Preparing Massachusetts affiliated group election combined returns when the state and federal groups are different and there are members with at-risk or passive activities

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Use this procedure to ensure the correct preparation of Massachusetts affiliated group election combined income tax returns if the members of the Massachusetts affiliated group are not the same as those included in the federal consolidated group and the federal group contains members with at-risk or passive activities. If preparing a combined return and not making or not subject to an affiliated group election, see Preparing Massachusetts Excise for Taxpayers Subject to Combined Reporting income tax returns.

  1. Clone the parent, subsidiary, and eliminations clients. Open each member one at a time, choose File > Save As, enter a new client ID for the client, and click the Save button. The new client will have the same EIN and name as the original client. Creating new clients is necessary so that the federal at-risk and passive calculations for the original consolidated and member clients are not changed when the group members are changed.
  2. Add Massachusetts to the parent, eliminations client, and applicable subsidiary clients. Complete all data entry for these member clients. Each member's state return should be complete and correct before proceeding to the next step.

    Notes

    • If you have an S Corporation that is a member of the Massachusetts affiliated group, you need to clone the client and change the client to a C Corporation.
    • Apportionment data entry must be completed for each member client, even if the client is 100 percent in-state. Apportionment data entry is accessed through View > Apportionment.
    • Including an eliminations client as part of a consolidated group is optional.
  3. Create a new consolidated client using the Consolidated C entity type in the File > Client Properties dialog.
  4. Select the appropriate members to be included in the Massachusetts combined group. Choose File > Client Properties and click the Advanced Properties button. In the Group tab, add the parent client and subsidiary clients as necessary. Click OK to close the Advanced Properties dialog. Click OK again to close the Client Properties dialog.
  5. Add Massachusetts to the new consolidated client.

    Note: When adding Massachusetts to a consolidated federal client, the state automatically defaults to being a combined return.

    If the state is added as a C Corporation to a federal consolidated group, the consolidated functionality does not take place. The amounts from each member are not combined, and the combined forms are not available.

  6. Review all Massachusetts combined client input screens and complete any necessary remaining data entry.

    Note: The consolidated options to combine member amounts in the File > Client Properties > Advanced Properties > Options dialog do not apply to the Massachusetts combined client.

  7. Click the Combined folder in the Massachusetts folders block. Complete the necessary information on Screens MAAffil, MAComb, MACInc, MACAdj, MACCr, MACInv, MACRC, MACO, and MACAmend.
  8. To change amounts entered in the Massachusetts parent, eliminations, or subsidiary clients, go back to the original source of data entry. For instance, if you made a mistake when you entered the apportionment of the first subsidiary, close the consolidated client and reopen the first subsidiary. Choose View > Apportionment for that client and correct the data. Close the subsidiary client and reopen the consolidated client. The correct amount is now a part of the consolidated group return.
  9. Print and review the Massachusetts affiliated group election combined tax return.

Example of when a Massachusetts group is different from a federal consolidated group and the federal group contains members with at-risk or passive activities.

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