MODEL BILLS

Corporate Income Tax Disclosure Act

This model is from page 47 of State Corporate Tax Disclosure: The Next Step in Corporate Tax Reform by the Center on Budget and Policy Priorities

Section 1: Definitions

“Corporation” means any entity subject to the tax imposed by [reference state corporate income or franchise tax statute] or by Section 11 of the Internal Revenue Code of 5-1986 as amended, except that “qualified personal service corporations,” as defined in section 448 of the Internal Revenue Code of 1986, as amended, shall be exempt from this Title.

“Doing business in this state” means owning or renting real or tangible personal property physically located in this state; having employees, agents, or representatives acting on the corporation’s behalf in this state; making sales of tangible personal property to purchasers that take possession of such property in this state, performing services for customers located in this state, performing services in this state, earning income from intangible property that has a business situs in this state, engaging in regular and systematic solicitation of sales in this state; being a partner in a partnership engaged in any of the preceding activities in this state; or being a member of a limited liability company engaged in any of the preceding activities in this state.

Section 2: Tax Disclosure Statement Required

The following corporations, if doing business in this state, shall file with the Secretary of State

the statement described by Section 3 of this Title:

All publicly traded corporations, including corporations traded on foreign stock exchanges; and
All corporations fifty percent or more of the voting stock of which is owned, directly or indirectly, by a publicly traded corporation.

Section 3: Content of Tax Disclosure Statement

The statement required by Section 2 of this Title shall be filed annually in an electronic format specified by the Secretary of State no more than 30 days following the filing of the tax return required by [reference to state corporate income or franchise tax statute], or, in the case of a corporation not required to file such a tax return, within 90 days of the filing of such corporation’s federal tax return, including such corporation’s inclusion in a federal consolidated return. The statement shall contain the following information: (1) The name of the corporation and the street address of its principal executive office; (2) If different from (1), the name of any corporation that owns, directly or indirectly, 50 percent or more of the voting stock of the corporation and the street address of the former corporation’s principal executive office;

(3) The corporation’s 4-digit North American Industry Classification System code number;

(4) A unique code number, assigned by the Secretary of State, to identify the corporation, which code number will remain constant from year to year;

[Note: The following (5) and (6) are applicable to non-combined-reporting states]

(5) The following information reported on or used in preparing the corporation’s tax return filed under the requirements of [reference state corporate income or franchise tax statute], or, in the case of a corporation included in a state consolidated tax return, reported on or used in preparing the state consolidated tax return filed under the requirements of [reference state corporate income or franchise tax statute], or, in the case of a corporation not required to file a tax return under the requirements of [reference to state corporate income or franchise tax statute], the information that would be required to be reported on or used in preparing the tax return were the corporation required to file such a return:

(a) Total receipts; [Note: or substitute state term for total gross income]

(b) Total cost-of-goods-sold claimed as a deduction from gross income;

(d) Property, payroll, and sales apportionment factors; [Note: as applicable to state]

(e) Calculated overall apportionment factor in the state;

(f) Total business income apportioned to the state;

(g) Net operating loss deduction, if any;

(h) Total non-business income and the amount of non-business income allocated to the state;

(i) Total taxable income;

(j) Total tax before credits;

(k) Tax credits claimed, each credit individually enumerated; [Note: individual enumeration might be limited to credits reducing pre-credit liability for all corporations taxable in the state collectively by more than 5-10 percent]

(l) Alternative minimum tax [if applicable];

(m) Tax due;

(n) Tax paid;

(o) Amount of tax due paid under protest, if applicable.

(6) The following information:

(a) Total deductions for management services fees, for rent, and for royalty, interest, license fee, and similar payments for the use of intangible property paid to any affiliated entity that is not included in the state consolidated income tax return, if any, that includes the corporation, and the names and principal executive office addresses of the entities to which the payments were made;

(b) The sales factor that would be calculated for this state if the corporation [or consolidated group] were required to treat as sales in this state sales of tangible personal property to the Federal Government and sales of tangible personal property shipped or delivered to a customer in a state in which the selling corporation is neither subject to a state corporate income tax or state franchise tax measured by net income nor could be subjected to such a tax were the state to impose it; [Note: only to be reported in states not having in effect the standard “throwback rule” under the Uniform Division of Income for Tax Purposes Act]

(c) A description of the source of any nonbusiness income reported on the return and the identification of the state to which such income was reported;

[(d) A listing of all corporations included in the consolidated tax return that includes the corporation, if such a return is filed, and their state identification numbers assigned under the provisions of this section;]

(e) Full-time-equivalent employment of the corporation in the state on the last day of the tax year for which the return is being filed and for the three previous tax years;

(f) In the case of a publicly-traded corporation incorporated in the United States or an affiliate of such a publicly-traded corporation, profits before tax reported on the Securities and Exchange Commission Form 10-K for the corporation or the consolidated group of which the corporation is a member for the corporate fiscal year that contains the last day of the tax year for which the return is filed;

[(g) The property and payroll factors for this state calculated as required by the Uniform Division of Income for Tax Purposes Act as embodied in Article IV of the Multi-state Tax Compact and Multistate Tax Commission regulations applying thereto.] [Note: this provision to be included in single sales factor formula states only]

(h) Accumulated tax credit carryovers, enumerated by credit.

[Note: The following (5) and (6) are applicable to combined-reporting states]

(5) The following information reported on or used in preparing the corporation’s tax return filed under the requirements of [reference state corporate income or franchise tax statute], or, in the case of a corporation not required to file a tax return under the requirements of [reference to state corporate income or franchise tax statute], the information that would be required to be reported on or used in preparing the tax return were the corporation required to file such a return:

(a) Total receipts of the unitary group of which the corporation is a member; [Note: or substitute state term for total gross income]

(b) Total cost-of-goods-sold claimed as a deduction from gross income by the unitary group of which the corporation is a member;

(c) Taxable income of the unitary group of which the corporation is a member prior to net operating loss deductions or apportionment;

(d) Property, payroll, and sales apportionment factors of the corporation as calculated on the combined report; [Note: as applicable to state]

(e) Calculated overall apportionment factor in the state for the corporation as calculated on the combined report;

(f) Total business income of the corporation apportioned to the state;

(g) Net operating loss deduction, if any, of the corporation apportioned to the state;

(h) Total non-business income of the corporation and the amount of non-business income allocated to the state;

(i) Total taxable income of the corporation;

(j) Total tax before credits;

(l) Alternative minimum tax [if applicable];

(m) Tax due;

(n) Tax paid;

(o) Amount of tax due paid under protest, if applicable.

(6) The following information:

(a) Total deductions for management services fees, for rent, and for royalty, interest, license fee, and similar payments for the use of intangible property paid to any affiliated entity that is not included in the unitary combined group that includes the corporation and the names and principal office addresses of the entities to which the payments were made;

(b) The sales factor that would be calculated for this state on the combined report if the corporation were required to treat as sales in this state sales of tangible personal property to the Federal Government and sales of tangible personal property shipped or delivered to a customer in a state in which the selling corporation is neither subject to a state corporate income tax or state franchise tax measured by net income nor could be subjected to such a tax were the state to impose it; [Note: only to be reported in states not having in effect the standard “throwback rule” under the Uniform Division of Income for Tax Purposes Act]

(c) A description of the source of any nonbusiness income reported on the return and the identification of the states to which such income was reported;

(d) A listing of all corporations included in the unitary group that includes the corporation, their state identification numbers assigned under the provisions of this section, if applicable, and a listing of all variations in the unitary group that includes the corporation used in filing corporate income or franchise tax returns in any of the following states: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Illinois, Kansas, Maine, Minnesota, Montana, Nebraska, New Hampshire, North Dakota, Oregon, Utah, Vermont;

(e) Full-time-equivalent employment of the corporation in the state on the last day of the tax year for which the return is being filed and for the three previous tax years;

(f) In the case of a publicly-traded corporation incorporated in the United States or the affiliate of such a publicly-traded corporation, profits before tax reported on the Securities and Exchange Commission Form 10-K for the corporation or the consolidated group of which the corporation is a member for the corporate fiscal year that contains the last day of the tax year for which the return is filed;

[(g) Property and payroll factors for the corporation for this state calculated on the basis of combined reporting and as required by the Uniform Division of Income for Tax Purposes Act as embodied in Article IV of the Multi-state Tax Compact and Multi-state Tax Commission regulations applying thereto.] [Note: this provision to be included in single sales factor formula states only]

(h) Accumulated tax credit carryovers, enumerated by credit.

Section 4: Alternative Statement Option for Corporations Not Required to File Tax Return

In lieu of the statement described in Section 3, a corporation doing business in this state but not required to file a tax return under the requirements of [reference state’s corporate income or franchise tax statutes] may elect to file a statement with the Secretary of State containing the following information:

(1) The information specified in Section 3, items (1) through (4), inclusive;

(2) An explanation of why the corporation is not required to file a corporate income tax return in this state, which explanation may take the form of checking one or more possible explanations drafted by the Secretary of State;

(3) Identification of into which of the following ranges the corporation’s total gross receipts from sales to purchasers in this state fell in the tax year for which this statement is filed:

(a) Less than $10 million;

(b) $10 million to $50 million;

(d) More than $100 million to $250 million;

(e) More than $250 million.

Section 5: Supplemental Information Permitted

Any corporation submitting a statement required by this Title shall be permitted to submit supplemental information that, in its sole judgment, could facilitate proper interpretation of the information included in the statement. The mechanisms of public dissemination of the information contained in the statements described in Section 7 of this Title shall ensure that any such supplemental information be publicly available and that notification of its availability shall be made to any person seeking information contained in a statement.

Section 6: Amended Tax Disclosure Statements Required

If a corporation files an amended tax return, the corporation shall file a revised statement under this section within sixty calendar days after the amended return is filed. If a corporation’s tax liability for a tax year is changed as the result of an uncontested audit adjustment or final determination of liability by the [name state’s administrative appeals body] as provided for in [reference administrative appeals portion of state statute] or by a court of law as provided for in [reference legal appeals portion of state statute], the corporation shall file a revised statement under this section within sixty calendar days of the final determination of liability.

Section 7: Public Access to Tax Disclosure Statements

The statements required under this Title shall be a public record. The Secretary of State shall make all information contained in the statements required under this Title for all filing corporations available to the public on an ongoing basis in the form of a searchable database accessible through the Internet. The Secretary of State shall make available and set charges that cover the cost to the state of providing copies on appropriate computer-readable media of the entire database for statements filed during each calendar year as well as hard copies of an individual annual statement for a specific corporation. No statement for any corporation for a particular tax year shall be publicly available until the first day of the third calendar year that follows the calendar year in which the particular tax year ends.

Section 8: Enforcing Compliance

The accuracy of the statements required under this Title shall be attested to in writing by the chief operating officer of the corporation and shall be subject to audit by the [department of revenue] as the agent of the Secretary of State in the course of and under the normal procedures applicable to corporate income tax return audits. The Secretary of State shall develop and implement an oversight and penalty system applicable to both the chief operating officer of the corporation and the corporation itself to ensure that corporations doing business in this state, including those not required to file a return under the requirements of [reference state corporate income or franchise tax statute], shall provide the required attestation and disclosure statements, respectively, in a timely and accurate manner. The Secretary of State shall publish the name and penalty imposed upon any corporation subject to a penalty for failing to file the required statement or filing an inaccurate statement. The Secretary of State shall promulgate appropriate rules to implement the provisions of this Title under the rulemaking procedures described in [reference state administrative procedures act].