Iowa Administrative Code › Agency 701 - Revenue Department › Title VI - Corporation Income Tax › Chapter 503 - Allocation and Apportionment › Rule 701-503.2 - Allocation or Apportionment of Investment Income

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Investment business
				income.
The classification of investment income by the labels
				customarily given them, such as interest, dividends, rents, and royalties, is
				of no aid in determining whether that income is business or nonbusiness income.
				Interest, dividends, rents, royalties, and other investment income shall be
				apportioned as business income to the extent the income was earned as a part of
				a corporation's unitary business, a portion of which is conducted in Iowa.
Mobil Oil Corp. v. Commissioner of Taxes,
455 U.S.
				425 (1980);
ASARCO, Inc. v. Idaho
				State Tax Commission,
458 U.S.
				307,
				73 L.Ed.2d 787, 102 S.Ct. 3103
				(1982);
F. W. Woolworth Co. v. Taxation and Revenue Dept.,
458 U.S.
				354,
				73 L.Ed.2d 819, 102 S.Ct. 3128
				(1982);
Container Corporation of America v. Franchise Tax
				Board,
463 U.S.
				159,
				77 L.Ed.2d 545, 103 S.Ct. 2933
				(1983). Whether investment income is part of a corporation's unitary business
				income depends upon the facts and circumstances in the particular situation.
				The burden of proof is upon the taxpayer to show that the treatment of
				investment income on the return as filed is proper. There is a rebuttable
				presumption that an affiliated group of corporations in the same line of
				business have a unitary relationship, although that is not the only element
				used in determining unitariness.
(2)
Inclusion in the apportionment
				factor.
a.
Income which must
				be included.
All investment business income described in subrule
				54.2(3), including capital gains or losses, shall be included in the
				computation of the denominator of the business activity formula if the income
				is derived from intangible property that has become an integral part of some
				business activity occurring regularly in or outside of Iowa. See 701-subrule
				52.1(4).
b.
Income included
				by election.
All other investment business income, including capital
				gains or losses, described in subrule 54.2(3) may at the taxpayer's election be
				included in the computation of the denominator of the business activity formula
				provided, however, that a taxpayer cannot elect to exclude or include
				investment business income where the election would result in an understatement
				of net income reasonably attributable to Iowa. A taxpayer cannot elect to
				include some investment business income in and exclude other investment
				business income from the business activity formula. The election applies to all
				investment business income of the taxpayer subject to the election.
(1) Written election. If the taxpayer has
				investment income which is deemed to be business income under the provisions of
				this rule, a written election shall be made with the taxpayer's income tax
				return in the first year in which the taxpayer has such income. The election
				must state whether the taxpayer wishes to include or exclude investment income
				which is deemed to be business income under the provisions of this rule in the
				computation of the business activity formula. The election shall be signed by a
				duly authorized officer of the corporation. The election is binding on all
				future tax years unless the taxpayer is granted permission by the department to
				change the election. If the taxpayer fails to make a written election, the fact
				that investment business income was or was not included in the computation of
				the business activity formula shall be deemed to be the taxpayer's election for
				all future tax years.
(2) Changing
				the election. If a taxpayer wishes to change the taxpayer's election to include
				or exclude investment business income in the taxpayer's Iowa apportionment
				factor, the taxpayer must request the department's permission to change the
				election not less than 90 days prior to the due date of the return for the tax
				year in which the taxpayer wishes the change to take effect. Permission to make
				a change in this election shall only be granted if the department determines
				that the change will more accurately reflect the net income reasonably
				attributable to Iowa.