Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 25 - Business Corporation Tax
Part 10 - Combined Reporting (280-RICR-20-25-10)
Section 280-RICR-20-25-10.10 - Apportionment; Single Sales Factor; Market-Based Sourcing

Universal Citation: 280 RI Code of Rules 20 25 10.10

Current through September 18, 2024

A. For the convenience of taxpayers and their advisers, this § 10.10 of this Part summarizes apportionment information for entities that are part of a combined group and that are engaged in a unitary business for purposes of Rhode Island's combined reporting regime. For additional information, taxpayers and their advisers should refer to the Rhode Island Division of Taxation's regulations on apportionment and nexus.

B. For tax years beginning on or after January 1, 2015, all entities that are treated as C corporations for federal income tax purposes shall apportion net income to this state by means of a single factor representing total receipts - gross receipts - from sales and other applicable sources during the taxable year which are attributable to the entity's activities or transactions.

1. When income is reported or recognized by a pass-through entity to the combined group, only the sales (total receipts) of the pass-through entity are used for apportionment purposes at the group level.

C. The sales factor is the ratio of the taxpayer's receipts in this state to the taxpayer's total receipts everywhere during the taxable year. Thus, the numerator shall reflect total receipts from sales and other applicable sources during the taxable year which are attributable to the taxpayer's activities or transactions in this state - whether or not an entity has nexus with this state. The denominator shall reflect everywhere receipts.

D. Each member's share of the combined unitary income is the product of the combined unitary income and the member's sales factor ratio.

E. To summarize, a combined group subject to Rhode Island mandatory unitary combined reporting shall use the Finnigan method, single sales factor apportionment, and market-based sourcing in its calculations.

1. Entities that are not taxed as C corporations for federal income tax purposes shall use the cost-of-performance method in computing the sales factor in three-factor apportionment.

F. Finnigan Method

1. Rhode Island applies the Finnigan method for purposes of calculating the sales factor. For purposes of applying the Finnigan method, the entire combined group as a whole - whether a combined group, or an affiliated group making the federal consolidated election for Rhode Island combined reporting purposes - is treated as the taxpayer for apportionment purposes: All sales of members of the group attributable to Rhode Island are included in the sales factor numerator - regardless of whether an individual member of the group has nexus with Rhode Island.

G. Example: The following example illustrates the application of the Finnigan method for apportioning the combined income of a combined group.

Name of Entity

Rhode Island Receipts

Everywhere Receipts

Nexus With Rhode Island

Hotel Corporation

50

100

Yes

India Corporation

100

200

Yes

Juliet Corporation

100

200

No

Factor Total:

250

500

Finnigan apportionment includes all Rhode Island factor attributes whether entities do or do not have nexus with Rhode Island.

H. No apportionment

1. For purposes of Rhode Island's combined reporting regime, it is possible that all corporations comprising a combined group, which is engaged in a unitary business, derive all of their income from within Rhode Island. In other words, in such a case, none of the member corporations of the combined group has income that is taxable in another state. In such a situation, none of the corporations apportions income because none of the corporations has income from activities that are taxable in another state. Therefore, one hundred percent (100%) of the combined group's taxable income is taxable in Rhode Island.

I. The provisions of § 10.10 of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes (as described in § 10.9 of this Part).

Disclaimer: These regulations may not be the most recent version. Rhode Island may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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