35 Miss. Admin. Code Pt. III, Subpt. 8, Ch. 07 — Consolidated or Combined Returns

100 Taxpayer Election to File Consolidated or Combined Returns

# 1.

Two or more members of an affiliated group of corporations may elect to file a
consolidated income tax return when all the business activities of the group of
affiliated corporations included in the consolidated return are conducted in, and
are taxable solely in, Mississippi. In determining whether the business activities
of the group are conducted in and are taxable in more than one state, the test of
"taxable in another state" as provided and defined in the Multistate Regulation,
will apply.

# 2.

Two or more members of an affiliated group of corporations taxable in
Mississippi and where one or more are taxable in another state, as provided in the
Multistate Regulation, may elect to file a combined income tax return, as follows:
a. Net income (or loss) of each member of the affiliated group included in
the combined return shall be computed on an individual corporate member
basis.
b. Mississippi taxable income for each member included in the combined
return shall be determined in accordance with the provisions of the
Multistate Regulation. The formula prescribed in, or the direct accounting
procedures prescribed in such regulation, shall be applied to each member
on an individual corporate basis to determine net business income
apportioned or directly assigned to Mississippi. To that amount shall be
added non -business income allocated or apportioned to Mississippi by
each member. The results from each member's computation shall then be
combined to determine the taxable income of the affiliated group.
101 Commissioner's Authority to Require Filing of Combined or Consolidated Return.
1. The Commissioner may require any or all members of a group of affiliated
corporations, whether or not subject to the tax jurisdiction of this state, to file a
combined or consolidated Mississippi income tax return if he believes such
combined or consolidated return is necessary to clearly and equitably reflect the
Mississippi taxable income of the affiliated group, or included member or
members thereof, subject to the following conditions:
a. The net business income (or loss) of each member required to be included
in the combined income tax return shall be determined on an individual
corporate member basis. The net business income (or loss) so computed
for each member shall be combined to determine the net business income
(or loss) of the affiliated group of corporations. The combined net business
income (or loss) shall then be apportioned by use of formulas prescribed
and set forth in the Multistate Regulation to determine the amount of net
business income apportioned to Mississippi. The apportionment formula
provided in the Multistate Regulation shall then be the consolidated
elements or components of the required factors for the affiliated group.
b. To the amount determined in (a) above shall be added the combined net
profit (or loss) from non -business income of the affiliated group allocated
or apportioned to Mississippi to determine the total Mississippi taxable
income.
2. However, if the combined income under paragraph one (1) of this section does not
clearly reflect Mississippi income then the Commissioner may require
consolidated returns of any of the corporations that are members of the affiliated
group that would be necessary to clearly and equitably reflect the Mississippi
income of the affiliated group.
102 In General.
1. The term "affiliated group" means one or more corporations connected through
stock ownership with a common parent corporation where at least eighty percent
(80%) of the voting power of all classes of stock and at least eighty percent (80%)
of each class of the nonvoting stock of each of the member corporations, except
the common parent corporation, is directly owned by one or more of the other
member corporations; and the common parent corporation directly owns stock
possessing at least eighty percent (80%) of the voting power of all classes of stock
and at least eighty percent (80%) of each class of the nonvoting stock of at least
one (1) of the other member corporations. As used in this Regulation, the term
"stock" does not include nonvoting stock which is limited and preferred as to
dividends.
2. When an affiliated group of corporations is eligible to and elects, or is required to
file returns on a combined or consolidated basis, all subsequent returns shall be
made upon the same basis unless permission to change the basis is granted by the
Commissioner, or unless the Commissioner requires a change in the basis. If a
consolidated or combined return is filed, all members of the affiliated group who
are "doing business" in Mississippi must be included in the return. If the affiliated
group filed separate returns, they cannot amend their returns and file a
consolidated or combined return unless such return was filed in the previous year.
An election will be considered exercised by the filing of an annual income tax
return reflecting consolidated reporting therein.

# 3.

The consolidated or combined return of eligible and included members of an
affiliated group relates only to its consolidated or combined income tax liability .
Liability for applicable franchise taxes, annual reports of corporations ,
withholding taxes and other payroll, privilege and other excise taxes may not be
computed on a consolidated or combined return basis. A separate report, return or
schedule, as otherwise required by Mississippi Law, shall be filed by each
applicable individual member of the affiliated group. In the case of franchise
taxes and the annual reports of corporations, a separate schedule is required for
each member of the affiliated group subject to the measure of the franchise tax
and subject to the requirement of filing an annual report of corporations.

# 4.

An includable corporation for the purpose of filing a consolidated or combined
income tax return, within the limitations imposed by Mississippi Law, is any
eligible corporation except corporations exempt under Section 27 -7-29(a),
Mississippi Code of 1972. Mississippi has not adopted Federal tax treatment of a
Domestic International Sales Corporation (DISC) and a DISC is treated under
Mississippi Law as an ordinary corporate entity; therefore, a DISC is an eligible
corporation for consolidated or combined return purposes where such entity is a
member of an affiliated group of corporations. S Corporations having an election
in effect under Section 27 -7-29(b) which choose to have their corporate income
taxed directly to shareholders lose their status of S Corporations if they become
members of an affiliated group electing to file a consolidated or combined return.

# 5.

Each member of the affiliated group is severally liable for the tax on a
consolidated or combined return and for any subsequently determined deficiency
thereon. No intercompany agreement can change this rule.

# 6.

There shall be attached to the consolidated return supporting schedules in
columnar form to show separately and in combination, the profit and loss
statement, balance sheet, analysis of unappropriated retained earnings and
reconciliation of book income to income per return of each affiliated corporate
member included in the elected combination.

# 7.

The consolidated or combined return of an affiliated group must be filed on the
basis of the common parent's taxable year and each subsidiary must adopt the
common parent's annual accounting period for the first consolidated or combined
return year for which the subsidiary's income is includable in the consolidated or
combined return.
102.01 If no parent -subsidiary relationship exists, the consolidated or combined return will be
determined using the income year of the affiliated corporation member expecting to have,
on a recurring basis, the largest amount of Mississippi net taxable income.
102.02 Generally, a newly organized affiliated corporate member will be, if eligible, included
within the group filing the consolidated return in the year organized.
102.03 A newly acquired corporate member will also be eligible to be included in the combined
return; but loss carryovers incurred prior to the time that the corporation became a
member of the affiliated group can only offset income in that newly acquired
corporation's future returns . Those losses will not be allowed to offset income of the
other affiliated corporations.
103 (Reserved)
104 (Reserved)