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Friday, February 10, 2012

Weekly Round-Up: North Carolina, D.C. Tackle Combined Reporting Issues

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Combined reporting has been a hot topic in North Carolina after the state enacted a 2011 law that aimed to place restrictions on the revenue department’s power to require combined income tax returns.

But uncertainty and differential treatment still exist in North Carolina's approach to requiring corporations to file combined returns covering related business entities and intercompany transactions, according to the North Carolina Chamber of Commerce, the North Carolina Retail Merchants Association, and the Council On State Taxation.

Lawmakers should require North Carolina's revenue agency to engage in a formal rulemaking process regarding its interpretation of recently enacted changes to state law and consider applying those changes retroactively, the groups said in their letter.

For a look at this development and the North Carolina Department of Revenue's authority to require combined returns, which has been the subject of much debate and litigation, check out Bloomberg BNA Staff Correspondent Andrew M. Ballard's report in this week’s issue of the Weekly State Tax Report.

Meanwhile, after enacting combined reporting legislation last year, D.C. issues proposed regulations implementing the new mandatory law.

The District of Columbia Office of Tax and Revenue proposes regulations to implement D.C. Code Ann. §47-1805.02a, which requires combined reporting by a unitary business for taxable years beginning after Dec. 31, 2010, Bloomberg BNA State Tax Law Editor Erin McManus writes in this week’s issue of the Weekly State Tax Report.

The proposed regulations include an extensive discussion of factors that would lead to a determination that there is a unitary business. Under the proposed regulations, there would be a rebuttable presumption that there is a unitary business if business activities of multiple corporations are in the same general line of business; comprise different steps in a vertically structured business; or are under a strong central management coupled with centralized departments for such functions as finance, advertising, research, or purchasing.

The proposed regulations would also establish a rebuttable presumption that a corporation newly formed or acquired by a member of the unitary group becomes unitary with the group on the date of formation or acquisition.

In other developments…

Monica Davey, of the New York Times, highlights the surprising turn of events in Michigan.

At 102%, James Ross’s tax rate takes the cake, James B. Stewart, of the New York Times explains.

Alabama corporate taxpayers and CPAs beware: House bill targets unitary combined reporting, the Section 199 deduction and bonus depreciation, according to a new article by Bruce P. Ely, James E. Long, Jr., both with Bradley Arant Boult Cummings LLP.

Howard Gleckman, at the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, looks at what tax reform would mean for the states.

Nick Kasprak’s Monday Map, at the Tax Policy Blog, reviews statewide sales tax exemptions for groceries.

Compiled by Priya D. Nair
Follow us on Twitter at: @SALTax
Join BNA's State Tax Group on LinkedIn here: http://www.linkedin.com/groups?gid=1821701&trk=hb_side_g

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