§ 105-130.6. Subsidiary and affiliated corporations.
§105‑130.6. Subsidiary and affiliated corporations.
The net income of acorporation doing business in this State that is a parent, subsidiary, oraffiliate of another corporation shall be determined by eliminating allpayments to or charges by the parent, subsidiary, or affiliated corporation inexcess of fair compensation in all intercompany transactions of any kindwhatsoever. If the Secretary finds as a fact that a report by a corporationdoes not disclose the true earnings of the corporation on its business carriedon in this State, the Secretary may require the corporation to file aconsolidated return of the entire operations of the parent corporation and ofits subsidiaries and affiliates, including its own operations and income. TheSecretary shall determine the true amount of net income earned by suchcorporation in this State. The combined net income of the corporation and ofits parent, subsidiaries, and affiliates shall be apportioned to this State byuse of the applicable apportionment formula required to be used by thecorporation under G.S. 105‑130.4. The return shall include in theapportionment formula the property, payrolls, and sales of all corporations forwhich the return is made. For the purposes of this section, a corporation isconsidered a subsidiary of another corporation when, directly or indirectly, itis subject to control by the other corporation by stock ownership, interlockingdirectors, or by any other means whatsoever exercised by the same or associatedfinancial interests, whether the control is direct or through one or moresubsidiary, affiliated, or controlled corporations. A corporation is consideredan affiliate of another corporation when both are directly or indirectlycontrolled by the same parent corporation or by the same or associatedfinancial interests by stock ownership, interlocking directors, or by any othermeans whatsoever, whether the control is direct or through one or moresubsidiary, affiliated, or controlled corporations. The secretary may require aconsolidated return under this section regardless of whether the parent orcontrolling corporation or interests or its subsidiaries or affiliates, otherthan the taxpayer, are or are not doing business in this State.
If a consolidated returnrequired by this section is not filed within 60 days after it is demanded, thenthe corporation is subject to the penalties provided in G.S. 105‑230 andG.S. 105‑236.
The parent, subsidiary, oraffiliated corporation must incorporate in its return required under thissection information needed to determine the net income taxable under this Part,and must furnish any additional information the Secretary requires. If thereturn does not contain the information required or the additional informationrequested is not furnished within 30 days after it is demanded, the corporationis subject to the penalties provided in G.S. 105‑230 and G.S. 105‑236.
If the Secretary finds thatthe determination of the income of a parent, subsidiary, or affiliatedcorporation under a consolidated return will produce a greater or lesser figurethan the amount of income earned in this State, the Secretary may readjust thedetermination by reasonable methods of computation to make it conform to theamount of income earned in this State. If the corporation contends the figureproduced is greater than the earnings in this State, it must file with theSecretary within 30 days after notice of the determination a statement of itsobjections and of an alternative method of determination. The Secretary must considerthe statement in determining the income earned in this State. The findings andconclusions of the Secretary shall be presumed to be correct and shall not beset aside unless shown to be plainly wrong. (1939, c. 158, s. 3181/2;1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 708, s. 4; 1959, c. 1259, ss.4, 8; 1967, c. 1110, s. 3; 1971, c. 1223, s. 1; 1973, c. 476, s. 193; 1998‑98,s. 69; 1998‑212, s. 29A.14(f).)