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Mastering Complex Consolidated Return Reporting: 163(j), NOLs, GILTI, Tax Attributes, Tax Allocations and Section 382

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, July 16, 2019

Recorded event now available

This course will guide preparers through difficult areas of consolidated return preparation. Tax reform brought with it a new level of complexity that is multiplied when applied to a consolidated group. The panel will explain how tax reform impacts the preparation of consolidated returns and guide practitioners through these and other issues, including consolidating NOLs, GILTI, Section 382 limitations and allocating tax attributes.

Description

Consolidating returns is a choice, not a requirement, and choosing to consolidate offers significant advantages. One company's income is offset by another's loss; one company's waning credits can be utilized by the group.

Recent tax reform changed the calculation and utilization of NOLs. Now an NOL deduction is limited to the lesser of the NOL carryforward or 80% of the consolidated group's taxable income. Excess losses cannot be carried back, but instead, are carried forward indefinitely. Calculations under Section 382, limiting losses after ownership shifts, continue to create challenges for consolidated groups.

Proposed regulations explain that Section 163(j) interest limitation provides a single threshold for controlled groups. This allows the calculation of this limitation to be made at the group level rather than using each member's adjusted taxable income (ATI). However, consolidated ATI is not reduced by intercompany transactions. The AICPA has requested that this is revisited.

Likely more troubling are the GILTI inclusion calculations under Section 951A. The proposed regulations clarify that GILTI inclusion is calculated at the group level. So that the GILTI inclusion is relative to the overall tax liability of the combined group, a quasi-single-entity approach is used in the calculation for consolidated returns. When the consolidated group tested income from CFCs is greater than the consolidated group's tested loss from CFCs, the entire loss is absorbed by the group. Conversely, if the group loss is higher, a pro-rata allocation of the amount used is made uniformly to all CFCs, regardless of the ownership structure of the CFCs within the controlled group. There are additional basis adjustments that must be made to reflect these allocations which add to the complexity of the calculation.

Listen as our consolidated return experts help tax practitioners address the difficulties of combined returns to maximize the benefits of consolidating. These new calculations, and allocating tax burdens and benefits among group members, add complications to consolidated return preparation that are absent on single-entity corporate returns.

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Outline

  1. Consolidated return eligibility
  2. After tax reform
    1. GILTI, FDII and Section 250 deductions
    2. 163(j)
    3. NOLs
  3. Ever-present issues
    1. Intercompany transactions
    2. Allocating tax attributes
    3. E&P
    4. Section 382 limitation
  4. State tax issues

Benefits

The panel will review these and other critical issues for consolidated returns:

  • Calculating GILTI inclusion and related 250 deduction
  • Determining the 163(j) limitation
  • Computing the Section 382 limitation
  • Allocating NOLs, tax attributes and basis adjustments
  • Preparing state returns

Faculty

Phillips, Patrick
Patrick Phillips
Principal
RSM US

Mr. Phillips is a Senior Manager in RSM’s Washington National Tax practice, focusing on Mergers and Acquisitions...  |  Read More