Tax News

CCH (cch.taxgroup.com) reports:

Income from a parent company's sale of its subsidiaries' stock and its sale of its minority interests in several partnerships constituted apportionable business income for Idaho corporate income tax purposes. The taxpayer failed to overcome the Idaho statutory presumptions that a sale of a subsidiary's stock is business income and that an Idaho State Tax Commission's (Commission) business versus nonbusiness income determination is correct. The evidence demonstrated that the various subsidiaries enabled the parent company to provide integrated service packages to its customers and expand its markets, and that the service subsidiaries provided installation and maintenance services, material and supplies, managerial, technical, accounting, and administrative services to the parent company's operating subsidiaries. All of these factors demonstrated that a unitary relationship existed and that the subsidiaries served an operational rather than an investment function, the income from which would constitute apportionable business income. Also, the taxpayer had previously included the subsidiaries in its combined reports filed in previous years and gave no justification why the unitary business status had changed.
Futhermore, there was nothing in Idaho law that would support the taxpayer's assertion that its sale of its partnership interests was nonbusiness income, because it was not a general partner in the partnerships and its ownership interest was less than 50%. Rather, income from the sale of a partnership interest is treated as apportionable business income if the sale served an operational function. Furthermore, the taxpayer had classified prior sales of its minority interests in partnerships as apportionable business income. Because the taxpayer failed to rebut the Commission's determination that the income from the sale of the partnership interest was business income, the Commission's determination was upheld.
Decision No. 19311 , Idaho State Tax Commission, July 30, 2007, received December 4, 2007, ¶400-556
Other References:
Explanations at ¶11-510
Explanations at ¶11-520