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Chapter_16_-_Multistate_Corporate_Taxation (1)--TESTBANK-GRADED A+

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CHAPTER 16: MULTISTATE CORPORATE TAXATION 1. Roughly five percent of all taxes paid by businesses in the U.S. are to state, local, and municipal jurisdictions. a. True b. False ANSWER: False RATIONALE: About forty percent of all business taxes are paid to state and local agencies, including income, sales/use, and property taxes. 2. Usually a business chooses a location where it will build a new plant based chiefly on tax considerations. a. True b. False ANSWER: False RATIONALE: Nontax considerations (e.g., wage rates, transportation availability) usually prevail. 3. Politicians frequently use tax credits and exemptions to create economic development incentives. a. True b. False ANSWER: True 4. All of the U.S. states have adopted a tax based on the net taxable income of corporations. a. True b. False ANSWER: False RATIONALE: A few states do not levy an income-based tax, including Nevada, Washington, and Wyoming. 5. Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system, in taxing the income of corporations. a. True b. False ANSWER: False RATIONALE: Only a few of the states use a Federal-style AMT. 6. Typically, corporate income taxes constitute about 20 percent of a state’s annual tax collections. a. True b. False ANSWER: False RATIONALE: The correct amount is about five percent. 7. Property taxes generally are collected by local taxing jurisdictions, not the state or Federal governments. a. True b. False ANSWER: True RATIONALE: State-level property taxes usually apply to business assets.CHAPTER 16: Multistate Corporate Taxation 8. State and local politicians tend to apply new and increased taxes to taxpayers who are visitors to the jurisdiction, such as a tax on auto rentals, because the taxpayer cannot vote to reelect the lawmaker. a. True b. False ANSWER: True 9. A typical U.S. state piggybacks its collections of the corporate income tax, by letting the Federal government collect and remit the corresponding tax to the state. a. True b. False ANSWER: False RATIONALE: Currently, none of the states piggybacks with the Federal government on collecting corporate income taxes. 10. Most states begin the computation of corporate taxable income with an amount from the Federal income tax return. a. True b. False ANSWER: True 11. If a state follows Federal income tax rules, the state’s tax compliance and enforcement become easier to accomplish. a. True b. False ANSWER: True 12. A typical state taxable income subtraction modification is the interest income earned from another state’s bonds. a. True b. False ANSWER: False RATIONALE: This would be an addition modification. 13. A typical state taxable income addition modification is for the Federal income tax paid for the tax year. a. True b. False ANSWER: False RATIONALE: This typically is a subtraction modification. 14. A state can levy an income tax on a business only if the business was incorporated in the state. a. True b. False ANSWER: False RATIONALE: Out-of-state businesses can be subject to the tax. Nexus is the threshold authorizing the state to levy

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