39-22-305 Consolidated Returns. Basis and Purpose. The bases for this rule are §§ 39-21-112(1) and 39-22-305, C.R.S.

The purpose of this rule is to clarify how to make an election to file a consolidated return and how to withdraw such election. (1) Election to File a Consolidated Return. (a) The election to file a consolidated C corporation return pursuant to § 39- 22-305, C.R.S., must be made on or before the due date of the filing of the return, including any extensions of time for filing the return. Such election must be made by indication on the return in the designated manner. If an election is made, such election may not be withdrawn after the due date, including any extension of time, for filing the return. A taxpayer who has not made a timely election may request permission from the Executive Director or his or her designee to make a consolidated return election consistent with the requirements set forth in Treas. Reg. (26 C.F.R.) § 301.9100-3. (b) The election to file a consolidated return is binding for the election year and the next three tax years, unless permission is granted in writing by the Executive Director or the Executive Director’s designee for an earlier change. (c) From the fifth year forward, a taxpayer may revoke the election prior to the due date for filing a consolidated return, including any extensions of time for filing the return. If revoked, the revocation may not be withdrawn after such due date or any extension of time for filing the return. If the taxpayer revokes the election, it may subsequently elect to file on a consolidated basis pursuant to (1)(a) of this rule. The filing by multiple taxpayers of non- consolidated returns shall be considered the revocation of the election. However, the inadvertent exclusion of a corporation from a consolidated return shall not be considered a revocation of the election. (i) Example. A taxpayer will not revoked its consolidated election if the taxpayer acquires a new C corporation doing business in Colorado and inadvertently fails to include such corporation in the consolidated return for the year of acquisition. (d) For any year a consolidated return is filed, the taxpayer shall file an affiliation schedule with the return. (2) Members of the Consolidated Return. The Colorado income tax liability for an affiliated group of corporations filing a consolidated return is based only on the net income of those members of the affiliated group that have substantial nexus in Colorado, exceed the minimum standards of Public Law 86-272 (15 U.S.C. § 381) in Colorado, and for which a tax is imposed under § 39-22-301, C.R.S., during that tax year. The consolidated net income of such corporations is allocated and apportioned in accordance with § 39-22-303.6, § 39-22-303.7, or § 39-22-303.9, C.R.S. The apportionment factors of such consolidated group are based solely on the consolidated sales of the consolidated group. (3) Consolidated Return that Includes a Combined Report. (a) An election to file a consolidated return can be made even if the consolidated return will include members of an affiliated group of corporations that are required to file a combined report. When filing a consolidated return that includes any member of an affiliated group that is required to be included in a combined report, such consolidated return must include the income as computed in the combined report even if that income calculation is based on business activities of one or more affiliated corporations not doing business in Colorado. (b) The affiliated group electing to file a consolidated return shall be treated as one taxpayer for purposes of filing the combined report. Cross References 1. See 1 CCR 201-2, Rule 39-22-301(1) for additional information on substantial nexus. 2. See 1 CCR 201-2, Rule 39-22-303(11)(a) for additional information on filing a combined report.