What is a potential outcome of the unitary approach?

The unitary approach is a method used for corporate taxation that considers the entire business as a single entity, regardless of the number of jurisdictions in which it operates. This approach is particularly relevant for businesses that operate across multiple states or countries. When applying the unitary method, the taxable income of the corporation is determined on a consolidated basis.

The potential outcome of a reduced tax liability in high-compensation states arises from the fact that under the unitary approach, the income and expenses of all parts of the business are aggregated. This means that if a corporation has significant operations in high-compensation states but also operates in lower-tax states, the overall taxable income can be minimized through the allocation of income and expenses across various locations. By taking into account losses or lower-income generating segments in other states, a business can effectively reduce its tax liability in jurisdictions where it has higher compensation and consequently higher income.

This conclusion contrasts with the other options, which don't accurately reflect outcomes typically associated with the unitary approach. For example, the option referring to the need for separate entity accounting directly contradicts the essence of the unitary method, which seeks to aggregate and treat the corporation as a singular entity rather than requiring individual state filings. Similarly, an increase in filings is not