District of Columbia Adopts Combined Reporting Regulations

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The District of Columbia Office of Tax and Revenue adopted extensive regulations to implement the combined reporting provisions enacted in 2011 as D.C. Code Ann. § 47-1805.02a. [D.C. Office of Tax and Rev., D.C. Mun. Regs. tit. 9, §§ 156 to 176, 9/14/12 D.C. Reg.]

The regulations include the following provisions:

  • entities that would be subject to the district's income and franchise tax must be included in a combined report even if those entities do not have nexus;
  • the term “unitary business” will be construed to the broadest extent possible permitted by the U.S. Constitution;
  • passive holding companies that hold intangible assets used in a unitary business will be considered part of the unitary group;
  • a water's edge election is binding for the taxable year in which it is made and for next nine taxable years;
  • tax credits only may be used and carried forward by the group member that generated the credit and not shared among the group; and
  • the apportionment factors of non-nexus members will be included in the denominator but not the numerator of each taxpayer member.

As with the statute, the regulations are retroactively effective for tax years beginning after Dec. 31, 2010.

Full text of the regulations are available at http://www.dcregs.dc.gov/Gateway/NoticeHome.aspx?Notice
ID=3387063
.

By Erin McManus  

Copyright 2012, The Bureau of National Affairs, Inc.