House File 326 - Introduced



                                       HOUSE FILE       
                                       BY  WISE


    Passed House, Date               Passed Senate,  Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act requiring combined corporate tax returns for unitary
  2    businesses and including a retroactive applicability date
  3    provision.
  4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  5 TLSB 2175HH 82
  6 mg/es/88

PAG LIN



  1  1    Section 1.  Section 422.37, Code 2007, is amended by
  1  2 striking the section and inserting in lieu thereof the
  1  3 following:
  1  4    422.37  COMBINED RETURNS.
  1  5    An affiliated group of corporations shall, under rules
  1  6 prescribed by the director, file a combined return showing the
  1  7 net income of all corporations engaged in a unitary business,
  1  8 subject to the following:
  1  9    1.  The affiliated group filing under this section shall
  1 10 meet the requirements to file a consolidated return for
  1 11 federal income tax purposes under the Internal Revenue Code
  1 12 for the same taxable year.
  1 13    2.  All members of the affiliated group shall join in the
  1 14 filing of an Iowa combined return to the extent they are
  1 15 engaged in a unitary business.
  1 16    3.  Members of the affiliated group exempt from taxation by
  1 17 section 422.34 shall not be included in a combined return.
  1 18    4.  All members of the affiliated group shall use the
  1 19 statutory method of allocation and apportionment unless the
  1 20 director has granted permission to all members to use an
  1 21 alternative method of allocation and apportionment.
  1 22    5.  The computation of federal taxable income before the
  1 23 net operating loss deduction on a combined return for members
  1 24 of an affiliated group shall be made in the same manner and
  1 25 under the same procedures, including all intercompany
  1 26 adjustments and eliminations, as are required for
  1 27 consolidating the incomes of affiliated corporations for the
  1 28 taxable year for federal income tax purposes in accordance
  1 29 with the Internal Revenue Code.
  1 30    6.  The combined income approach reflects the federal
  1 31 taxable income of the unitary members of the Iowa affiliated
  1 32 group as a single economic unit, with the application of the
  1 33 adjustments in section 422.35, and the affiliated group shall
  1 34 only file one income tax return.  Any nonunitary members of
  1 35 the federal affiliated group subject to tax imposed by section
  2  1 422.33 must each file its own separate corporate income tax
  2  2 return.  The net income of an affiliated group is determined
  2  3 by applying the apportionment formula against the combined
  2  4 income of the affiliated group.
  2  5    7.  Only the sales of those corporations in the affiliated
  2  6 group subject to the tax imposed by section 422.33 are
  2  7 included in the numerator of the apportionment formula.
  2  8    8.  Only those corporations in the affiliated group subject
  2  9 to the tax imposed by section 422.33 are jointly and severally
  2 10 liable for the Iowa tax of the combined group.
  2 11    Sec. 2.  RETROACTIVE APPLICABILITY PROVISION.  This Act is
  2 12 retroactively applicable to January 1, 2007, for tax years
  2 13 beginning on or after that date.
  2 14                           EXPLANATION
  2 15    This bill requires that the net income of affiliated groups
  2 16 of corporations engaged in a unitary business be computed on a
  2 17 combined return basis for corporate tax purposes if the group
  2 18 meets the requirements for filing a consolidated return for
  2 19 federal tax purposes.  The affiliated group would include
  2 20 corporations with common ownership whereby one or more
  2 21 corporations own 80 percent or more of another corporation.
  2 22 The bill would require that one Iowa corporate income tax
  2 23 return be filed that would include all unitary members of an
  2 24 affiliated group.  Any nonunitary member that is subject to
  2 25 Iowa tax would file its own separate corporate return.  Only
  2 26 Iowa sales of those corporations doing business in Iowa would
  2 27 be included in the numerator of the Iowa sales ratio.  The
  2 28 bill also provides that only those corporations doing business
  2 29 in Iowa are jointly and severally liable for the tax of the
  2 30 combined return.
  2 31    The bill applies retroactively to January 1, 2007, for tax
  2 32 years beginning on or after that date.
  2 33 LSB 2175HH 82
  2 34 mg:rj/es/88