Code of Massachusetts Regulations › 830 CMR - DEPARTMENT OF REVENUE › Title 830 CMR 63.00 - Taxation of corporations › Section 63.38.2 - Apportionment of Income of Airlines

Current through Register 1525, July 5, 2024
(1)
General
. If an airline has income derived from
			 business carried on both within and outside Massachusetts, the Commissioner
			 shall determine the amount of the airline's income derived from business
			 carried on within Massachusetts pursuant to M.G.L. c. 63, § 38, and
			 applicable regulations, in particular
			 830 CMR
			 63.38.1, except to the extent that
			 830 CMR
			 63.38.1 and the applicable regulations are
			 modified pursuant to 830 CMR 63.38.2. 830 CMR 63.38.2, has been issued pursuant
			 to the commissioner's authority under M.G.L. c. 63, § 38(j).
830 CMR 63.38.2 states rules for determining the property
				factor and the payroll factor of the apportionment formula that applies to
				airlines, because the apportionment provisions of M.G.L. c. 63, § 38 are
				not reasonably adapted under the Apportionment of Income regulation,
				830 CMR
				63.38.1, to approximate the net income
				derived from business carried on within Massachusetts by an airline with
				respect to the property and payroll factors. The rules for determining the
				sales factor for an airline under the Apportionment of Income regulation,
				830 CMR
				63.38.1(9), particularly at
				830 CMR
				63.38.1(9)(d)4.b.iii.,
				however, are reasonably adapted to approximate such income with respect to the
				sales factor, and are thus not restated in 830 CMR 63.38.2.
See
also,
				830 CMR
				63.38.1(9)(d)1.h.
				("Industry-specific Alternative Apportionment Rules").
Once the property and payroll factors of the apportionment
				formula for an airline are determined under the provisions of 830 CMR 63.38.2,
				a taxpayer will use those factors in calculating its apportionment percentage
				under M.G.L. c. 63, § 38, and the applicable regulations.
A taxpayer may have characteristics of an airline, a courier
				and package delivery service, as defined in
				830
				CMR 63.38.4, and/or a motor carrier, as
				defined in
				830 CMR
				63.38.3, as in the example of a taxpayer that
				accepts and delivers a package using both air and ground transportation. In
				such cases, the Apportionment of Income of Courier and Package Delivery
				Services regulation,
				830
				CMR 63.38.4, applies.
(2)
Definitions
.
Aircraft Ready for Flight
, aircraft in
				the possession of the airline that are available for service on its
				routes.
Airline
, any business entity that, for
				compensation, transports passengers or freight by air.
Departure
, a take-off by an aircraft
				with passengers or freight.
Flight Personnel
, the air crew aboard
				an aircraft assisting in the operations of the aircraft or the welfare of
				passengers while in the air.
Nonflight Personnel
, all employees
				other than flight personnel.
(3)
Determining Property and
			 Payroll Factors for Airline Corporations
.
(a)
Property Factor
.
			 An airline's property factor is a fraction, the numerator and denominator of
			 which are determined according to 830 CMR 63.38.2(3)(a)1. through 5.
1. The denominator of the property factor is
			 the average value of all of the airline's real and tangible personal property
			 owned, rented, or leased, and used during the taxable year. All property values
			 are determined according to the rules of M.G.L. c. 63, § 38, and
			 830 CMR
			 63.38.1.
2. The numerator of the property factor shall
			 be the sum of the following two amounts:
a.
			 the average value of the real and tangible personal property of the airline,
			 other than aircraft ready for flight, situated in Massachusetts; and
b. the average value of the aircraft ready
			 for flight owned or rented and used by the airline in Massachusetts.
3. The average value of the
			 aircraft ready for flight owned or rented and used by the airline in
			 Massachusetts shall be computed separately for each type of aircraft operated
			 by the airline. For each type of aircraft, the value shall consist of the total
			 average value of that type of aircraft ready for flight owned by the airline,
			 multiplied by the percentage of departures of the airline, of that aircraft
			 type, taking place within Massachusetts.
4. Property in the possession of an airline
			 under the terms of a lease, which is treated as a lease for federal income tax
			 purposes by operation of provisions contained or previously contained in 26
			 U.S. Code § 168 (the Internal Revenue Code), shall be treated as owned,
			 not rented, by the airline.
5.
Example 1
. During the taxable year, Wingit Airways
			 owned real and tangible personal property, other than aircraft ready for
			 flight, with an average value of $20,000,000. Of this property, a portion with
			 an average value of $10,000,000 was located in Massachusetts. Wingit also owned
			 ten Boeing 727-200s and five Lockheed L1011-500s. The total average value of
			 the 727-200s ready for flight was $90,000,000 and the total average value of
			 the L1011-500s ready for flight was $150,000,000. Wingit's 727-200s made 2,000
			 departures during the taxable year, of which 1,000 occurred in Massachusetts,
			 and Wingit's L1011-500s made 1200 departures during the taxable year, of which
			 800 occurred in Massachusetts. The numerator of Wingit's property factor
			 consists of $10,000,000 (the average value of the airline's real and tangible
			 personal property other than aircraft ready for flight located in
			 Massachusetts) plus $45,000,000 (the total average value of Wingit's 727-200s
			 ready for flight, multiplied by the proportion of the airline's departures of
			 that aircraft type occurring in Massachusetts, namely 50%) plus $100,000,000
			 (the total average value of Wingit's L1011-500s ready for flight, multiplied by
			 the proportion of the airline's departures of that aircraft type occurring in
			 Massachusetts, namely 66.67%). The denominator of the property factor is
			 $260,000,000, the total value of Wingit's real and tangible personal property,
			 including aircraft ready for flight. Thus, Wingit's property factor equals:
$10,000,000 + $45,000,000 + $100,000,000, / $260,000,000
or .5962.