Income Tax Combined & Consolidated Reporting

Author: Michael Bannasch

As business’s legal structures have gotten more complex with multiple corporate entities, tiered partnerships, and the like, the state income tax laws have adapted to try to ensure that each state gets its fair share of income taxes. A common method is to require or allow combined or consolidated reporting of multiple entities in one tax return. This course will examine the various methods states go about this, so that you can both properly comply with filing requirements and possibly plan to structure entities and operations in ways to save state income taxes.

Publication Date: May 2019

Designed For
CPAs who work with entity groups that have multistate operations.

Topics Covered

• Separate vs. combined vs. consolidated
• Definitions
• Which states are which
• Combined returns
• Unitary business principle
• Which entities are in the return
• Calculation of taxable income and apportionment
• Consolidated returns
• Which entities are in the return
• Calculation of taxable income and apportionment
• Considerations for whether to file combined or consolidated when it is optional

Learning Objectives

• Recognize the differences among states on the issue of combined/consolidated reporting
• Identify how to properly prepare required combined/consolidated returns
• Recognize which issues to consider for analysis of potential tax planning regarding avoiding or taking advantage of combined/consolidated reporting
• Recognize which state require certain groups of entities to file a combined and/or consolidated return
• Differentiate U.S. Supreme Court cases and how they apply to your client
• Identify what a centralized executive force and general system of operations refers to
• Recognize the steps once it is determined that a group of businesses constitutes a unitary business
• Differentiate true statements with respect to which entity is the filer of a combined return
• Describe how many states a consolidation is elective
• Differentiate state rules and how they apply
• Identify the weakest and most subjective test, with respect to the unitary relationship test
• Recognize the three unities, for purposes of the unitary relationship test
• Identify the primary test adopted by the Multistate Tax Commission, with respect to the unitary relationship test

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Prior experience preparing multi-state corporate income tax returns.

Advance Preparation
None