Current through Register Vol. 50, No. 9, September 20, 2024
A. General
1. From the total gross apportionable income
there shall be deducted all expenses, losses and other deductions except
federal income taxes, allowable under this Chapter, which are directly
attributable to such income, and there also shall be deducted a ratable portion
of allowable deductions, except federal income taxes, which are not directly
attributable to any item or class of gross income. Direct and indirect expenses
attributed to total allocable income derived from foreign sources, for federal
purposes, are not deductible in arriving at total net apportionable income.
Expenses sourced pursuant to federal law and regulations to allocable income
from foreign sources are presumed to be attributed to such income.
2.R.S.
47:287.94 provides two methods for computing
the amount of net apportionable income from Louisiana sources, viz., the
apportionment method and the separate accounting method. The apportionment
method must be used unless it produces a manifestly unfair result and the
conditions prescribed by
R.S.
47:287.94 are met. Where the apportionment
method is utilized, the apportionment percentage must be applied to the total
apportionable net income without exception. For rules pertaining to the
determination of the apportionment percentage refer to §1134
B. Separate Accounting Method;
Permission Obtained from Secretary. Any taxpayer desiring to use the separate
accounting method in determining the portion of the total net apportionable
income derived from Louisiana sources must first obtain permission from the
secretary to use that method. A written request for such permission should be
submitted to the secretary not more than 30 days after the close of the taxable
year for which the first use of the separate accounting method is to be made if
the permission is granted. The secretary will grant such permission if the
taxpayer demonstrates to his satisfaction that the apportionment method as
applied to the business operations of the taxpayer would produce a manifestly
unfair result, that the separate accounting method produces a fair and
equitable determination of the amount of net income taxable by Louisiana, and
that the other conditions of
R.S.
47:287.94 are met. The application of the
taxpayer must be accompanied by the following information:
1. a complete description of the nature of
the business operations of the taxpayer in Louisiana;
2. a complete description of the nature of
the business operations of the taxpayer in other states;
3. a comprehensive statement as to the
sources of goods or commodities sold by the taxpayer in Louisiana;
4. a comprehensive statement as to the
disposition of goods or commodities produced by the taxpayer in
Louisiana;
5. a computation for the
preceding taxable year showing the Louisiana net apportionable income on the
apportionment basis and on the separate accounting basis;
6. a statement of the particular
circumstances in the taxpayer's business operations and the particular factors
or elements in the apportionment formula which give rise to the difference
between the amounts of Louisiana net apportionable income as computed under the
two methods;
7. a statement as to
whether the circumstances, factors, and elements mentioned in
§1132. B.6 are relatively
permanent so that the two methods would reasonably be expected to yield similar
differences in results each year, or whether in the ordinary course of the
taxpayer's business those circumstances have changed from time-to-time and may
be expected to do so in the future; and
8. any other information which the taxpayer
may consider pertinent.
C. Separate Accounting of Apportionable
Income
1. When the separate accounting method
is used, the net apportionable income taxable in Louisiana shall be determined
by deducting from the gross apportionable income from sources in Louisiana all
costs and expenses directly attributable to such income and a ratable part of
overhead expenses and other expenses which are attributable in part to the
Louisiana gross apportionable income.
2. When Louisiana net apportionable income is
determined on the separate accounting method, interest expense applicable to
Louisiana gross apportionable and allocable income shall be deducted from such
gross income for the purposes of determining Louisiana net apportionable and
allocable income or loss. The amount of interest expense applicable to
Louisiana gross apportionable and allocable income shall be determined by
multiplying total interest expense by a ratio, the numerator of which is the
average value of assets in Louisiana and the denominator of which is the
average value of all assets of the taxpayer.
3. For the purposes of this Paragraph,
value to be used and average value mean the
same as defined in
§1130. B.6 Special rules
as provided in
§1130. B 11 also apply to
this Section.
4. When Louisiana net
apportionable income is determined on the separate accounting method, overhead
expense shall be deducted from Louisiana gross apportionable income for the
purposes of determining Louisiana net apportionable income or loss. The amount
of such overhead expense shall be determined by multiplying total overhead
expense attributable to gross apportionable income by a ratio, the numerator of
which is the amount of direct cost incurred in the production of Louisiana
gross apportionable income determined on a separate accounting method and the
denominator of which is total direct cost incurred in the production of gross
apportionable income from all sources. For the purpose of this Paragraph, the
secretary is authorized to adjust the amount of overhead expense allocated to
Louisiana gross apportionable income if he determines that such action is
necessary in order to clearly reflect Louisiana apportionable net income. For
rules pertaining to the determination of the amount of overhead expense
attributable to gross allocable income refer to
§1130. B.8
5. Income from Natural Resources. If the
separate accounting method is used by a taxpayer whose business includes the
production of natural resources, such as oil, gas, other liquid hydrocarbons,
or sulphur, (a) which are sold by the taxpayer prior to refining or processing,
or (b) which are transported by the taxpayer into or from the state of
Louisiana for refining or processing prior to sale and at the time of
production or transfer into or from this state have an ascertainable market
value, the Louisiana net apportionable income of such taxpayer shall be
computed as set forth below.
a. The gross
apportionable income of the taxpayer from sources in Louisiana shall be
determined by dividing the activities of the taxpayer into three classes:
i. the production of natural
resources;
ii. the marketing of
refined or manufactured products; and
iii. all other activities.
b. The Louisiana gross
apportionable income from the production of natural resources shall include:
i. sales of natural resources produced in
Louisiana and sold in this state;
ii. the market value, at the time of
transfer, of all natural resources produced in this state and transferred by
the taxpayer to another state for sale, refining, or processing, provided that
if the natural resources are sold by means of an "arm's length" transaction
prior to refining or processing, the market value prescribed herein shall not
exceed the selling price; and
iii.
the market value, at the time of transfer, of all natural resources produced by
the taxpayer in Louisiana and transferred to a refinery or processing plant of
the taxpayer located in Louisiana.
c. The Louisiana gross apportionable income
from the marketing of refined or manufactured products shall be the amount of
gross sales of such products in this state. From such gross sales there shall
be deducted, in lieu of the usual deduction for cost of goods sold, the market
value of the products sold as of the time of transfer into this state. In
determining the market value, the customary prices for the quantities
transferred shall be applied.
d.
The Louisiana gross apportionable income from all activities in this state
other than the production of natural resources and the marketing of refined or
manufactured products shall include all sales and other apportionable revenues
derived in this state from such other activities.
e. The net income of the taxpayer from each
of the three classes of income set forth in
§1132. C.5 b, c, and d
shall be determined by deducting from each such class of gross income all
allowable deductions directly attributable to the production of such income and
a ratable part of all allowable deductions which are attributable in part to
the production of such class of income.
6. For the purpose of this Section, a natural
resource shall be deemed to be sold in Louisiana if it is located in this state
at the time title thereto passes to the purchaser.
7. In the absence of specific proof of the
value of natural resources at the time of transfer from or into this state, the
value of the natural resources at the time of production, to be determined in
accordance with the methods prescribed for the determination of "gross income
from the property" for purposes of percentage depletion under
R.S.
47:287.745(B), shall be
deemed to be the market value at the time of transfer.
D. Change from Separate Accounting to
Apportionment Method. A taxpayer who has obtained permission to use the
separate accounting method, or who has been required by the secretary to use
that method, shall continue to use that method for succeeding taxable years
until a change occurs in the nature of the taxpayer's operations which would
warrant a change in accounting method. When such a change occurs, the taxpayer
shall report the facts to the secretary not later than 30 days after the close
of the taxable year in which the change occurred. If the secretary finds, on
the basis of the facts reported by the taxpayer or otherwise obtained by the
secretary, that the apportionment method should be used, the taxpayer will be
notified to use that method for the year in which the change in operations
occurred. The apportionment method shall then be used until a change is made
pursuant to
R.S.
47:287.94.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
47:287.94.
