North Carolina Appropriations Bill Contains Interesting Combined/Consolidated Return Tidbits

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7/6/2010

On June 30, North Carolina's governor signed an appropriations bill that included a few interesting items related to combined reporting. First, it amended certain penalties to exclude some situations where the Department of Revenue had force-combined affiliated entities. Prior to this law change, some taxpayers were assessed negligence penalties for failing to file a combined return when North Carolina state law expressly prohibited such a filing - a classic "damned if you do, damned if you don't" scenario.

The new legisaltion also permits the Secretary of Revenue to adopt rules describing when the Department will require the filing of combined or consolidated returns. Taxpayers have been requesting guidance on when the Department would require combined returns for some time now as the Department has continued to force combined without disclosing their more general policy rationale for doing so.

On a related note, the new law allows groups of corporations filing a federal consolidated return to also file a consolidated or combined North Carolina return if (1) the group's facts match those described in regulations promulgated by the Department; or (2) the group requests permission to file a combined or consolidated return and the Department approves the request.

We will be keeping our eyes out for any proposed regulations to see if they merit comment.

These provisions became effective July 1, 2010. The text of the bill is lengthy (189 pages), but you can click here and skip to Section 31.10 on page 184.

Posted at 10:21 AM by Daniel De Jong | Category: Income/Franchise Tax | Permalink | Email this Post | Comments (0)

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