Current through September 18, 2024
Authority: IC 6-5.5-9-1
Affected: IC 6-5.5-1-18; IC 6-5.5-5-1
Sec. 5.
(a) A
designated taxpayer who is a member of a unitary group shall file a combined
return covering all the operations of the unitary business and including all
taxpayer members of the unitary group.
(b) A corporation must be a taxpayer as
defined under 45 IAC 17-2 in order to be a member of a unitary group for
purposes of the FIT.
(c) A "unitary
business" means business activities or operations that are of mutual benefit,
dependent upon, or contributory to one another, individually, or as a group, in
transacting the business of a financial institution. Unity of ownership exists
when a corporation is a member of a group of two (2) or more entities and more
than fifty percent (50%) of the voting stock of each member of the group is
directly or indirectly owned by:
(1) a common
owner or common owners, either corporate or noncorporate; or
(2) one (1) or more of the member
corporations of the group. Example 1, Corporation A owns eighty percent (80%)
of Subsidiary B. Subsidiary B owns sixty percent (60%) of Subsidiary C.
Corporation A directly owns eighty percent (80%) of Subsidiary B and indirectly
owns forty-eight percent (48%) of Subsidiary C. There is unity of ownership
between Corporation A and Subsidiary B because Corporation A directly owns more
than fifty percent (50%) of Subsidiary B. There is unity of ownership between
Subsidiary B and Subsidiary C because Subsidiary B directly owns more than
fifty percent (50%) of Subsidiary C. Although Corporation A indirectly owns
only forty-eight percent (48%) of Subsidiary C, there is unity of ownership
between Corporation A and Subsidiary B and Subsidiary C because Subsidiary B is
a member corporation of the group and directly owns more than fifty percent
(50%) of Subsidiary C. Example 2, Corporation A owns one hundred percent (100%)
of Corporations B and C. Corporations B and C each owns thirty percent (30%) of
Corporation D. Although no single corporation owns more than fifty percent
(50%) of Corporation D, the unitary group owns sixty percent (60%) of
Corporation D. Therefore Corporation D is a member of the unitary group.
Unity is presumed whenever there is unity of ownership,
operation, and use evidenced by centralized management or executive force,
centralized purchasing, advertising, accounting, or other controlled
interaction among entities that are members of a unitary group.
(d) A unitary group for
purposes of the FIT is composed of those taxpayer members that are engaged in a
unitary business transacted wholly or partially within Indiana. Therefore, if
one (1) member of a unitary group is conducting the business of a financial
institution in Indiana, then all members of the unitary group engaged in a
unitary business must file a combined return, even if some of the members are
not transacting business in Indiana. The following are examples of unitary
groups:
(1) A parent corporation is a taxpayer
and commercially domiciled in Indiana. Parent owns fifty-five percent (55%) of
Subsidiary A which is a taxpayer and commercially domiciled in Indiana. Parent
also owns fifty-five percent (55%) of Subsidiary B which transacts the business
of a financial institution and is commercially domiciled outside the state of
Indiana. Subsidiary B does not extend credit in Indiana. Assume that the parent
and Subsidiary A and Subsidiary B are engaged in a unitary business. The
combined return must include the respective adjusted gross income of the parent
and both subsidiaries.
(2) A parent
corporation owns more than fifty percent (50%) of five (5) subsidiaries. Three
(3) of the corporations are conducting the business of a financial institution.
Two (2) of the corporations derive one hundred percent (100%) of their income
from manufacturing. For purposes of the FIT, the three (3) corporations
conducting the business of a financial institution are a unitary group and must
file a combined return. The two (2) corporations which are manufacturers are
neither subject to the FIT nor a member of the unitary group.
(3) Assume the same facts as stated in
subdivision (2). The parent corporation derives sixty percent (60%) of its
income from the three (3) subsidiaries which are financial institutions and
forty percent (40%) from its subsidiaries' manufacturing operations. If the
parent is not a taxpayer for purposes of the FIT, the parent would not be a
member of the unitary group for purposes of the FIT. (In the event the parent
is a taxpayer under the Gross Income Tax Act (IC 6-2.1-2-11), the parent would
exclude income attributable to the members of the group subject to the
franchise tax.) However, if the parent satisfies the eighty percent (80%) test
because eighty percent (80%) or more of its gross income is derived from the
business of a financial institution (either from the parent's financial
activities alone or in conjunction with the income stream from the financial
subsidiaries), the parent would be included as a member of the unitary
group.