Example: biology

Franchise and Excise Tax Manual - Tennessee

Franchise and Excise Tax Manual March 2021 2 | Page Contents Chapter 1: Introduction ..18 History ..18 Overview ..18 1. Entities Subject to Franchise & Excise Taxes ..19 2. Rates and Impositions ..19 3. Credits ..20 4. Exemptions ..20 Chapter 2: Persons Subject to Tax and Exemptions ..21 Entities Not Subject to Franchise and Excise Tax ..21 1. Sole Proprietorships ..21 2. General Partnerships ..21 3. Not-for-Profits ..21 4. SMLLC Owned by Pension Trust ..22 Entity 1. Franchise and Excise Tax Exemptions ..22 2. Exemptions Requiring an Evaluation ..23 Taxable Entities ..32 1. Types of Taxable Entities ..32 2. Attributes of Taxable Entities ..34 Entity Formation ..37 Entity Classification ..39 1. Classification for Franchise and Excise Tax 2.

3 | Page Overview.....42

Tags:

  Tennessee

Information

Domain:

Source:

Link to this page:

Please notify us if you found a problem with this document:

Other abuse

Transcription of Franchise and Excise Tax Manual - Tennessee

1 Franchise and Excise Tax Manual March 2021 2 | Page Contents Chapter 1: Introduction ..18 History ..18 Overview ..18 1. Entities Subject to Franchise & Excise Taxes ..19 2. Rates and Impositions ..19 3. Credits ..20 4. Exemptions ..20 Chapter 2: Persons Subject to Tax and Exemptions ..21 Entities Not Subject to Franchise and Excise Tax ..21 1. Sole Proprietorships ..21 2. General Partnerships ..21 3. Not-for-Profits ..21 4. SMLLC Owned by Pension Trust ..22 Entity 1. Franchise and Excise Tax Exemptions ..22 2. Exemptions Requiring an Evaluation ..23 Taxable Entities ..32 1. Types of Taxable Entities ..32 2. Attributes of Taxable Entities ..34 Entity Formation ..37 Entity Classification ..39 1. Classification for Franchise and Excise Tax 2.

2 Federal Default Classification ..39 3. State Classification of SMLLC ..40 4. Federal Election to be Treated as a Corporation ..40 Out-of-State Businesses Responding to State Declared Disaster or Emergency ..41 Chapter 3: Nexus ..42 3 | Page Overview ..42 1. Doing Business in Tennessee ..42 2. Substantial Nexus ..44 Entity Specific Nexus ..46 1. Trucking Companies ..46 2. Foreign Corporations ..47 3. Financial Institutions ..48 Due Process and Commerce Clause ..50 Nexus-Related Issues ..51 1. Ownership Interests Do Not Create Nexus ..51 2. Standard for Nexus and Right to Apportion ..52 Public Law 86-272 ..53 1. Overview ..53 2. Unprotected vs. Protected Activities ..55 Chapter 4: Identifying the Proper Franchise and Excise Taxpayer ..60 Separate Single-Entity 1.

3 Exceptions to Separate Single-Entity Reporting ..61 2. Tax Implications of Single Filer Returns vs. Consolidated Return ..61 3. Direct Taxation of Pass-Through Entities ..61 Disregarded Entities ..62 1. Corporations Formed Under State Law ..63 2. Default Classification ..63 3. Election to be Taxed as a Corporation ..63 Organizational Structure Role in an Audit ..64 1. Pre-Audit Evaluation ..64 2. Organizational Chart Symbols ..65 Special Circumstances ..66 1. Multimember LLC ..66 2. Series LLCs ..68 4 | Page Disregarded Entities Federal vs. State Rules ..69 Additional Examples of Complex Disregarded Business Structures ..72 1. Scenario One ..72 2. Scenario Two ..72 3. Revenue Ruling 11-46 Disregarded Entities and Filing Requirements.

4 74 4. Revenue Ruling 11-53 - Disregarded Entities and Filing Requirements ..77 Chapter 5: Filing Requirements ..80 Registration ..80 Electronic Filing ..80 Filing 1. Annual Returns ..81 2. Short-Period Returns ..82 3. Foreign Entities Newly Subject to Franchise and Excise Tax ..83 Filing Due Dates ..83 1. Calendar Year, Fiscal Year, and Short-Period Filers ..83 2. 52-53 Week Filers ..84 3. Filing Extension ..84 4. Estimated Assessment ..85 Change in Ownership - Filing Periods and Due Dates ..86 Franchise Tax Proration and Annualizing Rents ..87 1. Proration ..87 2. Annualizing Rents ..87 Final Returns ..89 1. True Final Return ..89 2. Liquidation and Tax Base Calculation ..90 3. Tax Clearance ..93 4. Tax Collection ..95 5. Events Not Resulting in a Final Return.

5 95 6. Corporate 5 | Page Estimated Tax Payments .. 100 1. Estimated Payment 100 2. Quarterly Estimated Payment Amount .. 100 3. Remitting Payments .. 101 4. Payment Due Dates .. 102 Penalties .. 102 1. Penalties and Penalty Rates .. 102 2. Penalty Waiver .. 105 Interest .. 107 Delinquent Accounts .. 107 Statute of 108 1. Assessments .. 108 2. Refunds .. 108 3. Statute Waivers .. 110 Records Maintenance .. 110 Assessment .. 110 Chapter 6: Federal Income Tax Returns and Filings .. 111 Corporations .. 111 1. Consolidated Group Election, Form 851 & Subsidiary Statements .. 111 2. Capital Loss .. 113 3. Capital Gain Net Income .. 113 4. Dividends and Inclusions .. 114 5. Exempt Interest Income .. 114 6. Other Income .. 114 7. Charitable Contributions.

6 114 8. Balance Sheet .. 114 9. Reconciliation of Income (Loss) per Books with Income per Return .. 115 S-corporations .. 115 Corporations Charted Outside the United States .. 117 6 | Page Partnerships .. 117 Limited Liability Company (LLC) .. 119 Single Member LLC .. 119 Other Federal Forms .. 119 1. Form 940 .. 119 2. Form 1125-A .. 120 3. Form 4562 .. 120 4. Form 4797 .. 121 5. Form 6252 .. 121 6. Form 7004 .. 121 7. Form 8594 .. 122 Chapter 7: Federal Income Revisions .. 123 General 123 Statute of Limitations - FIR .. 125 Audit Procedures .. 126 Chapter 8: Business and Nonbusiness Earnings .. 128 Introduction .. 128 1. Allocation Methodology for Nonbusiness Earnings .. 129 2. Audit Adjustments when Nonbusiness Earnings are Reclassified.

7 131 Business Earnings .. 131 1. Transactional and Functional Tests .. 132 2. Rule 23 Business and Nonbusiness Earnings .. 134 Nonbusiness Earnings .. 138 1. Nonbusiness Earnings Examples .. 138 2. Expenses Related to Nonbusiness Earnings .. 139 Tax Impact of Earnings Classification .. 139 Unitary Earnings .. 140 1. Legal Analysis .. 141 2. Example Nonunitary Business .. 143 7 | Page Litigation Unitary Business Principle .. 143 1. Finding: Nonunitary .. 143 2. Finding: Unitary Business Earnings .. 144 Audit Procedures .. 146 Chapter 9: Franchise Tax .. 148 Overview .. 148 1. Who Must File? .. 148 2. Minimum Franchise Tax .. 148 3. Franchise Tax Base .. 149 4. Minimum Measure (Schedule G) .. 149 5. Manufacturers Franchise Tax 149 6.

8 GAAP Books and Records .. 150 Non-Consolidated Net Worth Schedule F1 .. 150 1. Net 150 2. Affiliated Indebtedness .. 154 3. Net Worth Apportionment .. 160 Consolidated Net Worth Schedule F2 .. 160 1. Overview .. 160 2. Affiliated Group Members .. 161 3. Consolidated Net Worth Computation .. 164 4. Apportionment of Consolidated Net Worth .. 167 5. Verifying Affiliated Group Members .. 175 6. Other Issues .. 183 7. Audit Procedures .. 184 Chapter 10: Property Valuation .. 189 Overview .. 189 1. Property Included .. 189 2. Property 190 3. Property Exempted .. 191 8 | Page Property Owned .. 191 1. Land and Buildings .. 192 2. Leasehold Improvements .. 192 3. Depreciable Property .. 193 4. Prepaid Supplies .. 195 5. Inventory.

9 195 6. Construction in Progress .. 197 7. Exempt Certified Pollution Control Equipment .. 203 8. Exempt Certified Green Energy Production Facility .. 203 9. Exempt Required Capital Investment .. 203 10. Federal Repair Regulations .. 204 Property Rented or Leased .. 206 1. Property Multiples .. 207 2. Sub-Rents .. 208 3. In Lieu of Rents .. 210 4. Rents that Include a Service .. 211 5. Distinguishing Between Leases and Licenses .. 214 6. Annualize Rent in Short Period .. 217 7. Termination Fees, Renewals, and Software Fees .. 218 8. Common Lease Terms .. 218 9. Operating and Finance Leases .. 221 10. Industrial Development Corporation .. 227 Ownership in a General Partnership .. 227 1. Owned Property Held by a General Partnership .. 228 2.

10 Property Leased by a General Partnership .. 229 3. Audit Ownership of a General Partnership .. 230 Ownership in a Pass-through Entity Not Subject to the Tax .. 231 Property Used and Neither Owned nor 231 Chapter 11: Excise Tax .. 233 9 | Page Overview .. 233 Recent Form Changes .. 234 Partnerships - Schedule J1 .. 235 1. Addition - Ordinary Income (Loss) from Form 1065 .. 235 2. Addition - Income Items Specifically Allocated to Partners, Including Guaranteed Payments .. 235 3. Addition - Any Net Loss or Expense Distributed to a Publicly Traded REIT .. 237 4. Deduction - Expense Items Specifically Allocated to 238 5. Deduction - Amount Subject to Self-employment Taxes Distributable or Paid to Each Partner or Member .. 239 6. Deduction - Amount of Contribution, Not Previously Deducted, to Qualified Pension or Benefit Plans of any Partner or Member, Including all 401 Plans.


Related search queries