N.H. Admin. Code § Rev 304.10 - Adjustments Required to Apportionment Factors For Financial Institutions
(a) For purposes of this section, the
following definitions shall apply:
(1)
"Billing address" means the location indicated in the books and records of the
business organization on the first day of the taxable year, or on such later
date in the taxable period when the customer relationship began, as the address
where any notice, statement, or bill relating to a customer's account is mailed
to the customer;
(2) "Borrower or
credit cardholder located in New Hampshire" means:
a. An individual or business organization
engaged in a trade or business which maintains its commercial domicile in New
Hampshire; or
b. An individual who
is not engaged in a trade or business but whose billing address is in New
Hampshire;
(3)
"Commercial domicile" means, for businesses organized under the laws of:
a. The United States, the place from which
the trade or business is principally managed and directed; or
b. A foreign country, the Commonwealth of
Puerto Rico, any territory or possession of the United States, the state of the
United States, or the District of Columbia to which the greatest number of
employees, as defined in
Rev
301.14, are regularly connected or out of which they
are working, irrespective of where the services of such employees are
performed, as of the last day of the taxable year;
(4) "Credit card" means a card or other
medium entitling its holder to credit by virtue of its use to purchase goods or
services from businesses;
(5)
"Credit card issuer's reimbursement fee" means the fee a business organization
receives from a merchant's bank because one of the persons to whom the business
organization has issued a credit card has charged merchandise or services to
the credit card;
(6) "Finance
lease" means any lease transaction, including any that are classified as a
direct financing lease or leverage lease under generally accepted accounting
principles or any other lease that is accounted for as a financing by a lessor
under generally accepted accounting principles which is the functional
equivalent of an extension of credit and that transfers substantially all of
the benefits and risks incident to the ownership of property to the
lessee;
(7) "Financial institution"
means:
a. Any corporation or other business
entity registered under:
1. State law as a
bank holding company;
2. The
Federal Bank Holding Company Act of 1956, as amended; or
3. The Federal National Housing Act, as
amended, as a savings and loan holding company;
b. A national bank organized and existing as
a national bank association pursuant to the National Bank Act,
12 U.S.C.
21 et seq.;
c. A savings association or federal savings
bank as defined in the Federal Deposit Insurance Act,
12 U.S.C.
1813(b)(1);
d. Any bank or thrift institution
incorporated or organized under the laws of any state;
f. Any agency or branch of a foreign
depository as defined in 12
U.S.C. 3101;
g. A production credit association organized
under the Federal Farm Credit Act of 1933, all of whose stock held by the
Federal Production Credit Corporation has been retired;
h. Any corporation, other than an insurance
company, whose voting stock is more than 50% owned, directly or indirectly, by
any person or business entity described in subsections a. through g.
above;
i. A corporation or other
business entity which during the current taxable period and the previous 2
taxable periods derived an average of 50% of its total gross income for
financial accounting purposes from finance leases;
j. Any other person or business entity, other
than an insurance company, a real estate broker, a securities dealer, or other
similar business entities, which derive more than 50% of their gross income
excluding non-recurring and extraordinary items from activities that a person
described in subsections a. through i. above is authorized to transact;
and
k. Any person or business
entity having more than 50% of its total gross business income derived from or
attributable to the issuance and maintenance of credit cards to consumers
provided that such credit card can be used by the consumer to purchase goods
and services from organizations other than the card issuer;
(8) "Gross rents" means:
a. The actual sum of money or other
consideration payable for the use or possession of property except:
1. Reasonable amounts payable as separate
charges for water and electric service furnished by the lessor;
2. Reasonable amounts payable as service
charges for janitorial services furnished by the lessor;
3. Reasonable amounts payable for storage,
provided such amounts are payable for space not designated for use by and not
under the control of the taxpayer; and
4. That portion of any rental payment
applicable to the space subleased from the taxpayer and not used by the
taxpayer;
b. Any amount
payable for the use or possession of real property and tangible property
whether designated as a fixed sum of money or as a percentage of receipts,
profits, or otherwise; and
c. Any
amount payable as additional rent or in lieu of rent, such as interest, taxes,
insurance, repairs, or any other amount required to be paid by the terms of a
lease or other arrangement, including the amount of amortization or
depreciation allowed in computing the taxable income base for the taxable year
of any improvement to real property made by or on behalf of the business
organization which reverts to the owner or lessor upon termination of a lease
or other arrangement;
(9) "Loan" means any extension of credit
resulting from direct negotiations between the business organization and its
customers and:
a. Includes:
1. Participation;
2. Syndications;
3. Leases treated as loans for federal income
tax purposes; and
4. The purchase,
in whole or in part, of such extension of credit from another business
organization; and
b.
Excludes:
1. Properties treated as loans under
section 595 of the IRC;
2. Futures
or forward contracts;
3.
Options;
4. Notional principal
contracts such as swaps;
5. Credit
card receivables, including purchased credit card relationships;
6. Non-interest bearing balances due from
depository institutions;
7. Cash
items in the process of collection;
8. Federal funds sold;
9. Securities purchased under agreements to
resell;
10. Assets held in a
trading account;
11. Securities;
and
12. Interests in a real estate
mortgage investment conduit (REMIC), or other mortgage-backed or asset-backed
security;
(10) "Loan secured by real property" means
50% or more of the aggregate value of the collateral used to secure a loan or
other obligation, when valued at fair market value as of the time the original
loan or obligation was incurred, was real property;
(11) "Merchant discount" means the fee, or
negotiated discount, charged to a merchant by the business organization for the
privilege of participating in a program whereby a credit card is accepted in
payment for merchandise or services sold to the card holder;
(12) "Participation" means an extension of
credit in which an undivided ownership interest is held on a pro rata basis in
a single loan or pool of loans and the related collateral by the credit
originator and any other lenders who have purchased a portion of such loan or
pool of loans whether or not known to the borrower;
(13) "Person" means an individual, estate,
trust, partnership, corporation, and any other business entity;
(14) "Real and tangible property" means
assets:
a. On which the taxpayer may claim
depreciation for federal income tax purposes;
b. To which the taxpayer holds legal title
and on which no other person may claim depreciation for federal income tax
purposes or could claim depreciation if subject to federal income taxation;
or
c. That have not been acquired
in lieu of, or pursuant to, a foreclosure;
(15) "Regular place of business" means an
office where the business organization conducts business in a regular and
systematic manner and is continuously maintained, occupied, and used by
employees of the business organization;
(16) "Syndication" means an extension of
credit in which 2 or more persons fund the credit extension and each person is
at risk at a specified:
a. Percentage of the
total extension of credit; or
b.
Dollar amount;
(17)
"Taxable" means:
a. A business organization,
as defined in RSA
77-A:1, I., subject in
another state to:
1. A net income tax, a
franchise tax measured by net income;
2. A franchise tax for the privilege of doing
business; or
3. A corporate stock
tax including a bank shares tax, a single business tax, or an earned surplus
tax, or any tax which is imposed upon or measured by net income; or
b. Another state has jurisdiction
to subject the business organization to any of such taxes regardless of
whether, the state does or does not impose such taxes; and
(18) "Transportation property" means:
a. Vehicles and vessels capable of moving
under their own power; and
b.
Equipment or containers attached to the vehicle or vessel.
(b) Financial institutions shall
apportion their income to New Hampshire using the apportionment provisions
contained in RSA
77-A:3 and
Rev
304.02,
Rev
304.03,
Rev
304.04, and
Rev
304.041, subject to the adjustments in paragraphs (c),
(d), and (e), below.
(c) The
property factor's components shall be calculated utilizing the following
provision:
(1) 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, in the computation of
the apportionable income tax base for the taxable period;
(2) The property factor shall be the sum of
the value of the real and tangible property and the intangible property
components;
(3) The real and
tangible property component shall be calculated using the provision of
Rev
304.02;
(4) The intangible property component shall
include the average value of the business organization's loans and credit card
receivables;
(5) Intangible
property shall be determined to be located in New Hampshire when it is properly
assigned to a regular place of business of the business organization within New
Hampshire, based upon the preponderance of substantive contacts relating to the
loans having occurred in New Hampshire;
(6) Substantive contacts shall occur when one
or more of the following activities are conducted by employees connected with,
or working out of the business organization's regular place of business in New
Hampshire, regardless of where the services of such employee were actually
performed:
a. Solicitation of the customer by
an employee or the customer initiation of contact with the business
organization at its regular place of business;
b. Investigation of the customer's
credit-worthiness and the degree of risk involved in making the particular
loan;
c. Negotiation between the
employee of the business organization and the customer regarding the terms of
the loan such as the:
1. Amount;
2. Duration;
3. Interest rate;
4. Frequency of repayment;
5. Currency denomination; and
6. Security requirements;
d. Approval of the agreement by
the employees or directors of the business organization; and
e. Administering the account by performing
services such as:
1. Bookkeeping;
2. Collecting payments;
3. Corresponding with the customer;
or
4. Proceeding against the
customer in the case of default;
(7) The intangible property included under
paragraph (4) above shall be valued in the following manner:
a. Loans shall be valued at their outstanding
principal balance, without regard to any reserve for bad debts;
b. Credit card receivables shall be valued at
their outstanding principal balance, without regard to any reserve for bad
debts, with the exception that credit card receivables which are written-off in
whole or in part for federal income tax purposes shall not be included in the
principal balance to the extent of the portion that is written-off;
and
c. Loans, when written off in
whole or in part, shall not be included in the total to the extent of the
portion that is written off for:
1. Federal
income tax purposes; or
2.
Regulatory purposes through a specifically allocated reserve pursuant to
regulatory or financial accounting guidelines;
(8) Loans properly assigned to New Hampshire
shall, absent any change of material fact, remain assigned to New Hampshire for
the length of the original term of the loan;
(9) Upon completion of the original term of
loans referenced in (8), above, they may be properly assigned to another state
if said loans have a preponderance of substantive contact to a regular place of
business there; and
(10) Credit
card receivables shall be treated as loans and subject to the provisions of
(c)(6) above, for purposes of determining the location of credit card
receivables.
(d) The
payroll factor shall be calculated in accordance with
Rev
304.03.
(e) The sales factor shall be calculated
utilizing the following provisions in lieu of the provisions contained in
Rev
304.04 and
Rev
304.041:
(1) The
sales factor shall be a fraction, as follows:
a. The numerator shall be the receipts from
the lease, sublease, rental, or sub-rental of real property located in New
Hampshire, and the lease or rental of tangible personal property, other than
transportation equipment, located in New Hampshire when it is first placed in
service by the lessee owned by the business organization in New Hampshire
during the taxable year; and
b. The
denominator shall be the receipts of the business organization within and
without New Hampshire during the taxable period;
(2) The sales factor numerator and
denominator shall be calculated in a consistent manner from year-to-year, and
include those receipts described herein which constitute income and are
included in the computation of the apportionable income base for the taxable
period;
(3) Receipts from the lease
or rental of transportation property owned by the business organization shall
be:
a. Included in the numerator to the extent
that the property is used in New Hampshire; and
b. Calculated in the following manner:
1. The amount of receipts from the lease or
rental of aircraft to be included in the numerator of New Hampshire's sales
factor shall be determined by multiplying all the receipts from the lease or
rental of the aircraft by a fraction, as follows:
(i) The numerator shall be the number of
landings of the aircraft in New Hampshire; and
(ii) The denominator shall be the total
number of landings of the aircraft;
2. Motor vehicles shall be included in the
numerator of the state in which they are registered and deemed to be used
wholly within such state; and
3. If
the extent of the use of any transportation property within New Hampshire
cannot be determined, the property shall be deemed to be used wholly in the
state in which the property has its principal base of operations;
(4) The numerator shall
include interest and fees, or penalties in the nature of interest, from loans
secured by real property if, at the time the original agreement is made, the
following shall apply:
a. The property is
entirely located within New Hampshire;
b. The property is located both within New
Hampshire and one or more other states, and more than 50% of the fair market
value of the real property is located within New Hampshire; or
c. More than 50% of the fair market value of
the real property is not located within any one state, and the borrower is
located in New Hampshire;
(5) Interest and fees or penalties in the
nature of interest from loans not secured by real property shall be included in
the numerator if the borrower is located in New Hampshire;
(6) Net gains from the sale of loans,
including income recorded under the coupon stripping rules of section
1286 of the IRC, shall be included in the
numerator utilizing the following provisions:
a. The amount of net gains, but not less than
zero, from the sale of loans secured by real property included in the numerator
shall be determined by multiplying such net gains by a fraction, as follows:
1. The numerator shall be the amount included
in the numerator of the sales factor pursuant to (4) above; and
2. The denominator shall be the total amount
of interest and fees, or penalties in the nature of interest, from loans
secured by real property; and
b. The amount of net gains, but not less than
zero, from the sale of loans not secured by real property included in the
numerator shall be determined by multiplying such net gains by a fraction, as
follows:
1. The numerator shall be the amount
included in the numerator of the sales factor pursuant to (5) above;
and
2. The denominator shall be the
total amount of interest and fees, or penalties in the nature of interest, from
loans not secured by real property;
(7) The numerator shall include interest and
fees or penalties in the nature of interest from credit card receivables and
receipts from fees, such as annual fees, charged to cardholders if the billing
address of the cardholder is in New Hampshire;
(8) The amount of net gains, but not less
than zero, from the sale of credit card receivables included in the numerator
shall be determined by multiplying such net gains by a fraction, as follows:
a. The numerator shall be the amount included
in the numerator of the sales factor pursuant to (7) above; and
b. The denominator shall be the business
organization's total amount of interest and fees or penalties in the nature of
interest from credit card receivables and fees charged to card
holders;
(9) The
numerator shall include all credit card issuer's reimbursement fees multiplied
by a fraction, as follows:
a. The numerator
shall be the amount included in the numerator of the sales factor pursuant to
(7) above; and
b. The denominator
shall be the business organization's total amount of interest and fees or
penalties in the nature of interest from credit card receivables and fees
charged to card holders;
(10) Receipts from merchant discount:
a. If the business organization can readily
determine the location of the merchant and if the merchant is in this state,
the numerator of the sales factor includes receipts from merchant
discount;
b. If the business
organization cannot readily determine the location of the merchant, the
numerator of the sales factor includes receipts from merchant discount
multiplied by a fraction:
1. In the case of a
merchant discount related to the use of a credit card, the numerator of which
is the amount of fees, interest, and penalties charged to credit card holders
if the billing address of the credit card holder is in this state, and the
denominator of which is the business organization's total amount of fees,
interest, and penalties charged to credit card holders;
2. In the case of a merchant discount related
to the use of a debit card, the numerator of which is the amount of fees,
interest, and penalties charged to debit card holders if the billing address of
the debit card holder is in this state, and the denominator of which is the
business organization's total amount of fees, interest, and penalties charged
to debit card holders; and
3. In
the case of a merchant discount related to the use of all other types of cards,
the numerator of which is the amount of fees, interest, and penalties charged
to all other card holders if the billing address of the other card holder is in
this state, and the denominator of which is the business organization's total
amount of fees, interest, and penalties charged to all other card
holders;
c. The business
organization's method for sourcing each receipt from a merchant discount must
be consistently applied to such receipts in all states that have adopted
sourcing methods substantially similar to (10)a. and (10)b. above and must be
used on all subsequent returns for sourcing receipts from such merchant unless
the business organization petitions the commissioner for the employment of any
other method to effect an equitable apportionment as allowed according to
RSA
77-A:3, II(a).
(11) Receipts from merchant
discount, referenced in (10), above, shall:
a. Be computed net of any cardholder charge
backs; and
b. Not be reduced by any
interchange transaction fees or by any issuer's reimbursement fees paid to
another for charges made by its card holders;
(12) The numerator shall include receipts
from loan servicing fees utilizing the following provisions:
a. For loan servicing fees derived from loans
secured by real property, the total amount of such fees shall be multiplied by
a fraction, as follows:
1. The numerator shall
be the amount included in the numerator of the receipts factor pursuant to (4)
above; and
2. The denominator shall
be the total amount of interest and fees, or penalties in the nature of
interest, from loans secured by real property;
b. For loan servicing fees derived from loans
not secured by real property, the total amount of such fees shall be multiplied
by a fraction, as follows:
1. The numerator
shall be the amount included in the numerator of the receipts factor pursuant
to (9) above; and
2. The
denominator shall be the total amount of interest and fees, or penalties in the
nature of interest, from loans not secured by real property; and
c. For circumstances in which the
business organization receives loan servicing fees for servicing either the
secured or the unsecured loans of another business organization, the numerator
shall include such fees if the borrower is located in New Hampshire;
(13) The numerator shall include
all sales not otherwise apportioned under this section utilizing the provisions
of Rev
304.04 and
Rev
304.041;
(14) The sales factor shall include interest,
dividends, net gains not less than zero, and other income from investment
assets and activities and trading assets and activities in accordance with the
following provisions:
a. Investment assets
and activities and trading assets and activities shall include, but are not
limited to the following:
1. Investment
securities;
2. Trading account
assets;
3. Federal funds;
4. Securities purchased and sold under
agreements to resell or repurchase;
5. Options;
6. Future contracts;
7. Forward contracts;
8. Notional principal contracts such as
swaps;
9. Equities; and
10. Foreign currency transactions;
b. The sales factor shall include
the amount by which:
1. Interest from federal
funds sold and securities purchased under resale agreements exceeds interest
expense on federal funds purchased and securities sold under repurchase
agreements; and
2. Interest,
dividends, gains, and other income from trading assets and activities,
including but not limited to assets and activities in the matched book, in the
arbitrage book, and foreign currency transactions, exceed amounts paid in lieu
of interest, amounts paid in lieu of dividends, and losses from such assets and
activities;
c. The sales
factor:
1. Numerator shall include interest,
dividends, net gains, but not less than zero, and other income utilizing the
following provisions for:
(i) Investment
assets and activities and from trading assets and activities described in a.
above, the total amount of such income shall be multiplied by a fraction, as
follows:
i. The numerator shall be the average
value of such assets which are properly assigned to a regular place of business
of the business organization within New Hampshire; and
ii. The denominator shall be the average
value of all such assets;
(ii) Federal funds sold and purchased and
from securities purchased under resale agreements and securities sold under
repurchase agreements described in b. above, the amount of excess interest
shall be multiplied by a fraction, as follows:
i. The numerator shall be the average value
of federal funds sold and securities purchased under agreements to resell which
are properly assigned to a regular place of business of the business
organization within New Hampshire; and
ii. The denominator shall be the average
value of all such funds and such securities; and
(iii) Trading assets and activities described
in c. above, excluding amounts described in (i) or (ii), above, the amount of
the excess income shall be multiplied by a fraction, as follows:
i. The numerator shall be the average value
of such trading assets which are properly assigned to a regular place of
business of the business organization within New Hampshire; and
ii. The denominator shall be the average
value of all such assets; and
2. Average value shall be determined using
the provisions of Rev
304.02(j);
d. If the provisions of c. above do not
equitably reflect the business organization for business done in this state a
modified procedure shall be:
1. Required by
the commissioner in lieu of using the provisions enumerated in c. above, in
accordance with RSA 77-A:3, II (a); or
2. Requested by the business organization for
all subsequent returns utilizing the provisions of
Rev
304.05;
e. If using a modified procedure pursuant to
d. above, the modified procedure shall be calculated as follows:
1. The numerator shall include interest,
dividends, net gains not less than zero and other income utilizing the
following provisions for:
(i) Investment
assets and activities and from trading assets and activities described in a.
above, the total amount of such income shall be multiplied by the following
fraction:
i. A numerator consisting of the
gross income from such assets and activities assigned to a regular place of
business of the taxpayer within New Hampshire; and
ii. A denominator consisting of the gross
income from all assets and activities;
(ii) Federal funds sold and purchased from
securities purchased under resale agreements, and securities sold under
repurchase agreements described in b., above, the amount of excess interest
shall be multiplied by the following fraction:
i. A numerator consisting of the gross income
from funds and securities assigned to a regular place of business of the
business organization within New Hampshire; and
ii. A denominator consisting of the gross
income from all such funds and such securities; and
(iii) Trading assets and activities described
in c. above, excluding amounts described in (i) or (ii) above, the amount of
the excess income shall be multiplied by the following:
i. A numerator consisting of the gross income
from trading assets and activities assigned to a regular place of business of
the business organization within New Hampshire; and
ii. A denominator consisting of the gross
income from all such assets and activities;
f. Investment asset or activity,
or trading asset or activity, shall be presumed to occur at the commercial
domicile of the business organization;
g. The business organization may rebut the
presumption in f. above, by demonstrating that:
1. The day-to-day decisions regarding the
asset or activity occurred at a regular place of business outside New
Hampshire; and
2. Where the
day-to-day decisions regarding an investment asset or activity or trading asset
or activity occur at more than one regular place of business, one of which is
in New Hampshire, that the investment or trading policies or guidelines
concerning such decisions were made outside New Hampshire; and
h. All receipts assigned under
(14) to a state where the taxpayer is not taxable shall be included in the
numerator of the sales factor, if the business organization's commercial
domicile is in New Hampshire; and
(15) The numerator shall include receipts
from the sales of tangible personal property not otherwise apportioned under
this section utilizing the provisions of
Rev
304.04 and
Rev
304.041.
Notes
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