building a state modification matrix, evaluating multistate nexus exposure for a C-corporation, analyzing P.L. 86-272 protection for internet-era activities, or assessing voluntary disclosure program eligibility.
How this skill is triggered — by the user, by Claude, or both
Slash command
/tax-prep:multistate-salt-matrixThe summary Claude sees in its skill listing — used to decide when to auto-load this skill
Cross-state comparison matrix for state and local tax (SALT) planning and compliance.
Cross-state comparison matrix for state and local tax (SALT) planning and compliance.
This skill provides the structural framework for evaluating nexus, apportionment, conformity,
and reporting obligations across multiple states. For deep single-state coverage (Florida),
invoke tax-prep:state-returns.
A corporation must evaluate five nexus theories for every state where it has any activity. Each theory operates independently — triggering any one creates a filing obligation unless P.L. 86-272 provides protection.
Traditional constitutional nexus. Any of these facts creates nexus:
Remote worker nexus is a post-2020 compliance risk. States differ on whether a single remote employee is sufficient. Convenience-of-the-employer rules (NY and followers) may source income to the employer's state rather than the worker's home state.
Post-Wayfair, states apply economic nexus to income tax using the MTC factor presence model or state-specific variants. The MTC model triggers nexus when any single factor exceeds the state's threshold: property, payroll, or sales attributed to the state. Unlike sales tax economic nexus (based on gross receipts), income tax economic nexus uses property, payroll, and sales factors with state-determined thresholds.
An out-of-state entity may have nexus attributed through related entities:
Some states define nexus broadly as "doing business," which may capture activities beyond physical and economic presence: owning intangible property used in-state, licensing IP, or having customers in the state.
Federal law (15 USC 381-384) prohibits net income tax when the only in-state activity is solicitation of orders for tangible personal property, with orders approved and filled out of state.
P.L. 86-272 protects ONLY tangible personal property sales. It provides zero protection for:
For service-only corporations, P.L. 86-272 is irrelevant — nexus is determined solely by the physical presence and economic nexus tests.
The MTC's 2021 revised statement treats these internet activities as exceeding solicitation and therefore unprotected:
Still protected under the MTC statement:
State adoption varies. The trend is toward broader adoption of the MTC position.
States use one of three formula structures for general business corporations:
Single sales factor — the majority of states. Apportioned income = (State sales / Total sales) x Taxable income. Eliminates property and payroll from the formula, removing incentive to relocate those factors.
Double-weighted sales (or other weighted) — a declining number of states weight sales at 50-90% with the remainder split between property and payroll.
Equal three-factor (UDITPA) — a small number of states retain equal weighting: (Property + Payroll + Sales) / 3.
The sourcing rule determines which state claims a sale in its numerator:
Market-based sourcing (majority rule) — services sourced where the customer receives the benefit. Cascading hierarchy: delivery location, billing address, commercial domicile, reasonable approximation.
Cost-of-performance (declining) — services sourced where the income-producing activity is performed. Many states use an all-or-nothing approach (100% to the state with the greater proportion of activity). This is being replaced by market-based sourcing.
Tangible personal property — uniformly sourced to the destination state (where goods are delivered).
Throwback — sales shipped from a state where the taxpayer has nexus to a state where the taxpayer does NOT have nexus are "thrown back" to the origin state's numerator. Prevents "nowhere income." Many states have enacted throwback; some have repealed it alongside single sales factor adoption.
Throwout — instead of adding nowhere sales to the origin numerator, removes them from the denominator in all states. Increases apportionment everywhere proportionally. Adopted by only a small number of states.
In combined reporting states, the choice between Joyce and Finnigan determines whose nexus counts for the sales factor numerator:
Joyce — each entity's nexus is evaluated independently. Sales by a group member without nexus in the state are excluded from the combined numerator. Reduces combined apportionment.
Finnigan — the group is treated as a single taxpayer. If any member has nexus, all members' sales to the state are in the numerator. Increases combined apportionment.
Standard apportionment may not apply to certain industries:
When the standard formula does not "fairly represent" in-state activity, the taxpayer or tax authority may petition for an alternative method. High bar: must demonstrate the standard formula produces an unreasonable result AND the proposed alternative is reasonable.
Rolling conformity — state adopts the IRC as currently in effect. Federal changes flow through automatically. Majority of states. Risk: unplanned revenue impact from federal tax cuts unless the state decouples.
Static (fixed-date) conformity — state adopts the IRC as of a specified date. Federal changes after that date require state legislative action. Creates computation complexity when the state's IRC version differs from the current federal return.
Selective conformity — state adopts specific IRC provisions on a section-by-section basis. Maximum state control, highest compliance complexity.
These federal provisions generate the most significant state-by-state divergences:
Section 163(j) interest limitation — states may conform (apply the 30% ATI limitation), decouple fully (require addback), or apply a modified threshold. Treatment of disallowed interest carryforward varies.
GILTI (IRC 951A) — state treatment ranges from full inclusion with no Section 250 deduction (maximum tax) through partial deduction to full exclusion (treating GILTI as non-taxable foreign income). Combined reporting states face additional complexity on CFC income within the unitary group.
Section 174 R&E amortization — post-2021, federal law requires capitalization over 5 years (15 for foreign research). Some states decouple, allowing current deduction for state purposes. Static conformity states with a pre-2022 date may automatically allow current deduction. Creates multi-year timing differences requiring state-by-state tracking.
Bonus depreciation (IRC 168(k)) — states may fully conform, cap at a lower percentage, fully decouple (requiring addback and recomputation on a standard recovery schedule), or conform at the rate matching their static conformity date. Decoupling creates timing differences only (total depreciation is the same over the asset's life).
State NOL rules — key variables: carryback availability, carryforward period (indefinite or fixed), utilization limitation (80% of income, lower percentage, or dollar cap). State NOLs are computed from state taxable income after modifications and apportionment — not from the federal NOL amount.
Each legal entity files its own return, computes its own apportionment, and reports its own income. Allows potential income shifting through intercompany transactions (royalties, management fees, interest).
Combined reporting states require all members of a unitary business to file a combined return. Intercompany transactions are eliminated, removing the income-shifting mechanism. The combined apportionment factor captures all members' activity.
Water's edge — limits the combined group to domestic entities and certain foreign entities with substantial U.S. activity. The default in most combined reporting states.
Worldwide combined — includes all entities globally. Very few states require this; most offer it as an option or anti-avoidance override.
Three unities test: unity of ownership (common control, typically >50%), unity of operation (shared services — purchasing, accounting, HR, legal), unity of use (centralized management and strategy).
Contribution/dependency test: entities contribute to or depend upon each other through flows of goods, services, capital, or management.
Active holding companies (providing capital, strategy, shared services) are typically unitary with their subsidiaries. Passive holding companies that merely hold stock may be excluded.
For states where the corporation has nexus but has not been filing, voluntary disclosure agreements (VDA) limit exposure:
Initiate VDA before the state discovers non-filing. If the state contacts the taxpayer first, VDA eligibility may be foreclosed.
R&D credits (piggyback) — based on federal IRC 41 QRE definitions, with state-determined rates. May be refundable or nonrefundable. Typically limited to in-state research expenditures.
Investment credits — percentage of qualified capital investment (manufacturing equipment, real property, technology). Clawback provisions if investment is removed or employment targets are missed.
Hiring / employment credits — per-employee amount for net new positions above a base level. Tiered by region (enhanced in distressed areas). Multi-year availability while positions are maintained.
Enterprise zone / opportunity zone credits — enhanced incentives in designated geographic areas. May include income tax credits, property tax abatement, and sales tax exemption. Require pre-investment certification.
Clean energy credits — growing category for renewable energy, energy efficiency, and EV-related investment.
The operational artifact for multistate compliance. For each filing state, track:
Read these for detailed framework content, evaluation workflows, and authoritative model citations:
references/nexus-evaluation-framework.md — Physical presence nexus triggers,
economic/factor presence nexus (post-Wayfair for income tax), affiliate/attributional
nexus theories, P.L. 86-272 protection analysis (protected vs unprotected activities,
MTC 2021 revised statement on internet activities), VDA program structure and MTC
National Nexus Program, multistate nexus evaluation workflow. Read when performing a
multistate nexus evaluation, analyzing P.L. 86-272 for a service or internet-active
company, or assessing voluntary disclosure eligibility.
references/apportionment-formulas.md — UDITPA three-factor formula (property/payroll/sales
computation details), single sales factor mechanics, market-based vs cost-of-performance
sourcing rules and hierarchy, throwback/throwout rules, Joyce vs Finnigan combined
reporting election, special industry formulas (financial institutions, airlines, trucking,
telecom, construction), business vs nonbusiness income distinction, MTC model allocation
and apportionment regulation, Section 18 distortion relief. Read when computing
apportionment for a specific state, resolving sourcing questions for services or
intangibles, or evaluating special industry formula applicability.
references/state-conformity-matrix.md — Rolling/static/selective conformity comparison,
state modification patterns for Section 163(j), GILTI, Section 174 R&E, bonus
depreciation, and state NOL rules. Combined vs separate reporting mechanics, water's
edge and worldwide combined reporting, unitary business tests (three unities,
contribution/dependency). State tax credit inventory (R&D piggyback, investment, hiring,
enterprise zone, clean energy, film). Multistate modification matrix workflow. Read
when building a state-by-state modification matrix, evaluating combined reporting
obligations, or researching state treatment of a specific federal provision.
For single-state deep coverage and federal return data:
tax-prep:state-returns for Florida-specific return preparation, Florida nexus rules, Florida apportionment, Florida NOL, and Florida e-filing requirementstax-prep:form-1120-prep for federal taxable income (Line 30) that serves as the starting point for all state computationstax-prep:nol-tracking for federal NOL carryforward ledger; state NOLs are computed separately (documented in this skill)tax-prep:tax-planning for multi-year multistate tax planning, entity structure optimization, and estimated payment strategiestax-prep:tax-compliance for deadline management, extension filing, and penalty abatement across statesFor financial reporting and entity data:
financial-planning:tax-provision for ASC 740 state tax provision, deferred tax computations from state timing differences (bonus depreciation, Section 174, NOL), and state rate changesaccounting-foundation:entity-profile for corporate entity details affecting multistate filing (domicile state, registered states, fiscal year)accounting-foundation:chart-of-accounts for GL account mapping to state tax linesFor platform data supporting apportionment:
qbo-integration:qbo-reporting for financial data used in apportionment factor computation (sales by state, payroll by state, property by state)tax-prep:state-returns — uses cross-state matrix when expanding beyond Floridatax-prep:tax-planning — uses nexus analysis, apportionment data, and credit inventory for multistate planningtax-prep:form-1120-prep — references state tax liability for federal deduction analysisfinancial-planning:tax-provision — uses state rates, apportionment, and conformity data for ASC 740 provisionfinancial-planning:variance-analysis — uses state tax estimates for budget-to-actual variancefirm-operations:engagement-management — uses multistate filing list for engagement scopingfirm-operations:quality-compliance — references multistate filing requirements for review checklistsnpx claudepluginhub aeyeops/aeo-basis-plugin-marketplace --plugin tax-prepProvides common requirements matrix, state-specific deltas, and unified architecture for US state privacy laws across CA, VA, CO, CT, TX, OR, MT, KY. Useful for multi-state compliance programs.
Advisory reference for multi-jurisdiction income tax provision under ASC 740 and IAS 12. Covers deferred taxes, valuation allowances, uncertain tax positions, Pillar Two, ETR reconciliation, and local GAAP variations.
Estimates state income tax liability using gross income from spending_summary, prior payments from transaction_search, and state residence. Handles no-tax states and multi-state scenarios.