Telecom company gains traction with customized tax solutions

Client Description

A large telecommunications company with FCC licenses and activities in multiple states.

Problem/Issue

The company was selling FCC wireless licenses at a significant gain and was concerned about sourcing the gain to the proper jurisdiction.

BerryDunn’s Solution/Approach

BerryDunn experts:

• Identified a need to research and further analyze the transaction, as there was potential for different treatments in the various states that the company does business, having a significant impact on the company’s tax liability.
• Recognized that the transaction could be subject to special rules that could separate the gain and allow it to be sourced differently than other income.
• Completed a detailed analysis of the transaction and the laws in the applicable jurisdiction.

Outcomes

We ultimately determined that the gain was not taxable in either the company’s state of domicile or the state where licenses were applicable due to the classification of the transaction and state sourcing rules. We advised the client as to the proper reporting of the item on its state income tax returns in order to take advantage of these peculiar state sourcing rules. Our advice saved the client state income tax well in excess of $1 Million.

*Identifying information was changed to conceal our client's identity.