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:
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.