1.26-51-102(5) Characteristics of Corporations

The term “corporation” refers to an organization whose characteristics require it to be classified for purposes of taxation as a corporation rather than as another type of organization such as a partnership or a trust. There are a number of characteristics ordinarily found in a corporation which, when taken together, distinguish it from other organizations. These are: (i) associates, (ii) an objective to carry on business and divide the gains therefrom, (iii) continuity of life, (iv) centralization of management, (v) liability for corporate debts limited to corporate property, and (vi) free transferability of interests. Whether a particular organization is to be classified as a corporation must be determined by taking into account the presence or absence of each of these corporate characteristics. Other factors may be found in some cases which may be significant in classifying an organization as a corporation, a partnership, or a trust. An organization will be treated as a corporation if the corporate characteristics are such that the organization more nearly resembles a corporation than a partnership or trust.

1.26-51-102(7) Foreign Corporation

A foreign corporation or association or partnership is one organized under the laws of any other state or country, whether or not its principal place of business is located within the State of Arkansas.

1.26-51-102(8) Fiduciary

A fiduciary is an individual or corporate guardian, trustee, executor, administrator, receiver or conservator acting in any fiduciary capacity for any person, trust, estate or business entity. A fiduciary relationship is considered one of trust and confidence. A fiduciary has a legal responsibility to act in the beneficiary's best interest.

1.26-51-102(17)(A) Tax Year

Tax year means the calendar year or fiscal year upon which taxable income is computed. A calendar year means a period of 12 months ending on December 31. A fiscal year means a period of 12 months ending on the last day of any month other than December. A tax return for the period 01/01/93 through 12/31/93 is a calendar year return and is referred to as the 1993 tax year. Any correspondence or assessments from the Department concerning this tax year will be designated as the tax year ending 12/93 or as tax year 1993.

A tax return for the period 02/01/92 through 01/31/93 is a fiscal year return and is also considered a 1993 tax year return. Any correspondence or assessments from the Department will be designated as the tax year ending 01/93, or as tax year 1993.

2.26-51-102(17)(A) Tax Year

A taxpayer may elect to compute his taxable income on the basis of an annual period which varies from 52 or 53 weeks. A 52 or 53 week tax year means the annual period which varies from 52 or 53 weeks and always ends on the same day of the week and always ends:

For example, if the taxpayer elects a tax year which always ends on the last Saturday in November, then for the year 1994, the tax year would end on November 26, 1994. On the other hand, if the taxpayer had elected a tax year which always ends on the Saturday nearest to the end of November, then for the year 1994, the tax year would end on December 3, 1994. Thus, in the case of a tax year described in subparagraph (1) of this regulation, the year will always end within the month and may end on the last day of the month, or as many as six days before the end of the month. In the case of a tax year described in subparagraph (2) of this regulation, the year may end on the last day of the month, or as many as three days before or three days after the last day of the month.

For the purpose of determining the effective date or the applicability of any corporate income tax statute which is expressed in terms of tax years beginning, including, or ending on the first or last day of a specified calendar month, a 52 or 53 week tax year is deemed to begin on the first day of the calendar month beginning nearest to the first day of the 52 or 53 week tax year, and is deemed to end or close on the last day of the calendar month ending nearest to the last day of the 52 or 53 week tax year. This is illustrated by the following examples:

Example (1). Assume that an income tax provision applies to tax years beginning on or after January 1, 1994. For that purpose, a 52 or 53 week tax year beginning on any day within the period December 26, 1993, to January 1, 1994, shall be treated as beginning on January 1, 1994.

Example (2). Assume that an income tax provision requires that a return must be filed on or before the 15th day of the fifth month following the close of the tax year. For that purpose, a 52 or 53 week tax year ending on any day during the period May 25 to June 3, shall be treated as ending on May 31, the last day of the month ending nearest to the last day of the tax year, and the return, therefore, must be made on or before October 15.

Example (3). X, a corporation created on January 1, 1994, elects a 52 or 53 week tax year ending on the Friday nearest the end of December. Thus, X's first tax year begins on Saturday, January 1, 1994, and ends on Friday, December 30, 1994; its next tax year begins on Saturday, December 31, 1994, and ends on Friday, December 29, 1995; and its next tax year begins on Saturday, December 30, 1995, and ends on Friday, January 3, 1997. X's first tax year is deemed to begin on January 1, 1994, and end on December 31, 1994; its next tax year is deemed to begin on January 1, 1995, and end on December 31, 1995. Accordingly, each such tax year is treated as including one and only one December 31st.

1.26-51-102(17)(B) Tax Year

A fractional part of a year (short tax year) means a period of less than twelve (12) months. If a short tax year ends on or before the 15th day of the month, then the short tax year shall be deemed to have ended on the last day of the previous month. If a short tax year ends on or after the 16th of the month, then the short tax year shall be deemed to have ended on the last day of the current month.

2.26-51-102(17)(B) Carryforwards for Short Years

Tax years for a fractional part of a year will be counted as a full tax year for carryforward of net operating losses and tax credits unless otherwise specified by law.