Berkshire Tax Case Lays Path for Other States to Follow Nebraska

The Nebraska Supreme Court’s ruling in a tax case involving a Berkshire Hathaway Inc. subsidiary shakes the justification behind other states’ decisions not to tax income from multinationals’ foreign affiliates.

The justices upheld the Nebraska Department of Revenue’s decision to deny Precision Castparts Corp.'s request to deduct income generated since 1986 by its foreign subsidiaries as if it was an untaxed dividend.

The decision has the taxpayer community “totally freaking out,” according to Bruce Fort, senior counsel at the Multistate Tax Commission.

States have been treating income from controlled foreign corporations—referred to as Subpart F income from its location ...