Conformity of Missouri With Federal Accounting Methods

PURPOSE: The rule provides that a taxpayer must employ the same method of accounting for Missouri income tax purposes as is used for federal income tax purposes. (1) A taxpayer must employ the same method of accounting in determining Missouri taxable income as is used for federal income tax purposes. The term method of accounting refers not only to the overall method of accounting (such as cash or accrual) but also to the accounting treatment of particular items of income, gain, loss or deduction, such as depreciation, bad debts, inventory valuation, research and experimental expenditures. (2) If the taxpayer is allowed or is required to change an accounting method for federal income tax purposes, a similar change in the accounting method for Missouri income tax purposes will automatically be made. No application for change of accounting method for Missouri income tax purposes shall be required. AUTHORITY: section 143.961, RSMo 1986.* Regulations 1.281-1 and 1.281-2 were originally filed March 8, 1974, effective March 18, 1974. *Original authority: 143.961, RSMo 1972. Armco Steel Corporation v. State Tax Commission, 580 SW2d 242 (Mo. banc 1979). Appellant filed a consolidated federal tax return for 1969, making certain intercorporate payments to its subsidiaries for their tax losses incurred. Appellant then claimed as a deduction on its Missouri tax return the amount of federal tax that would have been paid if the appellant had filed as a separate entity. For deduction purposes on Missouri income tax returns, United States income taxes “assessed” are those that are actually paid. And, although the director of revenue is to “follow as nearly as practicable the rules and regulations prescribed by the United States government on income tax assessments and collection,” the director cannot interpret the statute in accordance with the federal regulations if to do so will change the substantive rules of the Missouri statute.