Q&A with the Pennsylvania Department of Revenue

Does the DOR still believe that the merger of a subsidiary into its parent company constitute a liquidating dividend for capital stock/franchise tax purposes?

Nov 04, 2015
Yes. The following is an excerpt from our annual question and answer session in 2006.   Our answer remains the same.


Parent Company conducts business in PA and is subject to both the CS/FT and CNI Tax. Subsidiary A, which is wholly owned by Parent, is going to be liquidated into Parent under IRC 332. Will the liquidation of Subsidiary A into its Parent be considered dividend income to Parent in the determination of book income for PA CS/FT purposes and the 5 year history of earnings calculation?


Yes, this would be a liquidating distribution and would be dividend income in the calculation of book income for PA CS/FT purposes.

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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.