Current through Supplement No. 394, October, 2024
1. General.
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 the
purpose of the numerator. The receipts factor includes only those receipts
described in this section which constitute business income and are included in
the computation of the apportionable income base for the taxable
year.
2. Receipts from the lease of
real property. 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.
3. Receipts from the lease of tangible
personal property.
a. Except as described in
subdivision b, 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.
b. 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.
4. Interest from loans secured by real
property.
a. 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 must be included in the numerator of the
receipts factor if the borrower is located in this state.
b. The determination of whether the real
property securing a loan is located within this state must be made as of the
time the original agreement was made and any and all subsequent substitutions
of collateral must be disregarded.
5. Interest from loans not secured by real
property. 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.
6. Net gains from the sale of loans. 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.
a. 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 the net gains by a fraction, the numerator of
which is the amount included in the numerator of the receipts factor under
subsection 4 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 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 the net gains
by a fraction, the numerator of which is amount included in the numerator of
the receipts factor under subsection 5 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.
7. Receipts from credit card receivables. 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 cardholders, such as annual fees, if the billing address of the cardholder
is in this state.
8. Net gains from
the sale of credit card receivables. 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 under subsection 7 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 cardholders.
9. Credit
card issuer's reimbursement fees. 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 under subsection 7 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 cardholders.
10. Receipts from merchant discount. The
numerator of the receipts factor includes receipts from merchant discount if
the commercial domicile of the merchant is in this state. Such receipts must be
computed net of any cardholder chargebacks but may not be reduced by any
interchange transaction fees or by any issuer's reimbursement fees paid to
another for charges made by its cardholders.
11. Loan servicing fees.
a.
(1) 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 under subsection
4 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 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 under subsection 5 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.
b. 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 must include
the fees if the borrower is located in this state.
12. Receipts from services. The numerator of
the receipts factor includes receipts from the 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.
13. Receipts from investment assets and
activities and trading assets and activities.
a. Interest; dividends; net gains, but not
less than zero; and other income from investment assets and activities and from
trading assets and activities must 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. With respect to the investment and
trading assets and activities described in paragraphs 1 and 2, the receipts
factor must include the amounts described in those paragraphs.
(1) The receipts factor must 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.
(2) The receipts factor must 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, exceeds amounts paid in
lieu of interest, amounts paid in lieu of dividends, and losses from these
assets and activities.
b. 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 subdivision a which are attributable to this state.
(1) 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 income from these
assets and activities by a fraction, the numerator of which is the average
value of the 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.
(2) 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 of subdivision a
from such funds and 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 securities.
(3)
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 paragraph 1 or 2, attributable to this state and included in the
numerator is determined by multiplying the amount described in paragraph 2 of
subdivision a by a fraction, the numerator of which is the average value of the
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.
(4) For
purposes of this subdivision, average value must be determined using the rules
for determining the average value of tangible personal property set forth in
subsections 3 and 4 of section
81-03-09.1-03.
c. In lieu of using the method set
forth in subdivision b, the taxpayer may elect, or the commissioner 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 subdivision.
(1) 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.
(2) 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 of subdivision 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.
(3)
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 paragraphs 1 and 2, attributable to this state and included in the
numerator is determined by multiplying the amount described in paragraph 2 of
subdivision a 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.
d. If the taxpayer elects or is
required by the commissioner to use the method set forth in subdivision c, the
taxpayer shall use this method on all subsequent returns unless the taxpayer
receives prior permission from the commissioner to use, or the commissioner
requires, a different method.
e.
The taxpayer has 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 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.
If 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 regular place of business is in this state and one regular place of
business is outside this state, the asset or activity must 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, the investment
or trading policies and guidelines are presumed to be established at the
commercial domicile of the taxpayer.
14. All other receipts. The numerator of the
receipts factor includes all other receipts under the rules set forth in North
Dakota Century Code chapter 57-38.1 and North Dakota Administrative Code
81-03-09, to the extent not inconsistent with this section.
15. Attribution of certain receipts to
commercial domicile. All receipts that would be assigned under this section to
a state in which the taxpayer is not taxable must be included in the numerator
of the receipts factor if the taxpayer's commercial domicile is in this
state.
General Authority: NDCC
57-38-56
Law Implemented: NDCC 57-38, 57-38.1,
57-38.1-18
