D.C. Combined Reporting Regulations Amended; Return Filing Deadline Extended
On August 31, 2012, the Office of Tax and Revenue (OTR) published a long anticipated second version of proposed Combined Reporting Regulations. These regulations are scheduled to be finalized this Friday (September 14) for tax year 2011.
Perhaps most troubling, the proposed regulations attempt to combine passive holding companies with their subsidiaries and include unincorporated businesses in combined reporting groups. The amendments also clarify that the District will apply the "Joyce rule" for income apportionment. Additionally, the amendments add new sections addressing REITs, RICs, and the FAS 109 deduction.
Crowell & Moring submitted comments last Friday opposing the expansion of combined reporting beyond the limitations of the statute. We are hopeful that OTR will give due consideration to our comments and make appropriate revisions before finalizing the regulations. We are concerned, however, that some of the substantive and procedural issues we have identified in the regulations will be the subject of controversy in years to come.
Recognizing the proximity of the proposed regulations to the September 17 return filing deadline, OTR extended to October 15, 2012 the deadline for calendar year taxpayers. The due date for fiscal year taxpayers has not been extended beyond the six-month extension allowed under D.C. Code § 47-1805.03(b).
Tax executives should consider - in the next month before filing combined reports - how combined reporting may affect their organization. Uncertainty remains even with the amended proposed regulations. For help navigating the combined reporting statute and regulations, please contact one of the authors of this Alert. For more information on Crowell & Moring's tax practice, visit www.crowell.com/Tax.
IRS Circular 230 Disclosure: To comply with certain U.S. Treasury regulations, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication, including attachments, was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties that may be imposed on such taxpayer by the Internal Revenue Service. In addition, if any such tax advice is used or referred to by other parties in promoting, marketing, or recommending any partnership or other entity, investment plan, or arrangement, then (i) the advice should be construed as written in connection with the promotion or marketing by others of the transaction(s) or matter(s) addressed in this communication and (ii) the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. To the extent that a state taxing authority has adopted rules similar to the relevant provisions of Circular 230, use of any state tax advice contained herein is similarly limited.
For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.