Bailout, Recession and Taxes

State governments are currently dealing with a strong recession which translates into lower revenues from sales and other taxes. In addition, they have to deal with federal mandates to provide services with a dramatic reduction in federal aid. The resulting budget deficits have forced the lay off of state employees, reduced spending and increased the need to find new or additional sources of tax revenue. Because the corporation is viewed by state politicians as a nonvoting resident of the state, they are often the first to be targeted.


Recent, and in most likelyhood future tax reform has and will have a tremendous impact on the significance of state corporate taxation. Currently, 41 of the 46 states that have state corporate income tax use federal corporate taxable income as the starting point in computing the state tax. So, when the federal tax laws disallows lobbying expenses, or a greater portion of meal and entertainment expense, it effects the amount of income tax the corporation will have to pay at both the state and federal levels.

"Nexus" describes the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on the corporation's income. Although most planning techniques are used to separate a corporations activities from an undesirable state, they can also be used to create a nexus in a corporate haven such as Nevada. Such activities could include maintaining bank accounts in Nevada, maintaining an office address, a corporate Yellow Pages listed telephone, obtaining appropriate business licenses, etc.

For details on tax saving strategies please contact Silver Shield Services, Inc. at staff@shieldcorp.net or call (775) 577-4822.