(b) APPLICATION OF PROHIBITIONS TO OTHER BUSI-
NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 
Act relating to the power of the States to impose net in-
come taxes on income derived from interstate commerce, 
and authorizing studies by congressional committees of 
matters pertaining thereto’’, approved September 14, 
1959 (15 U.S.C. 381 et seq.), is amended by adding at 
the end the following: 
‘‘SEC. 105. For taxable periods beginning on or after 
January 1, 2012, the prohibitions of section 101 that 
apply with respect to net income taxes shall also apply 
with respect to each other business activity tax, as defined 
in section 5(a)(2) of the Business Activity Tax Simplifica-
tion Act of 2011. A State or political subdivision thereof 
may not assess or collect any tax which by reason of this 
section the State or political subdivision may not impose.’’. 
SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE 
AND LOCAL NET INCOME TAXES AND OTHER 
BUSINESS ACTIVITY TAXES. 
(a) IN GENERAL.—No taxing authority of a State 
shall have power to impose, assess, or collect a net income 
tax or other business activity tax on any person relating 
to such person’s activities in interstate commerce unless 
such person has a physical presence in the State during 
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the taxable period with respect to which the tax is im-
posed. 
(b) REQUIREMENTS FOR PHYSICAL PRESENCE.— 
(1) IN GENERAL.—For purposes of subsection 
(a), a person has a physical presence in a State only 
if such person’s business activities in the State in-
clude any of the following during such person’s tax-
able year: 
(A) Being an individual physically in the 
State, or assigning one or more employees to be 
in the State. 
(B) Using the services of an agent (exclud-
ing an employee) to establish or maintain the 
market in the State, if such agent does not per-
form business services in the State for any 
other person during such taxable year. 
(C) The leasing or owning of tangible per-
sonal property or of real property in the State. 
(2) DE
MINIMIS
PHYSICAL
PRESENCE.—For 
purposes of this section, the term ‘‘physical pres-
ence’’ shall not include— 
(A) presence in a State for less than 15 
days in a taxable year (or a greater number of 
days if provided by State law); or 
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(B) presence in a State to conduct limited 
or transient business activity. 
(c) TAXABLE PERIODS NOT CONSISTING
OF
A 
YEAR.—If the taxable period for which the tax is imposed 
is not a year, then any requirements expressed in days 
for establishing physical presence under this Act shall be 
adjusted pro rata accordingly. 
(d) MINIMUM JURISDICTIONAL STANDARD.—This 
section provides for minimum jurisdictional standards and 
shall not be construed to modify, affect, or supersede the 
authority of a State or any other provision of Federal law 
allowing persons to conduct greater activities without the 
imposition of tax jurisdiction. 
(e) EXCEPTIONS.— 
(1) DOMESTIC BUSINESS ENTITIES AND INDI-
VIDUALS
DOMICILED
IN, OR
RESIDENTS
OF, THE 
STATE.—Subsection (a) does not apply with respect 
to— 
(A) a person (other than an individual) 
that is incorporated or formed under the laws 
of the State (or domiciled in the State) in which 
the tax is imposed; or 
(B) an individual who is domiciled in, or a 
resident of, the State in which the tax is im-
posed. 
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(2) TAXATION OF PARTNERS AND SIMILAR PER-
SONS.—This section shall not be construed to modify 
or affect any State business activity tax liability of 
an owner or beneficiary of an entity that is a part-
nership, an S corporation (as defined in section 
1361 of the Internal Revenue Code of 1986), a lim-
ited liability company (classified as a partnership for 
Federal income tax purposes), a trust, an estate, or 
any other similar entity, if the entity has a physical 
presence in the State in which the tax is imposed. 
(3) PRESERVATION OF AUTHORITY.—This sec-
tion shall not be construed to modify, affect, or su-
persede the authority of a State to enact a law and 
bring an enforcement action under such law or exist-
ing law against a person or persons or an entity or 
entities, including but not limited to related persons 
or entities, that is or are engaged in an illegal activ-
ity, a sham transaction, or an actual abuse in its or 
their business activities in order to ensure a proper 
reflection of its or their tax liabilities, nor shall it 
supersede the authority of a State to require com-
bined reporting. 
SEC. 4. GROUP RETURNS. 
If, in computing the net income tax or other business 
activity tax liability of a person for a taxable year, the 
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net income or other economic results of affiliated persons 
is taken into account, the portion of such combined or con-
solidated net income or other economic results that may 
be subject to tax by the State shall be computed using 
the methodology that is generally applicable to businesses 
conducting similar business activities and, if that generally 
applicable methodology employs an apportionment for-
mula, the denominator or denominators of that formula 
shall include the aggregate factors of all persons whose 
net income or other economic results are included in such 
combined or consolidated net income or other economic re-
sults and the numerator or numerators shall include the 
factors attributable to the state of only those persons that 
are themselves subject to taxation by the State pursuant 
to the provisions of this Act and subject to all other legal 
constraints on State taxation of interstate or foreign com-
merce. 
SEC. 5. DEFINITIONS AND EFFECTIVE DATE. 
(a) DEFINITIONS.—For purposes of this Act: 
(1) NET INCOME TAX.—The term ‘‘net income 
tax’’ has the meaning given that term for the pur-
poses of the Act entitled ‘‘An Act relating to the 
power of the States to impose net income taxes on 
income derived from interstate commerce, and au-
thorizing studies by congressional committees of 
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matters pertaining thereto’’, approved September 
14, 1959 (15 U.S.C. 381 et seq.). 
(2) OTHER BUSINESS ACTIVITY TAX.— 
(A) IN GENERAL.—The term ‘‘other busi-
ness activity tax’’ means any tax in the nature 
of a net income tax or tax measured by the 
amount of, or economic results of, business or 
related activity conducted in the State. 
(B) EXCLUSION.—The term ‘‘other busi-
ness activity tax’’ does not include a sales tax, 
a use tax, or a similar transaction tax, imposed 
on the sale or acquisition of goods or services, 
whether or not denominated a tax imposed on 
the privilege of doing business. 
(3) PERSON.—The term ‘‘person’’ has the 
meaning given such term by section 1 of title 1 of 
the United States Code. Each corporation that is a 
member of a group of affiliated corporations, wheth-
er unitary or not, is itself a separate ‘‘person.’’ 
(4) STATE.—The term ‘‘State’’ means any of 
the several States, the District of Columbia, or any 
territory or possession of the United States, or any 
political subdivision of any of the foregoing. 
(5) TANGIBLE PERSONAL PROPERTY.—For pur-
poses of section 3(b)(1)(C), the leasing or owning of 
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tangible personal property does not include the leas-
ing or licensing of computer software. 
(b) EFFECTIVE DATE.—This Act shall apply with re-
spect to taxable periods beginning on or after January 1, 
2012. 
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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 
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