August 11, 2017 Practice Point

State Corporate Income Tax Rules for Sourcing of Revenue for Law Firms

By Ilya A. Lipin, Baker Tilly Virchow Krause, LLP, Philadelphia, PA; Karen LoDico, Robert M. Porcelli, and Michael Vadner, PwC LLP, Tyson's Corner, VA and Philadelphia, PA

Historically, law firms subject to state corporate income taxes generally sourced receipts from sales of legal services by using a cost-of-performance method. Law firms with a taxable presence in multiple states may be impacted, however, by the growing trend of sourcing service revenue using the market-based sourcing method.

Due to the difference in treatment between the two revenue sourcing methods, the following common questions arise:

  • How should a law firm doing business in multiple jurisdictions source its revenue for compliance purposes when some of the jurisdictions in which it operates use the cost of performance approach and others use the market-based sourcing approach?
  • If legal services are provided in one state for a client in another state, where should the revenue from such services be sourced?
  • If legal services are provided in one state for a client in another state relating to an issue which occurred in a third state, where should the revenue from such services be sourced?
  • Are the sourcing rules for individual clients different from the rules for business clients?

Some of the answers are found in the market-based sourcing laws and regulations recently enacted in several states. Nonetheless, lack of uniformity in these laws and regulations significantly increases the complexity and potential pitfalls for practitioners. Misunderstanding of laws and regulations may cause an improper collection of data necessary for compliance resulting in an incorrect calculation of the apportionment formula’s sales factor and state income tax liability.

This article considers law firms subject to corporate income tax,1 as opposed to firms treated as flow-through entities or otherwise not subject to state corporate income tax; however, such firms may face similar issues when addressing the sourcing of their receipts.2 For instance, while a law firm organized as a partnership may be subject to varying sourcing rules by state, it would still need to determine the market-based sourcing for any cost of performance states to the extent the law firm partnership has any corporate partners (i.e., Professional Corporations). That creates an additional level of compliance complexity.

The Cost of Performance Method

The cost of performance method generally looks to where the costs associated with the performance of the service occurred.  Receipts are sourced either to the location where the greatest of those costs occurred compared to all other locations, or on a proportionate basis to each location where costs were incurred while providing services to the client.

Under the greater cost of performance method, receipts are generally sourced based on an “all or nothing” approach to the state with the greatest amount of these costs.3 For instance, where a multistate taxpayer performs services in three states and incurs costs at a ratio of 34/33/33 per state, all of the receipts should be sourced to the state where 34 percent of the costs were incurred. Under this example, no receipts would be sourced to either of the states where 33 percent of the costs were incurred, assuming of course that all three states imposed the same rule in regard to the sourcing of receipts.4 Conversely, the pro rata method sources the receipts on a proportionate basis in line with the costs incurred in each state. Under this approach, based on the example above, each of the three states where costs were incurred in the performance of services would have a portion of the receipts sourced to them.

The process for sourcing revenue under the cost of performance method involves identifying each income-producing activity and then allocating the cost to each such activity. For law firms, the income-producing activity could be an individual client, case, project, or similar category. Additionally, some states (e.g., Colorado) have professional services sourcing in their cost of performance rules that could pull in a law firm where the sourcing would be based on individual hours in each state.5

Under current law, approximately 20 states use some form of the cost of performance approach for sourcing receipts from sale of services.6

The Market-Based Sourcing Method

The market-based sourcing method assigns the receipts from sales of services to the location of a service provider’s customers or the destination where its customers receive the benefits of the service. This method attempts to identify the jurisdictions where the taxpayer has a market for services and where the users of the services are located.

Currently, approximately 26 states use the market-based sourcing approach for the sourcing of service receipts.7 At least 10 of those jurisdictions—Connecticut, the District of Columbia, Louisiana, Massachusetts, North Carolina,8 Nebraska, New York, Pennsylvania, Rhode Island, and Tennessee—have adopted the market-based sourcing approach since 2010. In recent years several states have provided specific guidance for sourcing of receipts generated through legal services which are further discussed here.

California

California has provided detailed market-based sourcing regulations and introduced hierarchy rules for determining where the receipt from services should be sourced based on the information available to the taxpayer. In general, California requires that receipts from the sale of services be sourced to California “to the extent the purchaser of the service received the benefit of the services in [California].”9 To identify where the benefit of the services is received, California differentiates in its law firm sourcing rules between receipts from individual clients and receipts from business entities.10

Specifically, when a law firm’s client is an individual with a California billing address the benefit is presumed to be received in California.11 The presumption may be overcome if, by a preponderance of evidence, the law firm proves that its contract with the client, or the law firm’s books and records kept in the regular course of business, provide a location where the benefit is received.12

When a law firm’s client is a corporation or other business entity, however, the benefit is presumed to be received at the location indicated in a contract between the law firm and the client, or on the law firm’s books and records.13 This presumption may be rebutted by proving that the benefit of the service was received at a location other than the location identified in the contract or on the books and records.14 If the contract or the books and records do not identify the location where the benefit of the service is received, or if the presumption is rebutted, then the location where the benefit of the service was received should be reasonably approximated.15 If the location cannot be determined or reasonably approximated, it is presumed that such location is where the client ordered the service.16   If the location still cannot be determined under these rules, the benefit of the service is generally sourced to the client’s billing address.17

California market-based sourcing regulations provide the following example regarding sourcing of receipts for law firms:

Law Corp located in State C has a Client Corp that has manufacturing plants in this state and State B. Law Corp handles a major litigation matter for Client Corp concerning a manufacturing plant owned by its client in this state. All gross receipts from Law Corp’s services related to the litigation are attributable to this state because Law Corp’s books and records kept in the normal course of business indicate that the services relate to Client Corp’s operations in this state.18

California regulations include another example for a corporation that provides consulting and tax services.  This example permits the receipts to be bifurcated based on where the employees physically performed the services.  It is our understanding that some law firms may source their receipts based on this example:

Audit Corp is located in this state and provides accounting, attest, consulting, and tax services for Client Corp. The contract between Audit Corp and Client Corp provides that Audit Corp is to audit Client Corp for taxable year ended 20XX. Client Corp’s books and records kept in the normal course of business, as well as Client Corp’s internal controls and assets, are located in States A, B and this state. As a result, Audit Corp’s staff will perform the audit activities in States A, B and this state. Audit Corp’s business books and records track hours worked by location where its employees performed their service. Audit Corp’s receipts are attributable to this state and States A and B according to the taxpayer’s books and records which indicate time spent in each state by each staff member.19

Massachusetts, North Carolina, Rhode Island, and Tennessee

The language of the market-based sourcing regulations in Massachusetts, North Carolina, Rhode Island, and Tennessee closely resembles the Multistate Tax Commission model regulations designed to promote uniformity among states. Regulations in these states define legal services as “professional services” that require specialized knowledge, professional certification, license, or a degree,20 and may include transmission of documents and other communication by mail or email.21 Similar to the California regulations, Massachusetts, North Carolina, Rhode Island, and Tennessee differentiate sourcing rules for services delivered to an individual versus to a business customer.22 A customer is the person who contracts for services regardless of whether someone else pays for or benefits from the services.23 A business customer is “a business operating in any form” including a sole proprietorship and an “individual customer” is “any customer that is not a business customer.”24 If in good faith it cannot be reasonably determined whether the customer is an individual or business, the customer is considered to be a business customer.25

When a legal service is provided to an individual customer, the sale is assigned to the “customer’s state of primary residence.”26 If this information is unavailable or cannot be determined, Massachusetts, North Carolina, Rhode Island, and Tennessee require the taxpayer to reasonably approximate the location and source the sale to the state of the customer’s billing address,27 which is the location indicated “in the books and records of the taxpayer as the primary mailing address relating to a customer’s account as of the time of the transaction as kept in good faith in the [normal / regular] course of business and not for tax avoidance purposes.”28 If a law firm derives more than 5 percent of its sales from this individual customer, however, it “is required to identify the customer’s state of primary residence and must assign the receipts from the service or services provided to that customer to that state.”29

The Massachusetts, Rhode Island, and Tennessee regulations provide the following example with respect to legal services provided to individual customers:

[Example 1.] Law Corp provides legal services to individual clients who are resident in [this state] and in other states.  In some cases, Law Corp may prepare one or more legal documents for its client as a result of these services and/or the legal work may be related to litigation or a legal matter that is ongoing in a state other than where the client is resident.  Assume that Law Corp knows the state of primary residence for many of its clients, and where it does not know this state of primary residence, it knows the client’s billing address.  Also assume that Law Corp does not derive more than 5% of its sales of services from any one individual client.  Where Law Corp knows its client’s state of primary residence, it shall assign the sale to that state.  Where Law Corp does not know its client’s state of primary residence, but rather knows the client’s billing address, it shall assign the sale to that state.  For purposes of the analysis it is irrelevant whether the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or the litigation or other legal matter that is the underlying predicate for the services is in another state.30

With respect to a business customer, a law firm is required to assign the receipts “to the state where the contract of sale is principally managed by the customer.”31 If the place of customer management is not reasonably determinable under the rules of reasonable approximation, then the receipts are assigned to the “customer’s place of order” or “if such customer place of order is not reasonably determinable, to the customer’s billing address.”32 If a law firm derives more than 5 percent of its sales from a customer, however, the law firm “is required to identify the state in which the contract of sale is principally managed by the customer.”33

The Massachusetts, Rhode Island, and Tennessee regulations provide the following two examples with respect to legal services provided to business customers:

[Example 2.] Law Corp provides legal services to several multistate business clients. In each case, Law Corp knows the state in which the agreement for legal services that governs the client relationship is principally managed by the client. In one case, the agreement is principally managed in [this state]; in the other cases, the agreement is principally managed in a state other than [in this state]. Where the agreement for legal services is principally managed by the client in [in this state] the sale of the services shall be assigned to [this state]; in the other cases, the sale is not assigned to [this state]. In the case of the sale that is assigned to [this state], the sale shall be so assigned even if (1) the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or (2) the litigation or other legal matter that is the underlying predicate for the services is in another state.34

Massachusetts, North Carolina, Rhode Island, and Tennessee provide for a “safe harbor” rule which permits assignment of sale to a particular customer to be based on the customer’s billing address. To qualify for the safe harbor, a law firm must engage “in substantially similar service transactions with more than 250 customers, whether individual or business,” and not originate more than 5 percent of its sales of services from the particular customer.35

Despite similar regulatory language and the Multistate Tax Commission’s uniformity efforts, Massachusetts, Rhode Island, and Tennessee have enacted their own unique provisions. For instance, in Massachusetts if a law firm is not subject to tax in the state to which the sale is sourced, the sale is excluded from the numerator and denominator of the law firm’s sales factor.36 This throwout provision impacts taxpayers by requiring extensive collection of the market-based sourcing data from all jurisdictions in order to conduct an analysis to determine which revenue may be excluded from the numerator and denominator of the sales factor. Excluding revenue from the sales apportionment factor can have a dramatic effect on the overall tax liability for a company.

Following up on two examples above and footnotes 30 and 34, Massachusetts provides two additional examples regarding this provision:

Same facts as in [Example 1 above], except that Law Corp provides legal services to several individual clients who it knows have a primary residence in a state where Law Corp is not taxable. Receipts from these services shall be excluded from the numerator and denominator of Law Corp’s sales factor even if the billing address of one or more of these clients is in a state in which Law Corp is taxable, including Massachusetts.

Same facts as in [Example 2 above], except that Law Corp is not taxable in one of the states other than Massachusetts in which Law Corp’s agreement for legal services that governs the client relationship is principally managed by the business client. Receipts from these latter services shall be excluded from the numerator and denominator of Law Corp’s sales factor.37

Rhode Island provides for a more explicit definition of what is included in the professional legal services. Specifically, Rhode Island states that “receipts for the sale of professional services involving the initiation, defense or maintenance of a judicial or administrative proceeding within this state shall be assigned to this state.”38

Tennessee provides for an annual election to apply a cost of performance sourcing methodology if the application of market-based sourcing “results in a lower apportionment factor than” the cost of performance.39 To be eligible, “the election must result in a higher apportionment factor for the tax year” and “the taxpayer must have net earnings, rather than a net loss, for that tax year[.]”40 A law firm may use this election to retain its cost of performance calculation for reasons of administrative ease, among others.

New York

Receipts from legal services are sourced to New York if the benefit is received in New York.41 This sourcing is completed pursuant to a hierarchy method if it is unknown whether the benefit from the legal services is received in New York. Specifically, if the location where the benefit was received is unknown, then the receipts are sourced to the delivery destination.42 If the destination is unknown, the apportionment fraction for service receipts within New York may be determined by using the prior year’s apportionment factor.43 If none of the above is known, the receipts may be sourced using the apportionment fraction in the current taxable year for the receipts from the services that can be sourced, using the location where the benefit was received and the services delivery destination.44

New York proposed regulations provide one example, factually similar to an example provided by the California regulations, pertaining to sourcing of receipts for law firms:

Law Corp, located in State C, is hired by Client Corp to handle a major litigation matter concerning the sale of its manufacturing plant located in New York. Client Corp has manufacturing plants in New York State and State B. The trial takes place in State C, which is the location of the opposing party in the lawsuit. Because Law Corp’s entire service is related to the manufacturing plant, which is real property, the benefit is received by Client Corp at the location of the manufacturing plant in New York State.45

Washington - Business & Occupation Tax

The Washington Business and Occupation tax is not an income-based tax and is generally imposed on the value of products, gross proceeds of sales and gross income of business.46 While most of this article concentrates on corporate income tax aspects of market-based sourcing, Washington provides an example of how a state with a different taxing regime (i.e., where the tax is based on gross proceeds) may approach sourcing of revenue from law firms centered on market-based sourcing concepts.

Washington sources receipts “based on a cascading method or series of steps.”47 As a general rule, Washington requires a receipt from services to be sourced to the state in which the benefit is received.48 In circumstances when a customer receives services in Washington and other states, an amount for a portion of services received in Washington must be attributed to Washington.49 This may be accomplished by use of “a reasonable method of proportionally attributing the benefit among states.”50 If it cannot be determined which receipts from services should be attributed to specific states, the receipt is attributed to the state in which the benefit of the service was primarily (more than 50 percent) received.51

If the receipts cannot be sourced under the general rule, the receipts must be sourced in the following order: 

  • To the state from which the customer ordered the service;
  • To the state to which the billing statements or invoices are sent to the customer by the taxpayer;
  • To the state from which the customer sends payment to the taxpayer;
  • To the state where the customer is located as indicated by the customer’s address shown on the taxpayer’s business records maintained in the regular course of business, or obtained during consummation of the sale or the negotiation of the contract, including any address of a customer’s payment instrument when readily available to the taxpayer and no other address is available; or
  • To the commercial domicile of the taxpayer.52

To illustrate the application of its market-based sourcing rule relating to the sourcing of receipts from legal services, Washington provides the following two examples:

[Example 1]: Assume Law Firm has thousands of charges to clients. It is not commercially reasonable for Law Firm to track each charge to each client to determine where the benefit related to each service is received. Assume the scope of Law Firm’s practice is such that it is reasonable to assume that the benefits of Law Firm’s services are received at the location of the customer as reflected by the customer›s billing address. Under these circumstances, Law Firm can use the billing addresses of each client as a reasonable method of proportionally attributing the benefit of its services.

[Example 2]: Same facts as Example [1] except, Law Firm has a single client that represents a statistically significant portion of its revenue and whose billing address is unrelated to any of the services provided. In this case, using the billing address of this client would not relate to the benefit of the services. Using the billing address for this client to determine where the benefit is received would significantly distort the apportionment of Law Firm’s receipts. Therefore, Law Firm would need to evaluate the specific services provided to that client to determine where the benefits of those services are received and may use billing address to attribute the income received from other clients.53

Conclusion

Due to the states’ continuing move towards market-based sourcing, law firms should pay more attention to the location at which they perform legal services, how such services are delivered to their clients, how their services are invoiced and documented, where their clients may be located, and where their legal services may be used.

Historically, non-filers may have been identified through court docket searches, filing fees for pro hac vice appearances, contracts, press-releases, registrations for personal income tax withholding and other means. Today, with the trend to source law firm revenue under the market-based method, additional filing implications could be created, especially in states with factor presence nexus standards (e.g., Alabama, California, Colorado, Connecticut, and Michigan).

Nonconformity in the state sourcing rules breeds complexity, compliance burdens, and potential pitfalls for taxpayers. As a result of nonconformity among state income tax sourcing laws and regulations, multistate law firms may need to create and run separate sourcing analyses under variations of the cost of performance and market-based sourcing methods, and assign the receipts from their legal services accordingly. For instance, in California, Massachusetts, North Carolina, Rhode Island and Tennessee, law firms should track whether the services are provided to individual or business clients, and apply a specific set of cascading rules to each group of clients. Among these states, additional attention should be given to unique provisions such as Massachusetts’ throw out rule, Rhode Island’s sourcing rule regarding judicial or administrative proceedings, and Tennessee’s cost of performance election. In New York and Washington if the location of the benefit of the service is unknown, specific state hierarchy methods should be followed.

It is important to note that even though one state determines that a receipt is properly sourced to it under a market-based sourcing approach, another state is not precluded from claiming the same receipt under its cost of performance or its own market rules. Consequently, depending upon the facts and the particular states involved, it is entirely possible for a receipt to be counted twice or not at all. Further, because market-based sourcing rules are relatively new, there is some uncertainty as to the interpretation and application of these complex rules.

Safe harbor rules, which may permit a taxpayer to source receipts from services to the client’s billing address, may simplify some of the compliance burden. At this time, however, only a limited number of states have a safe harbor rule, and it may apply only to law firms that engage in substantially similar service transactions with more than a specific number of clients. Further, reliance on the safe harbor may require additional attention to be paid to the client’s billing address. Questions may arise if the client’s billing address is associated with its accounts receivable address located in a state different from the one where the services were received.

Examples provided by the states referenced in this article answer some of the questions about application of the sourcing rules. The examples, however, may not consider all potential fact patterns and additional guidance may be needed. Accordingly, multistate corporate law firms will likely experience additional internal administrative compliance burdens as they will need to account for each state-specific rule, including its unique provisions, and track the data essential for accurate compliance.

Multistate law firms will need to consider the impact of the shift towards market-based sourcing and establish appropriate processes to track the various sourcing rules described in this article. Specifically, law firms should tailor processes and technology into their matter intake process so that they can capture the relevant information upfront. A good starting point for facilitating an automated market-based sourcing data analysis is building into a firm’s electronic intake process questions that identify data points such as client addresses for each matter’s billing, engagement letter, client headquarters, and the buyer responsible for supervising the matter, as well as questions that elicit information about the matter’s location such as where litigation is filed, where services will be performed, and the situs of the property or matter that is the subject of the legal services. This intake implementation, among other items described in this article, should automate data mining and analytics of market-based sourcing issues with actual data captured up front, and should help to support the return position if the state audits it in the future. ■


1 Note that some states (e.g., California) refer to their corporate income taxes as a “franchise tax.” For the purposes of this article, franchise taxes are referred to as income taxes.

2 Law firms not taxed as corporations generally encounter personal income tax sourcing issues which are outside the scope of this article.

3 See generally UDITPA Sec. 17.

4 Giles Sutton, Jamie C. Yesnowitz, Chuck Jones, & Shaya Rubenstein, California’s Market-Based Sourcing Reg: Fairness or Muddying the Waters?, 65 State Tax Notes 709 (Sept. 10, 2012).

5 Colo. Rev. Stat.  § 39-22-303.5(4)(c)(VII) ; Colo. Code Regs.  § 39-22-303.5.4(C)(7).

7 Ala. Code § 40-27-1; Ariz. Admin. Code § R15-2D-806 (allows for an election); Cal. Rev. & Tax. Cd. § 25136; Conn. Gen. Stat. § 12-218; D.C. Code § 47-1810.02(g)(3)(A)(iii); Ga. Code Ann. § 48-7-31(d)(2)(A)(i); 35 Ill. Comp. Stat. § 5/304(a)(3)(C-5); Iowa Admin. Code r. 701-54.6; La. Rev. Stat. Ann. § 47:287.95(L)(1); Me. Rev. Stat. Ann. tit. 36, § 5211(16-A); Md. Regs. Code § 03.04.03.08(C)(3),-(D); Mass. Gen. L. ch. 63 § 38(f); Mich. Comp. Laws Ann. § 206.665(2)Minn. Stat. § 290.191, Subd. 5; Mo. Rev. Stat. § 143.451 (allows for an election); Neb. Rev. Stat. § 77-2734.14(3)(b); N.C. Gen. Stat. § 105-130.4; N.Y. Tax Law § 210-A(5), -(10); Ohio Rev. Code Ann. § 5733.05(B)(2)(c)(ii); Okla. Stat. tit. 68, § 2358(A)(4); 72 Pa. Stat. Ann. § 7401(3)(2)(a)(17); R.I. Gen. Laws § 44-11-14(b)(1)(ii); Tenn. Code Ann. § 67-4-2012(i)(1)(C); Utah Code Ann. § 59-7-319(3); Wash. Rev. Code § 82.04.462; Wis. Stat. § 71.25(9)(dh).

8 North Carolina has been moving towards using market-based sourcing rules since 2015. The North Carolina Department of Revenue proposed administrative market-based sourcing rules which were adopted by the agency and were approved by the Rules and Review Commission on February 16, 2017. The regulations, however, “will not be entered into North Carolina’s administrative code unless and until the legislature enacts statutory market-based sourcing changes.” See Amy Hamilton, North Carolina Rules Review Commission Approves Market-Based Sourcing Regs, 2017 State Tax Notes 33-2 (Feb. 21, 2017).

9 Cal. Rev. & Tax. Cd. § 25136(1).

10 Cal. Code Regs. 25136-2(c)(1).

11 Cal. Code Regs. 25136-2(c)(1)(A).

12 Cal. Code Regs. 25136-2(c)(1)(A).

13 Cal. Code Regs. 25136-2(c)(2)(A).

14 Cal. Code Regs. 25136-2(c)(2)(A).

15 Cal. Code Regs. 25136-2(c)(2)(B).

16 Cal. Code Regs. 25136-2(c)(2)(C).

17 Cal. Code Regs. 25136-2(c)(2)(D).

18 Cal. Code Regs. 25136-2(c)(2)(E)(2).

19 Cal. Code Regs. 25136-2(c)(2)(E)(2).

20 830 CMR 63.38.1(9)(d)(4)(b)(i), -(d); 17 NCAC 05G .1001 (approved by North Carolina’s Rules Review Commission on 02/16/2017); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(1).

21 830 CMR 63.38.1(9)(d)(4)(d)(ii); 17 NCAC 05G .1002(c); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(a); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(2)(ii).

22 830 CMR 63.38.1(9)(d)(4)(d)(iii); 17 NCAC 05G .0801, -.1000; R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3).

23 830 CMR 63.38.1(9)(d)(4)(d)(iii); 17 NCAC 05G .1003; R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3).

24 830 CMR 63.38.1(9)(d)(1)(c); 17 NCAC 05G .0102(2), -(6); R.I. Reg. CT 15-04(5); Tenn. Comp. R. & Regs. 1320-06-01-.42(1)(c).

25 830 CMR 63.38.1(9)(d)(4)(d)(iii); 17 NCAC 05G .0103; R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3).

26 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(1); 17 NCAC 05G .1004(1); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(A); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(I).

27 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(1); 17 NCAC 05G .1004(1); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(A); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(I).

28 830 CMR 63.38.1(9)(d)(1)(c); 17 NCAC 05G .1004(1); R.I. Reg. CT 15-04(5); Tenn. Comp. R. & Regs. 1320-06-01-.42(1)(c).

29 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(1); 17 NCAC 05G .1004(1); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(A); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(I).

30 830 CMR 63.38.1(9)(d)(4)(d)(iv); R.I. Reg. CT 15-04(8)(i)(8)(B)(IV); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(ii). North Carolina’s proposed regulations provided the same example, but it was removed from the final version approved by North Carolina’s Rules Review Commission. See 17 NCAC 05G .1006 – Examples (proposed regulation 10/03/2016). The new provision in the North Carolina regulations, however, requires the North Carolina Department of Revenue to publish examples of application of these rules on its website. See 17 NCAC 05G .0601.

31 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(2); 17 NCAC 05G .1004(2)(a); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(B); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(II).

32 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(2); 17 NCAC 05G .1004(2)(b), -(c); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(B); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(II).

33 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(2); 17 NCAC 05G .1004(2); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(B); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(II).

34 830 CMR 63.38.1(9)(d)(4)(d)(iv); R.I. Reg. CT 15-04(8)(i)(8)(B)(IV); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(ii).

35 830 CMR 63.38.1(9)(d)(4)(d)(iii)(A)(3); 17 NCAC 05G .1004(3); R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(I)(C); Tenn. Comp. R. & Regs. 1320-06-01-.42(4)(d)(3)(i)(III).

36 830 CMR 63.38.1(9)(d)(4)(d)(iii).

37 830 CMR 63.38.1(9)(d)(4)(d)(iv).

38 R.I. Reg. CT 15-04(8)(i)(8)(B)(iii)(b)(III).