Repatriation, Digital Services, and Pot
US DOJ to SCOTUS: Uphold the “repatriation” tax. In a 96-page brief, the US Department of Justice (DOJ) urged the US Supreme Court to reject the challenge to the Tax Cuts and Jobs Act transition tax, which was imposed on undistributed profits accrued by US-controlled foreign corporations between 1986 and the end of 2017. DOJ argues that the tax is other levies upheld by the courts—such as those under Subpart F of the Internal Revenue Code—and that invalidating it could upend other parts of the code that aim to prevent tax avoidance.
Canada’s planned digital services tax could generate C$7.2 billion over five years. The Canadian government plans to levy a digital services tax starting in 2024 (retroactive to Jan. 1, 2022), if the Organization for Economic and Cooperative Development’s global tax deal isn’t in place by the end of the year. A new legislative cost estimate from Canada’s parliamentary budget office says the tax could generate C$7.2 billion over five years. The Biden administration continues to argue that the tax would disproportionately target and damage US tech companies.
Streaming services do not have to pay Illinois franchise fees. Illinois has statutory provisions that require cable companies to pay local franchise fees to municipalities. TaxNotes reports that late last week, the Seventh Circuit affirmed a federal district court’s dismissal of the City of East St. Louis’ proposed class action suit seeking to force streaming companies to pay the fees. The city argued that streaming companies like Netflix and Disney were using public rights of way and had to obtain statewide authorization from the Illinois Commerce Commission, under the state’s cable and video competition law and pay franchise fees. The federal district court dismissed the suit, saying localities did not have a cause of action.
Are some marijuana taxes in Missouri illegal? Recreational marijuana faces a 6 percent statewide excise tax, while authorized local governments can levy a sales tax of up to 3 percent. But what is a local government? Lawsuits in two counties argue that local taxes, like a county tax and city tax, can’t be levied concurrently or “stacked” based on language in the amendment legalizing recreational marijuana last year. They argue that “local government” means “village, town, or city” for incorporated areas, while county governments can only levy taxes in unincorporated places. But about 36 counties have passed a local tax, and the state Department of Revenue has notified dispensaries where a city and county tax are both in effect.
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