§ 44-14-14.4. Property factor.
(a) General. The property factor is a fraction, the numerator of which 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, and the
denominator of which is the average value of all the property located or used within
and outside of this state during the taxable year.
(b) Property included. 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) 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 the 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 guideline which is treated
as charged-off for federal income tax purposes shall be treated as charged-off for
purposes of §§ 44-14-14.1 — 44-14-14.5.
(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) Average value of property owned by the taxpayer. 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 tax administrator may require averaging
on a more frequent basis. When averaging on a more frequent basis is required by the
tax administrator or is elected by the taxpayer, the same method of valuation must
be used consistently by the taxpayer with respect to property within and outside of
this state and on all subsequent returns unless the taxpayer receives prior permission
from the tax administrator or the tax administrator requires a different method of
determining average value.
(e) Average value of real property and tangible personal property rented to 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 the tax administrator or by the taxpayer when approved, in writing,
by the administrator. Once approved, this other method of valuation must be used on
all subsequent returns unless the taxpayer receives prior approval from the tax administrator
or the tax administrator requires a different method of valuation.
(f) Location of real property and tangible personal property owned by or rented to the
taxpayer.
(1) Except as described in subdivision (2) of this subsection, 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 will be deemed to be used wholly in the state in which it is registered.
(g) Location of loans.
(1)(i) 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.
(ii) 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
outside of the state shall be presumed to have been properly assigned if:
(A) The taxpayer has assigned, in the regular course of its business, this loan on its
records to a regular place of business consistent with federal or state regulatory
requirements;
(B) The assignment on its records is based upon substantive contacts of the loan to the
regular place of business; and
(C) The taxpayer uses the 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.
(iii) The presumption of proper assignment of a loan provided in subparagraph (ii)(B) of
this subdivision may be rebutted upon a showing by the tax administrator, supported
by a preponderance of the evidence, that the preponderance of substantive contacts
regarding the 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:
(A) The taxpayer had a regular place of business within this state at the time the loan
was made; and
(B) 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 outside of 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
by § 44-14-14.2(c) 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 the activities
as the solicitation, investigation, negotiation, approval and administration of the
loan. The terms "solicitation�, "investigation�, "negotiation�, "approval�, and "administration�
are defined as follows:
(i) Solicitation. Solicitation is either active or passive. Active solicitation occurs when an employee
of the taxpayer initiates the contact with the customer. The activity is located at
the regular place of business with which the taxpayer's employee is regularly connected
or working out of, regardless of where the services of the 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.
(ii) Investigation. Investigation is the procedure where employees of the taxpayer determine the credit-worthiness
of the customer as well as the degree of risk involved in making a particular agreement.
The activity is located at the regular place of business with which the taxpayer's
employees are regularly connected or working out of, regardless of where the services
of the employees were actually performed.
(iii) Negotiation. Negotiation is the procedure where 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). The activity is located at
the regular place of business with which the taxpayer's employees are regularly connected
or working out of, regardless of where the services of the employees were actually
performed.
(iv) Approval. Approval is the procedure where employees or the board of directors of the taxpayer
make the final determination whether to enter into the agreement. The activity is
located at the regular place of business with which the taxpayer's employees are regularly
connected or working out of, regardless of where the services of the employees were
actually performed. If the board of directors makes the final determination, the activity
is located at the commercial domicile of the taxpayer.
(v) Administration. Administration is 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. The activity is located at the regular place
of business that oversees this activity.
(h) Location of credit card receivables. 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)
of this section.
(i) Period for which property assigned loan remains assigned. A loan that has been properly assigned to a state shall, absent any change of material
fact, remain assigned to the 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 contact to a regular place of business there.