80/20 Companies: Dispelling Common Misconceptions

modern glass building facade geometric architecture urban perspectivemodern glass building facade geometric architecture urban perspective

80/20 Companies: Dispelling Common Misconceptions

September 22, 2026

United States
United States
United States
Tax Notes State

Building on our prior Tax Notes State article that examined the history, purpose and policy rationale behind 80/20 company rules, Partners Jeff Friedman and Ted Friedman, and Associate Stephanie Terinoni, revisit the topic in this installment of “A Pinch of SALT,” taking a closer look at 80/20 companies and challenging several common misconceptions about their role in state water’s-edge combined reporting.

The authors explore how these rules operate in practice and examine recurring criticisms involving combined group membership, profit shifting and the mechanics of the underlying tests.

Ultimately, the authors conclude that 80/20 company rules remain an important feature of state tax systems, helping ensure combined reporting reflects business substance rather than form while balancing states’ taxing authority with constitutional constraints.

The materials on the Eversheds Sutherland website are for general information purposes only and do not constitute legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Eversheds Sutherland disclaims liability for actions taken based on the materials. Always consult a qualified lawyer for specific legal matters. To view the full disclaimer, see our Terms and Conditions or Disclaimer section in the footer. Eversheds Sutherland is a provider of legal and other services operating through various separate and distinct legal entities. For further information about these entities and Eversheds Sutherlands' structure please see the Legal Notice page of this website.

Services

Client Tools

Key contacts

jefffriedman@eversheds-sutherland.com

Jeffrey A. Friedman

Partner

Washington, DC, United States

Friedman_Ted_portrait_web_newstyle new 2024

Ted W. Friedman

Partner

New York, United States

StephanieTerinoni@eversheds-sutherland.com

Stephanie N. Terinoni

Associate

Washington, DC, United States

Latest Insights

Latest News

  • firm news
  • client news
  • firm news
  • firm news

Latest Events

zero waste new pic

legal updates

November 12, 2026

COP31: Leaders’ Summit | Zero Waste - The business case for zero waste

EV charging COP31

legal updates

November 11, 2026

COP31: Energy and Transport – Electrification takes center stage in Antalya

tracker image - Algorithmic

legal updates

November 11, 2026

Algorithmic Management of Workforces: Is your business a “platform” without...

atrium glass roof interior modern architecture indoor trees sustainability

legal updates

November 11, 2026

© Eversheds Sutherland 2026. All rights reserved. Eversheds Sutherland is a provider of legal and other services operating through various separate and distinct legal entities. For further information about these entities and Eversheds Sutherlands' structure please see the Legal Notice page of this website.

Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed or affiliated firms and the members of Eversheds Sutherland (Europe) Limited and Eversheds Sutherland (Africa) Limited (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the Eversheds Sutherland Entities are in a partnership or are part of a global entity. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client. For further information about these Eversheds Sutherland Entities and Eversheds Sutherlands’ structure please see the Legal Notices page of this website. For information on Konexo please also see the Legal Notices page of this website.