2023 Tennessee Code › Title 67 - TAXES AND LICENSES (§§ 67-1-101 — 67-10-107) › Chapter 4 - PRIVILEGE AND EXCISE TAXES (§§ 67-4-101 — 67-4-3206) › Part 20 - EXCISE TAX LAW OF 1999 (§§ 67-4-2001 — 67-4-2023) › Section 67-4-2013 - Apportionment - Special provisions

(a)
If the principal business in this state is that of a common carrier of persons or property for hire, then the appropriate ratios shall be as follows:
(1)
Railroads.
The ratio obtained by taking the arithmetical average of the following two (2) ratios:
(A)
The gross receipts from railway operations on business beginning and ending inside this state without entering or passing through any other state as compared with its entire gross receipts from such operations in and outside the state; and
(B)
The mileage owned and operated inside Tennessee, plus mileage leased and operated inside Tennessee, as compared with the total of such mileage in and outside the state;
(2)
Motor Carriers.
The ratio obtained by taking the arithmetical average of the following two (2) ratios:
(A)
The gross receipts from operations on business beginning and ending in this state without entering or passing through any other state as compared with its entire gross receipts from such operations in and outside the state; and
(B)
The ratio of the total franchise miles, or odometer miles, if there are no franchise miles, to which it holds or uses under lease, contract or otherwise, certificates of convenience and necessity from the interstate commerce commission or the department of safety inside the state, to the total franchise or odometer miles to which it holds or uses certificates from such commission or department, and like commissions, departments or agencies of other states, in and outside the state, all as shown by the annual reports made by such motor carrier to the various commissions, departments or agencies from which it holds certificates;
(3)
Rail and Motor Carriers.
Where the taxpayer is engaged in transporting passengers and property by both rail and motor, then the ratio of the sum of the miles in the state as computed under subdivisions (a)(1) and (2) to the sum of the miles under such subdivisions in and outside the state;
(4)
Pipelines.
The ratio obtained by taking the arithmetical average of the following two (2) ratios:
(A)
The gross receipts from operations on business beginning and ending inside this state without entering or passing through any other state as compared with its entire gross receipts from such operations inside and outside the state; and
(B)
The ratio of the pipeline miles owned, operated, or owned and operated inside the state to the miles of pipeline owned, operated or owned and operated inside and outside the state;
(5)
Air Carriers.
The ratio obtained by taking the arithmetical average of the following two (2) ratios:
(A)
The originating revenue in the state as compared with the entire originating revenue in and outside the state; and
(B)
The ratio of the total air miles flown in the state to the total air miles flown in and outside the state. "Air miles flown in the state" only includes miles in the state from flights originating from or ending in the state, or both originating from and ending in the state;
(6)
Air Express Carriers.
The ratio obtained by taking the arithmetical average of the following two (2) ratios:
(A)
The originating revenue inside the state as compared with the entire originating revenue in and outside the state; and
(B)
The ratio of the total air miles flown and ground miles traveled in the state to the total air miles flown and ground miles traveled in and outside the state. Air miles flown in the state shall only include miles in the state, from flights originating from or ending in the state, or both originating from and ending in the state. Ground miles traveled in the state or traveled in and outside the state shall only include miles traveled with respect to the actual common carriage of persons or property for hire; and
(7)
Barges.
The ratio obtained by taking the arithmetical average of the following two (2) ratios:
(A)
The revenue from the transportation of cargo loaded in this state as compared with the entire revenue from the transportation of cargo loaded in and outside the state; and
(B)
(i)
The ratio of the total miles operated in the state to the total miles operated in and outside the state. Miles operated in the state shall be fifty percent (50%) of the miles operated on the Mississippi River adjacent to the Tennessee shoreline, plus all miles operated on inland waterways within the state;
(ii)
"Mile operated" means one (1) mile of movement of each barge.
(b)
(1)
Notwithstanding any other provision of this part, net earnings of a financial institution that is not a member of a unitary group and therefore not filing a combined return, and that has business activities both in and outside this state, shall be apportioned by multiplying such earnings by the quotient of the institution's total receipts attributable to the transaction of business in Tennessee, as determined under subdivision (b)(3), divided by the institution's total receipts attributable to transacting business in all taxing jurisdictions, as determined under subdivision (b)(3). "Receipts" means all gross income derived from transactions and activities in the regular course of business, except that receipts from the disposition of assets such as securities and money market transactions are included to the extent of the net taxable gain on such transactions.
(2)
A unitary group shall have earnings apportioned to Tennessee that consists of the apportioned net earnings of the unitary group, as determined under subdivision (b)(1), including the receipts of those members of the unitary business that would not be subject to taxation in this state, if considered apart from the unitary group.
(3)
Receipts, as used in this section, shall be attributed to Tennessee as follows:
(A)
Receipts from the lease or rental of real or tangible personal property shall be attributed to Tennessee, if the property is located in Tennessee;
(B)
(i)
Interest income and other receipts from assets in the nature of loans or installment sales contracts, that are primarily secured by or deal with real or tangible personal property, shall be attributed to Tennessee, if the security or sale property is located in Tennessee. If any part of the sale property or property standing as security for the payment of the debt is located part in and part outside the state, only such proportion of the interest income or other receipts shall be attributed to Tennessee as the value of the property in the state bears to the whole property;
(ii)
"Value" means only that value that the property would command at a fair and voluntary sale. Value shall be determined at the time the loan is made and shall not vary from year to year. In the event additional real or tangible personal property is pledged as security, or otherwise covered under a loan or installment sales contract after the time the loan is made, the ratio based on the value of the property in the state compared to the whole property shall be adjusted;
(C)
Interest income and other receipts from consumer loans not secured by real or tangible personal property shall be attributed to Tennessee, if the loan is made to a resident of Tennessee, whether at a place of business, by a traveling loan officer, by mail, telephone or other electronic means;
(D)
Interest income and other receipts from commercial loans and installment obligations not secured by real or tangible personal property shall be attributed to Tennessee, if the proceeds of the loan are to be applied in Tennessee. If it cannot be determined where the funds are to be applied, the receipts are to be attributed to the state in which the business applied for the loan. As used in this subdivision (b)(3)(D), "applied for" means initial inquiry, including customer assistance in preparing the loan application, or submission of a completed loan application, whichever occurs first. For attribution purposes, "loan" does not include demand deposit clearing accounts, federal funds, certificates of deposit, and other similar wholesale banking instruments issued by other financial institutions;
(E)
All receipts and fee income from the issuance of letters of credit, acceptance of drafts, and other devices for assuring or guaranteeing a loan or credit, shall be attributed in the same manner as interest income and other receipts from the loan are attributed, as set out in subdivision (b)(3)(B), (b)(3)(C), or (b)(3)(D);
(F)
Interest income, merchant discount, other receipts, including service charges from financial institution credit card and travel and entertainment credit card receivables and credit card holders, and fees shall be attributed to the state to which the card charges and fees are regularly billed;
(G)
Receipts from the sale of an asset, tangible or intangible, shall be attributed in the same manner that the income from the asset would be attributed under this subsection (b);
(H)
Receipts equal to the net gain or income from the sale of a security made by a person who is a dealer in such security within the meaning of
26 U.S.C. § 475
shall be attributed to Tennessee if such person's customer is located in Tennessee and such receipt is not otherwise attributed under subdivision (b)(3)(G). For purposes of this subdivision (b)(3)(H), a customer is in this state if the customer is an individual, trust, or estate that is a resident of this state and, for all other customers, if the customer's commercial domicile is in this state. Unless the dealer has actual knowledge of the residence or commercial domicile of a customer during a taxable year, the customer shall be deemed to be a customer in this state if the billing address of the customer, as shown in the records of the dealer, is in this state;
(I)
Receipts from the performance of fiduciary and other services shall be attributed in accordance with §
67-4-2012(i)(1)(C)
;
(J)
Receipts from the issuance of traveler's checks, money orders or United States savings bonds shall be attributed to the state where such items are purchased;
(K)
Receipts from a participating financial institution's portion of participation loans shall be attributed as otherwise provided under this subsection (b). A participation loan is any loan in which more than one (1) lender is a creditor to a common borrower; and
(L)
Any other receipts not specifically attributed to Tennessee or to another taxing jurisdiction when applying this subsection (b) shall be attributed to Tennessee in the same proportion that the enumerated receipts are attributed to Tennessee under subdivisions (b)(3)(A)-(K).
(c)
Insurance companies shall apportion net earnings by a ratio of their premiums on policies, persons and property in and outside the state; however, foreign insurance companies, not domiciled in Tennessee, shall not consider nor include any annuity considerations as premiums for purposes of this section.
(d)
(1)
For tax years beginning prior to July 1, 2016, the net earnings of a captive REIT affiliated group shall be apportioned to this state based on property, payroll, and double weighted receipts as provided in §
67-4-2012(a)(1)
, including the factors of those members of the affiliated group that would not be subject to taxation in this state if considered apart from the affiliated group; provided, however, that dividends, receipts, and expenses resulting from transactions between members of the affiliated group shall be excluded for purposes of apportionment under this subdivision (d)(1).
(2)
For tax years beginning on or after July 1, 2016, the net earnings of a captive REIT affiliated group shall be apportioned to this state based on property, payroll, and triple weighted receipts as provided in §
67-4-2012(a)(2)
, including the factors of those members of the affiliated group that would not be subject to taxation in this state if considered apart from the affiliated group; provided, however, that dividends, receipts, and expenses resulting from transactions between members of the affiliated group shall be excluded for purposes of apportionment under this subdivision (d)(2).
Amended by 2015 Tenn. Acts, ch. 514, Secs.s 13, s 13, eff. 5/20/2015 and Secs.s 11, s 12 eff. 7/1/2016.
Amended by 2015 Tenn. Acts, ch. 514, s 10, eff. 7/1/2016.
Acts 1999, ch. 406, § 3; 2005, ch. 499, § 78; 2007 , ch. 602, § 13; 2010 , ch. 1134, § 12.