Over the last few years, the MTC has been developing a model statute that would impose an entity-level tax on certain disregarded entities or PTEs if the entity is owned 50 percent or more by an entity not subject to state income tax (e.g., an insurance company or financial institution). On December 6, 2012, the MTC voted to continue working on its model statute, despite requests from the National Conference of State Legislatures (“NCSL”) to drop the initiative. The MTC’s Executive Committee agreed to refer a revised proposal concerning the tax treatment of LLCs receiving revenues from insurance businesses and passive investment activity to its Uniformity Committee. On March 6, 2013, the Uniformity Committee voted to forward the proposal to the Executive Committee. Surprisingly, the EC voted on May 9, 2013, to discontinue the project, instead deciding to issue a white paper explaining the issues and possible solutions.
Co-author - Patrick Smith, Director Baker Tilly Virchow Krause, LLP
Mr. Ely is a partner and Messrs. Thistle and Rhyne are associates with the multistate law firm of Bradley Arant Boult Cummings LLP in its Birmingham, Alabama office. Mr. Ely is Chair of the firm’s State & Local Tax Practice Group. Messrs. Ely, Thistle, and Rhyne co-author a chapter on the state taxation of PTEs in the treatise “Keatinge, Conaway and Ely on Choice of Business Entity” (West). Mr. Smith is the Tax Director at Baker Tilly Virchow Krause, LLP and is head of State & Local Tax Services for the firm’s Chicago office. Mr. Smith is a co-author of “State Taxation of Pass-Through Entities and Their Owners,” a treatise published by Warren Gorham and Lamont/West since 2005. Messrs. Ely and Smith have co-presented on this topic at NYU’s Institute on Federal Taxation, as have Messrs. Thistle and Smith for a webinar hosted by Strafford Publications in early June.