North Dakota Administrative Code
Title 81 - Tax Commissioner
Article 81-03 - Income Taxes and Privilege Taxes Based on Income
Chapter 81-03-05.2 - Water's Edge Method
Section 81-03-05.2-01 - Definitions

As used in these sections and for the administration of North Dakota Century Code chapter 57-38.4, unless the context otherwise requires:

1. "Assets" means both tangible and intangible property valued at original cost less depreciation, amortization, or depletion as reflected on the corporation's balance sheet prepared according to generally accepted accounting principles.

2. "Average of property and payroll" means average of property and payroll as defined pursuant to chapter 81-03-09 and North Dakota Century Code chapters 57-38.1 and 57-59.

3. "Commissioner" means the tax commissioner of the state of North Dakota.

4. "80/20 corporation" means a corporation that:

a. Is incorporated in the United States.

b. Is eligible to be included in a federal consolidated return as defined in subsection 5 of North Dakota Century Code section 57-38.4-01.

c. Has eighty percent or more of the average of its property and payroll assigned to locations in foreign countries.

5. "Foreign corporation" means a corporation incorporated outside the United States.

6. "Foreign country" means a country other than the United States or a possession of the United States.

7. "Income from an 80/20 corporation" means net book income for financial statement purposes. However, a corporation's net book income cannot be offset by a net book loss from another 80/20 corporation.

8. "Net book income for financial statement purposes" as used herein means the results of operations as determined using the accrual method of accounting and generally accepted accounting principles as adopted by the American institute of certified public accountants. If a corporation has more than one financial statement, it must use the first statement in the following priority:

a. Financial statements required to be filed with the securities and exchange commission.

b. Financial statements audited by an independent certified public accountant.

c. Income statements prepared for a nontax purpose required to be provided to the federal government, state government, or a political subdivision of state government.

d. Income statements prepared for credit purposes, for reporting to stockholders or other owners, or for any other nontax purpose. An unaudited report that is accompanied by an independent auditor's review report has priority over another unaudited statement.

9. "New corporation" means a corporation that either has not filed or was not required to file an income tax return after the 1979 tax year.

10. "Property, payroll, and sales" means property, payroll, and sales as defined in 81-03-09 and North Dakota Century Code chapters 57-38.1 and 57-59.

11. "State" means each of the fifty states and the District of Columbia.

12. "Taxpayer" means a corporation that is required to file an income tax return in North Dakota.

13. "Transaction" means an event that causes a change in a corporation's assets, liabilities, or owner's equity.

14. "United States" means the fifty states and the District of Columbia.

General Authority: NDCC 57-38-56

Law Implemented: NDCC 57-38.4