(a) The receipts
factor is a fraction, the numerator of which is the receipts of the taxpayer in
this State during the taxable year and the denominator of which is the receipts
of the taxpayer within and without this State during the taxable year. The
method of calculating receipts for purposes of the denominator is the same as
the method used in determining receipts for purposes of the numerator. The
receipts factor shall include only those receipts described herein which
constitute business income and are included in the computation of the
apportionable income base for the taxable year.
(b) The numerator of the receipts factor
includes receipts from the lease or rental of real property owned by the
taxpayer if the property is located within this State or receipts from the
sublease of real property if the property is located within this
State.
(c) The following rules
relate to receipts from the lease of tangible personal property.
(1) Except as described in paragraph (2), the
numerator of the receipts factor includes receipts from the lease or rental of
tangible personal property owned by the taxpayer if the property is located
within this State when it is first placed in service by the lessee.
(2) Receipts from the lease or rental of
transportation property owned by the taxpayer are included in the numerator of
the receipts factor to the extent that the property is used in this State. The
extent an aircraft will be deemed to be used in this State and the amount of
receipts that is to be included in the numerator of this State's receipts
factor is determined by multiplying all the receipts from the lease or rental
of the aircraft by a fraction, the numerator of which is the number of landings
of the aircraft in this State and the denominator of which is the total number
of landings of the aircraft. If the extent of the use of any transportation
property within this State cannot be determined, then the property will be
deemed to be used wholly in the state in which the property has its principal
base of operations. A motor vehicle will be deemed to be used wholly in the
state in which it is registered.
(d) The following rules relate to interest
from loans secured by real property.
(1) The
numerator of the receipts factor includes interest and fees or penalties in the
nature of interest from loans secured by real property if the property is
located within this State. If the property is located both within this State
and one or more other states, the receipts described in this subsection are
included in the numerator of the receipts factor if more than fifty percent of
the fair market value of the real property is located within this State. If
more than fifty percent of the fair market value of the real property is not
located within any one state, then the receipts described in this subsection
shall be included in the numerator of the receipts factor if the borrower is
located in this State.
(2) The
determination of whether the real property securing a loan is located within
this State shall be made as of the time the original agreement was made and any
and all subsequent substitutions of collateral shall be disregarded.
(e) The numerator of the receipts
factor includes interest and fees or penalties in the nature of interest from
loans not secured by real property if the borrower is located in this
State.
(f) The numerator of the
receipts factor includes net gains from the sale of loans. Net gains from the
sale of loans include income recorded under the coupon stripping rules of
section 1286 of the Internal Revenue Code.
(1)
The amount of net gains (but not less than zero) from the sale of loans secured
by real property included in the numerator is determined by multiplying such
net gains by a fraction the numerator of which is the amount included in the
numerator of the receipts factor pursuant to subsection (d) and the denominator
of which is the total amount of interest and fees or penalties in the nature of
interest from loans secured by real property.
(2) The amount of net gains (but not less
than zero) from the sale of loans not secured by real property included in the
numerator is determined by multiplying such net gains by a fraction the
numerator of which is the amount included in the numerator of the receipts
factor pursuant to subsection (e) and the denominator of which is the total
amount of interest and fees or penalties in the nature of interest from loans
not secured by real property.
(g) The numerator of the receipts factor
includes interest and fees or penalties in the nature of interest from credit
card receivables and receipts from fees charged to card holders, such as annual
fees, if the billing address of the card holder is in this State.
(h) The numerator of the receipts factor
includes net gains (but not less than zero) from the sale of credit card
receivables multiplied by a fraction, the numerator of which is the amount
included in the numerator of the receipts factor pursuant to subsection (g) and
the denominator of which is the taxpayer's total amount of interest and fees or
penalties in the nature of interest from credit card receivables and fees
charged to card holders.
(i) The
numerator of the receipts factor includes all credit card issuer's
reimbursement fees multiplied by a fraction, the numerator of which is the
amount included in the numerator of the receipts factor pursuant to subsection
(g) and the denominator of which is the taxpayer's total amount of interest and
fees or penalties in the nature of interest from credit card receivables and
fees charged to card holders.
(j)
The numerator of the receipts factor includes receipts from merchant discount
if the commercial domicile of the merchant is in this State. Such receipts
shall be computed net of any cardholder charge backs, but shall not be reduced
by any interchange transaction fees or by any issuer's reimbursement fees paid
to another for charges made by its card holders.
(k) The following rules relate to loan
servicing fees.
(1)
(A) The numerator of the receipts factor
includes loan servicing fees derived from loans secured by real property
multiplied by a fraction the numerator of which is the amount included in the
numerator of the receipts factor pursuant to subsection (d) and the denominator
of which is the total amount of interest and fees or penalties in the nature of
interest from loans secured by real property.
(B) The numerator of the receipts factor
includes loan servicing fees derived from loans not secured by real property
multiplied by a fraction the numerator of which is the amount included in the
numerator of the receipts factor pursuant to subsection (e) and the denominator
of which is the total amount of interest and fees or penalties in the nature of
interest from loans not secured by real property.
(2) In circumstances in which the taxpayer
receives loan servicing fees for servicing either the secured or the unsecured
loans of another, the numerator of the receipts factor shall include such fees
if the borrower is located in this State.
(l) The numerator of the receipts factor
includes receipts from services not otherwise apportioned under this section if
the service is performed in this State. If the service is performed both within
and without this State, the numerator of the receipts factor includes receipts
from services not otherwise apportioned under this section, if a greater
proportion of the income-producing activity is performed in this State based on
cost of performance.
(m) The
following rules relate to receipts from investment assets and activities and
trading assets and activities.
(1) Interest,
dividends, net gains (but not less than zero), and other income from investment
assets and activities and from trading assets and activities shall be included
in the receipts factor. Investment assets and activities and trading assets and
activities include investment securities, trading account assets, federal
funds, securities purchased and sold under agreements to resell or repurchase,
options, futures contracts, forward contracts, notional principal contracts
such as swaps, equities, and foreign currency transactions.
(A) The receipts factor shall include the
amount by which interest from federal funds sold and securities purchased under
resale agreements exceeds interest expense on federal funds purchased and
securities sold under repurchase agreements.
(B) The receipts factor shall include the
amount by which interest, dividends, gains, and other income from trading
assets and activities, including assets and activities in the matched book, in
the arbitrage book, and foreign currency transactions, exceed amounts paid in
lieu of interest, amounts paid in lieu of dividends, and losses from such
assets and activities.
(2) The numerator of the receipts factor
includes interest, dividends, net gains (but not less than zero), and other
income from investment assets and activities and from trading assets and
activities described in paragraph (1) that are attributable to this State.
(A) The amount of interest, dividends, net
gains (but not less than zero), and other income from investment assets and
activities in the investment account to be attributed to this State and
included in the numerator is determined by multiplying all such income from
such assets and activities by a fraction, the numerator of which is the average
value of such assets which are properly assigned to a regular place of business
of the taxpayer within this State and the denominator of which is the average
value of all such assets.
(B) The
amount of interest from federal funds sold and purchased and from securities
purchased under resale agreements and securities sold under repurchase
agreements attributable to this State and included in the numerator is
determined by multiplying the amount described in paragraph (1)(A) from such
funds and such securities by a fraction, the numerator of which is the average
value of federal funds sold and securities purchased under agreements to resell
which are properly assigned to a regular place of business of the taxpayer
within this State and the denominator of which is the average value of all such
funds and such securities.
(C) The
amount of interest, dividends, gains, and other income from trading assets and
activities, including assets and activities in the matched book, in the
arbitrage book, and foreign currency transactions (but excluding amounts
described in subparagraph (A) or (B)), attributable to this State and included
in the numerator is determined by multiplying the amount described in paragraph
(1)(B) by a fraction, the numerator of which is the average value of such
trading assets which are properly assigned to a regular place of business of
the taxpayer within this State and the denominator of which is the average
value of all such assets.
(D) For
purposes of this paragraph, average value shall be determined using the rules
for determining the average value of tangible personal property set forth in
section 18-241-4-04(c) and (d).
(3) In lieu of using the method set forth in
paragraph (2), the taxpayer may elect, or the department of taxation may
require in order to fairly represent the business activity of the taxpayer in
this State, the use of the method set forth in this paragraph.
(A) The amount of interest, dividends, net
gains (but not less than zero), and other income from investment assets and
activities in the investment account to be attributed to this State and
included in the numerator is determined by multiplying all such income from
such assets and activities by a fraction, the numerator of which is the gross
income from such assets and activities which are properly assigned to a regular
place of business of the taxpayer within this State and the denominator of
which is the gross income from all such assets and activities.
(B) The amount of interest from federal funds
sold and purchased and from securities purchased under resale agreements and
securities sold under repurchase agreements attributable to this State and
included in the numerator is determined by multiplying the amount described in
paragraph (1)(A) from such funds and such securities by a fraction, the
numerator of which is the gross income from such funds and such securities
which are properly assigned to a regular place of business of the taxpayer
within this State and the denominator of which is the gross income from all
such funds and such securities.
(C)
The amount of interest, dividends, gains, and other income from trading assets
and activities, including assets and activities in the matched book, in the
arbitrage book, and foreign currency transactions (but excluding amounts
described in subparagraph (A) or (B)), attributable to this State and included
in the numerator is determined by multiplying the amount described in paragraph
(1)(B) by a fraction, the numerator of which is the gross income from such
trading assets and activities which are properly assigned to a regular place of
business of the taxpayer within this State and the denominator of which is the
gross income from all such assets and activities.
(4) If the taxpayer elects or is required by
the department of taxation to use the method set forth in paragraph (3), the
taxpayer shall use this method on all subsequent returns unless the taxpayer
receives prior permission from the department of taxation to use, or the
department of taxation requires, a different method.
(5) The taxpayer shall have the burden of
proving that an investment asset or activity or trading asset or activity was
properly assigned to a regular place of business outside of this State by
demonstrating that the day-to-day decisions regarding the asset or activity
occurred at a regular place of business outside this State. Where the
day-to-day decisions regarding an investment asset or activity or trading asset
or activity occur at more than one regular place of business and one such
regular place of business is in this State and one such regular place of
business is outside this State, such asset or activity shall be considered to
be located at the regular place of business of the taxpayer where the
investment or trading policies or guidelines with respect to the asset or
activity are established. Unless the taxpayer demonstrates to the contrary,
such policies and guidelines shall be presumed to be established at the
commercial domicile of the taxpayer.
(n) The numerator of the receipts factor
includes all other receipts pursuant to sections
235-35
to
235-37,
HRS, and the rules thereunder.
(o)
All receipts which would be assigned under this section to a state in which the
taxpayer is not taxable shall be included in the numerator of the receipts
factor if the taxpayer's commercial domicile is in this State.
