In the first episode in a two-part series of the SALTovation podcast, Meredith Smith and Stacey Roberts, from TaxOps’ SALTovation Team, speak with Michael Cataldo, of Cataldo Tax Law in California. Michael shares his insight with his experience on Franchise Tax Board, public accounting and private law on the publications released by the Franchise Tax Board. He also talks about tax issues and cases related to Public Law 86-272 and business versus non-business income.
Topics discussed in this episode:
- Current issues discussed by Franchise Tax Board including market-based sourcing and multi-state practice
- Business vs. non-business income and what qualifies as doing business in the state
- Public Law 86-272 and alternative proportment
What You Will Learn:
- [00:57] An introduction to Michael Cataldo
- [03:21] Current tax issues
- [10:20] Business vs. non-business income
- [17:55] What qualifies as doing business in the state
- [22:05] Interpreting Public Law 86-272
- [29:28] The procedure for alternative proportment
Quotables:
- “Over the years, there’s been this sort of gradual shift where my clients used to be mainly located in California, and now more and more of them are located outside the state.” - Michael Cataldo [04:09]
- “It used to be a little more debatable and it’s still not completely decided, but is it business or non-business income? You have to look at that question.” - Michael Cataldo [11:38]
- “Trying to explain that concept of business income vs. non-business income to the unknowing, it’s like ‘But I’m not in the business of selling land.’ But ‘Ok, fine, but did you use that land in order to create your other business income?’ It’s almost a given that if you call something non-business income, you will be audited. Like 100%” - Meredith Smith [14:03]
- “These issues come all the time and there is room to argue about it. Now California has their rule and regulation on substantial and unusual sales are thrown out of the sales factor but the income is still in there. The question is ‘Hey, is this a fair reflection of income?’ Sometimes it’s not.” - Michael Cataldo [17:00]
Relevant Links:
Cataldo Tax Law: cataldotaxlaw.com
Michael Cataldo on LinkedIn: linkedin.com/in/michael-cataldo-aaa9205/
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