Income Taxes: Consolidated Returns and Combined Reporting compares state combined reports and state consolidated returns in detail and discusses both the mechanics and implications of filing combined reports. At the state level, members of a multi-corporate group may, depending on the circumstances and the laws of the particular state, determine their state taxable incomes using one of several ways. This Portfolio, written by William L. Goldman, Esq., McDermott, Will & Emery, with analysis of California law provided by Kenneth C. Brown, CPA, and Laura L. Farrell-Legrand, CPA, this Portfolio examines those options and related issues, including:
In addition, this Portfolio discusses the issues that arise when a group files a consolidated federal income tax return, but one or more members file in a taxing state using the separate return method. Income Taxes: Consolidated Returns and Combined Reporting also discusses issues that may arise in filing state combined reports and contrasts how these issues have been handled at the state level with the treatment of these issues under the federal consolidated return regulations.
Income Taxes: Consolidated Returns and Combined Reporting allows you to benefit from:
This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.
Detailed Analysis
1130.01. INTRODUCTION
A. Methods of Computing Taxable Income
1. Federal Income Tax Returns
a. Separate Return Method
b. Consolidated Return Method
2. State Income Tax Returns
b. Combined Report Method
c. Consolidated Return Method
(1) Separate Company Method
(2) Federal Consolidated Return Method
B. Patterns of Filing State Returns
1130.02. COMPARISON OF COMBINED REPORTS AND STATE CONSOLIDATED RETURNS
Introductory Material
A. Function
B. Group Members Included in Return
1. Definition of a Unitary Business
2. Instant Unity
3. Water's-Edge Elections
4. Tax Havens
5. Missed Elections
6. Risk of Unitary Determination and Foreign Subsidiaries
7. Potential Impact of Change in Foreign Entity Classification
8. Inclusion in Consolidated Returns
C. Discretion of State Taxing Authority to Require Combination or Consolidation
1. In General
2. Combination Required to Avoid Distortion
3. Required Consolidation
D. Entitlement of Taxpayer to File a Combined Report or Consolidated Return Where No Statutory Authority Exists
E. Income Apportioned to Taxing State
1. Combination
2. Consolidation
F. Sales Factor
1. Background
2. Combined Report States
3. Consolidated Return States
G. Dividends From Unitary Subsidiaries
1. Combined Reports
2. Consolidated Returns
H. Tax Sharing Agreements
1130.03. THE IMPLICATIONS OF FEDERAL CONSOLIDATED RETURNS ON STATE TAXATION OF MULTI-CORPORATE GROUPS
A. Introduction
B. Common Parent as Agent for Group
1. Federal Rules
2. State Issues
a. Combined Reports
b. Consolidated Returns
C. Taxable Years of Members and Income to Be Included in Return
a. General Rule
b. Apportioning Income Between Taxable Years
a. Separate Returns
b. Combined Reports
(1) General Rule
(2) Apportioning Income Between Taxable Years
D. Due Dates of Returns for Members Entering or Leaving a Group
2. State Combined Report
E. Intercompany Transactions
1. General Rules
a. Federal Rules
b. State Issues
(1) Separate State Returns
(2) Combined Reports or Consolidated State Returns
(3) Inventories
(4) Fixed Assets and Capitalized Items
(5) Water's–Edge Elections
2. Nondeferred Transactions
(2) Combined Reports and State Consolidated Returns
3. Intercompany Sales of Stock of a Controlled Corporation
F. Stock Aggregation Rules
G. Distributions With Respect to Stock
1. Dividends
(1) Separate Returns
(2) Consolidated Returns
2. Nondividend Distributions
3. Distributions of Loss Property
4. Distributions of Appreciated Property
5. Taxable Year for Inclusion of Distribution in Income
H. Use of Net Operating Losses
b. Combined Reports and State Consolidated Returns
I. Dispositions of Stock of Members
1. Investment Adjustments
(2) Combined Reports
2. Loss on Disposition of Subsidiary
3. Stock Dispositions Treated as Asset Sales Followed by Liquidations
(3) Planning Possibility
1130.04. STATE-BY-STATE ANALYSIS
A. Overview
B. Specific States
1. Alabama
a. Consolidated Returns
b. Combined Reporting
2. Alaska
3. Arizona
4. Arkansas
5. California
6. Colorado
7. Connecticut
8. Delaware
9. District of Columbia
10. Florida
11. Georgia
12. Hawaii
13. Idaho
14. Illinois
15. Indiana
16. Iowa
17. Kansas
18. Kentucky
19. Louisiana
20. Maine
21. Maryland
22. Massachusetts
23. Michigan
24. Minnesota
25. Mississippi
26. Missouri
27. Montana
28. Nebraska
29. Nevada
30. New Hampshire
31. New Jersey
32. New Mexico
33. New York
34. North Carolina
35. North Dakota
36. Ohio
37. Oklahoma
38. Oregon
39. Pennsylvania
40. Rhode Island
41. South Carolina
42. South Dakota
43. Tennessee
44. Texas
45. Utah
46. Vermont
47. Virginia
48. Washington
49. West Virginia
50. Wisconsin
51. Wyoming
Working Papers
Item Description Sheet
Worksheet 1 New York Regs. § 6-2.1 -2.7
Worksheet 2 IRC § 482 and Intercompany Transfer Pricing: It's Not Just for the IRS Anymore
Bibliography
BIBLIOGRAPHY