A taxpayer that is a member of an affiliated group may make a group election with its affiliates to compute its franchise tax net worth base on a consolidated basis. An affiliated group is:
- a taxpayer that, standing alone, is subject to the Tennessee franchise tax;
- all domestic entities in which the taxpayer directly or indirectly has more than 50% ownership interest;
- A domestic entity is an entity with more than 20% of the average of its property, payroll, and receipts factors in the United States
- all domestic entities that, directly or indirectly, have more than 50% ownership interest in the taxpayer; and
- all other domestic entities (regardless of whether or not they do business in Tennessee) in which the entity described in the previous bullet directly or indirectly has more than 50% ownership interest.
This election is not available to affiliated groups in which one or more affiliates have a different year end.
The group election is made on the Consolidated Net Worth Election Registration Application. All affiliated group members should be listed, but only members that are doing business and have substantial nexus in Tennessee are subject to the franchise and excise tax. The election to compute net worth on a consolidated basis does not affect the entity's nexus in the state. Taxpayers who are subject to the franchise tax before electing to calculate their net worth on a consolidated basis are still required to file their own franchise and excise tax returns.
The Application must be filed prior to the statutory due date (including extensions) of the return for the period in which the election is to take effect and it should be submitted separately from the tax return in order to be processed and approved prior to receipt of the tax return.
Reference: Tenn. Code Ann. §§ 67-4-2004(2); 67-4-2103; 67-4-2106(b).