State Corporate Income Tax: General Principles (Portfolio 1100)

Arthur Rosen

Senior Counsel

McDermott Will & Emery LLP

Duane Dobson

Director

Ryan, LLC

Jaye Calhoun

Partner

Kean Miller LLP

Mark Nachbar

Mark Nachbar

Principal

Ryan

At a glance

I. Jurisdiction to Tax
II. Computation of the Tax Base
III. Apportionment and Unitary Tax Principles
IV. Filing Methodologies
V. Credits
VI. Taxes Imposed Directly on Pass-Through and Disregarded Entities
VII. Audits and Reporting Federal Changes

Abstract

This portfolio begins by considering the extent of and limitations on states’ jurisdiction to impose corporate income taxes, with discussion of relevant federal cases. It next addresses the computation of the tax base and its division via apportionment. This discussion includes critical apportionment issues, among them the unitary business principle, the distinction between allocable and apportionable income, and state uniformity efforts. The effects of different filing methodologies on the computation and division of the tax base are also discussed. This includes explanations of the differences between separate entity returns, combined reporting, and consolidated returns, and the distinction between water's edge and worldwide combined reporting. Other topics discussed in this portfolio include corporate income tax credits, taxes on pass-through and diregarded entities, franchise and other non-income taxes, and reporting federal audit adjustments.

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