Tax Analysts provides news, analysis, and commentary on tax-related topics, including on unitary tax treatment.

A unitary method and approach to taxation involves combined reporting which views a parent corporation and its subsidiaries as if they were a single entity. It is one of the most well-known versions of the formulary apportionment tax system. Formulary apportionment does not try to quantify how much is earned by any of the parts, but uses formulas to apportion income. It bases tax on where activities generating the income take place. It can be viewed as an alternative to the use of transfer pricing (section 482) and the arm’s length standard used to allocate profits between entities.This method of taxation is currently in use at the state level and its use is being debated in the international sphere, including within the OECD’s base erosion and profit shifting (BEPS) project, where it could have a significant effect on multinational enterprises (MNEs), as income is apportioned among various jurisdictions.

In determining the allocation formula, various factors could be used including assets, labor, or sales. Some common issues and controversies surrounding unitary treatment and formulary apportionment include double taxation, tax avoidance, income shifting, and the presence of stateless income, weighting of the formula factors, manipulation of the formula, defining a unitary business, including through management and control, raising of additional tax revenue, and compliance costs.

Tax Notes has covered the BEPS project in great detail and has gathered all related documents and news stories in its BEPS Expert product. It also contains the BEPS Report Tracker feature which allows a subscriber easy access to discussion drafts, final reports, and commentary on all BEPS topics.