California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 17 - Allocation of Income › Article 1 - General Provisions › Section 25106.5-4 - Fiscalization

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) If the
					 accounting period of a principal member and one of the other members of a
					 combined reporting group do not begin and end on the same dates, adjustments
					 must be made to the other members' combined report business income and
					 apportionment data to assign an appropriate amount of those values to the
					 accounting period of the principal member in order for total group combined
					 report business income to be apportioned. Each member of the group should
					 generally use combined report business income and apportionment data from its
					 books of account earned during the accounting period of the principal member.
					 This will require an interim closing of the books for members whose normal
					 accounting period differs from the principal member. However, a pro rata method
					 of converting income to the principal member's accounting period will be
					 accepted as long as the method does not produce a material misstatement of
					 income apportioned to this state. Unless otherwise permitted or required by the
					 Franchise Tax Board, the treatment of both the income and the apportionment
					 data of any particular member must use the same method. If one method was used
					 to account for a member's income and apportionment data in the combined report
					 for the principal member's preceding accounting period and another method will
					 be used in the combined report for the principal member's next accounting
					 period, adjustments to income and apportionment data of the member shall be
					 made to prevent income and apportionment data from being omitted or
					 duplicated.
(b) Interim closing
					 method.
(1) The combined report business
					 income and expense of a member of the combined reporting group is determined by
					 reference to the sum (or net) of such income from the actual books and records
					 (determined under the Revenue and Taxation Code) of that member for each of the
					 partial accounting periods of the member shared with the principal member. For
					 example, if the principal member has an accounting period ending on December
					 31, 1997, and another member has an accounting period ended March 31, 1998, the
					 other member determines its income from its actual books and records for the
					 partial accounting periods beginning January 1, 1997 and ending March 31, 1997,
					 and from April 1, 1997 and ending December 31, 1997.
(2) The apportionment data (property,
					 payroll, and sales in California, and everywhere) shall also be determined by
					 reference to the member's books and records, as provided in Sections
					 25129-
					 25137
					 of the Revenue and Taxation Code and the regulations thereunder, for the
					 appropriate partial accounting year. Under the interim method, the property
					 factor computation should reflect the actual, not prorated, property owned and
					 rented during the principal member's accounting period.
Example 1. If the principal member has an accounting
						period ending on December 31, 1997, and another member has an accounting period
						ended March 31, 1998, and monthly weighted averaging of the property factor is
						not required under Section
						25131,
						Revenue and Taxation Code, the other member will determine its total property
						and its California property on the dates of January 1, 1997 and December 31,
						1997 from its actual books and records.
Example 2. Assume the same facts as Example 1, except
						monthly weighted averaging is required. In that case, the actual monthly
						California property and total property values of the member required to
						fiscalize to accounting period of the principal member will be determined for
						each of the twelve months during the 1997 calendar year from that member's
						actual books and records.
(3) Interim combined report business income
					 and apportionment data from the respective partial periods is then combined
					 with the income and apportionment data of the accounting period of the
					 principal member, along with business income and apportionment data of other
					 members of the combined reporting group for the same period, using, if
					 applicable, the methods prescribed in this regulation.