Rhode Island Code of Regulations › Title 280 - Department of Revenue › Chapter 20 - Division of Taxation › Subchapter 25 - Business Corporation Tax › Part 15 - Treatment of Repatriated Income 2017 (280-RICR-20-25-15) › Section 280-RICR-20-25-15.7 - Dividend Received Deduction

Current through June 14, 2024
A. C Corporations
1. Rhode Island Net Income. A C-corporation
				 that receives Net 965 Income attributable to a foreign corporation subsidiary
				 must include such income in Rhode Island income, subject to the provisions of
				 this regulation regarding DRDs, intercompany eliminations, apportionment, and
				 other matters.
2. Other Includible
				 Income. Net 965 Income is includible in income and no DRD applies if the Net
				 965 Income is attributable to a foreign corporation subsidiary that is treated
				 as a member of a combined group with the corporation that recognizes such
				 income only to the extent of such foreign corporation subsidiary's U.S. source
				 income and factors as discussed in §
											10.7(H)(2)(a)     of this Subchapter.
a. Example: Alpha Corp is
				 a domestic C corporation member of a Rhode Island combined group that also
				 includes the U.S.-source items of Alpha Corp's 100% owned subsidiary Bravo
				 Corp, a foreign corporation, pursuant to §
												10.7(H)(2)(a)     of this Subchapter. Alpha Corp recognizes $350,000 in Net 965 Income
				 attributable to Bravo Corp. Alpha Corp would include in Rhode Island taxable
				 income the entire $350,000 Net 965 Income with no DRD offset, and the combined
				 group return would not eliminate as an intercompany item any portion of the
				 $350,000.
3.
				 Intercompany Eliminations. Under the Division's Combined Reporting regulation
				 (Part 10 of this Subchapter), Net 965 Income includible in Rhode Island income
				 that is attributable to any foreign corporation subsidiary that is a member of
				 a combined group with the corporation that recognizes such Net 965 Income
				 should be eliminated from a combined return as an item of intercompany income
				 only to the extent such Net 965 Income is attributable to accumulated deferred
				 foreign income earned by the foreign corporation subsidiary during periods in
				 which it was a combined group member. Accordingly, to the extent such Net 965
				 Income is attributable to accumulated deferred foreign income earned by the
				 foreign corporation subsidiary during periods in which it was not a combined
				 group member, the US corporation recognizing such income will include the
				 income in Rhode Island taxable income.
a.
				 Example: Hotel Corp is a domestic C corporation member of a Rhode Island
				 combined group that also includes its 100% owned subsidiary India Corp, a
				 foreign corporation. Hotel Corp and India Corp became Rhode Island combined
				 group members together commencing on January 1, 2015, and were not Rhode Island
				 combined group members with each other prior to that date. Hotel Corp
				 recognizes $300,000 in Net 965 Income. $25,000 of such Net 965 Income is
				 attributable to accumulated deferred foreign income earned by India Corp on or
				 after January 1, 2015. Hotel Corp and the combined group would include $275,000
				 of the Net 965 Income in Rhode Island taxable income with no elimination or DRD
				 offset, and the combined group would eliminate $25,000 of the Net 965 Income as
				 an intercompany item.
4.
				 Unitary Foreign Corporation Subsidiary. No DRD applies to Net 965 Income
				 includible in Rhode Island income that is attributable to an Unitary Foreign
				 Corporation Subsidiary.
a. Example: Charlie
				 Corp and Delta Corp are C corporation members of a Rhode Island combined group.
				 Echo Corp is a foreign corporation that is not a member of the combined group
				 due to the water's edge rules, is owned 80% by Charlie Corp, and is engaged in
				 a unitary business with Charlie Corp and Delta Corp. Charlie Corp in tax year
				 2017 for federal income tax purposes recognizes $100,000 in 965 Income
				 attributable to Echo Corp, offset by
				  26 U.S.C. §
													965(c) deductions totaling $30,000, resulting in Net 965 Income of $70,000. Charlie
				 Corp makes a
				  26 U.S.C. §
													965(h) election to pay the 965 net tax liability in installments for federal tax
				 purposes. Because Echo Corp is more than 50% owned by group member Charlie Corp
				 and is engaged in a unitary business with the group, it would be a member of
				 the Rhode Island combined group but for the water's edge rules. Therefore, the
				 combined group return would include as an item of income $70,000 in Net 965
				 Income, and no DRD would apply. Despite Charlie Corp's election under
				  26 U.S.C. §
													965(h), the
				 entire $70,000 must be included in the 2017 combined return and any additional
				 Rhode Island tax due as a result of the $70,000 income item is not
				 deferred.
5. Nonunitary
				 Foreign Corporation Subsidiary. If a corporation recognizes Net 965 Income
				 includible in Rhode Island income, attributable to a Nonunitary Foreign
				 Corporation Subsidiary, such Net 965 Income is entitled to a DRD equal to the
				 DRD that would be available under federal income tax law as incorporated into
				 Rhode Island tax computations if such subsidiary were a domestic rather than a
				 foreign entity and the includible Net 965 Income was a dividend.
a. Example: Foxtrot Corp and Golf Corp are C
				 corporation members of a Rhode Island combined group. Hotel Corp is a foreign
				 corporation that is not a member of the combined group, is owned 70% by Foxtrot
				 Corp, and is not engaged in a unitary business with Foxtrot Corp and Golf Corp.
				 Foxtrot Corp in tax year 2017 for federal income tax purposes recognizes
				 $200,000 in 965 Income attributable to Hotel Corp, offset by
				  26 U.S.C. §
													965(c) deductions totaling $70,000, resulting in Net 965 Income of $130,000. Even
				 though Hotel Corp is more than 50% owned by group member Foxtrot Corp, Hotel
				 Corp is not engaged in a unitary business with the group members and therefore
				 would not be a member of the Rhode Island combined group even if the water's
				 edge rules did not apply. As a result, the combined group return would include
				 as an item of income $130,000 in Net 965 Income but a DRD of $104,000 would be
				 available on the group return (80% of the Net 965 Income). If the facts are the
				 same except that Hotel Corp is owned 10% by Foxtrot Corp, the combined group
				 return would include as an item of income $130,000 in Net 965 Income but a DRD
				 of $91,000 would be available on the group return (70% of the Net 965
				 Income).
6. Dividend
				 Income from Pass-Through Entity. A corporation may recognize Net 965 Income as
				 a result of an allocation of such income from a pass-through entity that
				 directly or through tiers of other pass-through entities owns the deferred
				 foreign income corporation giving rise to such Net 965 Income. The corporation
				 must include any such allocation of Net 965 Income in Rhode Island income. The
				 availability of a DRD to such corporation shall be determined by applying the
				 principles of §
											15.7(A)     of
				 this Part to the relationship between the corporation and the foreign
				 corporation under the Division's Combined Reporting regulation (Part 10 of this
				 Subchapter).
a. Example: Juliett Corp is a C
				 corporation that files a separate Rhode Island return. Juliett Corp owns an 80%
				 interest in limited partnership Kilo, LP, which owns a 70% interest in foreign
				 corporation Lima Corp. Kilo, LP recognizes $150,000 in 965 income attributable
				 to Lima Corp, offset by
				  26 U.S.C. §
													965(c) deductions totaling $30,000, resulting in Net 965 Income of $120,000. Kilo, LP
				 issues to Juliett Corp a Form K-1 allocating 80% x $120,000 = $96,000 in Net
				 965 Income. Juliett Corp and Lima Corp are not engaged in a unitary business
				 and therefore if the water's edge rules did not apply would not file a combined
				 return, irrespective of what percentage of Lima Corp is deemed to be owned by
				 Juliett Corp for purposes of the combined return common ownership test. Juliett
				 Corp would include in Rhode Island Income $96,000 in allocated Net 965 Income,
				 offset by a DRD of $96,000 x 80% = $76,800.