Biographical Information Britte Stein, Senior Tax Manager of - PDF document

�� ������������������������������� - �������� ������������������������������������� Workshop PP California Dreaming: Tax Issues for Ohio Companies Doing Business in California Wednesday, January 29, 2020 2:00 p.m. to 3:00 p.m.

Biographical Information Britte Stein, Senior Tax Manager of Compliance and Tax Accounting, Grief, Inc. 425 Winter Rd., Delaware, OH 43015-8903 740-657-6550 Britte.Stein@Greif.com Britte has a Bachelor of Science in Accounting from University of Southern Indiana. She received her CPA in 2005. Britte started her tax career in public accounting for 5yrs. Then moved into the private sector where she worked as Senior Tax Accountant for Steel Dynamics, Inc. her main responsibilities were compliance and tax provision for 5yrs before moving to Zimmer Biomet, Inc. and was promoted to Corporate Domestic Tax Manager for 3yrs. Britte currently works for Greif, Inc. as Senior Tax Manager of Compliance & Tax Accounting since December 2015 and she is responsible for the overall consolidation of the company’s domestic/international financial results. As such, part of her responsibility is overseeing all domestic compliance, along with international/domestic provision and tax accounting. Ligia Machado, Partner, PricewaterhouseCoopers LLP 400 Capital Mall Ste. 600, Sacramento, CA 95814 Mobile: (530) 306-1355 ligia.l.machado@pwc.com A tax partner in PwC’s California State and Local Tax (SALT) practice, Ligia Machado is widely recognized as one of the top experts in the country with regard to California franchise tax consulting and controversy. Ligia's clients are large multistate and multinational corporations spanning a variety of industries, including financial services, telecommunications, industrial and extractive. Since joining PwC in 2001, Ligia has played a leading role in helping clients navigate through the decision-making process related to California compliance and reporting issues. Ligia has assisted many of the largest corporations in the world resolve complex California tax controversies. Ligia joined the Firm after a thirteen-year career at the California Franchise Tax Board. Ligia was the top technical resource for FTB’s Audit Branch. She had been a key participant in major policy- level decision-making with respect to FTB audit programs, litigation positions, and legislative and regulatory matters. Ligia wrote the California intercompany transaction regulation. She was also a co-author for the comprehensive California combined reporting regulations. Erin Eakes, Director, PricewaterhouseCoopers LLP 400 Capital Mall Ste. 600, Sacramento, CA 95814 Mobile: (805) 252-8308 erin.f.eakes@pwc.com Erin Eakes is a Director with PwC’s National Tax Services – SALT practice in Sacramento, CA, focusing on California franchise and income tax controversy and consulting. Erin works with taxpayers across the country to defend against California Franchise Tax Board audits, identify refund or offset opportunities in reverse income tax audits, and manage the California administrative processes with the California Franchise Tax Board and California State Board of Equalization / Office of Tax Appeals. Since joining the firm in 2012, Erin has represented taxpayers in corporate dispute resolution proceedings, both at protest and settlement, before the California Franchise Tax Board. Erin has also successfully represented clients on appeal before the California State Board of Equalization on nonbusiness income issues. Erin has experience with the California state taxation of varied business entity taxpayers across many industries and product sectors, with significant exposure to the oil and gas industry as well as to banks and financial institutions. Erin received a Bachelor of Science degree in Mathematics and Economics from University of California, Los Angeles, and a Juris Doctorate from University of California, Davis School of Law.

California Dream ing : Ta x Issues for Ohio Com p a nies Doing Business in Ca lifornia 1

2 California Market Based Sourcing

Ca lifornia Ma rket Ba sed Sourcing Cal. Rev. & Tax Code § 25136 (a)s [F]or taxable years beginning on or after January 1, 2013, sales, other than sales of tangible personal property, are in this state if: (1) Sales from services are in this state to the extent the purchaser of the service received the benefit of services in this state. (2) Sales from intangible property are in this state to the extent the property is used in this state. In the case of marketable securities, sales are in this state if the customer is in this state. (3) Sales from the sale, lease, rental, or licensing of real property are in this state if the real property is located in this state. (4) Sales from the rental, lease, or licensing of tangible personal property are in this state if the property is located in this state. (b) The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section. 3

Ca lifornia Ma rket Ba sed Sourcing California’s market-based sourcing regulation (Cal. Code Regs., tit. 18, § 25136-2) applies to sales other than sales of tangible personal property. First version of regulation established in March 2012 applied to taxpayers that made • a single-sales factor election beginning in 2011, and to all taxpayers beginning in 2013. • FTB amended the regulation on September 15, 2016 (effective for 2015 tax year but with a taxpayer election to make the changes retroactive to 2012). Primary changes were to add a definition of marketable securities, and provide • sourcing rules for gross receipts from dividends, goodwill, and interest. • Since the last amendment, the FTB has held four interested parties meetings (Jan. 2017; June 2017; May 2018; and July 2019) and proposed three different sets of changes. Another round of proposed language and interested parties meeting is expected in 2020. 4

Sourcing Receip ts from Sa les of Serv ices Current regulation, with cascading rules - RECEIPTS FROM SERVICES TO: Individuals Business Entities Customer's billing address and if Location identified in the taxpayer uses this method, the the contracts or books & records. Benefit presumed to be FTB will accept. received at: See Presumption may be overcome by Chief Counsel Ruling 2015-03, the taxpayer only. Chief Counsel Ruling 2017-01 If presumption overcome Location identified in contract or Reasonable approximation books & records. Reasonable approximation Location from which If presumption overcome customer placed order If presumption overcome Billing address 5

Sourcing Receip ts from Sa les of Serv ices to a Business Entity Chief Counsel Ruling 20 15-0 3: Distinguishes location where custom er receives benefit based on whether receipts were from a m arketing or non- m arketing service • Taxpayer’s customer received benefit of service directly at its location, and indirectly at location of its own customers (the customer’s customer). • The Ruling analogized this to sourcing receipts from intangibles, where location of benefit depends on whether they are “marketing” or “non-marketing” intangibles • The FTB found that the services were “non-marketing” services (that the value of the service lay not in the advertising or promoting of a product, service or other item, but in the service being used in the business operations of the direct customer). • The FTB ruled that the location of the direct customer (not the customer’s customer) was the appropriate sourcing for the non-marketing services. 6

Sourcing Receip ts from Sa les of Serv ices to a Business Entity Chief Counsel Ruling 20 17-0 1: Sourcing of Adm inistration / Outsourced Services (These are also “non-m arketing” Services) • Health plans are contractually obligated to perform a range of services to their clients. The taxpayer managed and administered certain of these services on behalf of the health plans, with the health plan as its direct customer. • The benefit of the service was received by the health plan at its own location where it otherwise would have had to perform the functions, and indirectly at the location of the health plan members (the customer’s customer). • The ruling reiterated that non-marketing services should be assigned to the location where the taxpayer’s customer (the health plans) directly received the benefit of the service, and not the location of the customers’ customers (the plan members). • The ruling held that the benefit the health plans’ received from the taxpayer’s administration services was being relieved of the obligation to perform the services for its members. • Accordingly, the benefit of that service was received by the health plans at the location where the health plans would otherwise have been obligated to perform those services – their base of operations. 7