Instructions For Schedule U-M - Member'S Income And Expenses

Members with Different Fiscal Years and “Fiscalization”:

Column (b)

Massachusetts requires all members of a combined group to determine their taxable share of the

combined group’s taxable income based on a common tax year, i.e., the combined group’s taxable year.

If the taxable year of one member of a combined group does not begin or end on the same date or

dates as the combined group’s taxable year, that member’s accounting periods must be adjusted in

order to properly calculate both group income and the member’s apportioned share of that income. In

such cases, the member reports in column (a) the amounts from its most recently completed federal

income tax return and reports in column (b) adjustments to those amounts to reflect income and

expense for the combined group’s taxable year.

This “fiscalization” may be done by an interim closing of the books or, provided it does not materially

distort income apportioned to Massachusetts, by a pro-rata method that includes appropriate shares of

income from more than one of the member’s tax years (e.g., if the combined group’s taxable year is a

calendar year and the member’s federal tax year ends on March 31st such that the group’s taxable year

overlaps two of the member’s tax years, that member would include 9/12ths of its income from one

year and 3/12ths of its income from the other year in the combined group’s taxable income). See 830

CMR 63.32B.2 (12) (b). Any fiscalization adjustments are to be made in Schedule U-M, column (b).

Combined Reporting Adjustments:

Column (c)

Column (c) is used to report certain additions or modifications to the income and deductions reported in

columns (a) or (b) that are required to calculate the combined group’s taxable income under

Massachusetts law. Note that adjustments that reduce an item of income or expense to be included in

the determination of the combined group’s taxable income are to be reported as negative amounts in

the respective line item of income or expense.

Examples of these adjustments may include but are not necessarily limited to: Reporting of certain

income and deductions by a non-U.S. corporation that is a member of the combined group where such

income or deductions are not reported for federal income tax purposes, but are to be reported for

Massachusetts purposes (e.g., items of non-effectively connected income on which the federal income

tax may be collected through withholding imposed upon the payers of such items). See the discussion

below with respect to reporting on column (c), in the case of a non-U.S. corporation.

Adding to a member’s income the dividend to such member from another group member where the

dividend is eliminated in a federal consolidated return to the extent they are not included in column (a),

Instructions For Schedule U-M - Member'S Income And Expenses - 2012 Page 4