When the taxpayer operates in one or more unitary states:

Question

Quizplus · Accepted Answer

When a taxpayer operates in one or more unitary states, all the options provided are relevant considerations. Apportionment factors are computed on a groupwide basis to reflect the integrated business operations across states. The tax incentive of creating nexus in a low-tax state is enhanced because it can affect the overall tax burden of the unitary business. The tax benefit of a passive investment subsidiary holding company is neutralized because unitary taxation considers the income of all related entities. Lastly, the use of a water's edge election, which limits the taxable income to U.S. borders (with some exceptions), should be considered as it can impact the overall tax strategy of a multinational enterprise operating in unitary states.

When the Taxpayer Operates in One or More Unitary States