reglab/statecodes huggingface dataset:
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.3 - Worldwide Method of Reporting › Section 81-03-05.3-01 - Definitions

Current through Supplement No. 393, July, 2024
As used in these sections, unless the context otherwise
				  requires:
1. "Commissioner" means the tax commissioner of the state of
				  North Dakota.
2. "Ownership interest" means voting interest.
3. "Taxpayer" means any corporation that is required to file
				  an income tax return in North Dakota.
4. "Transaction" means an event that causes a change in a
				  corporation's assets, liabilities, or owner's equity.
5. "Unitary business" means a group of corporations carrying
				  on activities the component parts of which transfer value among themselves
				  through the unities of ownership, operation, and use. Whether a group of
				  corporations is engaged in a unitary business depends on the facts and
				  circumstances of each case. However, if unity of ownership exists, any or all
				  of the following facts and circumstances will create a presumption that the
				  unities of operation and use exist and, therefore, that the corporations are
				  engaged in a unitary business:
a. All activities of the corporations in the group are in the
				  same general line or type of business.
b. The activities of the corporations in the group constitute
				  different steps in a vertically structured enterprise.
c. The group of corporations is characterized by centralized
				  management.
6. "United States" means the fifty states and the District of
				  Columbia.
7. "Unity of operation" means that the group of corporations
				  contributes to or receives benefits from functional integration or economies of
				  scale.
8. "Unity of ownership" means that the corporations in the
				  group are under the common control of a single corporation, which is also a
				  member of the worldwide group. Control is presumed to exist when the single
				  corporation owns, directly or indirectly, more than fifty percent of the
				  ownership interest of another corporation.
9. "Unity of use" means that the group of corporations
				  contributes to or receives benefits from centralized management and policy
				  formation.
10. "Worldwide combined report" means a method of determining
				  the amount of income which should be assigned to North Dakota on behalf of each
				  member of the worldwide group.
11. "Worldwide group" means the group of corporations engaged
				  in a unitary business. This group of corporations may be engaged in business
				  activity both within and without the United States or the group may be engaged
				  solely in business activity within the United States.
General Authority: NDCC
					 57-38-56
Law Implemented: NDCC
					 57-38,57-38.1
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.3 - Worldwide Method of Reporting › Section 81-03-05.3-02 - Method of filing

Current through Supplement No. 393, July, 2024
A taxpayer that is a member of a worldwide group shall file
				  its North Dakota income tax return using a worldwide combined report.
General Authority: NDCC
					 57-38-56
Law Implemented: NDCC 57-38, 57-38.1,
					 57-59
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.3 - Worldwide Method of Reporting › Section 81-03-05.3-03 - Elements of worldwide combined report

Current through Supplement No. 393, July, 2024
1. A taxpayer that is required to file using
				the worldwide method of reporting shall include the income and apportionment
				factors of the following unitary corporations in its combined report:
a. A parent corporation.
b. Any corporation incorporated in the United
				States.
c. Any corporation
				incorporated in a possession of the United States as described in Internal
				Revenue Code sections 931 through 936.
d. Any domestic international sales
				corporation as described in Internal Revenue Code sections 991 through
				994.
e. Any foreign sales
				corporation as described in Internal Revenue Code sections 921 through
				927.
f. Any export trade
				corporation as described in Internal Revenue Code sections 970 through
				972.
g. Any foreign corporation
				which derived gain or loss from disposing of a United States real property
				interest but only to the extent the gain or loss was recognized under Internal
				Revenue Code section 897.
h. Any
				foreign corporation.
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.4 - Federal Income Tax Deduction › Section 81-03-05.4-01 - Definitions

Current through Supplement No. 393, July, 2024
The following definitions are only applicable in computing a
				  taxpayer's federal income tax deduction pursuant to subdivision c of subsection
				  1 of North Dakota Century Code section
				  57-38-01.3:
1. "Apportionment factor" means a fraction, computed pursuant
				  to North Dakota Century Code chapter 57-38, 57-38.1, or 57-59, used to divide
				  business income of a multistate taxpayer among states.
2. "Federal" means the United States.
3. "Federal income tax deduction" means the adjustment
				  provided for in subdivision c of subsection 1 of North Dakota Century Code
				  section 57-38-01.3.
4. "Federal income tax liability" means the amount of federal
				  income tax, excluding any federal alternative minimum tax, computed under
				  chapter 1 of the Internal Revenue Code of 1986, as amended.
5. "Federal income tax ratio" means North Dakota taxable
				  income divided by income relating to federal income tax accrued.
6. "Income relating to federal income tax paid" means total
				  income less income relating to foreign tax credit.
7. "Income relating to foreign tax credit" means income
				  directly attributable to either the foreign tax credit or the possessions
				  credit.
8. "North Dakota taxable income" means income which has been
				  apportioned to North Dakota pursuant to North Dakota Century Code chapters
				  57-38, 57-38.1, and 57-59; provided, however, that no adjustment should be made
				  for the federal income tax deduction.
9. "Taxpayer" means a corporation that is required to file an
				  income tax return in North Dakota.
10. "Total income" means the federal taxable income of those
				  entities in the unitary group that are required to file a federal income tax
				  return during the period in question, plus or minus the adjustments provided
				  for in North Dakota Century Code section
				  57-38-01.3, with the exception of
				  subdivisions c and f of subsection 1 of North Dakota Century Code section
				  57-38-01.3.
General Authority: NDCC
					 57-38-57
Law Implemented: NDCC
					 57-38-01.3
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.4 - Federal Income Tax Deduction › Section 81-03-05.4-02 - Use of this rule

Current through Supplement No. 393, July, 2024
Any taxpayer entitled to claim a federal income tax deduction
				  shall compute the deduction in accordance with this chapter.
General Authority: NDCC
					 57-38-57
Law Implemented: NDCC
					 57-38-01.3
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.4 - Federal Income Tax Deduction › Section 81-03-05.4-03 - Computation - Part I

Current through Supplement No. 393, July, 2024
Any taxpayer claiming a federal income tax deduction shall
				  compute federal income tax liability on income which is taxable in North Dakota
				  in the following manner:
1. Consolidated federal income tax liability.
XXX
2. Separate company pro forma federal income tax
							 liability for all of the profit companies that are on the consolidated return
							 and included in the unitary group. Use the method described in Internal Revenue
							 Code section 1.1552-1(a)(2).
XXX
3. Separate company pro forma federal income tax
							 liability for all of the profit companies that are included on the consolidated
							 return.
XXX
4. Line 2 divided by line 3.
XXX
5. Unitary companies' share of consolidated federal
							 income tax liability (line 1 multiplied by line 4).
XXX
6. Federal taxable income of the unitary companies
							 which are included on the consolidated return.
XXX
7. Amount of federal taxable income reported on line 6
							 that is not taxable in North Dakota.
XXX
8. Federal taxable income attributable to North Dakota
							 (line 6 minus line 7).
XXX
9. Line 8 divided by line 6.
XXX
10. Consolidated federal income tax liability on
							 income which is taxable in North Dakota (line 5 multiplied by line 9).
XXX
General Authority: NDCC
					 57-38-57
Law Implemented: NDCC
					 57-38-01.3
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.4 - Federal Income Tax Deduction › Section 81-03-05.4-04 - Computation - Part II

Current through Supplement No. 393, July, 2024
1. Any taxpayer
				that is filing as a member of a worldwide unitary group and claiming a foreign
				tax credit on its federal return shall compute its federal income tax deduction
				by multiplying the result of subsection 10 of section
				81-03-05.4-03 by the federal
				income tax ratio. However, this subsection cannot be used if either or both
				North Dakota taxable income or income relating to federal income tax paid is
				less thanzero.
2. Any taxpayer not
				described in subsection 1 shall compute its federal income tax deduction by
				multiplying the result of subsection 10 of section
				81-03-05.4-03 by the apportionment
				factor.
General Authority: NDCC
					 57-38-57
Law Implemented: NDCC
					 57-38-01.3
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.4 - Federal Income Tax Deduction › Section 81-03-05.4-05 - Additional provisions

Current through Supplement No. 393, July, 2024
1. If members of a
				unitary group filed more than one federal income tax return, subsections 1
				through 10 in section
				81-03-05.4-03 must be repeated for
				each federal income tax return and the result totaled before application of the
				income tax ratio or apportionment factor in
				81-03-05.4-04.
2. A taxpayer may exclude subsections 1
				through 4 in section
				81-03-05.4-03 when:
a. A North Dakota return is filed using the
				combined report method and all corporations included in the federal
				consolidated return are included in the combined report.
b. A corporation does not file a federal
				consolidated return.
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-05.5 - Deduction and Credit for Alternative Minimum Income Tax › Section 81-03-05.5-02 - Deduction for federal alternative minimum tax

Current through Supplement No. 393, July, 2024
The following provisions are applicable for purposes of
				  interpreting subdivision c of subsection 1 of North Dakota Century Code section
				  57-38-01.3:
1.
Definitions.
The following
				definitions are applicable in computing a taxpayer's federal alternative
				minimum tax deduction:
a. "Apportionment
				factor" means a fraction, computed pursuant to North Dakota Century Code
				chapter 57-38, 57-38.1, or 57-59, used to divide business income of a
				multistate taxpayer among states.
b. "Disallowed federal alternative minimum
				tax" means the amount of federal alternative minimum tax for which a taxpayer
				did not receive a state income tax deduction pursuant to subdivision c of
				subsection 1 of North Dakota Century Code section
				57-38-01.3.
c. "Federal" means the United States.
d. "Federal alternative minimum
				tax" means the amount of federal alternative minimum tax computed under chapter
				1 of the Internal Revenue Code of 1986, as amended.
e. "Federal income tax ratio" means North
				Dakota taxable income divided by income relating to federal income tax accrued.
f. "State alternative minimum tax
				deduction" means the amount of disallowed federal alternative minimum tax which
				a taxpayer is allowed to claim as a deduction for purposes of determining North
				Dakota taxable income.
g.
				"Taxpayer" means a corporation that is required to file an income tax return in
				North Dakota.
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-01 - General

Current through Supplement No. 393, July, 2024
The sections in this chapter are intended to set forth rules
				  concerning the application of the apportionment and allocation provisions of
				  the Uniform Division of Income for Tax Purposes Act, North Dakota Century Code
				  chapter 57-38.1, and article IV of the multistate tax compact, North Dakota
				  Century Code chapter 57-59.
The apportionment rules set forth herein are applicable to
				  any taxpayer having business income, regardless of whether or not the taxpayer
				  has nonbusiness income, and the allocation rules set forth herein are
				  applicable to any taxpayer having nonbusiness income, regardless of whether or
				  not the taxpayer has business income.
The only exception to these allocation and apportionment
				  rules contained herein are those set forth in sections
				  81-03-09-32,
				  81-03-09-33, and
				  81-03-09-34, pursuant to the
				  provisions of North Dakota Century Code section
				  57-38.1-18 and article IV(18) of
				  North Dakota Century Code section
				  57-59-01.
These sections are not intended to modify existing rules
				  concerning jurisdictional standards.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC 57-38.1,
				  57-59
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-02 - Definitions

Current through Supplement No. 393, July, 2024
As used in this chapter, unless the context otherwise
				  requires:
1. "Allocation" refers to the assignment of nonbusiness
				  income to a particular state.
2. "Apportionment" refers to the division of business income
				  between states by the use of a formula containing apportionment factors.
3. "Article IV" or any reference to the provisions thereof
				  means article IV, division of income of the multistate tax compact, North
				  Dakota Century Code section
				  57-59-01.
4. "Business activity" refers to the transactions and
				  activity occurring in the regular course of a particular trade or business of a
				  taxpayer.
5. "Internal Revenue Code" or any reference to the provisions
				  thereof means the "United States Internal Revenue Code of 1954, as amended", as
				  that term is defined in subsection 21 of North Dakota Century Code section
				  57-38-01.
6. "Taxpayer" means any corporation, partnership, firm,
				  association, governmental unit or agency, or person acting as a business entity
				  in more than one state.
7. "Uniform Division of Income for Tax Purposes Act" or any
				  reference to any provisions thereof means the Uniform Division of Income for
				  Tax Purposes Act as adopted by several of the states of the United States, and
				  the Uniform Division of Income for Tax Purposes Act as enacted in the
				  provisions of North Dakota Century Code chapter 57-38.1.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC 57-38.1,
				  57-59
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-03 - Business and nonbusiness income defined

Current through Supplement No. 393, July, 2024
Subsection 1 of North Dakota Century Code section
				  57-38.1-01 and article IV(1)(a) of
				  North Dakota Century Code section
				  57-59-01 define "business income"
				  as income arising from transactions and activity in the regular course of the
				  taxpayer's trade or business and includes income from tangible and intangible
				  property if the acquisition, management, and disposition of the property
				  constitute integral parts of the taxpayer's regular trade or business
				  operations. In essence, all income which arises from the conduct of trade or
				  business operations of a taxpayer is business income. For purposes of
				  administration of North Dakota Century Code chapter 57-38.1 and North Dakota
				  Century Code chapter 57-59, the income of the taxpayer is business income
				  unless clearly classifiable as nonbusiness income. Nonbusiness income means all
				  income other than business income.
The classification of income by the labels occasionally used,
				  such as manufacturing income, compensation for services, sales income,
				  interest, dividends, rents, royalties, gains, operating income, nonoperating
				  income, and so forth, is of no aid in determining whether income is business or
				  nonbusiness income. Income of any type or class and from any source is business
				  income if it arises from transactions and activity occurring in the regular
				  course of a trade or business. Accordingly, the critical element in determining
				  whether income is "business income" or "nonbusiness income" is the
				  identification of the transactions and activity which are the elements of a
				  particular trade or business. In general, all transactions and activities of
				  the taxpayer which are dependent upon or contribute to the operations of the
				  taxpayer's economic enterprise as a whole constitute the taxpayer's trade or
				  business and will be transactions and activity arising in the regular course of
				  and will constitute integral parts of a trade or business. See sections
				  81-03-09-04 and
				  81-03-09-08 for further
				  explanation of a trade or business.
General Authority: NDCC
					 57-38-56
Law Implemented: NDCC
					 57-38.1-01(1),
					 57-59-01
					 (art.IV(1)(a))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-06 - Proration of deductions

Current through Supplement No. 393, July, 2024
In most cases an allowable deduction of a taxpayer will be
				  applicable only to the business income arising from a particular trade or
				  business or to a particular item of nonbusiness income. In some cases an
				  allowable deduction may be applicable to the business income of more than one
				  trade or business or to several items of nonbusiness income. In such cases the
				  deduction shall be prorated among such trades or businesses and such items of
				  nonbusiness income in a manner which fairly distributes the deduction among the
				  classes of income to which it is applicable.
In filing returns with this state, if the taxpayer departs
				  from or modifies the manner of prorating any such deduction used in returns for
				  prior years, the taxpayer shall disclose in the return for the current year the
				  nature and extent of the modification.
If the returns or reports filed by a taxpayer with all states
				  to which the taxpayer reports under article IV of the multistate tax compact or
				  the Uniform Division of Income for Tax Purposes Act are not uniform in the
				  application or proration of any deduction, the taxpayer shall disclose in its
				  return to this state the nature and extent of the variance.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-01(1),
				  57-59-01
				  (art.IV(1)(a))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-07 - Apportionment

Current through Supplement No. 393, July, 2024
If the business activity in respect to any trade or business
				  of a taxpayer occurs both within and without this state, and if by reason of
				  such business activity the taxpayer is taxable in another state, the portion of
				  the net income or net loss arising from such trade or business which is derived
				  from sources within this state shall be determined by apportionment in
				  accordance with North Dakota Century Code sections
				  57-38.1-09 through
				  57-38.1-17 or article IV(9)
				  through IV(17) of North Dakota Century Code section
				  57-59-01.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-02,
				  57-59-01
				  (art.IV(2))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-08 - Combined report

Current through Supplement No. 393, July, 2024
If a particular trade or business carried on by a taxpayer
				  and one or more affiliated corporations, nothing in either North Dakota Century
				  Code chapter 57-38.1 or North Dakota Century Code chapter 57-59 or in this
				  article shall preclude the use of a "combined report" whereby the entire
				  business income of such trade or business is apportioned in accordance with
				  North Dakota Century Code sections
				  57-38.1-09 through
				  57-38.1-17 or article IV(9)
				  through IV(17) of North Dakota Century Code section
				  57-59-01.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-02,
				  57-59-01
				  (art.IV(2))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-09 - Allocation

Current through Supplement No. 393, July, 2024
Any taxpayer subject to the taxing jurisdiction of this state
				  shall allocate all of the taxpayer's nonbusiness income or loss within or
				  without this state in accordance with North Dakota Century Code sections
				  57-38.1-04 through
				  57-38.1-08 or article IV(4)
				  through IV(8) of North Dakota Century Code section
				  57-59-01.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-02,
				  57-59-01
				  (art.IV(2))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-10 - Consistency and uniformity in reporting

Current through Supplement No. 393, July, 2024
In filing returns with this state, if the taxpayer departs
				  from or modifies the manner in which income has been classified as business
				  income or nonbusiness income in returns for prior years, the taxpayer shall
				  disclose in the return for the current year, the nature and extent of the
				  modification.
If the returns or reports filed by a taxpayer for all states
				  to which the taxpayer reports under article IV of the multistate tax compact or
				  the Uniform Division of Income for Tax Purposes Act are not uniform in the
				  classification of income as business or nonbusiness income, the taxpayer shall
				  disclose in the taxpayer's return to this state the nature and extent of the
				  variance.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC 57-38.1,
				  57-59
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-11 - Taxable in another state - In general

Current through Supplement No. 393, July, 2024
Under both North Dakota Century Code section
				  57-38.1-02 and article IV(2) of
				  North Dakota Century Code section
				  57-59-01, the taxpayer is subject
				  to the allocation and apportionment provisions of North Dakota Century Code
				  chapter 57-38.1 and article IV of North Dakota Century Code section
				  57-59-01 if it has income from
				  business activity that is taxable both within and without this state. A
				  taxpayer's income from business activity is taxable without this state if such
				  taxpayer, by reason of such business activity, that is, the transactions and
				  activity occurring in the regular course of a particular trade or business, is
				  taxable in another state within the meaning of North Dakota Century Code
				  section 57-38.1-03 or article IV(3) of
				  North Dakota Century Code section
				  57-59-01. A taxpayer is taxable
				  within another state if it meets either one of two tests.
1. If by reason of business activity in
				another state the taxpayer is subject to one of the types of taxes specified in
				subsection 1 of North Dakota Century Code section
				57-38.1-03 or article IV(3)(a) of
				North Dakota Century Code section
				57-59-01; namely, a net income
				tax, a franchise tax measured by net income, a franchise tax for the privilege
				of doing business, or a corporate stock tax; or
2. If by reason of such business activity
				another state had jurisdiction to subject the taxpayer to a net income tax,
				regardless of whether or not the state imposes such a tax on the taxpayer.
A taxpayer is not taxable in another state with respect to a
				  particular trade or business merely because the taxpayer conducts activities in
				  such other state pertaining to the production of nonbusiness income or business
				  activities relating to a separate trade or business.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-03,
				  57-59-01
				  (art.IV(3))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-13 - Taxable in another state - When a state has jurisdiction to subject a taxpayer to a net income tax

Current through Supplement No. 393, July, 2024
The second test, that of either subsection 2 of North Dakota
				  Century Code section
				  57-38.1-03 or article IV(3)(b) of
				  North Dakota Century Code section
				  57-59-01 applies if the taxpayer's
				  business activity is sufficient to give the state jurisdiction to impose a net
				  income tax by reason of such business activity under the constitution and
				  statutes of the United States. Jurisdiction to tax is not present where the
				  state is prohibited from imposing the tax by reason of the provisions of Public
				  Law 86-272, 15 U.S.C.
				  381 - 385. In the case of any "state" as
				  defined in either subsection 8 of North Dakota Century Code section
				  57-38.1-01 or article IV(1)(h) of
				  North Dakota Century Code section
				  57-59-01, other than a state of
				  the United States or political subdivisions of such state, the determination of
				  whether such "state" has jurisdiction to subject the taxpayer to a net income
				  tax shall be made as though the jurisdiction standards applicable to a state of
				  the United States applied in that "state". If jurisdiction is otherwise
				  present, such "state" is not considered as without jurisdiction by reason of
				  the provisions of a treaty between that state and the United States.
Example: Corporation X is actively engaged in manufacturing
				  farm equipment in state A and in foreign country B. Both state A and foreign
				  country B impose a net income tax but foreign country B exempts corporations
				  engaged in manufacturing farm equipment. Corporation X is subject to the
				  jurisdiction of state A and foreign country B.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-03,
				  57-59-01
				  (art.IV(3))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-14 - Apportionment formula

Current through Supplement No. 393, July, 2024
All business income of each trade or business of the taxpayer
				  shall be apportioned to this state by use of the apportionment formula set
				  forth in either North Dakota Century Code section
				  57-38.1-09 or article IV(9) of
				  North Dakota Century Code section
				  57-59-01. The elements of the
				  apportionment formula are the property factor, see sections
				  81-03-09-15,
				  81-03-09-16,
				  81-03-09-17,
				  81-03-09-18,
				  81-03-09-19,
				  81-03-09-20, and
				  81-03-09-21; the payroll factor or
				  see sections
				  81-03-09-22,
				  81-03-09-23,
				  81-03-09-24, and
				  81-03-09-25; and the sales factor,
				  see sections
				  81-03-09-26,
				  81-03-09-27,
				  81-03-09-28,
				  81-03-09-29,
				  81-03-09-30, and
				  81-03-09-31, of the trade or
				  business of the taxpayer.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-09,
				  57-59-01
				  (art.IV(9))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-15 - Property factor - In general

Current through Supplement No. 393, July, 2024
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, stocks of goods, equipment, and
				  other real and tangible personal property but does not include coin or
				  currency.
Property used in connection with the production of
				  nonbusiness income shall be excluded from the property factor. Property used
				  both in the regular course of taxpayer's trade or business and in the
				  production of nonbusiness income shall be included in the factor only to the
				  extent the property is used in the regular course of taxpayer's trade or
				  business. The method of determining that portion of the value to be included in
				  the factor will depend upon the facts of each case. The property factor shall
				  reflect the average value of property includable in the factor. See section
				  81-03-09-21.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-10,
				  57-59-01
				  (art.IV(10))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-16 - Property factor - Property used for the production of business income

Current through Supplement No. 393, July, 2024
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. Property
				  held as reserves or standby facilities or property held as a reserve source of
				  materials shall be included in the factor. For example, a plant temporarily
				  idle or raw material reserves not currently being processed are includable 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 of the taxpayer 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 its conversion to the production of nonbusiness
				  income, its sale, or the lapse of an extended period of time, normally, five
				  years, during which the property is held for sale.
Example a: The taxpayer closed its manufacturing plant in
				  state X and held such property for sale. The property remained vacant until its
				  sale one year later. The value of the manufacturing plant is included in the
				  property factor until the plant is sold.
Example b: Same as example a except that the property was
				  rented until the plant was sold. The plant is included in the property factor
				  until the plant is sold.
Example c: The taxpayer closed its manufacturing plant and
				  leased the building under a five-year lease. The plant is included in the
				  property factor until the commencement of the lease.
Example d: The taxpayer operates a chain of retail grocery
				  stores. Taxpayer closed store A, which was then remodeled into three small
				  retail stores such as a dress shop, drycleaning, and barber shop, which were
				  leased to unrelated parties. The property is removed from the property factor
				  on the date the remodeling of store A commenced.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-10,
				  57-59-01
				  (art.IV(10))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-17 - Property factor - Consistency in reporting

Current through Supplement No. 393, July, 2024
In filing returns with this state, if the taxpayer departs
				  from or modifies the manner of valuing property, or of excluding or including
				  property in the property factor, used in returns for prior years, the taxpayer
				  shall disclose in the return for the current year the nature and extent of the
				  modification.
If the returns of reports filed by the taxpayer with all
				  states to which the taxpayer reports under article IV of the multistate tax
				  compact or the Uniform Division of Income for Tax Purposes Act are not uniform
				  in the valuation of property and in the exclusion or inclusion of property in
				  the property factor, the taxpayer shall disclose in the taxpayer's return to
				  this state the nature and extent of the variance.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-10,
				  57-59-01
				  (art.IV(10))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-18 - Property factor - Numerator

Current through Supplement No. 393, July, 2024
The numerator of the property factor shall include the
				  average value of the real and tangible personal property owned or 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 its property
				  factor in accordance with its regular accounting practices shall be included in
				  the numerator according to the state of destination. The value of mobile or
				  movable property such as construction equipment, trucks, or leased electronic
				  equipment which are located within and without this state during the tax period
				  shall be determined for purposes of the numerator of the factor on the basis of
				  total time within the state during the tax period. An automobile assigned to a
				  traveling employee shall be included in the numerator of the factor of the
				  state to which the employee's compensation is assigned under the payroll factor
				  or in the numerator of the state in which the automobile is licensed.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-10,
				  57-59-01
				  (art.IV(10))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-21 - Property factor - Averaging property values

Current through Supplement No. 393, July, 2024
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 tax commissioner may require or allow
				  averaging by monthly values if such method of averaging is required to properly
				  reflect the average value of the taxpayer's property for the tax period.
Averaging by monthly 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.
Example: The monthly value of the taxpayer's property was as
				  follows:
January.. $ 2,000.00
July ......
$ 15,000.00
February. 2,000.00
August....
17,000.00
March.... 3,000.00
September.
23,000.00
April.... 3,500.00
October...
25,000.00
May ...... 4,500.00
November..
13,000.00
June ..... 10,000.00
December..
2,000.00
$25,000.00
$ 95,000.00
Total
$120,000.00
The average value of the taxpayer's property includable in
				  the property factor for the income year is determined as follows:
$120,000.00 divided by 12 = $10,000.00
Averaging with respect to rented property is achieved
				  automatically by the method of determining the net annual rental rate of such
				  property as set forth in section
				  81-03-09-20.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-12,
				  57-59-01
				  (art.IV(12))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-21.1 - Property factor - Intangible drilling costs

Current through Supplement No. 393, July, 2024
Intangible drilling and development costs incurred by oil and
				  gas producing companies in connection with oil and gas properties must be
				  included in the property factor. Intangible drilling and development costs
				  include such elements as wages, fuel, repairs, hauling, draining, roadbuilding,
				  surveying, geological works, construction of derricks, tanks, pipelines, and
				  other physical structures necessary for the drilling of wells and their
				  preparation for the production of oil and gas, and supplies incident to and
				  necessary for the drilling of wells and clearing of ground.
The amount to be included in the property factor is the
				  amount capitalized for financial reporting purposes using the successful effort
				  accounting method. An election to expense intangible drilling costs for federal
				  income tax purposes has no effect on their inclusion in the property factor.
Unproven properties must be included in the property factor
				  until such time as they have been determined to be impaired and have been
				  expensed for book purposes.
All costs relating to exploratory wells that have been
				  capitalized and classified as uncompleted wells, equipment, and facilities
				  (wells in progress or wells in process) must be included in the property factor
				  until such time as the well is determined to be a dry hole and the costs have
				  been expensed for book purposes.
Delay rentals, which are not capitalized for book purposes,
				  are includable in the property factor at their net annual rental rate and are
				  not capitalized times eight.
General Authority: NDCC
					 57-38-56
Law Implemented: NDCC
					 57-38-12,
					 57-38-13,
					 57-38-14,
					 57-38.1-02,
					 57-38.1-10,
					 57-38.1-11,
					 57-38.1-12,
					 57-59-01
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-23 - Payroll factor - Denominator

Current through Supplement No. 393, July, 2024
The denominator of the payroll factor is the total
				  compensation paid everywhere during the tax period. Accordingly, compensation
				  paid to employees whose services are performed entirely in a state where the
				  taxpayer is immune from taxation, for example, by Public Law 86-272, is
				  included in the denominator of the payroll factor.
Example: A taxpayer has employees in its state of legal
				  domicile, state A, and is taxable in state B. In addition, the taxpayer has
				  other employees whose services are performed entirely in state C where the
				  taxpayer is immune from taxation by Public Law 86-272. As to these latter
				  employees, the compensation will be assigned to state C where their services
				  are performed, that is, included in the denominator, but not the numerator, of
				  the payroll factor, even though the taxpayer is not taxable in state C.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-13,
				  57-59-01
				  (art.IV(13))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-24 - Payroll factor - Numerator

Current through Supplement No. 393, July, 2024
The numerator of the payroll factor is the total amount paid
				  in this state during the tax period by the taxpayer for compensation. The tests
				  in either North Dakota Century Code section
				  57-38.1-14 or article IV(14) of
				  North Dakota Century Code section
				  57-59-01 to be applied in
				  determining whether compensation is paid in this state are derived from the
				  Model Unemployment Compensation Act. Accordingly, if compensation paid to
				  employees is included in the payroll factor by use of the cash method of
				  accounting or if the taxpayer is required to report such compensation under
				  such method for unemployment compensation purposes, it shall be presumed that
				  the total wages reported by the taxpayer to this state for unemployment
				  compensation purposes constitutes compensation paid in this state except for
				  compensation excluded under sections
				  81-03-09-22,
				  81-03-09-23, and
				  81-03-09-24. The presumption may
				  be overcome by satisfactory evidence that an employee's compensation is not
				  properly reportable to this state for unemployment compensation purposes.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-13,
				  57-59-01
				  (art.IV(13))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-25 - Payroll factor - Compensation paid in this state

Current through Supplement No. 393, July, 2024
Compensation is paid in this state if any one of the
				  following tests, applied consecutively, are met:
1. The employee's service is performed
				entirely within the state.
2. The
				employee's service is performed both within and without the state, but the
				service performed without the state is incidental to the employee's service
				within the state. The word "incidental" means any service which is temporary or
				transitory in nature, or which is rendered in connection with an isolated
				transaction.
3. If the employee's
				services are performed both within and without this state, the employee's
				compensation will be attributed to this state:
a. If the employee's base of operations is in
				this state; or
b. If there is no
				base of operations in any state in which some part of the service is performed,
				but the place from which the service is directed or controlled is in this
				state; or
c. If the base of
				operations or the place from which the service is directed or controlled is not
				in any state in which some part of the service is performed but the employee's
				residence is in this state.
The term "base of operation" is the place of more or less
				  permanent nature from which the employee starts the employee's work and to
				  which the employee customarily returns in order to receive instructions from
				  the taxpayer or communications from the employee's customers or other persons
				  or to replenish stock or other materials, repair equipment, or perform any
				  other functions necessary to the exercise of the employee's trade or profession
				  at some other point or points. The term "place from which the service is
				  directed or controlled" refers to the place from which the power to direct or
				  control is exercised by the taxpayer.
General Authority:
NDCC
				  57-38-56
Law Implemented:
NDCC
				  57-38.1-14,
				  57-59-01
				  (art.IV(14))
North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-26 - Sales factor - In general

Current through Supplement No. 393, July, 2024
1. Subsection 7 of
				North Dakota Century Code section
				57-38.1-01 defines the term
				"sales" to mean all gross receipts of the taxpayer not allocated under North
				Dakota Century Code sections
				57-38.1-04 through
				57-38.1-08 and article IV(1)(g) of
				North Dakota Century Code section
				57-59-01 defines the term "sales"
				to mean all gross receipts of the taxpayer not allocated under paragraphs 5
				through 8 of article IV. Thus, for the purposes of the sales factor of the
				apportionment formula for each trade or business of the taxpayer, the term
				"sales" means all gross receipts derived by the taxpayer from transactions and
				activities in the regular course of such trade or business. The following are
				rules for determining "sales" in various situations.
a. In the case of a taxpayer engaged in
				manufacturing and selling or purchasing and reselling goods or products,
				"sales" includes all gross receipts from the sales of such goods or products,
				or other property of a kind which would properly be included in the inventory
				of the taxpayer if on hand at the close of the tax period, held by the taxpayer
				primarily for sale to customers in the ordinary course of its trade or
				business. Gross receipts for this purpose means gross sales, less returns and
				allowances, and includes all interest income, service charges, carrying
				charges, or time-price differential charges incidental to such sales. Federal
				and state excise taxes, including sales taxes, shall be included as part of
				such receipts if such taxes are passed on to the buyer or included as part of
				the selling price of the product.
b. In the case of cost plus fixed fee
				contracts, such as the operation of a government-owned plant for a fee, "sales"
				includes the entire reimbursed cost, plus the fee.
c. In the case of a taxpayer engaged in
				providing services, such as the operation of an advertising agency, or the
				performance of equipment service contracts, research and development contracts,
				"sales" includes the gross receipts from the performance of such services
				including fees, commissions, and similar items.
d. In the case of a taxpayer engaged in
				renting real or tangible property, "sales" includes the gross receipts from the
				rental, lease, or licensing the use of the property.
e. In the case of a taxpayer engaged in the
				sale, assignment, or licensing of intangible personal property such as patents
				and copyrights, "sales" includes the gross receipts therefrom.
f. If a taxpayer derives receipts from the
				sale of equipment used in its business, such receipts constitute "sales". For
				example, a truck express company owns a fleet of trucks and sells its trucks
				under a regular replacement program. The gross receipts from the sale of the
				trucks are included in the sales factor.