IB 

Union Calendar No. 173 

112TH CONGRESS 

1ST SESSION H. R. 1439 

[Report No. 112–257] 

To regulate certain State taxation of interstate commerce, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 8, 2011 

Mr. GOODLATTE (for himself, Mr. SCOTT of Virginia, Mr. DUNCAN of South 

Carolina, and Ms. JACKSON LEE of Texas) introduced the following bill; 

which was referred to the Committee on the Judiciary 

OCTOBER 21, 2011 

Additional sponsors: Mr. THOMPSON of Mississippi, Mr. DUNCAN of Tennessee, Mr. HASTINGS of Florida, Mr. JOHNSON of Georgia, Mr. COBLE, 

Mr. JORDAN, Mr. SENSENBRENNER, Mr. CHABOT, and Mr. DANIEL E. 

LUNGREN of California 

OCTOBER 21, 2011 

Committed to the Committee of the Whole House on the State of the Union 

and ordered to be printed 


smartinez on DSK6TPTVN1PROD with BILLS
2 

•HR 1439 RH

A BILL 

To regulate certain State taxation of interstate commerce, 

and for other purposes. 


smartinez on DSK6TPTVN1PROD with BILLS
3 

•HR 1439 RH

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Business Activity Tax 

5 Simplification Act of 2011’’. 

6 SEC. 2. MODERNIZATION OF PUBLIC LAW 86–272. 

7 (a) SOLICITATIONS WITH RESPECT TO SALES AND

8 TRANSACTIONS OF OTHER THAN TANGIBLE PERSONAL

9 PROPERTY.—Section 101 of the Act entitled ‘‘An Act re10 lating to the power of the States to impose net income 

11 taxes on income derived from interstate commerce, and 

12 authorizing studies by congressional committees of mat13 ters pertaining thereto’’, approved September 14, 1959 

14 (15 U.S.C. 381 et seq.), is amended— 

15 (1) in section (a), by striking ‘‘either, or both,’’ 

16 and inserting ‘‘any one or more’’; 

17 (2) in subsection (a)(1), by striking ‘‘by such 

18 person’’ and all that follows and inserting ‘‘(which 

19 are sent outside the State for approval or rejection) 

20 or customers by such person, or his representative, 

21 in such State for sales or transactions, which are— 

22 ‘‘(A) in the case of tangible personal prop23 erty, filled by shipment or delivery from a point 

24 outside the State; and 


smartinez on DSK6TPTVN1PROD with BILLS
4 

•HR 1439 RH

1 ‘‘(B) in the case of all other forms of prop2 erty, services, and other transactions, fulfilled 

3 or distributed from a point outside the State;’’; 

4 (3) in subsection (a)(2), by striking the period 

5 at the end and inserting a semicolon; 

6 (4) in subsection (a), by adding at the end the 

7 following new paragraphs: 

8 ‘‘(3) the furnishing of information to customers 

9 or affiliates in such State, or the coverage of events 

10 or other gathering of information in such State by 

11 such person, or his representative, which information 

12 is used or disseminated from a point outside the 

13 State; and 

14 ‘‘(4) those business activities directly related to 

15 such person’s potential or actual purchase of goods 

16 or services within the State if the final decision to 

17 purchase is made outside the State.’’; 

18 (5) by striking subsection (c) and inserting the 

19 following new subsection: 

20 ‘‘(c) For purposes of subsection (a) of this section, 

21 a person shall not be considered to have engaged in busi22 ness activities within a State during any taxable year 

23 merely— 

24 ‘‘(1) by reason of sales or transactions in such 

25 State, the solicitation of orders for sales or transVerDate Mar 15 2010 23:49 Oct 21, 2011 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1439.RH H1439

smartinez on DSK6TPTVN1PROD with BILLS
5 

•HR 1439 RH

1 actions in such State, the furnishing of information 

2 to customers or affiliates in such State, or the cov3 erage of events or other gathering of information in 

4 such State, on behalf of such person by one or more 

5 independent contractors; 

6 ‘‘(2) by reason of the maintenance of an office 

7 in such State by one or more independent contrac8 tors whose activities on behalf of such person in 

9 such State are limited to making sales or fulfilling 

10 transactions, soliciting order for sales or trans11 actions, the furnishing of information to customers 

12 or affiliates, and/or the coverage of events or other 

13 gathering of information; or 

14 ‘‘(3) by reason of the furnishing of information 

15 to an independent contractor by such person ancil16 lary to the solicitation of orders or transactions by 

17 the independent contractor on behalf of such per18 son.’’; and 

19 (6) in subsection (d)(1)— 

20 (A) by inserting ‘‘or fulfilling transactions’’ 

21 after ‘‘selling’’; and 

22 (B) by striking ‘‘the sale of, tangible per23 sonal property’’ and inserting ‘‘a sale or trans24 action, furnishing information, or covering 

25 events, or otherwise gathering information’’. 


smartinez on DSK6TPTVN1PROD with BILLS
6 

•HR 1439 RH

1 (b) APPLICATION OF PROHIBITIONS TO OTHER BUSI2 NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 

3 Act relating to the power of the States to impose net in4 come taxes on income derived from interstate commerce, 

5 and authorizing studies by congressional committees of 

6 matters pertaining thereto’’, approved September 14, 

7 1959 (15 U.S.C. 381 et seq.), is amended by adding at 

8 the end the following: 

9 ‘‘SEC. 105. For taxable periods beginning on or after 

10 January 1, 2012, the prohibitions of section 101 that 

11 apply with respect to net income taxes shall also apply 

12 with respect to each other business activity tax, as defined 

13 in section 5(a)(2) of the Business Activity Tax Simplifica14 tion Act of 2011. A State or political subdivision thereof 

15 may not assess or collect any tax which by reason of this 

16 section the State or political subdivision may not impose.’’. 

17 SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE 

18 AND LOCAL NET INCOME TAXES AND OTHER 

19 BUSINESS ACTIVITY TAXES. 

20 (a) IN GENERAL.—No taxing authority of a State 

21 shall have power to impose, assess, or collect a net income 

22 tax or other business activity tax on any person relating 

23 to such person’s activities in interstate commerce unless 

24 such person has a physical presence in the State during 


smartinez on DSK6TPTVN1PROD with BILLS
7 

•HR 1439 RH

1 the taxable period with respect to which the tax is im2 posed. 

3 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.— 

4 (1) IN GENERAL.—For purposes of subsection 

5 (a), a person has a physical presence in a State only 

6 if such person’s business activities in the State in7 clude any of the following during such person’s tax8 able year: 

9 (A) Being an individual physically in the 

10 State, or assigning one or more employees to be 

11 in the State. 

12 (B) Using the services of an agent (exclud13 ing an employee) to establish or maintain the 

14 market in the State, if such agent does not per15 form business services in the State for any 

16 other person during such taxable year. 

17 (C) The leasing or owning of tangible per18 sonal property or of real property in the State. 

19 (2) DE MINIMIS PHYSICAL PRESENCE.—For 

20 purposes of this section, the term ‘‘physical pres21 ence’’ shall not include— 

22 (A) presence in a State for less than 15 

23 days in a taxable year (or a greater number of 

24 days if provided by State law); or 


smartinez on DSK6TPTVN1PROD with BILLS
8 

•HR 1439 RH

1 (B) presence in a State to conduct limited 

2 or transient business activity. 

3 (c) TAXABLE PERIODS NOT CONSISTING OF A

4 YEAR.—If the taxable period for which the tax is imposed 

5 is not a year, then any requirements expressed in days 

6 for establishing physical presence under this Act shall be 

7 adjusted pro rata accordingly. 

8 (d) MINIMUM JURISDICTIONAL STANDARD.—This 

9 section provides for minimum jurisdictional standards and 

10 shall not be construed to modify, affect, or supersede the 

11 authority of a State or any other provision of Federal law 

12 allowing persons to conduct greater activities without the 

13 imposition of tax jurisdiction. 

14 (e) EXCEPTIONS.— 

15 (1) DOMESTIC BUSINESS ENTITIES AND INDI16 VIDUALS DOMICILED IN, OR RESIDENTS OF, THE

17 STATE.—Subsection (a) does not apply with respect 

18 to— 

19 (A) a person (other than an individual) 

20 that is incorporated or formed under the laws 

21 of the State (or domiciled in the State) in which 

22 the tax is imposed; or 

23 (B) an individual who is domiciled in, or a 

24 resident of, the State in which the tax is im25 posed. 


smartinez on DSK6TPTVN1PROD with BILLS
9 

•HR 1439 RH

1 (2) TAXATION OF PARTNERS AND SIMILAR PER2 SONS.—This section shall not be construed to modify 

3 or affect any State business activity tax liability of 

4 an owner or beneficiary of an entity that is a part5 nership, an S corporation (as defined in section 

6 1361 of the Internal Revenue Code of 1986), a lim7 ited liability company (classified as a partnership for 

8 Federal income tax purposes), a trust, an estate, or 

9 any other similar entity, if the entity has a physical 

10 presence in the State in which the tax is imposed. 

11 (3) PRESERVATION OF AUTHORITY.—This sec12 tion shall not be construed to modify, affect, or su13 persede the authority of a State to enact a law and 

14 bring an enforcement action under such law or exist15 ing law against a person or persons or an entity or 

16 entities, including but not limited to related persons 

17 or entities, that is or are engaged in an illegal activ18 ity, a sham transaction, or an actual abuse in its or 

19 their business activities in order to ensure a proper 

20 reflection of its or their tax liabilities, nor shall it 

21 supersede the authority of a State to require com22 bined reporting. 

23 SEC. 4. GROUP RETURNS. 

24 If, in computing the net income tax or other business 

25 activity tax liability of a person for a taxable year, the 


smartinez on DSK6TPTVN1PROD with BILLS
10 

•HR 1439 RH

1 net income or other economic results of affiliated persons 

2 is taken into account, the portion of such combined or con3 solidated net income or other economic results that may 

4 be subject to tax by the State shall be computed using 

5 the methodology that is generally applicable to businesses 

6 conducting similar business activities and, if that generally 

7 applicable methodology employs an apportionment for8 mula, the denominator or denominators of that formula 

9 shall include the aggregate factors of all persons whose 

10 net income or other economic results are included in such 

11 combined or consolidated net income or other economic re12 sults and the numerator or numerators shall include the 

13 factors attributable to the state of only those persons that 

14 are themselves subject to taxation by the State pursuant 

15 to the provisions of this Act and subject to all other legal 

16 constraints on State taxation of interstate or foreign com17 merce. 

18 SEC. 5. DEFINITIONS AND EFFECTIVE DATE. 

19 (a) DEFINITIONS.—For purposes of this Act: 

20 (1) NET INCOME TAX.—The term ‘‘net income 

21 tax’’ has the meaning given that term for the pur22 poses of the Act entitled ‘‘An Act relating to the 

23 power of the States to impose net income taxes on 

24 income derived from interstate commerce, and au25 thorizing studies by congressional committees of 


smartinez on DSK6TPTVN1PROD with BILLS
11 

•HR 1439 RH

1 matters pertaining thereto’’, approved September 

2 14, 1959 (15 U.S.C. 381 et seq.). 

3 (2) OTHER BUSINESS ACTIVITY TAX.— 

4 (A) IN GENERAL.—The term ‘‘other busi5 ness activity tax’’ means any tax in the nature 

6 of a net income tax or tax measured by the 

7 amount of, or economic results of, business or 

8 related activity conducted in the State. 

9 (B) EXCLUSION.—The term ‘‘other busi10 ness activity tax’’ does not include a sales tax, 

11 a use tax, or a similar transaction tax, imposed 

12 on the sale or acquisition of goods or services, 

13 whether or not denominated a tax imposed on 

14 the privilege of doing business. 

15 (3) PERSON.—The term ‘‘person’’ has the 

16 meaning given such term by section 1 of title 1 of 

17 the United States Code. Each corporation that is a 

18 member of a group of affiliated corporations, wheth19 er unitary or not, is itself a separate ‘‘person.’’ 

20 (4) STATE.—The term ‘‘State’’ means any of 

21 the several States, the District of Columbia, or any 

22 territory or possession of the United States, or any 

23 political subdivision of any of the foregoing. 

24 (5) TANGIBLE PERSONAL PROPERTY.—For pur25 poses of section 3(b)(1)(C), the leasing or owning of 


smartinez on DSK6TPTVN1PROD with BILLS
12 

•HR 1439 RH

1 tangible personal property does not include the leas2 ing or licensing of computer software. 

3 (b) EFFECTIVE DATE.—This Act shall apply with re4 spect to taxable periods beginning on or after January 1, 

5 2012. 


smartinez on DSK6TPTVN1PROD with BILLS

smartinez on DSK6TPTVN1PROD with BILLS
Union Calendar No. 173 

112TH CONGRESS 

1ST SESSION H. R. 1439 

[Report No. 112–257] 

A BILL 

To regulate certain State taxation of interstate 

commerce, and for other purposes. 

OCTOBER 21, 2011 

Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 


smartinez on DSK6TPTVN1PROD with BILLS