Income/Franchise:
Arizona: Combined Reporting of Parent and Affiliates Deemed Necessary to Accurately Reflect Income
Case No. 201800182-C, Ariz. Dept. of Rev. Hearing Office (5/5/20). The chief hearing officer for the Arizona Department of Revenue Hearing Office concluded that services provided by a parent company constituted operational components of the core business embodied in the products and services provided by its unitary affiliates and thus state law requires Arizona combined reporting of overall net income by the parent and the affiliates to clearly reflect the taxable income earned by those subsidiaries with Arizona income factors. Accordingly, the chief hearing officer held that the parent company must be included within the Arizona combined corporate income tax returns filed for the calendar years at issue. Under the provided facts, the parent company designed and developed programs for implementation by its affiliates and directed the affiliates’ day-to-day operations. Please contact us with any questions.
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