How do you record state minimum & tax and franchise tax during interim for a loss & full VA entity (US AETR = 0%)? I saw people prorate the state tax and record under discrete but it seems to be some inconsistency there- why would you prorate if it’s discrete? If not under discrete, how should I record it? Anyone hit me with a guideline reference would be highly appreciated

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Would be based on if you call franchise tax an income tax or not.

You should calculate a state AETR (which could be negative given the minimum tax) and then apply a rate to PTBI. Discrete treatment would not be appropriate.

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Above the line.

Agree with EY1. Minimum taxes and franchise taxes are generally not considered income taxes, so they’re not ‘counted’ as part of the (current or deferred) tax provision line.

They are usually just deducted on the income statement as an expense (which is why some folks call them ‘above the line’ taxes).

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Yes

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Isn’t it like UTP interest where the liability accrues fairly ratably and has nothing to do with actual pretax book income?

Franchise and minimum taxes should be separately stated from income taxes and not included as part of current expense

If this is a loss and full VA entity, then it wouldn’t even be included in the EATR calc. It’s a loss entity for which there is no benefit. If you wanted this in your YTD Tax Exp calc, the only way you could pull it in would be as a discrete, but I wouldnt even bother with that. Like the others said, it would likely already sit “above the line”.

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