Section 5 Consolidated Returns

• Library: Tax Law 2009

Section 143.431.3, RSMo Supp. 2007, provides that an affiliated group of corporations may file a consolidated Missouri income tax return if they filed a consolidated federal tax return and 50% or more of their income is derived from sources within Missouri. The 50% or more requirement violates the Commerce Clause of the United States Constitution because it discriminates against interstate commerce. Gen. Motors Corp. v. Dir. of Revenue, 981 S.W.2d 561 (Mo. banc 1998). Although stricken almost 10 years ago, Missouri statutes still purport to impose a “fifty percent or more” requirement as one condition for filing a consolidated Missouri income tax return. Tax practitioners should beware of the unconstitutional provisions of § 143.431.3 and should not provide advice based on it.

In 2002, the Supreme Court of Missouri determined that its holding in General Motors must be applied retroactively because federal due process requires Missouri to provide taxpayers with some meaningful remedy. Because Missouri denied certain taxpayers their right to a meaningful pre- or post-deprivation remedy for having paid taxes under a statute imposing an unlawful condition, the Supreme Court of Missouri allowed taxpayers to retroactively change their election...