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?
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.