STATE AND LOCAL TAX CONTROVERSY AND TAX POLICY

Nielsen Merksamer has a national reputation for excellence in handling the most difficult and high-dollar California tax issues. Our success is due to our unique strategic approach to solving tax problems. We have significant experience in utilizing legislative, regulatory and political solutions to augment traditional administrative appeals and litigation to solve problems for our clients. The diverse backgrounds of Nielsen Merksamer lawyers make it possible to offer a custom-crafted strategy for every tax issue we confront. An overall strategy for a tax problem could be as complex as sequencing a regulatory change with litigation and consolidating legislation or as simple as prevailing in an administrative controversy before the State Board of Equalization. By approaching each tax problem in a “holistic,” three-dimensional manner, Nielsen Merksamer has been able to prevail where other law or accounting firms fail.

Nielsen Merksamer is also built on a fundamentally different model than most California tax firms. We do not have a few “rainmaker” tax partners who turn your project over to a number of less experienced associates. Our clients' work is completed almost exclusively by our lead tax attorneys. Whom you retain is who does the work. The result: efforts that are focused, cost- and time-effective and on the mark.

Our firm wants to be an additional resource for your corporate tax department, not replace it. We have worked in a number of different roles on tax matters, including as a consultant in support of internal tax personnel, or as "trouble-shooters" to evaluate strategies commenced by others that have gotten into difficulties. Our strategies often involve working with industry and business groups, similarly situated taxpayers, accounting firms and other consultants in order to put the strongest team forward to help our clients prevail.

Practice Highlights:

Administrative Tax Controversy

          Nielsen Merksamer lawyers argue a significant number of income, sales, insurance gross premiums, excise and property tax cases before the State Board of Equalization, the Franchise Tax Board and local assessment appeals boards every year. Nielsen Merksamer lawyers have had significant experience working for and with California’s revenue agencies and as a result have a thorough and unique understanding of the inner workings of those agencies. Our representation has included:

• State Assessed Property: We have represented the state’s largest gas and electric and telecommunications companies before the State Board of Equalization on their appeals of state-assessed property taxes.

• Sales and Use Tax: Our firm has argued many sales and use tax controversies on issues as varied as drop shipments, bad debt allowances, property sold for resale/manufacturing aids, foreign commerce, transportation charges, sales of assets in a reorganization, aircraft parts, leases of motion pictures and printed sales messages.

• Local Property Tax Appeals: We have represented technology, entertainment, manufacturing and air transportation companies in local property tax appeals and in negotiations with county assessors. We are familiar with a number of significant issues in the local property tax arena including change of ownership, valuation of high technology equipment (depreciation), possessory interests and local property tax audits.

• Personal Income Tax: We have represented a number of high-wealth individuals on a variety of personal income tax issues including the property treatment on gains from “small business” stock and residency disputes with the Franchise Tax Board.

• Local Taxes: As local governments and their private contractors have become more aggressive in pursuing different types of taxes, so too has the magnitude of problems these taxes present for taxpayers. Nielsen Merksamer has had a great deal of expertise defending taxpayers in transient occupancy taxes, utility user taxes and business license taxes in a number of local jurisdictions in California.

• Employment Taxes: As California regulators and tax officials take aggressive steps to restore the near-bankrupt Unemployment Insurance Fund to solvency, employers take unprecedented challenges on employment tax issues. Nielsen Merksamer has represented clients before the Employment Development Department on a variety of employment tax issues, including employee/independent contractor status disputes, employer determination and temporary employee rules.

• Special Taxes and Fees: We have represented clients with disputes on the growing array of special fees, taxes and charges collected or administered by the State Board of Equalization.

          Nielsen Merksamer lawyers have also been involved in a direct or amicus capacity in a number of high profile tax cases decided by California courts. These include Title Insurance of Minnesota v. State Board of Equalization, 4 Cal. 4th 715 (1992), Heather Preston v. State Board of Equalization, 105 Cal. 4th 197 (2001), Rossi v. Brown, 9 Cal. 4th 688 (1995), Sinclair Paint v. State Board of Equalization, 15 Cal. 4th 866 (1997) and most recently General Motors v. Franchise Tax Board, 39 Cal. 4th 773 (2006). Our litigators have decades of trial and appellate experience representing a broad spectrum of industries on tax matters.

          An emerging problem for businesses in California has been the use of the unfair business practices class action lawsuits (California Business and Professions Code section 17200, et seq.) by plaintiffs' lawyers alleging that a retailer has improperly applied the sales tax law. Nielsen Merksamer’s unique expertise in sales and use tax law and defending unfair business practice cases generally has resulted in our firm defending more of these emerging lawsuits than any other California law firm.

          Because we are a law firm, we can take a tax controversy from audit through the United States Supreme Court, saving clients the expense of having to switch advocates when litigation is required.

Legislative and Administrative Tax Policy

          Nielsen Merksamer has unparalleled experience in legislative and administrative tax policy matters. Among our seven registered lobbyists are two lawyers who have participated in some manner on most major tax policy issues in California over the last decade.

• A significant number of recent California advances in the area of taxation were the result of bills lobbied by Nielsen Merksamer, including: SB 657 (Maddy)(1995) -The Omnibus Property Tax Reform Act; AB 315 (McDonald)(1995)-Established that "Entrepreneurial Profit" in the Income approach to value must be established with "market evidence"; AB 272 (Kuykendall)(1995)-The Employment Taxpayers Bill of Rights; AB 2798 (Machado)(1998)-Extension of the MIC to software manufacturers; AB 934 (Hertzberg)-Allowed independent judicial review of assessment appeals board decisions; AB 809 (Harman)(2001), AB 2561(Vargas)(2002), AB 2590 (Campbell)(2004) and AB 1037 (Frommer) (2006)-Single sales factor apportionment; AB 1823 (Alpert) (1993)-Local-option personal property tax rebates on "economic revitalization manufacturing property"; AB 2747 (Wesson)(2002) and AB 777 (Nuñez) (2006)-Motion picture production tax credit.

• We have also successfully stopped legislation that would have increased taxes for a wide variety of businesses in California.

• We have also represented several significant business coalitions before the Legislature, including the California Unitary Tax Council and Business for Economic Growth in California (the Single Sales Factor Coalition).

          A number of key California tax regulations in the income, property, and sales tax areas have been successfully lobbied by Nielsen Merksamer on behalf of a broad variety of industries including automotive, technology, graphic art and advertising, food processors, motion picture and entertainment, manufacturers, medical device and pharmaceuticals, and petroleum.

• Property Tax Rules: Rules 20-25 (Possessory Interests).

• Sales and Use Tax Regulations: 1528 (Photographers); 1529 (Motion Pictures); 1532 (Motion Picture Post Production); 1540 (Advertising Agencies); 1541 (Printing and Related Arts); 1543 (Publishers); 1583 (Modular Systems Furniture); 1584 (Membership Fees); 1587 (Animal Life, Feed, Drugs and Medicines); 1589 (Containers and Labels); 1591 (Medicines and Medical Devices); 1595 (Occasional Sales-Sale of a Business–Business Reorganization) and 1706 (Drop Shipments).

• Bank and Corporation Tax Regulations: 25137-10 (General Financial) and 25106.5 (Combined Reporting); 25110(d)(2)(F) (Non-Effectively Connected Income).

• Multistate Tax Commission: We have also represented taxpayers on regulatory issues before the Multistate Tax Commission.

          Whether you need assistance with a current tax dispute with a state or local government entity, are directly impacted by legislation or an administrative regulation or policy shift, Nielsen Merksamer has the team, drawing from a wide range of experiences, to provide a comprehensive solution that is efficient and cost effective.