New Consolidation Return Election Offers Planning Opportunities in Arizona

Article excerpt

As a result of recent Arizona legislation that took effect July 17, 1994, an affiliated group of corporations filing a Federal consolidated return may elect to file consolidated Arizona income tax returns for tax years beginning on or after December 31, 1993. Corporate taxpayers may also file amended returns on a consolidated basis for all tax years beginning on or after December 31, 1985, through 1993.

General Requirements

For any tax year beginning on or after December 31, 1993, an affiliated group of corporations may elect to file a consolidated Arizona income tax return. The election is made by filing such return on or before the extended due date of the Arizona return and attaching a copy of newly-created Arizona Form 122 (Arizona Consent Form). Form 122 must be signed by a current officer of each member of the affiliated group. Any affiliated group electing to file a consolidated return must be consolidated returns for all succeeding tax years unless the Arizona Department of Revenue (Department) consents to a change in filing method. The Department expects to issue a ruling estab lishing the circumstances under which it would consent to a corporation terminating its consolidated filing election.

An affiliated group of corporations may also make a retroactive election to file consolidated Arizona income tax return for tax years beginning on or after December 31, 1985, through the 1993 tax year, assuming a federal consolidated return was filed for those years. The retroactive election is made by filing amended Arizona tax returns on a consolidated basis for the earlier tax years. A completed copy of Arizona Form 122 must be attached to the amended return for the initial year to which the consolidated filing election relates. The Form 122 must be signed by a current officer of each member of the affiliated group.

Taxpayers filing amended returns on a consolidated basis must file such returns on or before December 31, 1994. Furthermore, those corporations making the retroactive election must file on a consolidated basis for the entire retroactive period (assuming the corporations were in existence and otherwise eligible to file consolidated returns).

The retroactive consolidated return election will be allowed for any eligible tax year beginning on or after December 31, 1985, even if that tax year is otherwise closed under the statute of limitations. In addition, all amended returns filed under this provision will be subject to audit without restriction for four years from the date that the consolidated election is filed or within the regular statute of limitations, whichever is later.

Filing 1993 Returns

As this law took effect on July 17, 1994, those corporate taxpayers whose 1993 returns will be filed on extension after July 17, 1994 may elect to file their original 1993 returns on a consolidated basis. Taxpayers who have already filed their 1993 returns and now wish to make a consolidated return election must file an amended return for the 1993 tax year. …