B. INTERSTATE DIVISION OF THE TAX BASE Twenty-three States or other jurisdictions which tax out-of-State financial institutions reported that they require or permit interstate division of the tax base generally. Another 15 States reported that they do permit or require such tax base division, but not for all types of businesses and circumstances or for all tax measures applicable to the out-of-State financial businesses. Six States replied that interstate division of the tax base is not permitted or required. The replies are tabulated in supplemental table B-8, p. 126. Where interstate division of the tax base is allowed, the method of division used is tabulated in supplemental table B-9 and summarized in table 6. Apportionment by formula, or a combination of formula apportionment and specific allocation, is the predominant method used for all types of financial businesses and measures of tax, with the exception of premiums taxes on insurance companies. Specific allocation by itself is not used by any of the major banking States except when taxing insurance companies. Separate accounting is likewise reported by none of the major banking States, except that in New York the Tax Commission typically prescribes separate accounting for State-chartered commercial and mutual savings banks and for savings and loan associations. TABLE 6.-METHOD OF INTERSTATE DIVISION OF THE TAX BASE, BY KIND OF BUSINESS AND MEASURE OF TAX 1 Some States may be tallied more than once in a row; for detail, see table B-9 at p. 127, below. C. CONSOLIDATION OR COMBINATION OF AFFILIATED CORPORATIONS FOR TAX PURPOSES The practice of consolidating or combining data for affiliated ocrporations (the "unitary concept") for tax purposes applies with greatest frequency in net income taxation, although it may be em ployed in the assessment of other types of taxes. Tax administrators' responses indicate that a requirement of consolidation or combination in the taxation of financial businesses often applies only in certain cases or at the discretion of the appropriate official. The responses received are tabulated in supplemental table B 10, p. 127. Of 26 States or areas for which responses were given on the ques tion of consolidation (section 3.5 of the questionnaire), 5 States reported with no qualification that such consolidation is required, and another 16 areas indicated in explanatory comments that consolidation may be required in certain cases. It appeared from the responses that required tax consolidation would depend not on the type of business involved but on whether a group of affiliated corporations constitutes a "unitary business operation" under the State's criteria; respondents from several States explained that it would depend on whether the tax commissioner decides that consolidation is necessary to avoid excessive attribution of income to other jurisdictions for tax purposes."4 Four States replied that consolidation or combination of affiliates, although not necessarily required, may be permitted in some cases. Two of these States were responding with regard to taxes other than income taxes, and whether consolidation is permitted depends on the type of tax.25 In retrospect, it appears that the question was ambiguous, making it difficult to interpret these negative replies. It is possible that in some of these States consolidation is permitted or even required in particular circumstances but is not universally required. Other responses may mean that consolidation is not permitted at all Only 5 areas (Connecticut, District of Columbia, Maryland, Mississippi, and New Jersey reported explícity that tax boganndarmá is not permitted or that there are no provisions for quon, orxandatges. There is no clear pattern in the reasons from the the pA MÁY States. Of the 10 major banking rate in terra of the exponny income, only California and Massachusetta tarbed, Y, OKAZ for tax purposes is requred in some ora.. taw A New Yor and Ohio, consolidation s jemnined in wrce zdar reported that conscitation is better raguing for sponzoly, mely ju other major banking wares V. OPINIONS NATIONAL AND STATE Barke "informal expressions of opinion" based on "present practice in the taxation of interstate businesses [other than commercial banks] and other relevant facts." The Board was particularly interested in opinions regarding those tax measures which cannot now (prior to P.L. 91-156) be levied on national banks domiciled outside the State, such as taxes on gross or net income or receipts, on capital stock, and on assets or on intangible property. The activity situations listed in the questionnaire fall into two general categories, lending activity (items 3.110 through 3.146), and other likely activities of a bank (items 3.150 through 3.233). Responses are tabulated in supplemental table B-5, p. 115, and in tables 7 and 8. TABLE 7.-OPINIONS OF STATE TAX ADMINISTRATORS REGARDING TAXATION OF OUT-OF-STATE BANKS AFTER JAN. 1, 1972, BASED ON LENDING ACTIVITY States which would not assert ARIZ, ARK, CONN, DC, FLA, GA, CONN, DC, FLA, GA, HAW, IND, ALAB, CALIF, CONN, DC, FLA, ALAB, ARIZ, ARK, CALIF, CONN, 1 Would not assert jurisdiction in the case of loans secured by real or tangible personal property located outside the State. 2 Uncertain in the case of loans secured by intangible property. 3 Uncertain in the case of unsecured loans. 4 Uncertain in the case of loans secured by intangible property held at the bank's principal office. & Would assert jurisdiction in the case of loans secured by real or tangible property in the State. Uncertain in the case of loans secured by real or tangible property outside the State. 7 Uncertain in the case of loans secured by real or tangible property in the State. & Would not assert jurisdiction in the case of loans secured by real or tangible property in the State. • Would not assert jurisdiction in the case of unsecured loans. |