(a) The entire net income of any corporation, financial institution, or unincorporated business, or the unrelated business income of an exempt organization, derived from any trade or business carried on or engaged wholly within the District shall, for the purposes of this chapter, be deemed to be from sources within the District and shall, along with other income from sources within the District, be allocated to the District. If the net income of a corporation, financial institution, or unincorporated business, or the unrelated business income of an exempt organization, is derived from sources within and without the District, the taxpayer shall apportion business income and allocate non-business income as provided in this section.
(b) For purposes of allocation and apportionment of income under this section, 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 net income, a franchise tax for the privilege of doing business, or a corporate stock tax; or
(2) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.
(1) Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute non-business income, shall be allocated as provided in paragraphs (2), (3), (4), and (5) of this subsection.
(A) Net rents and royalties from real property located in the District are allocable to the District.
(B) Net rents and royalties from tangible personal property are allocable to the District:
(i) If and to the extent that the property is utilized in the District; or
(ii) In their entirety if the taxpayer’s commercial domicile is in the District and the taxpayer is not organized under the laws of or taxable in the state in which the property is utilized.
(C) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, the tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.
(A) Capital gains and losses from sales of real property located in the District are allocable to the District.
(B) Capital gains and losses from sales of tangible personal property are allocable to the District if:
(i) The property had a situs in the District at the time of the sale; or
(ii) The taxpayer’s commercial domicile is in the District and the taxpayer is not taxable in the state in which the property had a situs.
(C) Capital gains and losses from the sales of intangible personal property are allocable to the District if the taxpayer’s commercial domicile is in the District.
(4) Interest and dividends from District sources are allocable to the District unless the interest and dividends are excluded under § 47-1810.01 .
(A) Patent and copyright royalties are allocable to the District:
(i) If and to the extent that the patent or copyright is utilized by the payer in the District; or
(ii) If and to the extent that the patent or copyright is utilized by the taxpayer in a state in which the taxpayer is not taxable and the taxpayer’s commercial domicile is in the District.
(B) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer’s commercial domicile is located.
(C) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer’s commercial domicile is located.
(d) Except as provided in subsection (d-1) or (d-2), whichever is applicable, all business income shall be apportioned to the District by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is 3.
(1) All business income shall be apportioned to the District by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor twice, and the denominator of which is 4.
(2) This subsection shall be applicable for the tax years beginning after December 31, 2010, and before January 1, 2015.
(1) All business income shall be apportioned to the District by multiplying the income by the sales factor.
(2) This subsection shall be applicable for the tax years beginning after December 31, 2014.
(1) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the District during the tax period and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used during the tax period.
(2) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at 8 times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from sub-rentals.
(3) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period, but the Mayor may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer’s property.
(1) The payroll factor is a fraction, the numerator of which is the total amount paid in the District during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period.
(2) Compensation is paid in the District if:
(A) The individual’s service is performed entirely within the District;
(B) The individual’s service is performed both within and without the District, but the service performed without the District is incidental to the individual’s service within the District; or
(C) Some of the service is performed in the District and:
(i) The base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the District; or
(ii) The base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual’s residence is in the District.
(1) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in the District during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period.
(2) Sales of tangible personal property are in the District if:
(A) The property is delivered or shipped to a purchaser within the District regardless of the f.o.b. point or other conditions of the sale; or
(B) The property is shipped from an office, store, warehouse, factory, or other place of storage in the District and (i) the purchaser is the United States government, or (ii) the taxpayer is not taxable in the state of the purchaser.
(A) For the tax years beginning after December 31, 2014, sales, other than sales of tangible personal property, are in the District if the taxpayer’s market for the sales is in the District. The taxpayer’s market for sales is in the District:
(i) In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in the District;
(ii) In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in the District;
(iii) In the case of the sale of a service, if and to the extent the service is delivered to a location in the District; and
(iv) In the case of intangible property:
(I) That is rented, leased, or licensed, if and to the extent the property is used in the District; provided, that intangible property utilized in marketing a good or service to a consumer is used in the District if that good or service is purchased by a consumer who is in the District; and
(II) That is sold, if and to the extent the property is used in the District; provided, that:
(aa) A contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is used in the District if the geographic area includes all or part of the District;
(bb) Receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of such intangible property under sub-sub-subparagraph (I) of this sub-subparagraph; and
(cc) All other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the sales factor.
(B) If the state or states of assignment under subparagraph (A) of this paragraph cannot be determined, the state or states of assignment shall be reasonably approximated.
(C) If the taxpayer is not taxable in a state in which a sale is assigned under subparagraph (A) or (B) of this paragraph, or if a state of assignment cannot be determined under subparagraph (A) of this paragraph or reasonably approximated under subparagraph (B) of this paragraph, the sale shall be excluded from the denominator of the sales factor.
(D) The Chief Financial Officer may issue rules to implement the provisions of this subsection.
(h) If the allocation and apportionment provisions of this section do not fairly represent the extent of the taxpayer’s business activity in the District, the taxpayer may petition for or the Mayor may require, in respect to all or any part of the taxpayer’s business activity, if reasonable:
(1) Separate accounting;
(2) The exclusion of any 1 or more of the factors;
(3) The inclusion of 1 or more additional factors that will fairly represent the taxpayer’s business activity in the District; or
(4) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer’s income.
(i) For the purposes of this section, the term:
(1) “State” shall include the District of Columbia.
(2) “Business income” means all income which is apportionable under the Constitution of the United States.
(j) This section shall be so construed as to effectuate its general purpose to make uniform the law of those states that enact it.