45 Ind. Admin. Code 3.1-1-111
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2; IC 6-3-4-14
Sec. 111.
Affiliated Group. The Adjusted Gross Income Tax Act adopts the definition of "affiliated group" contained in Internal Revenue Code section 1504, except that no member of the affiliated group may be included in the Indiana return unless it has adjusted gross income derived from sources within the state, as that phrase is defined in IC 6-3-2-2. For purposes of this subsection, "Adjusted Gross Income derived from sources within the state" means either income or losses derived from activities within the state.
Domestic International Sales Corporations (DISC'S) which are prohibited under the Internal Revenue Code from filing consolidated returns may not be included in the affiliated group for Indiana adjusted gross income tax purposes.
If any bank is a member of an affiliated group for Federal income tax purposes, it cannot be included as an affiliated member for Indiana adjusted gross income tax purposes, since the banking entity is not subject to the adjusted gross income tax. Any gross income tax liability of a bank must be added separately after the composite tax of the affiliated group has been computed. For supplemental net income tax purposes, the members of an affiliated group, including the banking entity, may compute the supplemental net income tax on a consolidated basis. Since banks are not included in the consolidation under the Adjusted Gross Income Tax Act, a separate schedule must accompany the consolidated return in order to compute the adjusted gross income of the affiliated group and subsequently the supplemental net income tax liability.
In the case of a bank holding company, the holding company may be allowed a special deduction for dividends received from its banking entity for Indiana adjusted gross income tax purposes in accordance with section 243(a)(1) of the Internal Revenue Code. The 100% dividend exclusion for those holding companies filing a consolidated return does not apply since, for Indiana adjusted gross income tax purposes, the banking entity is not taxable under the Act and thus cannot be part of the consolidation.
45 IAC 3.1-1-111