Sec. 4.
(a) The tax
is also imposed upon any corporation if the corporation is organized under the
laws of the United States, this state, another taxing jurisdiction, or a
foreign government and the corporation is carrying on the business of a
financial institution within Indiana.
(b) The corporation is deemed to be
conducting the business of a financial institution and therefore subject to the
FIT if eighty percent (80%) or more of the corporation's gross income during
the taxable year is derived from the following activities:
(1) Extending credit. (Refer to subsection
(e) below.)
(2) Leasing that is the
economic equivalent of extending credit.
(3) Credit card operations.
(c) As used in this section,
"gross income" includes the income derived from activities which are performed
by corporations primarily (as defined by the eighty percent (80%) test) engaged
in the business of extending credit. Gross income includes income from the
following:
(1) Interest.
(2) Fees.
(3) Penalties.
(4) A market discount or other type of
discount.
(5) Rental
income.
(6) The gain on a sale of
intangible or other property evidencing a loan or extension of
credit.
(7) Dividends or other
income received as a means of furthering any of the three (3) activities listed
in subsection (b).
(d)
Extraordinary income is excluded from gross income for purposes of satisfying
the eighty percent (80%) test. Extraordinary income includes income which is
unusual, infrequent, nonrecurring, and unrelated to the extension of
credit.
(e) For purposes of
satisfying the eighty percent (80%) test, corporations which are in the
business of a financial institution must be conducting the activities of
extending credit, leasing that is the economic equivalent of the extension of
credit, or credit card operations, as follows:
(1) Making, acquiring, selling, or servicing
loans or extensions of credit. For the purpose of this subdivision, loans and
extensions of credit include secured or unsecured consumer loans; installment
obligations; mortgage or other secured loans on real estate or tangible
personal property; credit card loans; secured and unsecured commercial loans of
any type; letters of credit and acceptance of drafts; loans arising in
factoring; and any other transactions with a comparable economic effect. The
following are examples of extending credit:
(A) A corporation is a manufacturer of
widgets. In 19x9, the corporation received one million dollars ($1,000,000) in
gross income from the sale of widgets. In selling such widgets, the corporation
makes available an installment obligation plan whereby its customers buy
widgets over an extended period of time. In 19x9, the corporation received one
hundred thousand dollars ($100,000) in interest and fees from such installment
obligations. Because only ten percent (10%) of the corporation's total receipts
from all sources is derived from extending credit, the corporation is not
considered a taxpayer for purposes of the FIT.
(B) Corporation A is primarily engaged in the
business of a collection agency. Various other corporations enter into
contracts with Corporation A for purposes of having delinquent loan monies
collected. Corporation A does not originate or acquire the loans. Corporation A
receives income from the various corporations based upon the percentage of
payments collected. Corporation A is not a taxpayer for purposes of the FIT.
Although one hundred percent (100%) of Corporation A's income is from servicing
loans, Corporation A is not extending credit.
(2) Leasing or acting as an agent, broker, or
advisor, in connection with leasing real and personal property that is the
economic equivalent of the extension of credit if the transaction is not
treated as a lease for federal income tax purposes. If the lease is the
economic equivalent of the extension of credit, and the lease is not treated as
a lease for federal income tax purposes, the income derived from the lease is
included in gross income for purposes of satisfying the eighty percent (80%)
test whether the corporation is leasing its own real or personal property or is
the lessor of real or personal property owned by another.
(3) Operating a credit card, debit card,
charge card, or similar business. If eighty percent (80%) of a corporation's
total gross income is derived from:
(A)
extending credit;
(B) leasing;
or
(C) credit card operations; the
corporation is subject to the FIT.
(See 45 IAC 17-4-4 concerning taxation of corporations which
are partners in a partnership and corporations which are grantors and
beneficiaries of a trust.)
