| Audit Examinations and Settlements
All large companies undergo state audits, often with open periods that can stretch back 20 years. As part of the audit process, multiple items are reviewed and analyzed for their potential impact(s). Often, the impact of a federal or state audit adjustment (such as NOLs and credits) is not limited to a single tax year or a single state. Rather, this impact may ripple across many states for many years. To minimize exposure, it is critical that the tax department fully understand the multi-year impact of conceding any single audit item. Unfortunately, the depth of analysis required is all but impossible with today's system of disconnected spreadsheets and limited access to multi-year tax information.
Liquid Engines STx remedies this problem by enabling users to fully understand the impact of audit concessions. STx's multi-year calculation logic allows tax professionals to simply add an audit adjustment in a given year and instantaneously flow the result across every subsequent year and every state in the scenario. NOL and credit carry-forwards are automatically recalculated, giving a true picture of the overall impact of each possible audit adjustment. With this capability, companies are better prepared to negotiate settlements and defend their tax strategies. With STx, users can accurately model audit examinations and settlements, such as:
Changes to federal income caused by Federal RAR adjustments will roll down to the state level and impact the state returns. These changes can impact NOLs as well as credit utilization across multiple years. STx automatically recalculates the impact of these adjustments on the state level, including changes to NOL and credit generation, utilization, and expiration as a result of the Federal RAR.
When a company has multiple subsidiaries in a unitary state but is filing on a separate return basis for at least one subsidiary, some states have successfully argued that a unitary relationship exists. Therefore the unitary return should include the excluded subsidiary. This situation may also occur when a combined filing is permitted but the companies are filing on a separate-company basis. Leveraging STx, customers can quickly and easily analyze the impact of filing on a combined or unitary basis.
In the last five years, states have successfully argued for broader nexus standards. As a result, more companies are forced to file in states where they had previously claimed a lack of nexus with the foreign jurisdiction. STx customers can measure the impact of nexus in different jurisdictions in a matter of minutes, allowing them to quickly model the impact of nexus changes on their overall tax liability, and on their destination/throwback sales.
The current and proposed Anti-Passive Investment Company (PIC) expense disallowance for intercompany royalty and interest transactions requires that companies be able to model these disallowance rules. With STx, customers can modify the state disallowance rules for their intercompany transactions to model the expense disallowance.
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