Massachusetts unitary returns are processed in a manner similar to the federal consolidated return in that each separate company return must be processed before processing the unitary group return. Returns for all companies, except the principal reporting corporation, are produced on the separate company level. The return for the principal reporting corporation is produced in the consolidating unit with taxable income, apportionment information, and credit information saved off from the separate company returns and general information and options entered on the consolidating unit. Please note that tiers are not allowed in the creation of a Massachusetts unitary return.
There are two ways to designate a return as a member of a unitary group. Option 1 is to enter a checkmark on the Basic Data > General > Return may be included in a consolidated return field . If this option is used, the federal parent will be assumed to also be the Massachusetts parent. See the next paragraph for information on changing the parent designation. This option cannot be used if the unitary group consists of both corporations and S corporations. Option 2 is to identify the return as a parent or subsidiary for Massachusetts on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field . "MA" must be entered on the State/City Common Data > General Information > State/City code field before making the Consolidated/Combined Return Information section entry. Either option will be used to save off information from the separate company that is required to process a Massachusetts unitary return.
If option 1 is used, the federal parent return will be assumed to be the Massachusetts principal reporting corporation. Please note that you may have to change this designation. Massachusetts law states that the principal reporting corporation must be a taxable member of the unitary group. See 830 CMR 63.32B.2 (11) for additional information about the determination of the principal reporting corporation and the requirements and obligations of such a corporation. To override the principal reporting designation for a return, enter "MA" on the State/City Common Data > General Information > State/City code field and "Subsidiary" on the Consolidated/Combined Return Information section, Member of a consolidated/combined or affiliated group field . To designate a different return as the principal reporting corporation, enter "MA" on its the State/City Common Data > General Information > State/City code field and "Parent" on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field .
The unitary return is created when separate companies have been selected on either the Consolidated Tab > Membership Information worksheet or the Massachusetts Unitary Return Automated Feature . These methods are mutually exclusive. You will not be allowed to make entries in the Massachusetts Unitary Return Automated Feature if any return is listed on the Consolidated Tab > Membership Information worksheet . A separate Massachusetts consolidating return would need to be created. Information from the selected companies will carry to the unitary return if the correct entries have been made in the separate company returns. See Designating a Return as a Member of a Unitary Group for more information on the necessary entries. An exception exists for security corporations. Security corporations file Form 355SC and are not allowed to be members of a unitary return. No information will flow to the consolidating unit from a security corporation.
If any of the companies listed on the Consolidated Tab > Membership Information worksheet are not to be included in the Massachusetts unitary return, enter "MA" on the State/City Common Data > General Information > State/City code field and "Not a member" on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field . The unitary return will include all companies entered on the Consolidated Tab > Membership Information worksheet , that do not contain the entries on the State/City Common Data worksheets as described above.
The the Consolidated Tab > Membership Information worksheet cannot be used if the unitary return's membership includes corporations and S corporations. The the Massachusetts Unitary Return Automated Feature must be used instead.
The Massachusetts unitary income tax return is prepared for calendar, fiscal, and short year corporations. Using entries from the federal tax return and Massachusetts worksheets , the following forms and schedules are prepared for the Massachusetts unitary return:
The following schedules can be created in the separate company returns and will carry to the consolidating unit:
The following schedules can be created in the separate company returns and/or in the consolidating unit:
All other forms and schedules are created in the consolidating unit from separate company input or from information in the schedules listed above.
The unitary return starts with the Schedule U-M. The Schedule U-M numbers are totaled and carry to Schedule U-CI. See below for information on how to create a Schedule U-M. The totals then carry to the Schedule U-E. Certain input from the separate company returns also carries directly to the Schedule U-E. If the group is involved in multiple unitary business ventures and an affiliated group election has not been made, you would use the Massachusetts Unitary Return > Schedule U-E section to divide the income and apportionment information between the ventures. Please see the instructions for that section for more information. The Schedule U-E numbers carry to Schedule U-MSI, where the income gets apportioned between the unitary return members. The apportioned income or loss then carries to each taxable member's Schedule U-ST where it is reduced by any credits on the Schedule U-IC. Afterward, all the Schedules U-ST are totaled and the information carries to Form 355U and Schedule U-TM.
There are two ways to create a Schedule U-M. The first option is to create a Schedule U-M in each member's separate company return. Use the Massachusetts Separate Company Unitary Information > Schedule U-M section . You must enter the appropriate option in the Type of return Schedule U-M figures are from field . If this return is a member of a federal consolidating group, the Schedule U-M will carry up to the consolidating unit if a checkmark is entered on the Basic Data > General > Return may be included in a consolidated return field and the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field is blank, "Parent", or "Subsidiary" . If the return is not a member of a federal consolidating group, on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field enter "Parent" or "Subsidiary" .
The second way to create a separate Schedule U-M for each member is to enter them on the consolidated return using the Massachusetts Unitary Return > Schedule U-M section . This should only be done for group members that are not taxable in Massachusetts.
An eliminations and adjustments Schedule U-M can only be created in the consolidating unit on the Massachusetts Unitary Return > Schedule U-M section .
Any general business return that contains a checkmark on the Basic Data > General > Return may be included in a consolidated return field or contains "Parent" or "Subsidiary" on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field will produce a Form 355 or 355S. In most cases this return will be informational only.
A business corporation will now only file a separate Form 355 or 355S to calculate its non-income measure of excise if its separate federal taxable year ends at a different time than the common year used to determine combined group income. This situation is not currently supported. A Massachusetts S corporation that is included in a unitary return and shares the same year as the group will continue to file Form 355S, but for informational purposes only. All Schedules SK-1 must be submitted with Form 355S.
There are two ways to include non-taxable members in a unitary return. If a federal return is being filed, use the Massachusetts Separate Company Unitary Information > Schedule U-M > Member's taxability status field, select "Not a taxable member" to indicate the member's status and to prevent Form 355 or 355S from printing, but allow the Schedules U-M, NIR, income adjustments, dividend information, and apportionment information to carry up to the consolidated level. The return must be properly designated as a unitary member, or this option will not work.
The second way to include a non-taxable member in a unitary return is to not create a separate company return, but instead enter all of the non-taxable member's information on the consolidated worksheets in the consolidating unit. Schedule U-E will have to be overridden to add any non-taxable member's income adjustments and apportionment information.
ProSystem fx will not be supporting Form P.S.1 for tax year 20 20 . Utility corporations should create a separate company return as if a Form 355 or 355S was being filed. On the Massachusetts Separate Company Unitary Information > Overrides > Unitary return membership code field, enter "Utility" to identify the return as a utility corporation.
While Massachusetts does not require corporation financial institutions to file Form 63 FI if they are unitary return members, a Form 63 FI must be created in order to flow the information into a unitary return. S corporation financial institutions are required to file Form 63 FI solely to report the shareholder information on Schedules S and SK-1, but they must be paper filed. Since Form 63 FI is not allowed for electronic filing, special input is required in order for the unitary return to clear the electronic filing rules. You must file the federal and any other state returns separate from the filing of the Massachusetts return. As a best practice you should first export and file the federal and any other states you want to electronically file, then enter a checkmark on the Massachusetts General > Return Options > Exclude return from electronic filing field in the separate returns that contain a Form 63 FI. See the instructions for that field for more information.
Process the separate corporation and S corporation returns in the applicable system. In either system, designate the return as a member of a unitary group by entering "MA" on the State/City Common Data > General Information > State/City code field and "Parent" or "Subsidiary" on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field .
In the consolidating unit, use the the Massachusetts Unitary Return Automated Feature to identify the separate companies to be included in the unitary return. Only corporations and S corporations will be allowed as members. It is advisable to sort the member corporations by corporation type. Please list first all the 1120 corporations before entering the 1120S member companies.
Enter all credits in the separate company returns and enter the tax before credits from Schedule U-ST, line 37. This amount is needed so the credits can be calculated in the separate company return. The total of a member's credits used on Schedule U-IC lines 2, 5, and 8 is coming from the Credit Manager Schedule, Parts 1 and 3. The total of other member's credits used on Schedule U-IC lines 3, 6, and 9 is coming from Schedule U-CS according to the electronic filing business rules.
For example, in a 3 member group with Members A and B both generating Research Credit (RC) and Investment Tax Credit (ITC) and both sharing a piece of each credit with Member C, Member C would have 4 Schedule U-CS's for each credit shared from Members A and B, 1 for Member A's RC, Member B's RC, Member A's ITC and Member B's ITC. The total of the 2 U-CS's related to ITC should agree to U-IC line 3 and the total of the 2 U-CS's related to RC should agree to U-IC line 6. Additionally, each Member A and B would report its total amount of RC and ITC, amounts taken and amounts shared on their own respective Schedule CMS's. For example, Member A would have a line item for each RC and ITC with amounts shared listed on Sch CMS, on 1g.. The total amount reported on Member C's U-CS related to RC taken from Member A should agree also. If A was sharing this credit with 2 members, say Member C and an additional Member D, the amount on each members U-CS related to RC shared from A should be totaled and agreed to Member A's CMS 1g., RC line item.
In a more simplistic example, a two member group with Member A having and sharing EOAC with Member B. Member B would have 1 U-CS., this same amount would agree to line 3 of their U-IC. If this was the only credit sharing activity taking place in the group, it would also agree with Member A’s CMS line 1g..
These examples, of course, assume all members are eligible for each credit and limitation and sharing rules have been applied.
To summarize, all three schedules below should reconcile.
U-IC: A summary for each member, total credits taken, either its own credits or those shared from other members.
U-CS: Detail of credits taken under sharing rules. Reports each “piece of credit” shared, separate U-CS for each credit and each entity sharing credit.
CMS: Detail of each credit held by, taken by and shared by each member.
A. If the corporation is a member of a federal consolidated return, the corporation will generally be considered a member of a Massachusetts unitary group. The General > Basic Data > General > Consolidated Return Information subsection, Code for consolidated return field must be "Parent" or "Subsidiary" and the Return may be included in the consolidated return field must be checked .
If the corporation is NOT a member of a federal consolidated return, enter "MA" on the federal Common State > State/City Common Data > General Information > State/City code field and on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field enter "Parent" or "Subsidiary" .
A. If the corporation is a member of a federal consolidated return, the federal parent will be considered the Massachusetts principal reporting corporation. If the corporation is NOT a member of a federal consolidated return or the principal reporting corporation is not the federal parent, the member with "Parent" entered on the Common State > State/City Common Data > Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field will be the principal reporting corporation.
A. Enter "MA" on the federal Common State, State/City Common Data > General Information > State/City code field and on the Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field enter "Not a member" .
A. All returns for members of a combined group (Form 355, 355S, or 63 FI) are produced at the separate company level. The unitary return (Form 355U) is produced in the consolidating unit with most of the information being saved off from separate company level input and brought into the consolidating unit.
A. Income, expenses, balance sheet entries, and credits for the principal reporting corporation should be made on the separate company level and not on the consolidating unit. This information will be saved off and the return produced on the consolidating unit.
A. Payments that you wish to appear on Schedule CG, Part 4, Additional Payments Made Separately by Individual Members, should be made at the separate company level. Payments that you wish to appear on Schedule CG, Part 3, Payments by the Principal Reporting Corporation, should be made on the consolidating unit.
A. Information from a separate company return will not flow up to the unitary return if any of the following are true:
1. This corporation is not a member of a federal consolidated return and you have NOT indicated on the federal Common State, State/City Common Data > Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field that the corporation is either the parent or a subsidiary.
2. On the federal Common State, State/City Common Data > Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field you have indicated that the corporation is a parent or subsidiary, but "MA" is not in the General Information > State/City code field for this occurrence .
3. This corporation is a member of a federal consolidated return and you have indicated on federal Common State, State/City Common Data > Consolidated/Combined Return Information > Member of a consolidated/combined or affiliated group field that the corporation is not a member of a unitary return.
4. On the Massachusetts Corporation category > General > Basic Data > Type of return field you have indicated that the corporation is a security corporation. Per the Massachusetts Combined Reporting Instructions a security corporation cannot be a member of a unitary return.
A. The total excise used for determining the credit limitation is needed in the separate company return so that credits can be calculated on Schedule U-IC and the Credit Manager Schedule. This amount must be entered on MA > Separate Company Unitary Information > Other Credit Information > Members total taxes due before credits from Schedule U-ST in the separate company returns. The separate returns need to be recalculated to produce correct separate company returns and carryovers. After recalculating the separate returns, the consolidating unit will need to be recalculated again to properly complete Schedule U-IC and Schedule CMS.. A diagnostic is produced in the separate company returns and in the unitary return to prompt this action.
A. Unitary group members only need to separately file Form 355 if the corporation's federal taxable year ends in a different month than the taxable year of the combined report. Form 355S must be separately filed in order to file Schedules S and SK-1. However, Form 63 FI cannot be electronically filed.
To electronically file Form 355 or Form 355S separate from the unitary group you must first exclude this return from the unitary filing. You can file from the consolidating unit or from the separate return. You must then recalculate the return, clear any electronic filing diagnostics, and export the return.
A. Non-unitary income on Schedule U-MTI is entered on MA > Separate Company Unitary Information > Schedule U-MTI in the separate company returns. Schedule U-MTI cannot be created for elimination companies.
A. Payments to insurance companies under common ownership on Schedule U-INS are entered on MA > Separate Company Unitary Information > Schedule U-INS in the separate company returns.
AThe user must either enter assets and liabilities for MA or select to use the federal amounts in the separate companies on I MA > Balance Sheet . Either reenter amounts or select > Options > Use federal balance sheet amounts..
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