Q&A with the Pennsylvania Department of Revenue

A liquidation of a subsidiary or an upstream merger is not book income for GAAP. Why are DOR auditors treating this as book income for PA CST/Franchise tax purposes?

Sep 25, 2014
Q:

A liquidation of a subsidiary or an upstream merger (which is treated as a “Section 332” liquidation) is not book income for GAAP. Why are the PA Department of Revenue auditors treating this as book income for PA CST/Franchise tax purposes?

A:

This question was asked and answered in 2006. The response at that time is still applicable. This would be a liquidating distribution and would be dividend income in the calculation of book income for PA CS/FF purposes. If the taxpayer is able to establish that their method of accounting, on a separate company basis, allows an increase in retained earnings without effecting net income it will be considered by the Department’s auditors and taxing officers.

Leave a comment

Watch: 2019 Q&A with the DOR
Watch: 2019 Q&A with the DOR

Watch Now

A PICPA member login is required to access this content. A full transcript is also available.

Full Transcripts:
Annual Meetings
     
Oct. 2019      Oct. 2018

Oct. 2017      Oct. 2016

  Sept. 2015     Sept. 2014

Full Transcripts:
Quarterly Meetings
Disclaimer

These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.