Current through Register Vol. 42, No. 11, August 30, 2024
(1)
In General. Where an airline has income from sources both within and without
Alabama, the amount of business income from sources within Alabama shall be
determined pursuant to §§
40-27-1 and
40-27-1.1,
Code of Ala. 1975, except as modified by this rule.
(a) Apportionment of Business Income.
Business income is determined in accordance with §
40-27-1.1,
Code of Ala. 1975.
(b) All business income must be apportioned
to Alabama in accordance with the calculation provided in §
40-27-1,
Code of Ala. 1975, and Rule 810-27-1-09.
1. For tax periods beginning on or after
January 1, 2021, the property factor and the payroll factor are no longer
considered in calculating a taxpayer's Alabama apportionment factor.
2. The industry specific definitions and
guidance provided in this rule for property and payroll are applicable for tax
periods beginning on or after January 1, 2021, when:
(i) A taxpayer petitions and is granted
approval from the department to employ an alternative apportionment method in
accordance with
40-27-1,
Code of Ala. 1975.
(ii) Measuring against nexus thresholds
pursuant to §
40-18-31.2,
Code of Ala. 1975.
(2) General Definitions. The
following definitions are applicable to the terms used in the apportionment
factor descriptions.
(a) "Value" of owned
real and tangible personal property shall mean its original cost. (See Section
40-27-1,
Article IV.11, Code of Ala. 1975, and Alabama Rule
810-27-1-.11)
(b) "Cost of aircraft by type"
means the average original cost or value of aircraft by type which are ready
for flight.
(c) "Original cost"
means the initial federal tax basis of the property plus the value of capital
improvements to such property, except that, for this purpose, it shall be
assumed that Safe Harbor Leases are not true leases and do not affect the
original initial federal tax basis of the property. (See Rule
810-27-1-.11)
(d) "Average value" of the
property means the amount determined by averaging the values at the beginning
and ending of the income year, but the Commissioner may require the averaging
of monthly values during the income year if such averaging is necessary to
reflect properly the average value of the airline's property. (See §
40-27-1,
Code of Ala. 1975, and Alabama Rule
810-27-1-.12)
(e) The "value" of rented real and
tangible personal property means the product of eight (8) times the net annual
rental rate. (See §
40-27-1,
Code of Ala. 1975, and Rule
810-27-1-.11)
(f) "Net annual rental rate" means
the annual rental rate paid by the taxpayer.
(g) "Property used during the income year"
includes property which is available for use in the taxpayer's trade or
business during the income year.
(h) "Aircraft ready for flight" means
aircraft owned or acquired through rental or lease (but not interchange) which
are in the possession of the taxpayer and are available for service on the
taxpayer routes.
(i) "Revenue
service" means the use of aircraft ready for the production of
revenue.
(j) "Transportation
revenue" means revenue earned by transporting passengers, freight and mail as
well as revenue earned from liquor sales, pet crate rentals, etc.
(k) "Departures" means, for purposes of these
rules, all takeoffs, whether they be regularly scheduled or charter flights,
that occur during revenue service.
(3) Sales (Transportation Revenue) Factor.
The transportation revenue derived from transactions or activities in the
regular course of the trade or business of the taxpayer and miscellaneous sales
of merchandise, etc., are included in the denominator of the revenue factor.
(See §
40-27-1.1,
Code of Ala. 1975, and Rule
810-27-1-.01)
Passive income items such as interest, rental income, dividends, etc., will not
be included in the denominator nor will the proceeds or net gains or losses
from the sale of aircraft be included. The numerator of the revenue factor is
the total revenue of the taxpayer in Alabama during the income year. The total
revenue of the taxpayer in Alabama during the income year is the result of the
following calculation: The ratio of departures of aircraft in Alabama weighted
as to the cost and value of aircraft by type, as compared to total departures
similarly weighted multiplied by the total transportation revenue. The product
of this calculation is to be added to any non-flight revenues directly
attributable to Alabama.
(4)
Property Factor. The following applies for tax years prior to January 1, 2021,
or if the taxpayer is granted approval from the Commissioner to employ an
alternative apportionment method that includes the use of the property factor.
(a) Property valuation. Owned aircraft shall
be valued at its original cost and rented aircraft shall be valued at eight (8)
times the net annual rental rate in accordance with Alabama Rule
810-27-1-.11.
The use of the taxpayer's owned or rented aircraft in an interchange program
with another air carrier will not constitute a rental of such aircraft by the
airlines to the other participating airline. Such aircraft shall be accounted
for in the property factor of the owner. Parts and other expendables, including
parts for use in contract overhaul work, will be valued at cost.
(b) The denominator and numerator of the
property factor. The denominator of the property factor shall be the average
value of all of the taxpayer's real and tangible personal property owned or
rented and used during the income year. The numerator of the property factor
shall be the average value of the taxpayer's real and tangible personal
property owned or rented and used in Alabama during the income year.
(c) Determining the numerator of the property
factor. In determining the numerator of the property factor, all property
except aircraft ready for flight shall be included in the numerator of the
property factor in accordance with Section
40-27-1,
Code of Ala. 1975, inclusive. Aircraft ready for
flight shall be included in the numerator of the property factor in the ratio
calculated as follows: Departures of aircraft from locations in Alabama
weighted as to the cost and value of aircraft by type compared to total
departures similarly weighted.
(5) The Payroll Factor. The following applies
for tax years prior to January 1, 2021, or if the taxpayer is granted approval
from the Commissioner to employ an alternative apportionment method that
includes the use of the payroll factor. The denominator of the payroll factor
is the total compensation paid everywhere by the taxpayer during the income
year. The numerator of the payroll factor is the total amount paid in Alabama
during the income year by the taxpayer for compensation. With respect to
non-flight personnel, compensation paid to such employees shall be included in
the numerator as provided. With respect to flight personnel (the air crew
aboard an aircraft assisting in the operations of the aircraft or the welfare
of passengers while in the air), compensation paid to such employees shall be
included in the ratio of departures of aircraft from locations in this state,
weighted as to the cost and value of aircraft by type compared to total
departures similarly weighted, multiplied by the total flight personnel
compensation.
(6) Records. The
taxpayer must maintain the records necessary to arrive at departures by type of
aircraft as used in these rules. Such records are to be subject to review by
the respective state taxing authorities or their agents.
Authors: Kathleen Abrams, Holly H. Coon
Statutory Authority:
Code of Ala.
1975, §§
40-2A-7(a)(5);
40-18-57.
