United States

Colorado: Department Issues Notice on Regulation Excluding Certain Companies from the Combined Group

Jan 25, 2016
From KPMG TaxWatch

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The Colorado Department of Revenue recently clarified its position on the inclusion of domestic holding companies with no property or payroll in the Colorado combined group.  Under Colorado Regulation 39-22-303.12(C), promulgated in 1994, only “corporations whose property and payroll factors are assigned twenty percent or more to locations inside the United States may be included in a combined report.” Because corporations that have no property or payroll cannot have twenty percent or more of their factors assigned to locations in the United States, such corporations, per the regulation, cannot be included in a combined report.  In the recently-issued notice, the Department stated that the regulation was intended to address Foreign Sales Corporations. In the Department’s view, the regulation cannot be used to exclude domestic corporations, such as holding companies, that have no property or payroll. The Department advises taxpayers to not rely on this regulation to exclude such domestic companies from the combined group until an outcome is reached in the pending litigation over how Regulation 39-22-303.12(c) should be interpreted. For further information on this Notice, please contact Mark Kaye at 303-382-7855.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.