Mississippi Administrative Code › Title 35 - Department of Revenue › Part 3 - Income and Franchise › Subpart 08 - Corporations › Chapter 06 - Multistate Taxation › Section 35-3-08-06-402 - Computation of Basis of Filing › Section 35-3-08-06-402.09 - Apportionment Factors

Current through June 25, 2024
1. Property Factor
					 Defined.
a. Except as otherwise provided, the
					 property factor of the apportionment formula for each trade or business of the
					 taxpayer shall include all real and tangible personal property owned or rented
					 by the taxpayer and used during the tax period in the regular course of such
					 trade or business. The term "real and tangible personal property" includes
					 land, buildings, machinery, stock of goods, equipment, and other real and
					 tangible personal property, but does not include such properties owned or
					 rented and used for general and administrative functions, transportation
					 equipment (automobiles, trucks, and trailers, aircraft and other mobile
					 equipment), coin or currency, or properties used in the production of
					 non-business or exempt income. The includable property in the property factor
					 shall include the average net book value of property owned, plus the value of
					 rented property computed as provided in the "valuation of rental property"
					 portion of this section of the Regulation.
b. PROPERTY USED IN THE PRODUCTION OF
					 BUSINESS INCOME. Property shall be included in the property factor if it is
					 actually used or is available for or capable of being used during the tax
					 period in the regular course of the trade or business of the taxpayer unless
					 expressly excluded. Property held as reserves or standby facilities or property
					 held as a reserve source of materials shall be included in the factor. Property
					 or equipment under construction during the tax period (except inventoriable
					 goods in process) shall be excluded from the factor until such property is
					 actually used in the regular course of the trade or business of the taxpayer.
					 If the property is partially used in the regular course of the trade or
					 business while under construction, the value of the property to the extent used
					 shall be included in the property factor. Property used in the regular course
					 of the trade or business of the taxpayer shall remain in the property factor
					 until its permanent withdrawal is established by an identifiable event such as
					 conversion to the production of non-business income, its sale or its
					 abandonment.
c. NUMERATOR. The
					 numerator of the property factor shall include rented by the taxpayer and used
					 in this state during the tax period in the regular course of the trade or
					 business of the taxpayer. Property in transit between locations of the taxpayer
					 to which it belongs shall be considered to be at the destination for purposes
					 of the property factor. Property in transit between a buyer and seller which is
					 included by a taxpayer in the denominator of his property factor in accordance
					 with his regular accounting practices shall be included in the numerator
					 according to the state of destination. The value of transportation equipment
					 such as automobiles, trucks and trailers, aircraft, etc. shall be excluded
					 completely from the property factor.
d. DENOMINATOR. The denominator of the
					 property factor is the total of such property described in the above three
					 paragraphs wherever located during the tax year.
e. VALUATION OF OWNED PROPERTY.
i. Property owned by the taxpayer shall be
					 valued at net book value.
As a general rule
"net book value
" is deemed
						to be the original cost of the property less the depreciation as reflected on
						the books of the taxpayer and includes the net book value of subsequent capital
						additions or improvements to the includable property as well as adjustment or
						partial disposition thereof, by reason of sale, exchange, abandonment,
						etc.
ii. Inventory of stock
					 of goods shall be included in the factor in accordance with the valuation
					 method acceptable for federal income tax purposes and used by the taxpayer for
					 book purposes.
iii. Property
					 acquired by gift or inheritance shall be included in the factor as its net book
					 value as reflected on the books of the taxpayer.
f. VALUATION OF RENTED PROPERTY. Property
					 rented by the taxpayer is valued at eight times the net annual rental rate. The
					 net annual rental rate for any item of rented property is the annual rental
					 rate paid by the taxpayer for such property, less the aggregate annual
					 subrental rates paid by subtenants of the taxpayer.
g. SUBRENTALS. Subrents are not deducted when
					 subrents constitute business income because the property which produces the
					 subrents is used in the regular course of a trade or business of the taxpayer
					 when it is producing such income.
h. ANNUAL RENTALS. "Annual rental rate" is
					 the amount paid as rental for property for a 12-month period. Where property is
					 rented for less than a 12-month period, the rent paid for the actual period of
					 rental shall constitute the "annual rental rate" for the tax period. Where a
					 taxpayer has rented property for a term of 12 or more months and the current
					 tax period covers a period of less than twelve months, the rent paid for the
					 short tax period shall be annualized. If the rental term is for less than 12
					 months, the rent shall not be annualized beyond its term. Rent shall not be
					 annualized because of the uncertain duration when the rental term is on a month
					 to month basis. Annual rent is the actual sum of money or other consideration
					 payable, directly or indirectly, by the taxpayer or for its benefit for the
					 used of the property. Leasehold improvements shall, for the purposes of the
					 property factor, be treated as property owned by the taxpayer regardless of
					 whether the taxpayer is entitled to remove the improvements or the improvements
					 revert to the lessor upon expiration of the lease. Hence, the net book value of
					 leasehold improvements shall be excluded in the factor.
i. AVERAGING PROPERTY. As a general rule the
					 average value of property owned by the taxpayer shall be determined by
					 averaging the values at the beginning and ending of the tax period. However,
					 the Commissioner may require or allow averaging by monthly values, or other
					 periodic values, if such method of averaging is required to property reflect
					 the average values of the taxpayer's property for the tax period. Averaging by
					 monthly values, or other periodic values, will generally be applied if
					 substantial fluctuations in the values of the property exist during the tax
					 period or where property is acquired after the beginning of the tax period or
					 disposed of before the end of the tax period. Averaging with respect to rented
					 property is achieved automatically by the method of determining the net annual
					 rental rate of such property.