By: Shu-Yi Oei
Over the past few days, we here at Surly Subgroup have received several requests for a post explaining our blog name. So, here’s a Very General primer for non-tax readers, and for our tax readers who maybe don’t spend all of their waking hours staring at the consolidated return rules.
Old lawyerly disclaimer habits die hard, so I’ll just say that the following discussion is Very General and mostly for fun. Others have written about this far more exhaustively. See, e.g., Martin J. McMahon, Jr., Understanding Consolidated Returns, 12 Fla. Tax Rev. 125 (2012) and four whole BNA Tax Management Portfolios.
Here are the key points:
Everybody Wants to Belong…
The general idea behind the consolidated return is that where there’s an affiliated group of corporations, a rule that requires each corporation in the group to file its own separate tax return may create frictions and transaction costs and may give rise to weird incentives and disincentives in the case of transactions between corporations in the group.
Enter the consolidated income tax return.