Nevada Corporate Income Tax

A California superior court has issued a temporary and proposed statement of decision holding that a Nevada corporation was entitled to a refund of California corporation franchise taxes paid for the tax years in question because the corporation met its burden of proof in establishing that it was commercially domiciled in Nevada during those years. The corporation, which was incorporated in Nevada, did not rely upon any presumption that its commercial domicile was its place of incorporation. The corporation submitted evidence that it maintained its corporate office in Nevada, its bank accounts were held at a branch in Las Vegas, its brokerage accounts were maintained with an office in Las Vegas, its board of directors’ meetings were held at its office in Nevada, and its original books and records were maintained in Nevada. Also, its only corporate officer resided in Nevada and handled all of its expenditures and business affairs from Nevada. The Franchise Tax Board (FTB) contended that a California resident, the corporation’s sole shareholder and a member of its board of directors, in fact managed and directed the corporation from California, and that therefore the corporation was commercially domiciled in California. However, the FTB submitted no direct evidence to support its contention. Furthermore, both the corporate officer and the sole shareholder testified that decisions on corporate matters were made by the officer and that the shareholder relied on the officer to manage the corporation. The court found the testimony of both witnesses to be credible. In contrast, the FTB’s evidence consisted entirely of circumstantial evidence from which it had asked the court to infer that the sole shareholder was directing or managing the affairs of the corporation from California. The tentative decision will become the final Statement of Decision unless either party requests a Statement of Decision, specifying the principal controverted issues to be addressed, within 10 days.

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