Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 25 - Business Corporation Tax
Part 9 - Apportionment of Net Income (280-RICR-20-25-9)
Section 280-RICR-20-25-9.6 - Apportionment - Generally

Universal Citation: 280 RI Code of Rules 20 25 9.6

Current through September 18, 2024

A. Purpose of Apportionment. The purpose of apportionment is to determine the amount of income attributable to Rhode Island by any taxpayer under the Rhode Island General Laws.

B. Business Income vs. Non-Business Income. Rhode Island does not distinguish between business income and non-business income for formulary apportionment purposes.

C. Combined Group Members' Share of Tax. The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned to this state. Thus, only those members in a combined group that have corporate income tax nexus with Rhode Island shall be assessed a tax on the combined group's Rhode Island-apportioned net income. Any member in a combined group that lacks corporate income tax nexus with Rhode Island shall not be responsible for the tax assessed on the combined group.

D. Apportionment of Income Derived Entirely Within State. In the case of any taxpayer, including a C corporation, deriving all its income from sources within this state, or engaging in activities or transactions wholly within this state for the purpose of profit or gain, or where said taxpayer does not have a regular place of business outside of this state other than a statutory office, one hundred (100%) percent of its net income shall be apportioned to this state.

1. Note. For tax years beginning on or after January 1, 2015, any corporation that independently meets the criteria set forth in § 9.6(D) of this Part, but which is also a member in a combined group subject to R.I. Gen. Laws Chapter 44-11 that derives income from sources both within and outside of this state for the purpose of profit or gain, shall be included in the combined group's combined return.

2. Examples.
a. During the 2014 through 2016 tax years, Independent Man Corp., a Rhode Island C corporation unaffiliated with any other business entity, derives 100% of its income from the sale of yellow and green paper cups. For tax years 2014 through 2016, all of Independent Man Corp.'s income shall be apportioned to Rhode Island.

3. For tax year 2017, Independent Man Corp. is acquired by Lemon, Inc. and becomes part of a combined group with multiple members, not all of whom derive income entirely from Rhode Island sources. A combined return must be filed with the Division of Taxation on behalf of the combined group. The combined group derives only a portion of its income from Rhode Island sources, but Independent Man Corp. continues to derive 100% of its income from sources within Rhode Island. The combined group's income will be apportioned to Rhode Island as set forth in § 9.6(E)(3) of this Part and Independent Man Corp.'s income and apportionment information must be included on a schedule attached to the combined group's combined return.

E. Apportionment of Income Derived Partially within State.

1. Pre-2015. For tax years beginning before January 1, 2015, all taxpayers that derive their income from sources both within and outside of this state for the purpose of profit or gain, shall apportion net income to this state by means of a three-factor apportionment formula, using sales (receipts), property, and payroll, as set forth in R.I. Gen. Laws § 44-11-14(a), and as detailed in § 9.9 of this Part. In certain cases, a taxpayer may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6, as detailed in § 9.10 of this Part.

2. Example:
a. During tax year 2013, Quahog Jewelry LLC and Netop Corp. are separate business entities engaged in the manufacture, design, and sale of expensive charm bracelets derived from Rhode Island seashells. Both companies sell their wares in Rhode Island and also more widely throughout the United States. Quahog Jewelry LLC operates a manufacturing facility in Massachusetts, whereas Netop Corp. manufactures all of its bracelets in Rhode Island. Both companies own retail locations in Rhode Island and nowhere else. Because both companies - one an LLC and the other a corporation - derive income from sources both within and outside of this State in a pre-2015 tax year, they must both apportion their income according to a three-factor apportionment formula on the basis of sales, property and payroll, consistent with §§ 9.9 and 9.10 of this Part.
(1) Note. For tax years beginning before January 1, 2015, the existence of a combined group shall be disregarded, and a combined group shall not be considered a taxpayer within the meaning of this Regulation.

3. 2015 and Thereafter - C Corporations and Combined Groups. For tax years beginning on or after January 1, 2015, all C corporations and combined groups deriving income from sources both within and outside of this state, or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain, including those C corporations that are members in a combined group and those that are not members in a combined group, shall apportion net income to this state by means of an allocation fraction. The fraction shall be computed by means of a simple arithmetical operation employing a single factor that represents total receipts from sales or other sources during the taxable year which is attributable to the taxpayer's activities or transactions within this state during the taxable year, as set forth in R.I. Gen. Laws § 44-11-14(b), and as detailed § 9.8 of this Part. In limited cases, such C corporations may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11 - 14.6, and as detailed in § 9.11 of this Part.
a. Combined Group Tax Liability Determinations. When a C corporation subject to tax under R.I. Gen. Laws Chapter 44-11 is a member in a combined group, the corporation must determine the tax liability of the combined group and its own individual tax liability based upon the income and apportionment information of all members in the combined group, using a combined report as set forth in R.I. Gen. Laws § 44-11-4.1, and subject to exclusions therein, if any.

b. Federal Affiliated Groups. An affiliated group of C corporations, as defined in section 1504 of the Internal Revenue Code, may elect to be treated as a combined group with respect to the combined reporting requirement imposed by R.I. Gen. Laws § 44-11-4.1(a), as set forth in Tax Division's Combined Reporting Regulation, and subject to the statutory and regulatory conditions set forth therein.

4. 2015 and Thereafter - Other Taxpayers. For tax years beginning on or after January 1, 2015, any taxpayer that derives income from sources both within and outside of this state or engages in any activities or transactions both within and outside of this state for the purpose of profit or gain, but which is not:
a. a C corporation;

b. a combined group with a C corporation member; or

c. a member in a combined group with a C corporation member, shall apportion net income to this state by means of a three-factor apportionment formula, using sales (receipts), property, and payroll, as set forth in R.I. Gen. Laws § 44-11-14(a), and as detailed in § 9.9 of this Part. In the case of a combined group without a C corporation member, no combined report shall be filed on behalf of the combined group. In certain cases, a taxpayer subject to this provision may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6, and as detailed in § 9.10 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.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.