Deloitte
Multistate Tax  |  June 10, 2022
State Tax Matters
State Tax Matters
The power of knowing.
 

Print Facebook Twitter Linkedin

Income/Franchise:
Tennessee DOR Says No Franchise Tax Addback Required for Short-Term Intercompany Trade Payables

Letter Ruling No. 22-03, Tenn. Dept. of Rev. (5/4/22). The Tennessee Department of Revenue (Department) issued a letter ruling on application of the Tennessee franchise tax “addback” requirement for certain intercompany debt, holding that the foreign corporation in this case is not required to add back the short-term intercompany trade payable owed by its US branch to an affiliate in arriving at its net worth calculation. Under the facts, the taxpayer is a foreign corporation that conducts its US operations through a US branch, which to serve its customers, purchases inventory from the taxpayer’s affiliate at an arm’s length price pursuant to an executed Advance Pricing Agreement (APA) with the Internal Revenue Service that results in the creation of the short-term intercompany trade payable. This trade payable is settled on a monthly basis, reported as a short-term or current liability on the taxpayer’s balance sheet, and reflected likewise on Schedule L of the federal Form 1120-F. The taxpayer files its Tennessee franchise and excise tax return on a separate entity basis and reports the activity of the US branch. Under the provided facts, the Department reasoned that the intercompany trade payables in question were correctly classified as current liabilities for financial reporting purposes that should not be treated as affiliated debt, and thus the addback provision under Tenn. Code Ann. section 67-4-2107(b)(1) does not apply. Please contact us with any questions.

 

—

Joe Garrett (Birmingham)

Managing Director

Deloitte Tax LLP

Amber Rutherford (Nashville)

Senior Manager

Deloitte Tax LLP



Back to top
 
In this issue

Income/Franchise
California FTB Summarizes Recently Enacted Changes to PTE Tax

District of Columbia: OTR Says Pandemic-Related Telecommuting Nexus Relief Ends July 16

Michigan Supreme Court Says Financial Institution May Claim Credits Transferred in Merger

Michigan Department of Treasury Updates Corporate Income Tax FAQs on Nexus and Apportionment

Minnesota DOR Says Business Nexus Relief for Pandemic-Related Telecommuting Ends June 30

Tennessee DOR Says No Franchise Tax Addback Required for Short-Term Intercompany Trade Payables

Vermont: New Law Addresses State Reporting and Impact of Federal Partnership Audit Regime Changes

Sales/Use/Indirect
Florida: Adopted Rules Reflect Remote Seller and Marketplace Laws and Rounding Algorithm

Tennessee DOR Explains New Law Broadening Scope of Exemption for Computer Software Development

Miscellaneous
Louisiana: New Law Excludes Certain Video Programming and Streaming Content from Franchise Fees

Multistate Tax Alerts



Helpful resources

Visit Deloitte.com

State tax Matters archive

Multistate Tax Alert archive

Read Accounting for Income Taxes

Join Dbriefs

Follow us on Twitter
Get the Tax@hand mobile app



Have a question?

If you have needs specifically related to this newsletter's content, send us an email to have a Deloitte Tax professional contact you.
 

Deloitte.com  | Manage email preferences  |  Legal  |  Privacy

30 Rockefeller Plaza
New York, NY 10112-0015
United States

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

Copyright © 2022 Deloitte Development LLC. All rights reserved.
36 USC 220506



Facebook Twitter Linkedin Google Plus Email