(a) The property
factor is a fraction. The numerator of the fraction is the average value of
real property and tangible personal property rented to the taxpayer that is
located or used within this State during the taxable year, the average value of
the taxpayer's real and tangible personal property owned that is located or
used within this State during the taxable year, and the average value of the
taxpayer's loans and credit card receivables that are located within this State
during the taxable year. The denominator of the fraction is the average value
of all such property located or used within and without this State during the
taxable year.
(b) The property
factor shall include only property the income or expenses of which are included
(or would have been included if not fully depreciated or expensed, or
depreciated or expensed to a nominal amount) in the computation of the
apportionable income base for the taxable year.
(c) The following rules relate to value of
property owned by the taxpayer.
(1) The value
of real property and tangible personal property owned by the taxpayer is the
original cost or other basis of such property for federal income tax purposes
without regard to depletion, depreciation, or amortization.
(2) Loans are valued at their outstanding
principal balance, without regard to any reserve for bad debts. If a loan is
charged-off in whole or in part for federal income tax purposes, the portion of
the loan charged-off is not outstanding. A specifically allocated reserve
established pursuant to regulatory or financial accounting guidelines which is
treated as charged-off for federal income tax purposes shall be treated as
charged-off for purposes of this section.
(3) Credit card receivables are valued at
their outstanding principal balance, without regard to any reserve for bad
debts. If a credit card receivable is charged-off in whole or in part for
federal income tax purposes, the portion of the receivable charged-off is not
outstanding.
(d) The
average value of property owned by the taxpayer is computed on an annual basis
by adding the value of the property on the first day of the taxable year and
the value on the last day of the taxable year and dividing the sum by two. If
averaging on this basis does not properly reflect average value, the department
of taxation may require averaging on a more frequent basis. The taxpayer may
elect to average on a more frequent basis. When averaging on a more frequent
basis is required by the department of taxation or is elected by the taxpayer,
the same method of valuation must be used consistently by the taxpayer with
respect to property within and without this State and on all subsequent returns
unless the taxpayer receives prior permission from the department of taxation
or the department of taxation requires a different method of determining
average value.
(e) The following
rules relate to average value of real property and tangible personal property
rented to the taxpayer.
(1) The average value
of real property and tangible personal property that the taxpayer has rented
from another and which is not treated as property owned by the taxpayer for
federal income tax purposes, shall be determined annually by multiplying the
gross rents payable during the taxable year by eight.
(2) Where the use of the general method
described in this subsection results in inaccurate valuations of rented
property, any other method which properly reflects the value may be adopted by
department of taxation or by the taxpayer when approved in writing by the
department of taxation. Once approved, such other method of valuation must be
used on all subsequent returns unless the taxpayer receives prior approval from
the department of taxation or the department of taxation requires a different
method of valuation.
(f)
The following rules relate to location of real property and tangible personal
property owned by or rented to the taxpayer.
(1) Except as described in paragraph (2),
real property and tangible personal property owned by or rented to the taxpayer
is considered to be located within this State if it is physically located,
situated, or used within this State.
(2) Transportation property is included in
the numerator of the property factor to the extent that the property is used in
this State. The extent an aircraft will be deemed to be used in this State and
the amount of value that is to be included in the numerator of this State's
property factor is determined by multiplying the average value of the aircraft
by a fraction, the numerator of which is the number of landings of the aircraft
in this State and the denominator of which is the total number of landings of
the aircraft everywhere. If the extent of the use of any transportation
property within this State cannot be determined, then the property will be
deemed to be used wholly in the state in which the property has its principal
base of operations. A motor vehicle shall be deemed to be used wholly in the
state in which it is registered.
(g) The following rules relate to location of
loans.
(1)
(A) A loan is considered to be located within
this State if it is properly assigned to a regular place of business of the
taxpayer within this State.
(B) A
loan is properly assigned to the regular place of business with which it has a
preponderance of substantive contacts. A loan assigned by the taxpayer to a
regular place of business without the State shall be presumed to have been
properly assigned if:
(i) The taxpayer has
assigned, in the regular course of its business, such loan on its records to a
regular place of business consistent with federal or state regulatory
requirements;
(ii) Such assignment
on its records is based upon substantive contacts of the loan to such regular
place of business; and
(iii) The
taxpayer uses said records reflecting assignment of loans for the filing of all
state and local tax returns for which an assignment of loans to a regular place
of business is required.
(C) The presumption of proper assignment of a
loan provided in paragraph (1)(B) may be rebutted upon a showing by the
department of taxation, supported by a preponderance of the evidence, that the
preponderance of substantive contacts regarding such loan did not occur at the
regular place of business to which it was assigned on the taxpayer's records.
When the presumption has been rebutted, the loan shall then be located within
this State if:
(i) The taxpayer had a regular
place of business within this State at the time the loan was made;
and
(ii) The taxpayer fails to
show, by a preponderance of the evidence, that the preponderance of substantive
contacts regarding the loan did not occur within this State.
(2) In the case of a
loan which is assigned by the taxpayer to a place without this State which is
not a regular place of business, it shall be presumed, subject to rebuttal by
the taxpayer on a showing supported by the preponderance of evidence, that the
preponderance of substantive contacts regarding the loan occurred within this
State if at the time the loan was made the taxpayer's commercial domicile, as
defined in section
18-241-4-02, was within this State.
(3) To determine the state in which the
preponderance of substantive contacts relating to a loan have occurred, the
facts and circumstances regarding the loan at issue shall be reviewed on a
case-by-case basis and consideration shall be given to such activities as the
solicitation, investigation, negotiation, approval, and administration of the
loan.
(4) As used in this section:
"Administration" means the process of managing the account.
This process includes bookkeeping, collecting the payments, corresponding with
the customer, reporting to management regarding the status of the agreement,
and proceeding against the borrower or the security interest if the borrower is
in default. Such activity is located at the regular place of business which
oversees this activity.
"Approval" means the procedure whereby employees or the board
of directors of the taxpayer make the final determination whether to enter into
the agreement. Such activity is located at the regular place of business which
the taxpayer's employees are regularly connected with or working out of,
regardless of where the services of such employees were actually performed. If
the board of directors makes the final determination, such activity is located
at the commercial domicile of the taxpayer.
"Investigation" means the procedure whereby employees of the
taxpayer determine the creditworthiness of the customer as well as the degree
of risk involved in making a particular agreement. Such activity is located at
the regular place of business which the taxpayer's employees are regularly
connected with or working out of, regardless of where the services of such
employees were actually performed.
"Negotiation" means the procedure whereby employees of the
taxpayer and its customer determine the terms of the agreement (e.g., the
amount, duration, interest rate, frequency of repayment, currency denomination,
and security required). Such activity is located at the regular place of
business which the taxpayer's employees are regularly connected with or working
out of, regardless of where the services of such employees were actually
performed.
"Solicitation" means either active or passive solicitation.
Active solicitation occurs when an employee of the taxpayer initiates the
contact with the customer. Such activity is located at the regular place of
business which the taxpayer's employee is regularly connected with or working
out of, regardless of where the services of such employee were actually
performed. Passive solicitation occurs when the customer initiates the contact
with the taxpayer. If the customer's initial contact was not at a regular place
of business of the taxpayer, the regular place of business, if any, where the
passive solicitation occurred is determined by the facts in each case.
(h) For purposes of
determining the location of credit card receivables, credit card receivables
shall be treated as loans and shall be subject to the provisions of subsection
(g).
(i) A loan that has been
properly assigned to a state shall, absent any change of material fact, remain
assigned to that state for the length of the original term of the loan.
Thereafter, the loan may be properly assigned to another state if the loan has
a preponderance of substantive contacts to a regular place of business
there.
