As reported in the State Tax Return last quarter, state and local governments continue to propose mandatory unitary combined reporting (“MUCR”) as well as allocation and apportionment changes in attempts to generate much-needed revenue. Below, we summarize some of the recent state and local legislative action in these areas.

MUCR—Dead or Alive?

MUCR has sparked intense legislative debate nationwide in 2011, yet most MUCR proposals have garnered little, if any, real traction. Legislative bodies in Arkansas, Connecticut, Maryland, New Mexico, and Tennessee considered MUCR bills in their recent regular sessions, but all such bills died prior to adjournment. MUCR bills still pending this session include the following:  

District of Columbia

On May 25, 2011, the Council of the District of Columbia initially approved Mayor Vincent Gray’s budget, which implements MUCR and double-weighted sales-factor apportionment for tax years beginning on or after December 31, 2010. The District’s chief financial officer estimates that MUCR is expected to generate $22 million a year in taxes. The proposed budget is subject to a final vote by the D.C. Council on June 14, 2011, and appears likely to pass.  


The Pennsylvania Senate (SB 679) and House of Representatives (HB 1396) are considering similar bills that would enact MUCR effective for tax years beginning on or after January 1, 2012. In addition, HR 286 would mandate a study of the effects of MUCR. The bills have not been set for hearing in their respective committees, however, and appear unlikely to pass this session.  

Rhode Island

Rhode Island Governor Lincoln Chafee included MUCR in his proposed budget bill, H 5894. If passed, the bill would implement MUCR for tax years beginning on or after January 1, 2012. The bill is currently pending before the House Finance Committee. The 2011 Rhode Island General Assembly adjourns its regular session on July 1, 2011.

Allocation and Apportionment Trends

The legislative trend in income apportionment towards heavier sales-factor weighting and market-based sourcing has continued. Of the pending legislation in Arizona, California, Maryland, Montana, Pennsylvania, and Virginia discussed in the State Tax Return last quarter,1 none has become law to date.2 Recently, however, additional legislation involving such allocation and apportionment changes has become law (or is currently expected to become law).


HB 434, which passed both houses and now awaits Governor Robert Bentley’s signature, would change the formula used to apportion business income to Alabama to a double-weighted sales factor from the current equally weighted three-factor formula. Furthermore, the bill would change from “cost of performance” to “market-based sourcing” for purposes of sourcing receipts from certain sales of intangibles and services. The Legislative Fiscal Office estimates that, if signed into law, HB 434 would raise state revenue by approximately $20 million per fiscal year.  


On May 25, 2011, Governor Rick Snyder signed into law HB 4479, which clarifies that beginning January 1, 2011, multistate companies are not permitted to elect three-factor apportionment under the state’s Multistate Tax Compact provisions. Businesses operating in other states that are subject to the Michigan Business Tax (or the newly created Corporate Income Tax) are now required to allocate and apportion their receipts using single-sales-factor apportionment.

New Jersey

On April 28, 2011, Governor Chris Christie signed S 2753. The new law, effective upon execution by Governor Christie, phases in single-sales-factor apportionment by 2014. New Jersey’s current double-weighted sales apportionment scheme is replaced with a 70 percent sales, 15 percent property, and 15 percent payroll formula for periods beginning on or after January 1, 2012, but before January 1, 2013; a 90 percent sales, 5 percent property, and 5 percent payroll formula for periods beginning on or after January 1, 2013, but before January 1, 2014; and a 100 percent sales-factor apportionment formula for periods beginning on or after January 1, 2014. Governor Christie signed S 2753 despite vetoing a similar measure last session.