Earlier this year we reported on a Massachusetts case where a court, (wrongly, we think), determined that a nonresident taxpayer could be taxed on the sale of stock in a business that he founded and ran in the state. Turns out this issue might be contagious……a few months ago, Ohio successfully made a similar argument. In a Final Determination issued on March 28, 2024, the Ohio Tax Commissioner denied Claimants Dr. Garry Rayant and Dr. Kathy Fields’s $719,492 refund application filed with their amended 2018 Ohio tax return. The Claimants sold 25% of their interest in Rodan & Fields, a skincare products company, and originally apportioned their resulting capital gain income to Ohio in calculating their Ohio nonresident credit. On their amended return, however, they allocated this capital gain income to California, increased their nonresident credit, and claimed a refund.
Over the past few years, we’ve seen a major expansion of enforcement efforts by the New York City Department of Finance, particularly with respect to the City’s unique Unincorporated Business Tax (the “UBT”). In these audits, DOF has been taking increasingly aggressive positions around the application of various statutory provisions.