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We are a team of former Big 4 partners with over 100 collective years of state and local tax consulting experience.

We represent leading Fortune 500 businesses in many different industries.

State Tax Consulting from Seasoned Professionals.

Barnwell & Company was founded in July 2000 by Charles Barnwell and David Mallory to provide dedicated state and local tax consulting to large, multistate corporate groups.  We provide focused tax consulting through discrete, non-intrusive tax strategies.  We use our experience to maximize tax savings with minimum client effort.  To deliver superior state and local tax services, we have created a firm comprised solely of highly experienced tax professionals.  Each has at least 25 years of state and local tax experience.  They include former Big 4 partners, industry tax vice presidents, CPAs and attorneys.  Our members have not only broad general tax backgrounds but also expertise in particular tax niches.

Our Clients, and Stories From the "Field"

Our clients are primarily companies with revenues in excess of $500 million, who need strategies that address the distinctions of tax law in each of the fifty states. We understand the complex needs of multistate companies, and combine Big Four breadth of experience with a boutique agility to focus on the unique needs of our clients. We have assisted clients in a wide variety of industries, including:

* Manufacturing
* Retail
* Healthcare
* Software and e-commerce
* Quick Service Food
* Energy and Utilities
* Direct Marketing
* Distribution
* Construction
* Real Estate
* Media and Entertainment
* Beverage
* Transportation
* Telecommunications
* Hospitality

“Values Based with Value Delivered”

Barnwell & Company’s mission is to bring measurable value to companies, based on our business values:

* “Win/win or no deal”
* We only bill fees when the client has received value and has acknowledged our role in obtaining the value.
* We have relationships with people, not companies, and above all else honor and value the individuals that are open to using our firm. When our relationships leave companies they often hire us again at their new company.
* We freely disclose ideas because we believe the consultant must trust the client and with that trust, the client comes to trust us.
* We look for offsetting exposure, and will not advise a client to file a refund claim when offsetting exposure exists unless the net benefit is material and the client believes the refund claim is justified.
* We invest. To find value we need context. Value seen from afar is typically value that has already been identified. Our investment in clients, open to sharing information, enables us to leverage our experience and creativity. The examples below of our work tell the story.

Stories from the “Field”

We find value by investing time in client fact patterns to obtain “contextual knowledge” - leveraging an up to date knowledge of evolving multistate tax authority and detailed client facts. Since the relevant authority, fact patterns and tax profiles vary significantly, often we find value in unexpected places, frankly places the Big 4 have overlooked. Evidence of this may be found in the following stories. In every story the company had a tax relationship with one or more Big Four firm:

$2 million refund of California Franchise Taxes

California’s Franchise Tax Board is known for its two-sided interpretation of the theory of unity and seems to recognize the facts that lead to unity when the tax is greater or non-unitary when the tax is less. The unitary theory is so esoteric that taxpayers have a difficult time determining unity, and if unity exists, when it might exist.

We met with a new client regarding a $2 million California tax attributable to a dividend from a wholly owned subsidiary based in North Carolina. The client had made a water’s edge election, and had been advised that under such an election all dividends were to be considered business income and includible in the tax base. After consulting with two “Big 4” firms, the client had included the dividend and paid $2 million to California as a result.

When asked, we suspected that advisors may have misunderstood the requirement in a water’s edge election that the electing business treat all foreign dividends as business income. In the alternative, perhaps advisors believed the North Carolina subsidiary to be unitary, and sought factor relief by including the subsidiary.

Upon examination we determined that the North Carolina subsidiary was not unitary with the rest of the group and sought a $2 million refund from California. After careful examination the Franchise Tax Board, despite its reputation as self-serving on the unitary issue, awarded the client the full $2 million.

Florida $4.5 million corporate income tax refund

This taxpayer sold a significant business and reported an apportioned share of the gain to Florida. Advise from a “Big 4” firm was that “Florida doesn’t have non-business income” and therefore the client was advised to report an apportioned share of the gain. We told that client that while Florida has a statute that typically requires apportionment this is certainly not always the case. The law actually requires all income to be apportioned unless allocation would be required under the due process clause of the U.S. Constitution. We had an awareness that Florida, like all states, must afford taxpayers protection as required under the law of the land.

As a result, we carefully analyzed the facts in this case. As we suspected, the business sold was totally unrelated to the business selling it. In essence, the gain in this case was non-business and properly allocated away from Florida. We were successful in obtaining a $4.5 million refund in this case.

$35 million refund claim

We attended an introductory lunch with a client based in the Northeast. The client had significant net operating loss carryforwards, and while willing to meet with us, believed that we could offer little in the income tax arena given their huge losses. In fact, the losses were so great that the client had a large valuation allowance as utilization of the losses was doubtful.

We inquired as to the nature of the loss which turned out to stem from a significant law suit in which the client had been forced to repay over $350 million in revenue to former customers. The lawsuit concerned revenue the client received in the late 80’s, a time during which the income tax rate was 46%, then 40% - as compared to today’s rate of 35%. This interesting fact pattern suggested an exciting possibility: that the repayment of this revenue might qualify for Internal Revenue Code §1341 treatment. This bizarre and little known law provides for a taxpayer to treat revenue that it must repay as never having been received. The net result was a claim for $35 million! Even more astonishing, a Big 4 firm handled the settlement accounting of the claim but never brought the refund opportunity to this client. Fortunately we were able to identify the claim before the statute of limitations tolled.

$40 million City incentive contract

A construction materials client purchased several other companies in its industry. The company became plagued with arcane and inconsistent accounting systems, and decentralized operations. For two years following the acquisitions the company consolidated operations. We understood that by centralizing the sales force in a central location, we could obtain a significant recurring annual incentive for the client, an opportunity that the client would not have seen without our introduction of the idea. Today the client is receiving about $2 million per year and will continue to receive this incentive for 30 years to come.

$2.8 million settlement award of California Franchise Tax from Settlement Board

In this case, the Texas based client sold Texas based radio and TV stations for a significant gain. Since the California operations were unitary with the Texas and other operations the client properly apportioned the extraordinary gain. This resulted in over $10 million in California Franchise tax.

Upon our review of the return we determined that the taxpayer had correctly filed the return under the applicable rules in California. However, based on our perspective we nonetheless advised the client to seek a refund, simply based on the fact that the tax was not fair. Ironically, the very rule in California ( i.e. alternative apportionment §25137) to correct “unfair” situations operated in this case to tax the client unfairly. In the end, we secured a $2.8 million settlement with the Franchise Tax Board, "found money" based on a refund claim literally filed days before the statute of limitations for the refund would have otherwise expired.

$270,000 in “quick hit” Georgia Sales Tax Savings

In a regular meeting with a client relationship, the client (CFO) informed us that the company planned to close on the purchase of a large software package. We inquired as to whether the client would be paying sales tax on the software in Georgia. ‘Yes, we are. We looked at it, and it appears the software is taxable, and the vendor agrees and plans to collect it’. The tax in this instance was $270,000. We understood that in Georgia, if software is purchased and delivered electronically (via internet download or delivery electronically), with no tangible medium, the transaction is not subject to Georgia sales tax. That evening we were on the phone with the software vendor, and were successful in modifying the contract for sale and delivery terms. The client saved $270,000 in sales tax, a tax the company would have otherwise been forced to pay.

Example of creative ‘win/win’ fee arrangement

Another client has significant work opportunity tax credits. The client wished to outsource credit processing, a service offered by Barnwell & Company (we currently process several thousand WOTC applications a year). The client wanted to outsource, but insisted that for it to win, it needed to be convinced that the WOTC credit would grow enough to cover the incremental fees. Other WOTC vendors, the client complained, wanted a percentage of the credit. The client’s concern centered on the risk that the credit would not grow enough to cover the percentage fee, a win for the consulting firm but a loss for the client.

We proposed a creative solution, that we would take no fee for the existing credits, but to the extent we “grew” the credit, we would take a larger percentage. The client readily agreed, and has been a happy WOTC client of ours for five years. This example underscores our commitment to value, that we only get paid when the client receives (and acknowledges receipt of) value.

338(h)(10) win in California

A new client sold a subsidiary for a $110 million gain, and hired a regional CPA firm to prepare the tax returns to report the 338(h)(10) gain, a transaction in which the sale of stock gets treated as the sale of assets for tax purposes. The regional firm prepared the California return, reporting a $1 million tax. The company agreed to Barnwell & Company’s review prior to mailing the state return fortunately.

We understood a nuance in California law, that based on a recent General Counsel ruling the company could treat the transaction as the sale of stock. This resulted in virtually no liability in California for the seller, discovered just in the nick of time and saving the client $1 million.

$8 million “JDIG” (Jobs Development Incentives Grant) in North Carolina

A client planned to build a new manufacturing plant in North Carolina a rare development in today’s world of off-shore sourcing. The client asked us to assist in identifying and procuring incentives from the state and county in which it planned to locate. Most critically, we immediately recognized that the client could obtain $4 million in credits provided by law, but we did not charge the client for this. Statutory credits for this company were relatively easy to identify. We did not see much value in identifying these particular credits. However, we did see value in orchestrating an approach to the North Carolina Department of Commerce. We understood the need to negotiate incentive packages with rivaling states (in this case, Mississippi), and the “but for” provision, a recognition that the company would go elsewhere “but for” the JDIG offer. We were successful in obtaining the JDIG, and significant other incentives for the client.

$2.7 million Georgia Jobs Credit

This company, audited by a Big 4, had a complex history, including several acquisitions and divestitures and a corporate headquarters move from out-of-state to Georgia. The company began adding jobs in Georgia in the mid-90’s. For whatever reason, the Big 4 firm had not advised the client to claim Georgia jobs credits, credits the client clearly was entitled to claim. The problem was, by the time we got involved with this company, most of the jobs had been added in back-years. Seemingly the statute of limitations in Georgia (usually three years) had closed. Through our insight, we identified two unique rules that enabled us to go “way back” into seemingly closed years, and secure a $2.7 million credit for the client.

In most of the examples above, we turned these big wins into deeper relationships, and were able to identify additional opportunities. We are grateful to the companies that share their facts with us, and as noted above, a core value of our firm is to invest in gaining contextual knowledge. The above examples tell the story: there are hidden opportunities in the state and local tax area for large companies. The trick is to know how to find them, and then how to pull the trigger to lock in the value.

In short, we have assisted companies in finding state income/franchise tax refunds and have collected approximately $20 million in cash refunds for clients.

We have assisted companies in altering corporate structure when good business purpose exists, to help lower state income tax liabilities.

We have assisted clients with FIN 48 accruals, but more importantly with strategies to resolve FIN 48 uncertainty projects that help companies lower the state effective tax rate.

We handle complex income and sales/use tax audits for companies, and have been successful in eliminating or reducing material assessments.

We assist clients with state and local tax issues in acquisitions and divestitures.

We have identified literally tens of millions in credits and incentives. Credits and incentives fall into two broad categories, statutory and negotiated. With respect to the former, we see our job less as identifying statutory credits - and more focused on whether our client has fully recognized the credit, and obtained the maximum possible benefit.

Can we make this credit larger? Are there other factors that would enhance it? To achieve the maximum negotiated credits and incentives we rely on our years of experience. Negotiating credits and incentives may be described as an art, not a science, with traps for the unwary. It is often what a client does not do, as opposed to what they do, that can make the difference in a negotiated incentive project.

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