Tennessee § 67-4-2107 - Tax diminished by operating deficits or business losses deemed impairment of capital.

§ 67-4-2107. Tax diminished by operating deficits or business losses deemed impairment of capital.

Where a corporation doing business without surplus or undivided profits has had the value of its capital stock impaired by operating deficits or other business losses, such as fire, flood, tornado, or other natural disasters, and where such deficit or loss is carried upon the books and records of the corporation as an impairment of capital, the measure of the tax shall be diminished by such loss or deficit. If the capital stock of a corporation that is a subsidiary of another corporation or closely affiliated with another corporation by stock ownership is inadequate for its business needs apart from credit extended or indebtedness guaranteed by the parent or an affiliated corporation, in determining the amount of capital, surplus and undivided profit of such corporation with respect to its liability for the tax imposed by this part, there shall be included in the measure of the tax the indebtedness owed to or guaranteed by the parent or an affiliated corporation. If necessary to apportion such indebtedness, the methods of allocation set forth in this part shall be used. [Deleted by 2013 amendment, effective May 13, 2013.] Acts 1999, ch. 406, § 4; 2000, ch. 982, § 32; 2002, ch. 729, § 1; 2004, ch. 932, § 6; 2013, ch. 321, §§ 4, 5. Compiler's Notes. Acts 1999, ch. 406, § 19(b) provided that §§ 67-4-2101 — 67-4-2120 shall apply to tax years ending on and after June 30, 1999, for limited liability companies, limited liability partnerships and limited partnerships, in which one or more corporations subject to franchise taxes under prior law directly or indirectly have in the aggregate an eighty percent (80%) or more ownership interest at any time after June 30, 1998; however, §§ 67-4-2101 — 67-4-2120 shall apply to tax years beginning on or after July 1, 1999, for all other taxpayers. Acts 2000, ch. 982, § 60(a) provided that §§ 1-38 of that act shall apply to tax years beginning on or after July 1, 1999, and to limited liability companies, limited liability partnerships and limited partnerships whose tax years ended on or after June 30, 1999, and in which one (1) or more corporations subject to franchise and excise taxes under title 67, chapter 4, parts 8 and 9 before their repeal by Chapter 406 of the Public Acts of 1999, directly or indirectly had in the aggregate an eighty percent (80%) or more ownership interest at any time after June 30, 1998. Acts 2004, ch. 932, § 11 provided that the amendment by that act shall apply to all tax years beginning on or after January 1, 2004. Amendments. The 2013 amendment, in (b), substituted “set forth in this part” for “set forth in subdivision (b)(2)” in the last sentence of (1), and deleted (2) which read: “(2)(A) Notwithstanding the provisions of this subsection (b) to the contrary, any corporation that, pursuant to this subdivision (b)(2), has excluded any indebtedness to or guaranteed by a parent or an affiliated corporation in determining the amount of its capital, surplus and undivided profits subject to franchise tax, shall provide the commissioner with an additional computational schedule to supplement its franchise and excise tax return. This schedule shall be filed with the return or within ninety (90) days from April 23, 1998, if the return has already been filed. It shall show the corporation's total indebtedness to or guaranteed by its parent or any affiliated corporation, and a computation of the amount of any indebtedness that would have been included in the determination of its capital, surplus and undivided profits subject to the franchise tax had it not been for this subdivision (b)(2).“(B) Any corporation that fails to timely file the schedule required by subdivision (b)(2)(A) shall be expressly prohibited from relying upon subdivision (b)(2)(A) to exclude any of its indebtedness to or guaranteed by a parent or affiliated corporation from its franchise tax base. In such a case, the commissioner shall disregard subdivision (b)(2)(A) for the tax year involved and shall assess any resulting additional franchise tax plus interest accrued from the original due date of the return.” Effective Dates. Acts 2013, ch. 321, § 9. May 13, 2013. Textbooks. Tennessee Jurisprudence, 17 Tenn. Juris., Taxation, § 79.