98-048
Response
July 20, 1998
June 30, 1998
The 1996 Small Business Job
Protection Act (the "'96 Act")
amended the Internal Revenue Code ("Code") to permit
qualifying corporations and their wholly owned subsidiaries to elect S
corporation status. In such cases, the parent can elect to treat all of its
subsidiaries as if the parent and the subsidiaries were collectively one
corporation for federal income tax purposes. The subsidiaries are called
"QSSS" subsidiaries under the relevant federal S corporation
provisions, and are treated as divisions of the parent company.
My questions are:
1. Does your Department or Commission intend to follow
this specialized tax treatment for your
state's income or franchise tax purposes?
2. If not, is it your opinion that legislation would be
required in order to permit state tax treatment that would conform to the
federal treatment'?
3. Would you please provide me with copies of or citations for
any notices, regulations or other rulings that your state has issued on
this topic?
I would really appreciate a
prompt response to this inquiry because some taxpayers who have made special S
and QSSS elections for federal purposes are requesting guidance on how to file
their income tax returns for state purposes.
Sincerely,
NAME
July
20, 1998
NAME
ADDRESS
CITY, STATE ZIP
RE: Advisory
Opinion - S Corporations That Elect to Treat Subsidiaries as Qualified
Subchapter S Subsidiaries
Dear NAME,
We
have received your request for an advisory opinion concerning Utah’s income and
franchise tax treatment of parent S corporations that elect to treat its
subsidiaries as Qualified Subchapter S Subsidiaries for federal income tax
purposes. The Commission has previously
discussed this issue and decided that Utah law, which generally establishes
that federal taxable income is a base from which to determine Utah taxable
income, permits the same treatment of Qualified Subchapter S Subsidiaries as
provided under the Internal Revenue Code.
While
no regulations have been enacted that specifically implement this policy, the
most recent Small Business Corporation Franchise or Income Tax Return and
Instructions (Form TC-20S) has been modified to reflect this treatment (copy
enclosed).
We
hope this provides the guidance you requested.
Please contact us if you have any other questions.
For
the Commission,
Joe
B. Pacheco, CPA
Commissioner
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