1.Consolidated Lint Inc. is organized in Delaware with headquarters in New York.The Company had federal taxable income of $600,000 in 2020 after deducting $100,000 of New York taxes.In 2019 Consolidated Lint Inc. sold $100,000 of lint to New York customers and shipped $3,000,000 to all customers around the world.New York has single sales factor apportionment.New York has "rolling conformity" with the Internal Revenue Code.

a.What is New York "entire net income" (New York's term for taxable income)?

b.What is the apportionment factor percentage?

c.What is New York apportioned entire net income?

d.Assuming a tax rate of 10% what is the New York tax?

e.If instead of rolling conformity, New York defined federal taxable income as that amount that would have been computed using the internal revenue code that was in place on August 18, 2015, explain how this might have affected the computation?

2.In 2020, Consolidated Lint Inc. became concerned about an increasingly competitive market for lint.Seeking to diversify and increase corporate earnings, the Company started to invent and build new jet engines for the Air Force at a new location in California.In 2020, the Lint Division had a good year earning $4,000,000 in federal taxable income while the new Jet Engines Division lost $500,000 in federal taxable income.In New York, the Lint Division had apportionment of 40% and the Jet Engines Division had apportionment of 10%.Collectively the two divisions had NY apportionment of 35%.

a.In your opinion, are these two business unitary?

b.What tax would Consolidated Lint Inc. owe NY if the two divisions are treated as separate unitary businesses.

c.What tax would Consolidated Lint Inc. owe NY filing as a single unitary business (make a general estimate).

d.Say that in California the Jet Engines Division has apportionment of 100% and the Lint Division has apportionment of 0%.Which is the optimal filing positionone or two unitary businesses?

3.Say that Consolidated Lint Inc. decided that instead of diversifying into jet engines, it decided to stick with what it knew and developed a line of stuffed animals which it sold to stores.70 percent of the Company's lint production was utilized by the Toy Division to fill in the stuffed animals.Is it likely or not likely that these to divisions constitute a single unitary business?

4.In 2019, the Treasury unit of Consolidated Lint (located at its Company headquarters at 40 Wall Street) purchased 1 percent of the outstanding stock of Augo Inc., a gold mining company listed on the New York Stock Exchange.In 2013, the stock is sold for a $100,000 profit.Can Connecticut (assuming Consolidated Lint has lint business nexus in CT) tax the gain on stock?

a.Can Connecticut require Consolidated Lint to allocate interest and other expenses against non-unitary income?Why might it require this?

b.Can Connecticut require Consolidated Lint to allocate all of its interest expense to offset non-unitary income?

5.Say instead that the treasury unit purchased 30-day commercial paper of the Company in May 2019 and earned $100,000 in interest income.Can Connecticut(assuming Consolidated Lint has lint business nexus in CT) tax the interest income?

6.In 2020, Consolidated Lint had nexus in New Jersey, the lint capital of the world.The Company stores 90 percent of its raw lint inventory in New Jersey warehouses.New Jersey apportions taxable income using a formula that utilizes inventory property in New Jersey divided by inventory property all over the world.Accordingly, Consolidated lint has a 90 percent apportionment factor in New Jersey.

a.Is the business income earned by the company from the sale of inventory "apportionable" to New Jersey?

b.Is the State's apportionment formula internally consistent?

c.If the Company's plant and equipment, mines, labor force and management are entirely located outside New Jersey does the issue arise as to whether the Company is being subjected to "fair apportionment?"

d.What should the Company be prepared to prove were it to petition for fair apportionment?

e.Is this fact pattern closer to Hans Rees or Butler Brothers?

7.What if Consolidated Lint sold all its inventory to a single customer in Maryland.Accordingly, its New York apportionment (single sales factor) is zero percent and its Maryland apportionment (single sales factor) is 100 percent (assuming nexus in that State. Could New York State argue for alternative apportionment.

a.Could the Taxpayer in Maryland argue for fair apportionment?

8.In February 2020, Consolidated purchases the business of its competitor Abi Gizent (Be Healthy!) Lint of Bismarck, North Dakota.

a.Are the activities of this business unit unitary with the operations of Consolidated Lint in 2020?

b.2021?

9.There is a variance in how the states approach the unitary principal which is discussed in the book?For example, Arizona adopts to the "Operational Interdependence Test.Can the State rules be less stringent than the federal concept of unitary?More stringent?

10. General Big, Inc. is a holding company operating from NY.Its auto rental subsidiary is located in Houston Texas, its fast food franchising subsidiary is located in North Carolina and it owns a National League Baseball franchise in yet another subsidiary.Will this company be able to file combined in the 25 states or so that have combination laws?