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  • Of states that impose a corporate income tax, 20 require separate entity reporting.
  • Transfer pricing for companies located in these states are of utmost importance.
  • Tax authority audits focused in this area necessitate the need for transfer pricing documentation.
  • Additionally, planning opportunities exist to reduce effective tax rates.

Nearly all states that impose a corporate income tax begin their income tax calculation with a direct tie-in to the federal taxable income that the taxpayer reported to the federal government. While each state has its own state-specific nuances (e.g., sourcing of receipts, decoupling from bonus depreciation), the main issue in state corporate income taxation is whether the state requires mandatory combined reporting or separate entity reporting.

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