In response to a taxpayer’s protest, the Indiana Department of Revenue ruled that an LLC did not meet the statutory definition of an “includable corporation” and was not a member of an affiliated group. Thus, the intangible expenses paid, accrued, and incurred by the LLC could not be included in the add-back calculations provided by the statute. Ind. Code § 6-3-2-20(b) requires a corporation subject to the adjusted gross income tax to add back to its taxable income intangible expenses and any directly related intangible interest expenses paid, accrued, or incurred with one or more members of the same affiliated group. The LLC is treated at the federal level as a partnership, not as a corporation, and thus is neither an “includable corporation” nor a member of the “affiliated group” as defined by IRC § 1504. Because it was not a member of the affiliated group, the intangible expenses paid, accrued, or incurred by the LLC are not included in the addback calculations under Ind. Code§ 6-3-2-20. Indiana Dep’t of State Rev. Letter of Finding No. 02- 20110459 (Sept. 1, 2012).

Co-author - Patrick Smith, Director Baker Tilly Virchow Krause, LLP

Mr. Ely is a partner and Messrs. Thistle and Rhyne are associates with the multistate law firm of Bradley Arant Boult Cummings LLP in its Birmingham, Alabama office. Mr. Ely is Chair of the firm’s State & Local Tax Practice Group. Messrs. Ely, Thistle, and Rhyne co-author a chapter on the state taxation of PTEs in the treatise “Keatinge, Conaway and Ely on Choice of Business Entity” (West). Mr. Smith is the Tax Director at Baker Tilly Virchow Krause, LLP and is head of State & Local Tax Services for the firm’s Chicago office. Mr. Smith is a co-author of “State Taxation of Pass-Through Entities and Their Owners,” a treatise published by Warren Gorham and Lamont/West since 2005. Messrs. Ely and Smith have co-presented on this topic at NYU’s Institute on Federal Taxation, as have Messrs. Thistle and Smith for a webinar hosted by Strafford Publications in early June.