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Preparing the tax provision for carve-out financial statements can be challenging, particularly if separate financial statements (including a tax provision) have not historically been prepared or the carve-out business was not a stand-alone tax paying entity. However, taxable entities must include a tax provision in the carve-out financial statements.
The carve-out entity’s tax provisions should be based on the financial statement accounts of the carve-out business. Reflecting the appropriate tax effect requires a full understanding of the pre-tax accounts included in the carve-out financial statements, as well the allocation methodologies used. The carve-out business will often have a tax profile that differs from the parent with respect to state, local, and foreign taxes. Accordingly, the carve-out business may need to prepare a separate tax provision calculation for each material jurisdiction in which the carve-out operations take place.
Guidance provided by the SEC staff in SAB Topic 1.B.1 Question 3 (codified in ASC 220-10-S99) should be considered when preparing the income tax provision.

Excerpt from ASC 220-10-S99-3

Question 3: What are the staff's views with respect to the accounting for and disclosure of the subsidiary's income tax expense?
Interpretive Response: Recently, a number of parent companies have sold interests in subsidiaries, but have retained sufficient ownership interests to permit continued inclusion of the subsidiaries in their consolidated tax returns. The staff believes that it is material to investors to know what the effect on income would have been if the registrant had not been eligible to be included in a consolidated income tax return with its parent. Some of these subsidiaries have calculated their tax provision on the separate return basis, which the staff believes is the preferable method. Others, however, have used different allocation methods. When the historical income statements in the filing do not reflect the tax provision on the separate return basis, the staff has required a pro forma income statement for the most recent year and interim period reflecting a tax provision calculated on the separate return basis.(1)
(1) FASB ASC paragraph 740-10-30-27 (Income Tax Topic) states: "The consolidated amount of current and deferred tax expense for a group that files a consolidated tax return shall be allocated among the members of the group when those members issue separate financial statements.... The method adopted... shall be systematic, rational, and consistent with the broad principles established by this Subtopic. A method that allocates current and deferred taxes to members of the group by applying this Topic to each member as if it were a separate taxpayer meets those criteria."

There are many tax considerations related to carve-out financial statements, including whether to use the separate return method, uncertain tax provisions, indefinite reinvestment, and valuation allowances. See TX 14 for additional information on these topics.

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