Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 25 - Business Corporation Tax
Part 15 - Treatment of Repatriated Income 2017 (280-RICR-20-25-15)
Section 280-RICR-20-25-15.8 - Apportionment
Universal Citation: 280 RI Code of Rules 20 25 15.8
Current through September 18, 2024
A. Apportionment shall be governed by the Division's Combined Reporting (Part 10 of this Subchapter) and Apportionment of Net Income (Part 9 of this Subchapter) regulations, which shall treat the Net 965 Income like dividend income and apply as follows:
1. A taxpayer that recognizes Net 965 Income
and uses a single sales factor to apportion income shall include in receipts
for apportionment purposes the Net 965 Income amount, as reduced by any DRD
granted under this regulation. The taxpayer shall treat the entirety of such
amount as receipts from the taxpayer's activities or transactions outside of
Rhode Island and therefore shall include such amount in the denominator but not
numerator of the single sales factor.
a.
Example: Mike Corp and November Corp are C corporation members of a Rhode
Island combined group. Oscar Corp is a foreign corporation that is not a member
of the combined group, is owned 70% by Mike Corp, and is not engaged in a
unitary business with Mike Corp and November Corp. In tax year 2017 Mike Corp
recognizes for federal tax purposes $200,000 in 965 Income and $50,000 in
26 U.S.C. §
965(c) deductions attributable to Oscar Corp, resulting in Net 965 Income of $150,000.
For Rhode Island tax purposes, the $150,000 of 965 Net Income is included in
the combined return of Mike Corp and November Corp which the combined group
properly offsets with an 80% DRD of 80% x $150,000 = $120,000, such that the
income attributable to
26 U.S.C. §
965 included in the Rhode
Island apportioned tax base is $150,000 - $120,000 = $30,000. Mike Corp, and
thus the combined group, include in the single sales factor $30,000 as a
non-Rhode Island receipt, included in the denominator but not the numerator of
the factor.
2. A
taxpayer that recognizes Net 965 Income and uses three-factor apportionment
shall include as receipts in the sales factor of the apportionment factor the
Net 965 Income amount, reduced by any DRD granted under this regulation. The
taxpayer shall treat the entirety of such amount as receipts from the
taxpayer's activities or transactions outside of Rhode Island and therefore
shall include such amount in the denominator but not numerator of the sales
factor. The Net 965 Income shall not affect the taxpayer's computation of the
payroll factor or the property factor, subject to the taxpayer's right to
request alternative apportionment under R.I. Gen. Laws §
44-11-15.
a. Example: Domestic limited partnership
Papa, LP owns a 35% interest in foreign corporation Quebec Corp. Papa LP in tax
year 2017 for federal income tax purposes recognizes $250,000 in 965 Income
attributable to Quebec Corp, offset by
26 U.S.C. §
965(c) deductions totaling $100,000, resulting in Net 965 Income of $150,000. Papa, LP
includes $150,000 with no DRD offset in its Rhode Island income subject to
apportionment. Papa, LP receives no DRD because it is a pass-through entity
that is not entitled to a DRD under Rhode Island law. Papa, LP in the sales
factor of its three-factor apportionment factor includes $150,000 as a
non-Rhode Island receipt included in the denominator but not the numerator, but
Papa, LP's payroll and property factors are unaffected by the 965 Income or its
ownership interest in Quebec Corp.
3. No portion of Net 965 Income may be
included in sales factor receipts for purposes of single sales factor
apportionment or three-factor apportionment unless it is included in
apportionable Rhode Island taxable income and is not eliminated by a combined
return intercompany elimination or offset by a DRD.
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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