Federal taxable income is used as the starting point in computing the state's income tax base, but numerous state adjustments or modifications generally are required to:
a. Reflect differences between state and Federal tax statutes.
b. Remove income that a state is constitutionally prohibited from taxing.
c. Allow for all of the states to use the same definition of taxable income.
d. a. and b.
d
RATIONALE: Federal taxable income is used as the starting point in computing the state's income tax base, but numerous state adjustments or modifications generally are required to: (1) reflect differences between state and Federal tax statutes (e.g., different cost recovery schedules) and (2) remove income that a state is constitutionally prohibited from taxing (e.g., portfolio income on Federal obligations).
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