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The Unitary Group's Identity Crisis: Is There Really an "I" in Unitary? |
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| The article was authored by Kimberley Reeder, Sarah McGahan, and Jon Sedon and is 32 pages in length. It was originally published in the State and Local Tax Lawyer 2008 Symposium Edition. |
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The articles and essays included in this Edition offer an overview of the group reporting schemes in use across the country and examine the economic origins and the evolution of the unitary business principle that underlies combined reporting. They explore the policy considerations that states assess in choosing whether to adopt combined reporting and the conflicting policy goals of different jurisdictions. Additionally, they examine single vs. aggregate taxpayer theory, analyze procedural issues raised by combined reporting, explore the ultimate (but apparently unreachable) goal of uniformity, and, finally, weigh all the pros and cons of combined reporting. The day-long program from which these pieces are adapted was held at Georgetown University Law Center on May 14th, 2008.
For information on the State and Local Tax Lawyer 2008 Symposium Edition, click here.
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This Article attempts to (1) identify the various circumstances in the combined reporting context where it is important to determine whether the entities engaged in a unitary enterprise are viewed in the aggregate or separately, and (2) in each of the contexts identified, present differing state positions as to which entity --- or group of entities --- is considered the "taxpayer." First, we will conduct a detailed examination of the controversial Joyce/Finnigan line of cases in California and other states. These cases attempt to reconcile the underlying premise of combined reporting --- that the income of related corporations engaged in a common enterprise should be determined by treating the enterprise as one unitary business --- with the jurisdictional limitations imposed under federal law and the U.S. Constitution. In the course of the Joyce/Finnigan discussion, we will address the conflicting views on whether Joyce and Finnigan are simply different methods of apportioning the income of a unitary group or are jurisdictional rules. Following the discussion of Joyce/Finnigan, we will address additional circumstances when a state's adoption of the aggregate taxpayer theory or the separate taxpayer theory is important: use of net operating losses or credits and the filing of, payment of, and liability for taxes. Finally, we will discuss the recent trend among states that are moving to combined reporting to adopt the Finnigan rule, and how the dichotomy between states using the Finnigan method and the Joyce method may impact taxpayers that do business in jurisdictions adopting these inconsistent rules.
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