Kan. Admin. Regs. § 92-12-111 - Special rules; airlines
(a) Apportionment
of business income. When an airline has income from sources both within and
without the state of Kansas, the amount of business income from sources within
the state of Kansas shall be determined pursuant to this regula-tion.
(b) The following definitions are
applicable to the terms used in the apportionment factor de-scriptions:
(1) "Value of owned real and tangible
personal property" shall mean its original cost.
(2) "Cost of aircraft by type" means the
average original cost or value of aircraft by type which are ready for flight.
(3) "Original cost" means the
initial federal tax basis of the property plus the value of capital
improvements to such property, except, for this purpose, it shall be presumed
that safe harbor leases are not true leases and do not affect the original
initial federal tax basis of the property.
(4) "Average value" of property means the
amount determined by averaging the values at the beginning and end of the
income year. However, the department of revenue may require the averaging of
monthly values during the income year if averaging is necessary to reflect
properly the average value of the airline's property.
(5) The "value of rented real and tangible
personal property" means the product of eight times the net annual rental rate.
(6) "Net annual rental rate" means
the annual rental rate paid by the taxpayer.
(7) "Property used during the income year"
includes property which is available for use in the taxpayer's trade or
business during the income year.
(8) "Aircraft ready for flight" means
aircraft owned or acquired through rental or lease, except for an interchange,
which are in the possession of the taxpayer and are available for service on
the taxpayer routes.
(9) "Revenue
service" means the use of aircraft ready for flight for the production of
revenue.
(10) "Transportation
revenue" means revenue earned by transporting passengers, freight and mail as
well as revenue earned from such things as liquor sales and pet crate rentals.
(11) "Departures" means all
takeoffs, whether they are regularly scheduled or charter flights, that occur
during revenue service.
(c) Property factor.
(1) Owned aircraft shall be valued at its
original cost and rented aircraft shall be valued at eight times the net annual
rental rate. The use of the taxpayer's owned or rented aircraft in an
interchange program with another air carrier will not constitute a rental of
the aircraft by the airline to the other participating airline. The aircraft
used in an interchange program shall be accounted for in the property factor of
the owner. Parts and other expendables, including parts for use in contract
overhaul work, shall be valued at cost.
(2) The denominator of the property factor
shall be the average value of all of the taxpayer's real and tangible personal
property owned or rented and used during the income year. The numerator of the
property factor shall be the average value of the taxpayer's real and tangible
property owned or rented and used in the state of Kansas during the income
year. To determine the numerator of the property factor, all property except
aircraft ready for flight shall be included in the numerator of the property
factor. Aircraft ready for flight shall be included in the numerator of the
property factor in the ratio calculated as follows: Departures of aircraft from
locations in the state of Kansas weighted as to the cost and value of aircraft
by type compared to total departures similarly weighted.
(d) Payroll factor.
(1) The denominator of the payroll factor is
the total compensation paid everywhere by the taxpayer during the income year.
The numerator of the payroll factor is the total amount paid in the state of
Kansas during the income year by the taxpayer for compensation.
(2) Compensation paid to non-flight employees
shall be included in the numerator as provided in K.A.R. 92-12-93 and 92-12-94 .
Compensation to flight personnel, including the air crew aboard an aircraft
which assist in the operations of the aircraft or the welfare of the passengers
while in the air, shall be included in the ratio that departures of aircraft
from locations in the state of Kansas, weighted as to the cost and value of
aircraft by type compared to total departures similarly weighted, multiplied by
the total flight personnel compensation.
(e) Sales factor.
(1) The transportation revenue derived from
transactions and activities in the regular course of the trade or business of
the taxpayer and miscellaneous sales of merchandise are included in the
denominator of the revenue factor. Passive income items, including but not
limited to items such as interest, rental income, dividends, and proceeds,
shall not be included in the denominator. Proceeds and net gains or losses from
sales of an aircraft shall not be included in the denominator.
(2) The numerator of the revenue factor is
the total revenue of the taxpayer in the state of Kansas during the income
year. The total revenue of the taxpayer in Kansas during the income year is the
result of the following calculation: The ratio of departures of aircraft in
Kansas weighted as to the cost and value of aircraft by type, as compared to
total departures similarly weighted multiplied by the total transportation
revenue. The product of this calculation is to be added to any non-flight
revenues directly attributable to the state of Kansas.
(f) The taxpayer shall maintain the records
necessary to arrive at departures by type of aircraft as used in these
regulations. These records are subject to review by the department of revenue.
Notes
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