PURPOSE: This rule sets out the policy of the Office of the Secretary of State regarding the franchise tax report.

1. (1) Each corporation liable for the franchise tax prescribed in Chapter 147, RSMo, shall file a franchise tax report on such form as prescribed by the secretary of state.

2. (2) Contents of Report.

   1. (A) Par value of issued and outstanding shares (line 1) shall be listed at par as stated in the taxpayer’s Articles of Incorporation. If the taxpayer’s shares have no par value, issued and outstanding shares shall be valued at five dollars ($5) per share.
   2. (B) The taxpayer must submit a balance sheet prepared in conformity with the books and records of the taxpayer as of the beginning of business on the first day of its tax year. The taxpayer’s submission of Schedule L of IRS Form 1120 or Part 2 of IRS Form 1120A, and supporting schedules, shall satisfy the requirement for submitting a balance sheet.
   3. (C) Assets invested in or advanced to subsidiary corporations (line 2b) are considered to be employed by the subsidiary. Any portion of a corporation’s surplus so invested may be deducted from its tax base on line 2b of the franchise tax form, with the following conditions: a) The corporation claiming the deduction must own more than fifty percent (50%) of the voting stock of the subsidiary, and b) The subsidiary must be a corporation.

   4. (D) Assets advanced “upward” from a subsidiary to a parent may be deducted under the same conditions applicable to advances from parent to subsidiary. Cross-company advances may be deducted with the following conditions:

      1. 1. The entities involved in the transac-

tion must be connected in an uninterrupted chain of ownership of more than fifty percent (50%) of voting stock; and

1. 2. Both the entity claiming the deduction

and the entity receiving the advance must be corporations; and

1. 3. All of the entities connecting the cor-

porations involved in the transaction must be corporations; and

1. 4. The deduction may only be taken on

one (1) corporation’s franchise tax report.

1. (E) A corporation having assets employed both within and without Missouri shall calculate the percentage of its assets attributable to Missouri on lines 3a through 3d and 4.

   1. 1. Accounts Receivable (line 3a). All

notes, accounts and contracts receivable that are based on Missouri destination sales shall be included as Missouri assets. Receivables not derived from sales must be included as Missouri assets if the borrower is located in Missouri. If exact figures for Missouri receivables are not kept in the books and records of the taxpayer, the taxpayer may multiply its Missouri destination sales percentage by its total accounts receivable. Any inter-company receivables deducted on line 2b shall not be included in line 3a. Receivables must be reported net of allowance for bad debts.

1. 2. Inventories (line 3b). All inventories

owned by the taxpayer and physically located within Missouri shall be included as Missouri assets. The value and ownership of inventories shall be determined by the methods used for federal and Missouri state income tax purposes.

1. 3. Land and Fixed Assets (line 3c).

Land and fixed assets shall be valued at historical cost less accumulated depreciation. All land and fixed assets, including construction in progress, owned by the taxpayer and located in Missouri shall be included as Missouri assets.

1. 4. A corporation may, upon prior writ-

ten approval by the secretary of state and for good cause shown, file its franchise tax report using an alternate method of apportionment that fairly reflects the “proportion of its entire outstanding shares and surplus that its property and assets employed in this state bears to all its property and assets wherever located” (section 147.010, RSMo). To obtain approval of an alternative method of apportionment, the taxpayer shall submit a written request to use such a method. This request shall be submitted to the secretary of state prior to the due date of the report and shall include an explanation of the corporation’s need to use an alternative method of apportionment and an explanation of the alternative method. The request shall be accompanied by detailed financial statements reflecting the corporation’s assets employed in Missouri and all assets wherever located. Such statements shall include a balance sheet prepared in conformity with the books and 12 CSR 10-9

records of the corporation, as prescribed by section (2), subsection (B) of this regulation.

1. (3) The franchise tax report and payment are due on or before the fifteenth day of the fourth month of the corporation’s tax year as defined in 15 CSR 30-150.140.

AUTHORITY: section 147.120.9, RSMo Supp. 1997.* This rule previously filed as 15 CSR 30-150.170. Original rule filed Sept. 28, 1995, effective March 30, 1996. Amended: Filed Oct. 21, 1998, effective April 30, 1999. Changed to 12 CSR 10-9.200, effective Jan. 1, 2000. *Original authority: 147.120.9, RSMo 1939, amended 1943, 1945, 1969, 1979, 1982, 1983, 1987, 1992, 1995.