In complete opposition to the determinations of capital gain income being subject to apportionment, Vermont recently determined that the gain from the sale of Federal Communications Commission (FCC) licenses was nonbusiness income subject to allocation. Vermont National Telephone Company (VNT) was a Connecticut corporation that sold two unused FCC licenses that granted the company the exclusive right to broadcast in upstate New York. VNT allocated the gain on the sale of the licenses to New York because the licenses could only apply there. Upon audit, the Vermont Department of Taxes (DOT) determined that the sale was subject to Vermont tax, also assessing penalties and interest.
The taxpayer appealed to the Vermont Supreme Court arguing that if not allocated to New York, where it believed the licenses had a situs, the gain from the sale of an intangible should alternatively be allocated to VNT’s legal domicile, Connecticut. The Court took the position that, by definition, intangible property has no location. The fact that the licenses conveyed rights in New York was irrelevant. The Court agreed with the taxpayer that the gain was allocable to the taxpayer’s commercial domicile. When the Court considered the facts surrounding the business operations of the taxpayer, however, the determination was that Vermont was the actual “center of authority and control,” citing the Wheeling Steel Corp.1 decision. Almost all of VNT’s employees worked in the Vermont office from where all day-to-day activities were conducted. VNT owned no property in Connecticut and had no employees there. The “principal place from which the business was directed” was determined to be Vermont.
1Wheeling Steel Corp. v. Fox, 299 U.S. 366 (1937).
TECHNICAL INFORMATION CONTACTS:
Mark L. Nachbar
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at email@example.com.