Rhode Island Code of Regulations › Title 280 - Department of Revenue › Chapter 20 - Division of Taxation › Subchapter 25 - Business Corporation Tax › Part 8 - Nexus (280-RICR-20-25-8) › Section 280-RICR-20-25-8.8 - Combined Reporting Requirement for C-corporations and Combined Groups - Factor-Based Nexus Approach for Tax Years Beginning on or after January 1, 2015

Current through June 14, 2024
A. For tax years
				 beginning on or after January 1, 2015, all C-corporations that do business in
				 Rhode Island and are members in a combined group are subject to combined
				 reporting, whether the combined group does business in multiple states or only
				 in Rhode Island.
B. In such
				 situations, the C-corporation must, for Rhode Island tax purposes, include in
				 its combined report the income and apportionment factors of all members in its
				 combined group. As long as one member in a combined group has corporate income
				 tax nexus with Rhode Island and also engages in activities that exceed the
				 protection of  15 U.S.C. §§
											381 - 384  ( Public Law 86-272), then all
				 members in the combined group, including those protected from state taxation by
				  15 U.S.C. §§
											381 - 384  ( Public Law 86-272) and those that do not have
				 nexus with Rhode Island, must be included when calculating the combined group's
				 net income and apportionment factors. The Rhode Island receipts of a combined
				 group member that lacks nexus with Rhode Island or that is protected from Rhode
				 Island taxation by  15 U.S.C. §§
											381 - 384  ( Public Law 86-272) must
				 always be included in the numerator of an apportionment fraction on the
				 combined return, as set forth in Part 9 of this Subchapter (Apportionment of
				 Net Income).
C. The purpose of
				 apportionment in the context of a combined report is to determine the combined
				 group's Rhode Island source income, which is taxable. In determining the
				 combined group's taxable income in this manner, the Division of Taxation is
				 merely measuring the in-state activities of the combined group, and not
				 imposing a tax on members in the combined group that lack nexus with Rhode
				 Island or that are protected from Rhode Island taxation by  15 U.S.C.
				 §§
											381 - 384  ( Public Law 86-272). After determining through such an
				 apportionment formula the amount of a combined group's net income apportioned
				 to Rhode Island, combined group net income is solely attributed to and tax is
				 solely imposed on those members in the combined group that have corporate
				 income tax nexus with Rhode Island.
D. Examples
1. Corporations M, N, and O, all foreign
				 corporations, are engaged in a unitary business and are members in the same
				 combined group. Only Corporation M has nexus with Rhode Island. The combined
				 group of Corporations M, N, and O must file a combined report with Rhode Island
				 as a single taxpayer, including the receipts of Corporations N and O that are
				 attributable to Rhode Island in the numerator of the combined group's
				 apportionment formula, without regard to whether Corporations N or O have nexus
				 with Rhode Island or are protected from state taxation under  15 U.S.C.
				 §§
												381 - 384  ( Public Law 86-272). The apportioned Rhode Island income
				 will then be attributed to taxable members in the combined group, as set forth
				 in Part 9 of this Subchapter (Apportionment of Net Income).
2. Books.com is a corporation operating a
				 website and internet business headquartered in New York with no physical
				 presence in Rhode Island. It has an affiliated corporation, Booksellers, Inc.
				 which has three stores in Rhode Island. The two corporations share common
				 ownership, cross marketing, book return policy, and gift card/customer loyalty
				 program, and are therefore engaged in a unitary business. As a result, the
				 businesses are subject to mandatory combined reporting in Rhode Island and must
				 file a combined return as a combined group. The Rhode Island sales of Books.com
				 would be included in the numerator of the combined group's sales factor. In
				 order to determine the amount of the combined group's net income apportioned to
				 Rhode Island, it is not necessary for the Books.com corporation to have nexus
				 with Rhode Island.