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What is a unitary business?
Should a group of corporations be taxed as a unitary business?
Which states have mandatory unitary combined reporting?
Is a business within a state a unitary business?
Unitary combined reporting, income apportionment, and State tax jurisdiction can present surprising consequences for foreign corporations. As illustrated by Wisconsin, State unitary tax regimes can also produce constitutionally suspect results.
Apr 14, 2015 · The unitary business principle finds its roots in 19th-century property taxation, when the U.S. Supreme Court first observed that an integrated business should be taxed as one unit instead of...
The first difference is a concept unique to state reporting — the unitary business principle. A U.S. consolidated federal income tax return is made by taxpayer election and requires 80% ownership of vote and value, and the Sec. 1504 affiliated group includes only U.S. corporations.
Dec 8, 2010 · News Flash: All States Are Unitary States. Each year, many taxpayers file inaccurate corporate income tax returns in separate-reporting jurisdictions because they do not consider the unitary business principle applicable to those states. Although you may find this revelation shocking, the simple fact is that all states are unitary states.
- Unitary Group Opportunities
- Functional Integration
- Centralization of Management
- Economies of Scale
- Jurisdictional Inconsistency
- Sources
While combined reporting often limits potential opportunities for impacted businesses through the imposition of mandatory rules under separate reporting regimes, several opportunities may be available, including defining the unitary group subject to combination, as well as apportionment planning in the proper calculation of the sales factor. In mos...
The functional integration test looks to shared functions and refers to transfers between, or pooling among, business entities that significantly affect the operation of the business activities.5Generally, functional integration includes, but is not limited to, transfers or pooling with respect to the business’s products or services, technical info...
The centralized management test focuses on not the ability to control but the actual amount of common control exercised between business segments. Centralization of management exists when directors, officers, and/or other management employees jointly participate in the management decisions that affect the respective business activities and that may...
The economies of scale test focuses on whether there is any income earned as a result of shared functions, activities, or operations. Economies of scale refer to a relation among and between business activities resulting in a significant decrease in the average per-unit cost of operational or administrative functions due to the increase in operatio...
Currently, approximately 30 jurisdictions mandate unitary combined reporting for general corporations that are commonly owned or controlled. However, notwithstanding the constitutional tests discussed above, these states adopt varying statutory definitions of “unitary” for purposes of combined reporting. Even in cases where the definitions in diffe...
Butler Brothers v. McColgan, 315 U.S. 501 (1942); See also 17 Cal. 2d 664.Edison California Stores v. McColgan, 183 P.2d 16 (1947).Mobil Oil Corp. v. Commissioner of Taxes of Vermont, 445 U.S. 425 (1980).Ibid.STATE & LOCAL TAXES. The Recent Growth of Mandatory Unitary Combined Reporting. By Bridget McCann, MBA, CPA, Edison, NJ, Jamie C. Yesnowitz, J.D., LL.M., Washington, DC, Chuck Jones, J.D., CPA, Chicago, IL, and Giles Sutton, J.D., LL.M., Charlotte, NC. January 31, 2010. Reporting & Filing Requirements. Editor: Greg A. Fairbanks, J.D., LL.M.
Under the unitary business principle, if at least one member of a corporate group is subject to a state’s taxing jurisdiction, the entire income of the corporate group can become part of the group’s apportionable tax base in that state if the group and the member are deemed unitary.
