Cecile Barker has bad news from the Eleventh Circuit. They have upheld the Tax Court’s disallowance of his multi-million dollar net operating loss deduction (NOL) largely generated by SoBe Entertainment LLC. SoBe Entertainment is a record label that has represented numerous artists included Brooke Hogan, daughter of Hulk Hogan. The indirect Hulk Hogan connection makes Mr. Barker a tangential figure in a fascinating story you can read about in Conspiracy – Peter Thiel, Hulk Hogan, Gawker and the Anatomy of Intrigue by Ryan Holiday. For purposes of this article, we will stick to the tax story which began with a Tax Court opinion in 2018, which I covered previously.
State Tax Planning with the “80/20 Company” Exclusion
Ted Stotzer
Many multinational groups find that foreign-source dividends and other income earned by domestic affiliates are fully or partially subject to state income taxation, even where the federal system provides an exemption. This state-level “leakage” can be material – particularly in high-tax jurisdictions – and is often overlooked because the income appears sheltered at the federal level. For groups with predominantly foreign operations, a starting structure or a restructuring that causes one or more domestic affiliates to qualify as an “80/20 company” can substantially reduce or eliminate state taxation on that income.
