830 CMR: DEPARTMENT OF REVENUE
830 CMR 63.00: TAXATION OF CORPORATIONS
830 CMR 63.00 is hereby repealed and replaced with the following:
830 CMR 63.32B.1: Combined Returns of Income

(1) General. A group of corporations may file a combined return of income for taxable years ending on or after December 31, 1988 only in the manner prescribed by 830 CMR 63.32B.1, provided, however, that the provisions of 830 CMR 63.32B.1 do not apply to taxable years beginning on or after January 1, 2009.

(2) Definitions.

Affiliated group, a group of foreign and/or domestic corporations, defined by Code § 1504, whose members are related by common ownership.

Code, the Internal Revenue Code as amended and in effect for the taxable year.

Commissioner, the Commissioner of the Massachusetts Department of Revenue or the Commissioner's duly authorized representative.

Combined group, a Massachusetts group that has elected to file a combined return.

Combined return, a return of income filed under M.G.L. c. 63, § 32B. as amended by St. 1988, c. 202, § 15.

Consolidated return, a return of income filed with the federal government by an affiliated group under Code § 1501.

Credit, any credit that a corporation may apply against its excise under M.G.L. c. 63, §§ 32, 39.

Election, an election, made in the manner prescribed by 830 CMR 63.32B.1(4), to file a combined return.

Federal consolidated group, an affiliated group that has filed a consolidated return of income under Code § 1501.

Massachusetts group, all members of an affiliated group that are subject to excise under M.G.L. c. 63, §§ 32, 39 for all or part of a particular taxable year. The membership of the Massachusetts group may vary from year to year, even if the membership of the affiliated group remains constant.

Member, a corporation that is a member of an affiliated or a Massachusetts group for all or part of a taxable year. Both parent and subsidiary corporations within a group are members of the group.

Minimum corporate excise, the minimum excise payable under M.G.L. c. 63, §§ 32, 39, as amended from year to year, and including any surtax. The minimum corporate excise for calendar year 1988, which is used in examples in this regulation, is $456.

Net Operating Loss (NOL), a net operating loss, defined under Code § 172, and subject to the restrictions of the Internal Revenue Code including, without limitation, those contained in Code §§ 382, 1502.

Principal reporting corporation, the combined group member that reports the income of the combined group. As used in this regulation the principal reporting corporation is generally the member of a combined group that filed as the group's principal reporting corporation on the group's most recent combined return. The group may change its principal reporting corporation from year to year by so indicating on its return.

(3) Eligibility for combined filing. A Massachusetts group is eligible to elect to file a combined return if it consists of at least two corporations, and if the affiliated group to which it belongs filed a consolidated return with the federal government in the taxable year for which the election is made. only a Massachusetts group, as defined above, may elect to file a combined return.

(4) Election Procedures. In order to elect to file a combined return, an eligible Massachusetts group must use the following procedures. No purported election shall be valid unless these procedures are followed or unless the Commissioner specifically agrees to treat an election as proper under 830 CMR 63.32B.1(11)(a). The Commissioner's acceptance of Forms 355C-A or 355C-B from a group of corporations is not an acknowledgment that the group has properly elected to file a combined return.

(a) Each member of the Massachusetts group must properly complete and file the current year's Form 355C-A or 355C-B. The form must be signed by an authorized officer. Substitute forms or schedules will not be accepted either in the year of election or in subsequent years.

(b) Each member of the federal consolidated group that is subject to excise under M.G.L. c. 63, §§ 32, 39, must join in the combined return. No other corporation may be included.

(c) The completed returns must be filed on or before the earliest due date, or extended due date, for the filing of a return under M.G.L. c. 62C, 63, for any member of the Massachusetts group. No return filed after this date, whether filed with an application for abatement or otherwise, shall constitute a valid election to file a combined return.

(5) Effect of Election in Subsequent Taxable Years.

(a) An election by a Massachusetts group to file a combined return is binding upon all members of the affiliated group to which the Massachusetts group belongs that may from time to time become subject to M.G.L. c. 63, §§ 32, 39. Once a Massachusetts group has elected to file a combined return, all and only those members of the affiliated group that are subject to excise under M.G.L. c. 63, §§ 32, 39, in a subsequent taxable year, shall join in the filing of a combined return for that year, unless and until the Massachusetts group receives permission from the Commissioner to file separate returns.

(b) The provisions of 830 CMR 63.32B.1(5)(a) notwithstanding, if a combined group is reduced, in any taxable year after the election is made, to a single member, that corporation shall file a separate return. The Massachusetts group to which the corporation belonged when it last participated in the filing of a combined return shall resume filing combined returns if its membership increases to two or more corporations in any of the three taxable years following the last taxable year for which a combined return was filed. The three-year period may be reduced or waived by application to the Commissioner under the provisions of 830 CMR 63.32B.1(6).

(c) If the federal consolidated group to which a combined groups belongs discontinues the filing of federal consolidated returns, all members of the Massachusetts group must file separate returns in Massachusetts beginning with the first taxable year in which a federal consolidated return is not filed. With its first such separate return, each member shall attach a statement notifying the Commissioner that it is no longer participating in a combined return because it no longer participates in the filing of federal consolidated returns. The notice shall state the last taxable year for which consolidated returns were filed and the name and identification number of the principal reporting corporation on the combined group's final combined return.

(d) If, through acquisition in an arms length transaction, one or more members of a combined group (the "acquired corporations") are purchased by one or more members of a separate affiliated group (the "purchasing corporations") and become members of this affiliated group, the acquired corporations shall adopt the filing status of the group to which the purchasing corporations belong. Notwithstanding the provisions of 830 CMR 63.32B.1(5)(a), the written permission of the Commissioner is not needed to terminate the election of the acquired corporations in this situation. Any surviving members of the Massachusetts combined group to which the acquired corporations previously belonged shall continue to file returns as required under the provisions of 830 CMR 63.32B.1(5)(a)‑(c).

If an acquired corporation ceases to file combined returns because of the application of this subsection, the acquired corporation shall attach a statement to its first separately filed return notifying the Commissioner that it is no longer participating in a combined return because of its acquisition by an affiliated group that does not file combined returns. The notice shall state the last taxable year for which a consolidated return was filed with the Massachusetts combined group, together with the name and identification number of the principal reporting corporation on the combined group's return. The notice shall also contain the name and identification number of the principal reporting corporation of the acquiring affiliated group, or if no principal reporting corporation exists, the name and identification number of its parent corporation.

(6) Revocation of Election. An election to file a combined return may not be revoked except with the prior written approval of the Commissioner. The Commissioner may grant such approval either upon his own initiative to particular classes of combined or affiliated groups that may be defined by the Commissioner, or upon the request of an individual combined group. Permission to file separate returns will be granted only for a valid business purpose, other than a reduction of tax. A combined group must request permission to file separate returns in the following manner.

(a) A written request for a letter ruling under 830 CMR 62C.3.2 must be submitted to the Commissioner on or before the due date under M.G.L. c. 62C, 63, including extensions, for the filing of the return by the combined group requesting the revocation.

(b) Any member of the combined group may request the revocation, but all group members must give written, signed consent to the request.

(c) The request must explain in detail the business purpose that justifies the request.

(7) Combined Net Income. A combined group shall calculate the income measure of its excise under M.G.L. c. 63, §§ 32, 39, on the basis of its combined net income. Combined net income shall be determined as follows.

(a) Each member of the combined group shall first separately determine its "taxable net income," as defined in M.G.L. c. 63, § 38(a), as if it were filing a separate return.

1. Modifications to the separate taxable incomes of federal consolidated group members under Treas. Reg. § 1.1502-12, which generally include deferrals and eliminations for intercompany transactions, are not used when determining the Massachusetts net income of combined group members, even for transactions exclusively involving members of a Massachusetts group. The net income of each corporation should, if necessary, be adjusted to compensate for any such federal modifications. The corporation must maintain records adequate to substantiate any such adjustment.

2. The provisions of 830 CMR 63.32B.1(7)(a)1, above, notwithstanding, income or loss deferred from taxable years ending before December 31, 1988, as described in 830 CMR 63.32B.1(7)(b), below, must continue to be deferred until recognition is required by that subsection.

3. The provisions of 830 CMR 63.32B.1(7)(a)1, above, notwithstanding, the modifications contained in Treas. Reg. § 1.1502-12 are recognized in Massachusetts whenever they (or equivalent rules) would be necessary to calculate the net income of a corporation filing a separate return. For example, 830 CMR 63.32B.1(7)(a)1 does not prevent the application of these modifications in situations where they are used to determine permissible deductions under Code § 267.

(b) Recapture of previously deferred income. As described in Technical Information Release 1988-10, corporations that filed combined returns in taxable years ending before December 31, 1988, and that calculated their combined net income by the method determined in General Electric Company v. Commissioner of Revenue, 402 Mass. 523 (1988), were required to employ adjustments and eliminations for intercompany transactions. If any modification under Treas. Reg. § 1.1502-12 was used in calculating the Massachusetts taxable net income of a corporation in a taxable year ending before December 31, 1988, and if that modification postponed a recognition of income or loss for federal tax purposes until a subsequent taxable year, then the postponed income or loss must be recognized in Massachusetts in the first year in which any of the following occur:

1. the corporation recognizes the income or loss on its federal return;

2. corporation whose recognition of income or loss has been postponed is excluded from the Massachusetts group (The corporation must recognize the income or loss in the final year in which it belongs to the Massachusetts group);

3. an affiliated corporation that participated in the transaction creating the income or loss, such as the purchaser of appreciated property, is excluded from the Massachusetts group;

4. a transaction occurs, with a member of the federal consolidated group that does not belong to the combined group, which would have triggered recognition of the postponed gain or loss for federal purposes if that corporation had not been a member of the federal consolidated group; or

5. the Massachusetts group ceases filing combined returns.

The following examples illustrate the provisions of 830 CMR 63.32B.1(7)(b):

Example 1. Corporation A and Corporation B are foreign corporations that participated in the filing of a federal consolidated return for calendar year 1987. A and B did business in Massachusetts in 1987 and filed a combined return under M.G.L. c. 63, § 32B (as then amended). During 1987, A sold to B a widget that had appreciated in value. A deferred the recognition of gain on the sale of the widget on both its federal and Massachusetts returns. See Technical Information Release 1988-10. A and B participate in the filing of a combined return in calendar year 1988. (If the Massachusetts group that includes A and B does not elect to file a combined return in calendar year 1988, A must recognize the gain in the 1988 taxable year.) A must file a return and include the gain on the sale of the widget in its taxable net income in the first year in which any of the following occur:

1. A recognizes the gain on its federal return;

2. A ceases doing business in Massachusetts (A must include the gain in its income in the final year in which it does business in Massachusetts);

3. B loses nexus with Massachusetts;

4. B transfers the widget to Corporation C which is a member of the same federal consolidated group as A and B, but which does not have nexus with Massachusetts; or

5. the Massachusetts group to which A and B belong does not file combined returns in Massachusetts.

Example 2. Corporation A and Corporation B are foreign corporations that participated in the filing of a federal consolidated return in calendar year 1988. A and B did business in Massachusetts and elected to file a combined return under M.G.L. c. 63, § 32B, (as amended by St. 1988, c. 202). During 1988, A sold to B a widget that had appreciated in value. A deferred the recognition of gain on the sale of the widget on its federal return. However, A may not defer the gain for Massachusetts purposes and must include it in its taxable net income in 1988.

(c) If any members of the combined group have income from business activity that is taxable in another state within the meaning of M.G.L. c. 63, § 38(b), each such member shall individually apportion its taxable net income to Massachusetts in the manner provided by G.L. c. 63, §§ 38, 42.

(d) The taxable net incomes of the members of the combined group, after any apportionment permitted by 830 CMR 63.32B.1(7)(c) above, shall finally be added together to compute the "combined net income" of the group.

If any member of the combined group sustains a loss (after any NOL deduction available to the member under 830 CMR 63.32B.1(9)) apportioned to Massachusetts in the taxable year, that loss shall offset the apportioned taxable net incomes of the other group members on a dollar-for-dollar basis, to the extent of the available taxable net income, and shall be shared among the group members that have positive taxable net income in proportion to the amount of income that each such member contributes to the combined group.

Similarly, if the total loss of those group members with losses exceeds the total available taxable net income of the remaining group members, those members with losses shall offset the income of other group members on a pro rata basis. The combined net income of a combined group, one or more of whose members sustained a loss, shall be the sum of the taxable net incomes of the other group members after any apportionment and after the offsets described above. In no event shall a group's combined net income be a negative number. To the extent that unused losses may be carried over to subsequent taxable years, the carry-over must be taken by the individual member with the loss. Loss carry-over does not follow the group.

(e) As provided by M.G.L. c. 63, § 38G, and 830 CMR 63.38G.1, a member of a combined group shall include in its income all of the income of any DISC that it wholly owns.

The following examples illustrate the provisions of 830 CMR 63.32B.1(7):

Example 3. A combined group consists of three chemical companies: Acetone, Inc; Benzene, Inc; and Copper, Inc. In a particular taxable year, the apportioned taxable net incomes (losses) of the members are: Acetone $40,000; Benzene $20,000; and Copper ($15,000). The $15,000 loss of Copper offsets the incomes of Acetone and Benzene on a pro rata basis.

Thus, $40,000 x $15,000 = $10,000 of
$60,000

Acetone's income is offset, and $20,000 x $15,000 = $5,000
$60,000

of Benzene's income is offset. Acetone is left with $30,000 of income after the offset, and Benzene is left with $15,000. Copper has no loss remaining after the offset. The combined net income of the group is: $30,000 + $15,000 = $45,000.

Example 4. A combined group consists of three chemical companies: Acetone, Inc; Benzene, Inc; and Copper, Inc. In a particular taxable year, Acetone has apportioned taxable net income of $15,000, and Benzene and Copper have apportioned losses of $20,000 and $40,000, respectively.

Acetone's income offsets $20,000 x $15,000 = $5,000 of
$60,000

Benzene's loss, and $40,000 x $15,000 = $10,000 of
$60,000

Copper's loss. Acetone is left with zero taxable net income, and Benzene and Copper are left with losses of $15,000 and $30,000, respectively. The group's combined net income is zero. Benzene and Copper may carry over their losses to the extent permitted by Massachusetts law. No loss carry-over is available to Acetone or to the combined group.

(8) Credits.

(a) A tax credit generated by a member of a combined group may be applied only against the excise of that member and not against the excise of other group members. For the purposes of calculating allowable credits the excise of a group member is the greater of either the minimum corporate excise or the sum of:

1. the excise under M.G.L. c. 63, §§ 32(3)(a)(1), 39(3)(a)(1), attributable to the member's property, and

2. the excise under M.G.L. c. 63, §§ 32(3)(a)(2), 39(3)(a)(2), attributable to the member's income, after any apportionment or loss offset, as calculated under subsection (7).

(b) A group member may not reduce its excise, through the application of credits, by more than fifty percent or to less than the minimum corporate excise. Credits unused because of the fifty percent limitation may be carried over to any subsequent taxable year.

(c) To the extent that a combined group member is entitled to take a credit under the limitations of 830 CMR 63.32B.1(8)(a), (b) above, that credit may be recorded either on that member's Form 355C-A or 355C-B or on the Schedule E completed by the principal reporting corporation. In no event, however, shall credits reduce the excise shown on a member corporation's form 355C-A or 355C-B to less than the minimum corporate excise.

The following example illustrates the provisions of 830 CMR 63.32B.1(8):

Example 5. A combined group consists of three fruit processing and distributing companies: Apple, Inc; Berries, Inc; and Cantaloupes Unlimited, Inc. In a particular taxable year, the apportioned taxable net incomes (losses) of the members are Apple ($11,000); Berries $5,000; and Cantaloupes $50,000. Each corporation has $1,000 in available tax credits. The excise attributable to each corporation's property factor is $600.

Apple's loss is offset by the incomes of Berries and Cantaloupes. It has no excise attributable to its income factor and $600 attributable to its property factor. Its total excise for purposes of applying credits is therefore $600. However, the maximum credit that Apple may use in this taxable year is $144, because credits may not reduce its excise below the $456 minimum corporate excise. $300.00 of Apple's remaining credit converts to unlimited carry-over status. The balance of $556.00 may be carried over only if it is not scheduled to expire.

$1,000 of Berries' income is offset by Apple's loss. The excise attributable to its income factor is $4,000 x 0.095 = $380.00. Its total excise for purposes of applying credits is therefore $380.00 + $600 = $980.00. However, the maximum credit that Berries may use in this taxable year is $490.00 because credits may not reduce its excise by more than fifty percent. $490.00 of Berries' remaining credit converts to unlimited carry-over status. The balance of $20.00 may be carried over only if it is not scheduled to expire.

$10,000 of Cantaloupe's income is offset by Apple's loss. The excise attributable to its income factor is $40,000 x 0.095 = $3,800.00. Its total excise for purposes of applying credits is therefore $3,800.00 + $600.00 = $4,400.00. Cantaloupes must use its full $1,000 tax credit in this taxable year. It may not carry over any credits.

(9) NOL Carry-over.

(a) As described in 830 CMR 63.32B.1(7), apportioned losses incurred by a member of a combined group during a taxable year offset the apportioned income of other group members in that year. Net operating losses, to the extent that they may be carried from year to year and used under Massachusetts law, are deductions taken by individual corporations in calculating their net incomes under M.G.L. c. 63, § 30(5)(b). NOL therefore affects whether a member corporation has a loss (i.e. a negative net income and taxable net income) in a taxable year which, after apportionment, may offset income of other group members under the provisions of 830 CMR 63.32B.1(7). Because NOL is a deduction taken by an individual corporation in calculating its individual net income, NOL is carried from year to year separately by each combined group member, not by the group as a whole. Furthermore, if a corporation leaves a combined group, its NOL will follow the individual corporation and will not affect the group's calculation of combined net income in later years, even if the NOL is attributable to years in which the corporation belonged to the combined group.

(b) The provisions 830 CMR 63.32B.1(9)(a) notwithstanding, a NOL carry-over available to a combined group member may create a loss that will, after apportionment, offset income of other group members under 830 CMR 63.32B.1(7) only to the extent that the carry-over could be included in the calculation of consolidated income, under the provisions of the Internal Revenue Code, by the federal consolidated group to which the combined group belongs. Thus, without limitation, NOL attributable to a combined group member's separate return limitation year, as defined by Treas. Reg. § 1.1502-1(f), may not create a loss that will, after apportionment, offset income of other combined group members. Similarly, and also without limitation, a loss attributable to NOL incurred by a combined group member before a consolidated return change of ownership, as defined by Treas. Reg. § 1.1502-1(g), may offset apportioned income only of "old members" of the federal consolidated group that also belong to the combined group.

(c) NOL carry-over in Massachusetts is subject to the limitations of both federal and state law. Under the provisions of M.G.L. c. 63, § 30(b)(ii), as amended by St. 1988, c. 202, a corporation may deduct NOL incurred in previous taxable years from its Massachusetts gross income in only two circumstances:

1. Any corporation may carry forward NOL incurred in taxable years ending on or after December 31, 1989, for up to five years. However, the NOL deduction available under this provision (in taxable years ending on or after December 31, 1990) is limited to that percentage of the corporation's net income (as calculated before the deduction of any NOL carry-over) that is allowed by M.G.L. c. 63, § 30(5)(b)(ii) for the particular year in which the deduction is taken. Any unexpired NOL in excess of the amount permitted to be deducted must be carried over by the individual corporation to the following taxable year.

2. Corporations in their first five years of existence, fifty percent or more of whose stock is not owned by another corporation, are entitled to carry over NOL from previous taxable years ending on or after December 31, 1975. The NOL must have been incurred while the corporation was subject to tax in Massachusetts. Because the NOL available to a corporation under this provision is not limited to a percentage of the corporation's net income, all of the corporation's NOL may be deducted, even if a negative net income (and a negative taxable net income) results. Any such negative taxable net income will, after apportionment, offset the apportioned taxable net income of other group members. To the extent that unexpired NOL remains unused after this offset, it may be carried over to later years only by the corporation that incurred the NOL.

The following examples illustrate the provisions of 830 CMR 63.32B.1(9). These examples assume that no adjustments under M.G.L. c. 63, § 38(a), happen to be available to the corporations involved, so that their net incomes under M.G.L. c. 63, § 30(5)(b), equal their taxable net incomes under M.G.L. c. 63, § 38.

Example 6. Anchorage Away, Inc. ("Anchorage") is a Massachusetts corporation that operates a travel agency with offices in Massachusetts and Alaska. It was organized in 1986, and earned a small profit in that year. In 1987, Anchorage organized a wholly-owned Massachusetts subsidiary, Bimini Bound, Inc. ("Bimini"), which does business in Massachusetts and Florida.

Anchorage and Bimini file federal consolidated returns. In 1987, Anchorage and Bimini incurred losses of $10,000 and $1,000, respectively, on their federal return for a $11,000 consolidated NOL. In Massachusetts, both corporations paid the minimum excise for the 1987 taxable year. Anchorage was entitled to carry over its $10,000 loss in Massachusetts because it had been in existence for less than five years and because fifty percent or more of its stock was not owned by another corporation. See 830 CMR 63.32B.1(9)(c)2, above. Bimini was not entitled to NOL carry-over in Massachusetts in 1987 because all its stock was owned by Anchorage.

In 1988, Anchorage sustained an additional $2,000 loss from its operations, while Bimini achieved a $16,000 profit. Thus, for federal purposes, the group had $14,000 taxable income before its NOL deduction (Form 1120, line 28) and $3,000 taxable income after its NOL deduction (Form 1120, line 30). The federal group has no consolidated NOL remaining.

Anchorage and Bimini elect to file a combined return in Massachusetts for calendar year 1988. Their 1988 apportionment percentages are 0.75 and 0.25, respectively. The group's combined net income is calculated as follows.

Anchorage has a $2,000 current loss plus $10,000 NOL carry-over for a total loss of $12,000. (NOL deductions available under 830 CMR 63.32B.1(9)(c)2 are not limited to a percentage of net income). Its apportioned loss is .75 x $12,000 = $9,000. Bimini has taxable net income of $16,000 and, after apportionment, a net income subject to tax of .25 x $16,000 = $4,000.

Because the $4000 apportioned income of Bimini is more than offset by the losses available to Anchorage ($9,000), the group's combined net income in Massachusetts is zero. Anchorage is left with unused losses of $9,000 - $4,000 = $5,000. However, because the $5,000 remaining loss is an apportioned amount while NOL must be carried from year to year before apportionment, Anchorage's remaining Massachusetts NOL carry-over is

$5,000 = $6,666.67.
0.75

For Massachusetts purposes, $2000 of this remaining carry-over is attributable to 1988, while the balance is attributable to 1987. Bimini has no NOL carry-over available.

Example 7. Anchorage and Bimini, the corporations discussed in Example 6, above, continue to do business in Massachusetts in calendar year 1989. As stated in Example 6, Anchorage has a $6,666.67 Massachusetts NOL carry-over, and Bimini has no Massachusetts NOL carry-over.

In 1989, Anchorage achieves a profit of $7,666.67, while Bimini loses $8,000. Thus, for federal purposes, the group has a consolidated NOL of $333.33 which it may carry over to subsequent years.

The Massachusetts apportionment percentages of Anchorage and Bimini in 1989 have changed to 0.60 and 0.40, respectively. The group's combined net income for 1989 is calculated as follows:

Anchorage has $7,666.67 current year income and a $6,666.67 NOL carry-over for net income of $1,000. (NOL deductions available under 830 CMR 63.32B.1(9)(c)2 are not limited to a percentage of net income.) Its apportioned income is $1,000 x 0.60 = $600. Bimini has an $8,000 current year loss and no NOL carry-over. Its apportioned loss is $8,000 x 0.40 = $3,200.

Because the $600 apportioned income of Anchorage is more than offset by the losses available to Bimini ($3,200), the group's combined net income in Massachusetts is zero. Bimini is left with unused losses of $3,200 - $600 = $2,600. Under the provisions of M.G.L. c. 63, § 30(b), Bimini may carry over its unused 1989 loss. Thus, compensating for apportionment, it may carry over losses of

$2,600 = $6,500, all of which are attributable to 1989. Anchorage has no NOL
0.40
carry-over.

Example 8. Anchorage and Bimini, the corporations discussed in Examples 6 and 7, above, continue to do business in Massachusetts in 1990. Each corporation has profits for the year of $10,000. For federal purposes, the group has $20,000 taxable income before its NOL deduction and $19,666.67 after its federal NOL deduction. It has no federal NOL remaining.

The Massachusetts apportionment percentages of Anchorage and Bimini in 1990 are 0.70 and 0.30, respectively. The group's combined net income in 1990 is calculated as follows:

Anchorage has $10,000 current year income and no NOL carry-over. Its apportioned taxable net income is $10,000 x 0.70 = $7,000.

Bimini has $10,000 current year income and a $6,500 NOL carry-over. However, because Bimini's carry-over is available under 830 CMR 63.32B.1(9)(c)1, and not under 830 CMR 63.32B.1(9)(c)2, the NOL deduction that it may use is limited to a percentage of its net income (as calculated before any NOL deduction). The percentage for calendar 1990 is 25%. Therefore, Bimini's NOL deduction is limited to $10,000 x 0.25 = $2,500. Its net income after its NOL deduction is therefore $10,000 $2,500 = $7,500. Bimini's apportioned taxable net income is $7,500 x 0.30 = $2,250.

The combined net income of the group in 1990 is $7,000 + $2,250 = $9,250. Anchorage has no Massachusetts NOL carry-over available. Bimini has $6,500 - $2,500 = $4,000 of Massachusetts NOL carry-over remaining, which is all attributable to 1989.

(10) Extensions. Before an election to file combined returns has been made, all members of a Massachusetts group must separately request any extensions of time for the filing of their returns. In order to obtain an extension of time for the filing of a combined return in any taxable year after an election has been made, the principal reporting corporation must request the extension under M.G.L. c. 62C, § 19, on behalf of all members of the combined group. The request must list the names and identification numbers of all of the group members. No extensions, including extensions for the filing of a return stating the property measure of a member's excise, will be granted to individual members of a combined group after an election has been made.

(11) Enforcement Procedures.

(a) The Commissioner generally will require all members of a Massachusetts group to file separate returns unless and until a proper election is made under 830 CMR 63.32B.1(4). However, if a Massachusetts group demonstrates reasonable cause for failing to make an election in the manner prescribed by 830 CMR 63.32B.1(4), the Commissioner may agree in writing to treat an improper election as having been properly made. A decision to accept an improper election will be made solely at the discretion of the Commissioner and may be conditioned upon such terms as the Commissioner may state, including the payment of any outstanding excise, interest, additions to tax, or penalties by any member of the Massachusetts group. The Commissioner will not agree to treat an improper election as having been properly made in any taxable year that is beyond the statute of limitations under M.G.L. c. 62C, §§ 26, 37, for the Massachusetts group members that timely filed Forms 355C‑A or 355C‑B.

(b) If, in any year after an election is properly made, a corporation is improperly excluded from a group's combined return, the Commissioner will require the inclusion of the omitted corporation and will recalculate the excise of the group and the individual corporation accordingly.

(c) If, in any year after an election is properly made, a corporation is improperly included in a group's combined return, the Commissioner will require the exclusion of the corporation from the combined group and will recalculate the excise of the group and the individual corporation accordingly.

(d) If a combined group does not request permission, in a proper and timely manner, to file separate returns when such a request is required by 830 CMR 63.32B.1(5), (6), the Commissioner will require the Massachusetts group to continue to file combined returns until permission is properly obtained.

(e) The Commissioner will require the members of a Massachusetts group to file separate returns in any years in which the group did not participate in the filing of a federal consolidated return.

(f) The enforcement procedures specified in this subsection do not limit or preclude any other legal or administrative action available to the Commissioner, including the assessment of interest, additions to tax, or penalties. The following example illustrates the provisions of 830 CMR 63.32B.1(11):

Example 9. A federal consolidated group engaged in the processing and distribution of fish and shellfish consists of four corporations: Abalone, Inc.; Barracuda, Inc.; Cod, Inc.; and Dogfish International, Inc. All four corporations have nexus with Massachusetts and are subject to M.G.L. c. 63, § 32 or § 39. In calendar year 1988, Abalone, Barracuda, and Cod timely file the appropriate Forms 355C-A or 355C-B in order to elect combined filing in Massachusetts, but Dogfish International is omitted from the group. In calendar year 1989, all four corporations participate in the timely filing of a combined return. However, in calendar year 1990, Dogfish International is again omitted from the group. The returns of the group for these three years are reviewed pursuant to an audit.

Because of the omission of Dogfish International, the group did not properly elect to file combined returns in 1988. See 830 CMR 63.32B.1(4). Therefore, the four corporations will be required to file separate returns in 1988 unless the group shows, to the Commissioner's satisfaction, that it had reasonable cause for the omission. See 830 CMR 63.32B.1(11)(a). In 1989, however, the group's return constituted a proper election under M.G.L. c. 63, § 32B, and will not be changed on audit.

Once a group properly elects to file combined returns it must continue to file on a combined basis unless and until it receives permission from the Commissioner to file separate returns. See 830 CMR 63.32B.1(5). Having properly elected combined filing in 1989, the group must continue combined filing in 1990. Therefore, the Commissioner will require the group to file a combined 1990 return that includes Dogfish International. See 830 CMR 63.32B.1(11)(b).

(12) Filing Requirements and Application of Payments.

(a) The Form 355C-A or 355C-B filed by the principal reporting corporation calculates the excise attributable to the property owned by the principal reporting corporation and the excise attributable to the group's combined net income. The Forms 355C-A or 355C-B filed by other group members reflect only excise attributable to the property of those members. All group members must use the Forms 355C-A or 355C-B provided by the Department. Substitute forms or schedules are not acceptable. To expedite processing, the Department prefers that all the Forms 355C-A or 355C-B of the group be filed together.

(b) The principal reporting corporation of a combined group must make estimated payments of tax based on the excise it anticipates due to its property under M.G.L. c. 63, §§ 32(3)(a)(1), 39(3)(a)(1) plus the excise it anticipates due to the group's combined net income. Other group members must make estimated payments on the basis of their individual property measures. All group members are responsible for their respective estimated payments regardless of whether they anticipate payments being made on their behalf under the provisions of 830 CMR 63.32B.1(12)(c), below.

(c) The Commissioner will attribute payments made by an individual member of a combined group first to the excise owed by that member on account of its property under M.G.L. c. 63, §§ 32(3)(a)(1), 39(3)(a)(1). If any member of a combined group makes a payment that exceeds the excise, including any associated interest, additions to tax, or penalties, attributable to that corporation's property in a particular taxable year, the excess may be applied toward the group's income excise in that year or toward the excise attributable to the property of any other member that timely filed Form 355C-A or 355C-B in that year.

If a combined group member wants an excess portion of its estimated payment to be applied to the excise of other group members, it should so indicate in writing, by dollar amount, company name, and identification number, at the time the payment is made. The group should ensure that estimated payments made by or on behalf of the group members reflect the excise actually anticipated by each member. Although the group may subsequently adjust its initial application of estimated payments by using the Schedule CG filed with the Form 355C-A or 355C-B of the principal reporting corporation, such later adjustments may hinder the mathematical verification of the tax liabilities of the group members within the meaning of M.G.L. c. 62C, § 40. Furthermore, the Commissioner may disallow any adjustments on the Schedule CG if, in the opinion of the Commissioner, they are being used to impede the collection of tax.

(13) Liability. All members of a combined group are jointly and severally liable for the group's income excise, including any associated interest, additions to tax, or penalties. Assessment against any member of a combined group for excise attributable to the group's income in a particular taxable year, including any interest, additions to tax, or penalties, shall constitute assessment against all corporations belonging to the combined group in that year.

REGULATORY HISTORY
Date of Promulgation: 6/23/89
Amended: 12/27/96
Amended: 5/29/09 - section (1)