Code of Massachusetts Regulations › 830 CMR - DEPARTMENT OF REVENUE › Title 830 CMR 63.00 - Taxation of corporations › Section 63.32B.2 - Combined Reporting

Current through Register 1525, July 5, 2024
(1)
Purpose; General Rule; Relationship to Other Rules;
			 Outline
(a)
Purpose
. The purpose of 830 CMR 63.32B.2 is to provide
			 rules for the combined reporting of income as required by M.G.L. c. 63, §
			 32B. The M.G.L. c. 63, § 32B reporting requirement recognizes that a
			 unitary business can be conducted not only through separate divisions of a
			 single corporation but also through corporations related by common ownership
			 such that in either instance, in the case of a multi-state business, it is
			 appropriate and constitutionally permissible to apportion the resulting income
			 of the unitary business even if that income arises from activities conducted
			 outside the state. A combined report is a computational schedule that is
			 generally required to be filed when a corporation that is subject to tax under
			 M.G.L. c. 63 is engaged in a unitary business with one or more other
			 corporations that are required to be included in a combined report under M.G.L.
			 c. 63, § 32B. In such cases, in the case of a multi-state business, the
			 combined report is required to calculate the corporation's taxable net income
			 derived from the unitary business as its share, attributable to the
			 commonwealth, of the apportionable income or loss of the combined group engaged
			 in the unitary business.
(b)
General Rule
. In general, a corporation is required to
			 file a combined report when it is subject to tax under M.G.L. c. 63 and is
			 engaged in a unitary business with one or more other corporations that are
			 required to be included in a combined report pursuant to M.G.L. c. 63, §
			 32B. In such cases, if any member of the group has income from the activities
			 of the group's unitary business that is taxable in another state, the taxable
			 member shall calculate its taxable net income derived from such unitary
			 business as its apportioned share of the income or loss of the combined group
			 engaged in the unitary business, determined in accordance with such combined
			 report. The combined report shall be filed with the taxpayer's tax return, as
			 further explained in 830 CMR 63.32B.2, and shall include the income and
			 apportionment information of all corporations that are members of the combined
			 group and such other information as required by the Commissioner. The
			 composition of the combined group and the computation of the taxable member's
			 income and its apportionment formula are explained by 830 CMR 63.32B.2. A
			 combined report is also required in cases where a taxpayer corporation is
			 engaged in a unitary business with one or more corporations and no member of
			 the combined group has income from the activities of the group's unitary
			 business that is taxable in another state. In some cases a taxpayer may make an
			 election to treat as its combined group all corporations that are members of
			 its Massachusetts affiliated group, as defined in 830 CMR 63.32B.2(2), on such
			 terms and in keeping with such requirements as are further explained by 830 CMR
			 63.32B.2. The requirement to file a combined report is
not
dependent upon an evidentiary showing that there is a distortion of
			 income between corporations that are related by common ownership or that there
			 is a lack of arm's length pricing in transactions between such
			 corporations.
(c)
Relationship to Other Rules
.
1.
Application of Combined
			 Reporting
. The corporations that are included in a combined group,
			 including the taxable member or members of such group, generally retain their
			 separate identities under M.G.L. c. 63 for purposes of determining the income
			 measure of the corporate excise to be applied to the taxable members' share of
			 the combined group's taxable income. Consequently, in determining the corporate
			 excise income tax on such taxable income, the rules of M.G.L. c. 63 generally
			 apply to determine the computation of such income and the apportionment
			 formulas, as applicable, of the taxable members of the group, subject to
			 modifications pursuant to M.G.L. c. 63, § 32B or 830 CMR 63.32B.2, as well
			 as the rate of tax to be applied to the taxable members' apportioned income
			 derived from the group.
2.
Continued General Application of M.G.L. c. 63
. The
			 combined reporting requirement does not disregard the separate identity of an
			 individual taxable member of a combined group for purposes of M.G.L. c. 63
			 generally. Therefore, a taxable member may have tax attributes or tax
			 consequences apart from those determined through the means of a combined
			 report. For example, in any case where no affiliated group election is made, a
			 taxable member of a combined group may have, in addition to its apportionable
			 share of the combined group's unitary business income, allocable or
			 apportionable income from activities that were conducted by the taxpayer and
			 not as part of the combined group's unitary business. In these cases, the
			 taxpayer corporation shall be subject to tax on such other income under the
			 general rules as set forth in M.G.L. c. 63.
3.
Application of Non-income
			 Measure
. The combined reporting rules provide a method for
			 determining the share of taxable net income derived by a taxable member of a
			 combined group from the group's unitary business activities (or Massachusetts
			 affiliated group activities in the instance of an affiliated group election).
			 These rules do not dispense with the requirement that certain corporations are
			 required to pay the minimum corporate excise or the non-income measure of the
			 corporate excise as determined under M.G.L. c. 63, § 39. A member of a
			 combined group that is subject to the non-income measure must separately
			 calculate that measure under the rules that apply thereto. In some instances
			 payment of the non-income measure is required even when a corporation is not
			 subject to tax on its income either through the means of a combined report or
			 otherwise. For example, a corporation that would otherwise be subject to the
			 income measure but for the application of Public Law 86-272 is nonetheless
			 required to pay either the greater of the minimum excise or the non-income
			 measure.
4.
Revocation
			 of Election under Prior M.G.L. c. 63, § 32B
. Pursuant to the
			 enactment of M.G.L. c. 63, § 32B by St. 2008, c. 173, the prior version of
			 M.G.L. c. 63, § 32B has been repealed. Therefore, any taxpayer election
			 that was made pursuant to prior M.G.L. c. 63, § 32B and 830 CMR 63.32B.1,
			 is revoked for tax years beginning on or after January 1, 2009 and any such
			 prior election shall have no further effect except as set forth in 830 CMR
			 63.32B.2.
(d)
Outline
. 830 CMR 63.32B.2 is organized as follows:
1. Purpose; General Rule; Relationship to
			 Other Rules; Outline
2.
			 Definitions
3. Unitary Presumptions
			 and Inferences
4. Corporations to
			 Be Included in a Combined Report
5.
			 Water's Edge or Worldwide Parameters of a Combined Report
6. Determination of Taxable Income of Taxable
			 Member of a Combined Group
7.
			 Apportionment of Income Computation; Tax Computation Where No
			 Apportionment
8. Net Operating Loss
			 Carry Forwards
9. Credits
10. Affiliated Group Election
11. Principal Reporting Corporation;
			 Liability
12. Tax Returns; Taxable
			 Year; Fiscalization; Partial Years
13. No Limit on Other Authority
14. Effective Date