57-38.1 Uniform Division of Income Tax Act
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<![CDATA[CHAPTER 57-38.1UNIFORM DIVISION OF INCOME TAX ACT57-38.1-01. Definitions. As used in this chapter, unless the context otherwise requires:1."Business income" means income arising from transactions and activity in the<br>regular course of the taxpayer's trade or business and includes income from tangible<br>and intangible property if the acquisition, management, and disposition of the<br>property constitute integral parts of the taxpayer's regular trade or business<br>operations.2."Commercial domicile" means the principal place from which the trade or business<br>of the taxpayer is directed or managed.3."Compensation" means wages, salaries, commissions, and any other form of<br>remuneration paid to employees for personal services.4."Nonbusiness income" means all income other than business income.5."Public utility" means any business entity which owns or operates for public use any<br>plant,equipment,property,franchise,orlicenseforthetransmissionofcommunications, transportation of goods or persons, or the production, storage,<br>transmission, sale, delivery, or furnishing of electricity, water, steam, oil, oil products,<br>or gas.6."Sales" means all gross receipts of the taxpayer not allocated under sections<br>57-38.1-04 through 57-38.1-08.7."State" means any state of the United States, the District of Columbia, the<br>Commonwealth of Puerto Rico, any territory or possession of the United States, and<br>any foreign country or political subdivision thereof.57-38.1-02.Taxpayers - Applicability.Any taxpayer having income from businessactivity which is taxable both within and without this state, including a public utility, shall allocate<br>and apportion the taxpayer's net income as provided in this chapter.57-38.1-03. Nonresident taxpayer. For purposes of allocation and apportionment ofincome under this chapter, a taxpayer is taxable in another state if:1.In that state the taxpayer is subject to a net income tax, a franchise tax measured by<br>net income, a franchise tax for the privilege of doing business, or a corporate stock<br>tax; or2.That state has jurisdiction to subject the taxpayer to a net income tax regardless of<br>whether, in fact, the state does or does not.57-38.1-04.Certain items - Allocation.Rents and royalties from real or tangiblepersonal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent<br>that they constitute nonbusiness income, must be allocated, net of related expenses, as provided<br>in sections 57-38.1-05 through 57-38.1-08.57-38.1-05. Rents and royalties.1.Net rents and royalties from real property located in this state are allocable to this<br>state.2.Net rents and royalties from tangible personal property are allocable to this state:Page No. 1a.If and to the extent that the property is utilized in this state; orb.In their entirety if the taxpayer's commercial domicile is in this state and the<br>taxpayer is not organized under the laws of or taxable in the state in which the<br>property is utilized.3.The extent of utilization of tangible personal property in a state is determined by<br>multiplying the rents and royalties by a fraction, the numerator of which is the<br>number of days of physical location of the property in the state during the rental or<br>royalty period in the taxable year and the denominator of which is the number of<br>days of physical location of the property everywhere during all rental or royalty<br>periods in the taxable year. If the physical location of the property during the rental<br>or royalty period is unknown or unascertainable by the taxpayer, tangible personal<br>property is utilized in the state in which the property was located at the time the<br>rental or royalty payer obtained possession.57-38.1-06. Property - Capital gains and losses.1.Capital gains and losses from sales of real property located in this state are<br>allocable to this state.2.Capital gains and losses from sales of tangible personal property are allocable to<br>this state if:a.The property had a situs in this state at the time of the sale; orb.The taxpayer's commercial domicile is in this state and the taxpayer is not<br>taxable in the state in which the property had a situs.3.Capital gains and losses from sales of intangible personal property are allocable to<br>this state if the taxpayer's commercial domicile is in this state.57-38.1-07. Interest and dividends. Interest and dividends are allocable to this state ifthe taxpayer's commercial domicile is in this state.57-38.1-08. Patents and copyrights.1.Patent and copyright royalties are allocable to this state:a.If and to the extent that the patent or copyright is utilized by the payer in this<br>state; orb.If and to the extent that the patent or copyright is utilized by the payer in a state<br>in which the taxpayer is not taxable and the taxpayer's commercial domicile is<br>in this state.2.A patent is utilized in a state to the extent that it is employed in production,<br>fabrication, manufacturing, or other processing in the state or to the extent that a<br>patented product is produced in the state.If the basis of receipts from patentroyalties does not permit allocation to states or if the accounting procedures do not<br>reflect states of utilization, the patent is utilized in the state in which the taxpayer's<br>commercial domicile is located.3.A copyright is utilized in a state to the extent that printing or other publication<br>originates in the state. If the basis of receipts from copyright royalties does not<br>permit allocation to states or if the accounting procedures do not reflect states of<br>utilization, the copyright is utilized in the state in which the taxpayer's commercial<br>domicile is located.Page No. 257-38.1-09. Business income. All business income must be apportioned to this stateby multiplying the income by a fraction, the numerator of which is the property factor plus the<br>payroll factor plus the sales factor, and the denominator of which is three.57-38.1-10. Property factor. The property factor is a fraction, the numerator of which isthe average value of the taxpayer's real and tangible personal property owned or rented and<br>used in this state during the tax period and the denominator of which is the average value of all<br>the taxpayer's real and tangible personal property owned or rented and used during the tax<br>period.57-38.1-11. Property owned and rented. Property owned by the taxpayer is valued atits original cost. Property rented by the taxpayer is valued at eight times the net annual rental<br>rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental<br>rate received by the taxpayer from subrentals.57-38.1-12.Average value of property.The average value of property must bedetermined by averaging the values at the beginning and ending of the tax period but the tax<br>commissioner may require the averaging of monthly values during the tax period if reasonably<br>required to reflect properly the average value of the taxpayer's property.57-38.1-13. Payroll factor. The payroll factor is a fraction, the numerator of which is thetotal amount paid in this state during the tax period by the taxpayer for compensation and the<br>denominator of which is the total compensation paid everywhere during the tax period.57-38.1-14. Compensation. Compensation is paid in this state if:1.The individual's service is performed entirely within the state;2.The individual's service is performed both within and without the state, but the<br>service performed without the state is incidental to the individual's service within the<br>state; or3.Some of the service is performed in the state and:a.The base of operations or, if there is no base of operations, the place from<br>which the service is directed or controlled is in the state; orb.The base of operations or the place from which the service is directed or<br>controlled is not in any state in which some part of the service is performed, but<br>the individual's residence is in this state.57-38.1-15. Sales factor. The sales factor is a fraction, the numerator of which is thetotal sales of the taxpayer in this state during the tax period and the denominator of which is the<br>total sales of the taxpayer everywhere during the tax period.57-38.1-16.Local tangible personal property sales.Sales of tangible personalproperty are in this state if:1.The property is delivered or shipped to a purchaser, other than the United States<br>government, within this state regardless of the f.o.b. point or other conditions of the<br>sale; or2.The property is shipped from an office, store, warehouse, factory, or other place of<br>storage in this state and:a.The purchaser is the United States government; orb.The taxpayer is not taxable in the state of the purchaser.Page No. 357-38.1-17. Other sales. Sales, other than sales of tangible personal property, are inthis state if:1.The income-producing activity is performed in this state; or2.The income-producing activity is performed both in and outside this state and a<br>greater proportion of the income-producing activity is performed in this state than in<br>any other state, based on costs of performance.57-38.1-17.1. Gain or loss on the sale of a partnership. Gain or loss on the sale of apartnership interest is allocable to this state in the ratio of the original cost of partnership tangible<br>property in the state to the original cost of partnership tangible property everywhere, determined<br>at the time of the sale. In the event that more than fifty percent of the value of the assets of the<br>partnership consist of intangibles, gain or loss from the sale of the partnership interest is<br>allocated to this state in accordance with the ratio of total North Dakota income to total income of<br>the partnership for its first full tax period immediately preceding the tax period of the partnership<br>during which the partnership interest was sold. This section applies to the extent, that prior to the<br>sale of the partnership interest, the partnership's income or loss constituted nonbusiness income.57-38.1-17.2.Taxation of two or more member limited liability companies.Forpurposes of this chapter, a limited liability company having two or more members that is formed<br>under either the laws of this state or under similar laws of another state and that is considered to<br>be a partnership for federal income tax purposes is considered to be a partnership and the<br>members must be considered to be partners. A limited liability company having two or more<br>members that is not treated as a partnership for federal income tax purposes must be treated as<br>a corporation for state tax purposes.57-38.1-17.3. Taxation of single-member limited liability companies. For purposesof this chapter, a limited liability company having a single member that is formed under either the<br>laws of this state or under similar laws of another state and that is considered to be a corporation<br>for federal income tax purposes is considered to be a corporation for state tax purposes. A<br>limited liability company having a single member that is not treated as a corporation for federal<br>income tax purposes is disregarded as an entity separate from its owner for state tax purposes.57-38.1-18. Additional methods of determining business situs. If the allocation andapportionment provisions of this chapter do not fairly represent the extent of the taxpayer's<br>business activity in this state, the taxpayer may petition for or the tax commissioner may require,<br>in respect to all or any part of the taxpayer's business activity, if reasonable:1.Separate accounting;2.The exclusion of any one or more of the factors;3.The inclusion of one or more additional factors which will fairly represent the<br>taxpayer's business activity in this state; or4.The employment of any other method to effectuate an equitable allocation and<br>apportionment of the taxpayer's income.57-38.1-19. Purpose. This chapter must be so construed as to effectuate its generalpurpose to make uniform the law of those states which enact it.57-38.1-20. Citation. This chapter may be cited as the "Uniform Division of Income forTax Purposes Act".57-38.1-21. Effective date. The provisions of this chapter apply to all income accruingafter January 1, 1965, for taxpayers operating on a calendar year basis, and apply to income<br>accruing in 1965 after the beginning of their fiscal year for taxpayers operating on a fiscal year<br>basis.Page No. 4Document Outlinechapter 57-38.1 uniform division of income tax act]]>