“To regulate certain State taxation of interstate commerce, and for other purposes.”
No CRS summary available for this bill.
This section expands the protections of Public Law 86-272 (15 U.S.C. 381) that limit states’ power to impose net income taxes on income from interstate commerce. It covers solicitation of sales or transactions of services and other property fulfilled from outside the state, furnishing information to customers or affiliates, coverage of events, activities related to purchases decided outside the state, and sales or transactions of digital goods or services; applies the same limits to other business activity taxes beginning January 1, 2019; and defines digital goods and digital services.
This section prohibits states from imposing net income taxes or other business activity taxes on persons engaged in interstate commerce unless the person maintains a physical presence in the state during the taxable period. Physical presence exists only through an individual in the state, assigned employees, an agent used exclusively to maintain the market in the state, or ownership or lease of tangible or real property there, but excludes presence of fewer than 15 days or for limited transient business activity. The rule does not apply to in-state incorporated or domiciled entities and residents, does not alter partner-level taxation when the entity has physical presence, and preserves state authority over illegal activities, sham transactions, and combined reporting.
This section requires states to apportion combined or consolidated net income or other economic results of affiliated persons for net income or business activity tax purposes using the methodology generally applicable to similar businesses. When an apportionment formula applies, the denominator must include the aggregate factors of all affiliated persons whose results are combined, while the numerator includes only the factors attributable to the state of persons subject to tax under the Act.
This section defines terms for the Act, including net income tax (as under 15 U.S.C. 381 et seq.), other business activity tax (excluding sales, use, or similar transaction taxes), person (treating each affiliated corporation as separate), State, and tangible personal property (excluding computer software for purposes of section 3(b)(1)(C)). It applies the Act to taxable periods beginning on or after January 1, 2026.