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All US States are Unitary States
Each year, many taxpayers file inaccurate corporate income tax returns in separate-reporting jurisdictions because they do not consider the unitary business principle applicable to those states. The simple fact is that all US states are unitary states and they must abide by the unitary business principle in administering their corporate income tax regimes. Taxand US highlights a selection of the notable, and sometimes overlooked, impacts of unitary relationships in traditional separate-reporting states.
Bear in mind that the unitary business principle is neither synonymous with nor inseparable from combined reporting. In addition, there are many instances where the unitary business principle should be applied in separate-reporting states, and the failure to do so could result in incorrect returns being filed. Those who stay vigilant will be shielded against unfair state taxation of non-unitary income.
Companies should be aware that tax authorities may use the unitary business principle as a sword -- or, more accurately, as a blunt instrument -- to draw more of your company's income into their state.
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