96-080
Response
May 20, 1996
Request
XXXXX
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134-0180
Dear
XXXXX
The
purpose of this letter is to request an interpretive ruling pertaining to the
use of carryforward Utah tax credits.
The issue is whether Utah tax credits generated at the time a company
was filing on a separate company basis in the state of Utah can now be used on
a consolidated Utah tax return.
Company
A, a 9/30 year end taxpayer, was acquired by Company B, a calendar year
taxpayer, on 10/21/95. Prior to that time, Company A filed a separate company
Utah tax return. Company B files a
consolidated Utah tax return. For the
1995 Utah tax return, Company A's tax information for the period of 10/21/95 to
12/31/95 will be included in Company B consolidated Utah tax return. Company A has unused Utah tax credits which
will expire on 9/30/98.
Please
cite the basis upon which your department's determination is predicated
including all pertinent rulings and court decisions.
If
you are in need of further information regarding this ruling, please contact me
in writing at the following address:
XXXXX
Thank
you for your time and consideration in this matter.
Sincerely,
XXXXX
XXXXX
Re: Advisory Opinion - Corporate Tax
Carryforwards
Dear
XXXXX
We have received your request for an
opinion regarding unused carryforward tax credits of a company that has been
acquired by another company. We find as
follows:
Combined Return
Utah law no longer provides for a
consolidated return. Company B, as
described in your request, must file a combined report for itself and its
subsidiaries if they are operating as a unitary group. A unitary group is a group of corporations
that:
a.
are related through common ownership; and
b.
are economically interdependent with one another as demonstrated by
centralized management, functional integration, and economies of scale.
§59-7-101
(28) (a) Utah Code Ann. Even if
Company B is not operating with Company A as a unitary group, Company B may
file a combined report if each company is doing business in Utah; each is part
of an affiliated group; and each is qualified under Section 1501 of the
Internal Revenue Code to file a consolidated return. §59-7-401 (2) Utah Code Ann.
Carrying Forward Tax Credits
The carryback and carryforward
provisions for tax credits vary from one credit type to another. Your letter
does not describe the nature of the tax credit at issue, so we cannot address
your question specifically. However, we
can say that Utah law has no provision for
transferring tax credits from one taxpayer to another. Assuming that Company A earned tax credits
which may be carried forward, Company A’s tax credits may not be used to offset
Company B’s income.
We assume from the facts offered in
your letter that Company A cannot file a separate return. In preparing a combined report, Company B
must prepare a separate calculation to demonstrate that the credit is applied
only against the tax on Company A’s share of income on the combined report.
Please let us know if you have further
questions.
For the Commission,
Alice Shearer,
Commissioner