Unlike most other rolling conformity states, further analysis must be undertaken in Colorado, Maryland, and Oregon to determine whether and to what extent specific IRC provisions are in fact adopted on a rolling basis. Inconsistent approaches to IRC rolling conformity When determining IRC conformity, a determination must be made whether the Oregon tax base is affected by the federal change. As explained by the Legislature, "specific legislation disconnecting Oregon from federal law is required to avoid inherently adopting federal changes to the Oregon tax base" (id.). Oregon refers to its rolling conformity concept as "rolling reconnect" (Oregon Legislative Revenue Office, Oregon Income Tax Connection to Federal Law (August 2020)). Thus, Oregon adopts the IRC on a rolling basis as it relates to federal taxable income, but otherwise has a static IRC conformity date. 31, 2018 or (2) "f related to the definition of taxable income, as applicable to the tax year of the taxpayer" (Or.
Oregon law defines the IRC for corporation excise and income tax purposes as the laws as they are amended and in effect: (1) on Dec. Maryland is required to issue a report of the revenue impact within 60 days of when the amendment to the IRC is enacted (Md. Specifically, an amendment to the IRC does not apply to the tax year that begins in the calendar year in which the amendment is enacted if the revenue impact is greater than $5 million (Md. Maryland generally is a rolling conformity state, but Maryland automatically decouples from certain federal changes for one year. The Maryland corporate income tax computation begins with the corporation's federal taxable income for the tax year as determined under the IRC, subject to certain adjustments (Md. Specifically, the regulation provides in part that the IRC "does not, for any taxable year, incorporate federal statutory changes that are enacted after the last day of that taxable year." Any changes made by the CARES Act will therefore not be effective for Colorado purposes for tax years ending before March 27, 2020. In its regulation, the DOR explains that its interpretation of the Colorado conformity statute is that IRC changes are effective only on a prospective basis. The CARES Act includes provisions that are retroactive to various effective dates, as early as Sept. On July 31, 2020, the DOR permanently adopted this regulation. The statutory inclusion of the language "at any time" has been widely interpreted to mean that Colorado is a rolling conformity state, which incorporates changes to the IRC as immediately effective, whenever enacted.Īfter enactment of the CARES Act on March 27, 2020, the Colorado Department of Revenue (DOR) released an emergency regulation to clarify the state's conformity to IRC changes (Colo.
Irc 61 code#
ColoradoĬolorado law defines the IRC as "provisions of the federal 'Internal Revenue Code of 1986,' as amended, and other provisions of the laws of the United States relating to federal income taxes, as the same may become effective at any time or from time to time, for the taxable year" (Colo. This discussion examines the complex approaches used by Colorado, Maryland, and Oregon to adopt the IRC on a rolling basis. The rolling conformity approach may initially seem fairly easy to follow, but this approach is sometimes difficult to apply in certain states in practice, with potentially counterintuitive results. Finally, "selective" conformity states selectively conform to certain provisions of the IRC while decoupling from others.
Irc 61 update#
In contrast, "static" or "fixed date" conformity states adopt the IRC as of a specific date and must decide whether to update their conformity through subsequent legislation. "Rolling" conformity states automatically tie to the IRC as changes are adopted. States generally follow one of three different approaches to IRC conformity. The state- specific impact of the federal tax legislation depends largely on how each state conforms to and incorporates changes to the IRC. 116- 136, in 2020, the version of the IRC that is adopted by states has become increasingly important in recent years. 115- 97, in 2017 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L.
Due to the significant changes to the Code enacted by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. A state's conformity to the Internal Revenue Code (IRC) is an important policy choice that affects state corporate income tax regimes using a measure of income determined by the IRC, such as federal taxable income, as the starting point for state taxable income computations.
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