What is a consolidated tax return?

Consolidated tax returns are a means of allowing corporations that are all part of the associated groups to file one yield for the period of the year, rather than any entity submission separately. The ability to administer together depends on the exact nature of the connection between the parent organization and any subsidiary companies that make up the group. Along with the simplification of the process of tax reports, consolidation is sometimes so that conglomerates and other associated groups take advantage of certain tax reliefs that would not be possible for individual submissions.

The history of the consolidated tax return in the United States returns to the early 20th century. During this period, the government was looking for ways to reduce corporations to avoid paying taxes by shifting what was considered to be excessive profit from one high -profit subsidiary to another member of the corporate family who worked with little profit or even loss. Until 1917 Commissioner of the Internal Revenue ServiceULA consolidated format as a means to prevent this profit shift.

The final result is that the families of corporations that included more corporations could give as one entity and to be assessed taxes from the total profit of generated parent and all subsidiaries. This arrangement was seen as fair for the purpose of determining the total tax liability without creating unrealistic burden for any business unit. In 1918, Congress made this type of return compulsory to ensure compliance with the laws concerning income tax and excessive profit tax.

After the end of the First World War, excess tax taxes were canceled and the main purpose of the consolidated tax return ceased to exist. Congress abolished laws that order its use, but great depression led to revival of interest in this form of tax filing because the practice of routing profits through NonmentabiLights of subsidiaries have again become somewhat common. In 1942, Congress again enabled businesses to file consolidated revenues, which helped minimize the functions of the funnel.

The function of the consolidated tax return has been more or less constant since the 1840s. For some time, there were 2% of the sentence imposed on consolidated taxable income, but this punishment was abolished in 1964. Currently, corporate structures that include the parent company and subsidiary companies can freely use this form or file as individual entities.