State Codes and Statutes

Statutes > North-carolina > Chapter_105 > GS_105-130_4

§ 105‑130.4.  Allocationand apportionment of income for corporations.

(a)        As used in thissection, unless the context otherwise requires:

(1)        "Apportionableincome" means all income that is apportionable under the United StatesConstitution.

(2)        "Commercialdomicile" means the principal place from which the trade or business ofthe taxpayer is directed or managed.

(3)        "Compensation"means wages, salaries, commissions and any other form of remuneration paid toemployees for personal services.

(4)        "Excluded corporation"means any corporation engaged in business as a building or constructioncontractor, a securities dealer, or a loan company or a corporation thatreceives more than fifty percent (50%) of its ordinary gross income fromintangible property.

(5)        "Nonapportionableincome" means all income other than apportionable income.

(6)        "Publicutility" means any corporation that is subject to control of one or moreof the following entities: the North Carolina Utilities Commission, the FederalCommunications Commission, the Interstate Commerce Commission, the FederalEnergy Regulatory Commission, or the Federal Aviation Agency; and that owns oroperates for public use any plant, equipment, property, franchise, or licensefor the transmission of communications, the transportation of goods or persons,or the production, storage, transmission, sale, delivery or furnishing ofelectricity, water, steam, oil, oil products, or gas. The term also includes amotor carrier of property whose principal business activity is transportingproperty by motor vehicle for hire over the public highways of this State.

(7)        "Sales"means all gross receipts of the corporation except for the following receipts:

a.         Receipts from acasual sale of property.

b.         Receipts allocatedunder subsections (c) through (h) of this section.

c.         Receipts exempt fromtaxation.

d.         The portion ofreceipts realized from the sale or maturity of securities or other obligationsthat represents a return of principal.

(8)        "Casual sale ofproperty" means the sale of any property which was not purchased, producedor acquired primarily for sale in the corporation's regular trade or business.

(9)        "State"means any state of the United States, the District of Columbia, theCommonwealth of Puerto Rico, any territory or possession of the United States,and any foreign country or political subdivision thereof.

(b)        A corporationhaving income from business activity which is taxable both within and withoutthis State shall allocate and apportion its net income or net loss as providedin this section. For purposes of allocation and apportionment, a corporation istaxable in another state if (i) the corporation's business activity in thatstate subjects it to a net income tax or a tax measured by net income, or (ii)that state has jurisdiction based on the corporation's business activity inthat state to subject the corporation to a tax measured by net incomeregardless whether that state exercises its jurisdiction. For purposes of thissection, "business activity" includes any activity by a corporationthat would establish a taxable nexus pursuant to 15 United States Code section381.

(c)        Rents and royaltiesfrom real or tangible personal property, gains and losses, interest, dividends,patent and copyright royalties and other kinds of income, to the extent thatthey constitute nonapportionable income, less related expenses shall beallocated as provided in subsections (d) through (h) of this section.

(d)       (1)        Netrents and royalties from real property located in this State are allocable tothis State.

(2)        Net rents androyalties from tangible personal property are allocable to this State:

a.         If and to the extentthat the property is utilized in this State, or

b.         In their entirety ifthe corporation's commercial domicile is in this State and the corporation isnot organized under the laws of, or is not taxable in, the state in which theproperty is utilized.

(3)        The extent ofutilization of tangible personal property in a state is determined bymultiplying the rents and royalties by a fraction, the numerator of which isthe number of days of physical location of the property in the state during therental or royalty period in the income year and the denominator of which is thenumber of days of physical location of the property everywhere during allrental or royalty periods in the income year. If the physical location of theproperty during the rental or royalty period is unknown or unascertainable bythe corporation, tangible personal property is utilized in the state in whichthe property was located at the time the rental or royalty payer obtainedpossession.

(e)       (1)        Gainsand losses from sales or other disposition of real property located in thisState are allocable to this State.

(2)        Gains and lossesfrom sales or other disposition of tangible personal property are allocable tothis State if

a.         The property had asitus in this State at the time of the sale, or

b.         The corporation'scommercial domicile is in this State and the corporation is not taxable in thestate in which the property has a situs.

(3)        Gains and lossesfrom sales or other disposition of intangible personal property are allocableto this State if the corporation's commercial domicile is in this State.

(f)         Interest and netdividends are allocable to this State if the corporation's commercial domicileis in this State. For purposes of this section, the term "netdividends" means gross dividend income received less related expenses.

(g)       (1)        Royaltiesor similar income received from the use of patents, copyrights, secret processesand other similar intangible property are allocable to this State:

a.         If and to the extentthat the patent, copyright, secret process or other similar intangible propertyis utilized in this State, or

b.         If and to the extentthat the patent, copyright, secret process or other similar intangible propertyis utilized in a state in which the taxpayer is not taxable and the taxpayer'scommercial domicile is in this State.

(2)        A patent, secretprocess or other similar intangible property is utilized in a state to theextent that it is employed in production, fabrication, manufacturing,processing, or other use in the state or to the extent that a patented productis produced in the state. If the basis of receipts from such intangibleproperty does not permit allocation to states or if the accounting proceduresdo not reflect states of utilization, the intangible property is utilized inthe state in which the taxpayer's commercial domicile is located.

(3)        A copyright isutilized in a state to the extent that printing or other publication originatesin the state. If the basis of receipts from copyright royalties does not permitallocation to states or if the accounting procedures do not reflect states ofutilization, the copyright is utilized in the state in which the taxpayer'scommercial domicile is located.

(h)        The income lessrelated expenses from any other activities producing nonapportionable income orinvestments not otherwise specified in this section is allocable to this Stateif the business situs of the activities or investments is located in thisState.

(i)         (Effective fortaxable years beginning before January 1, 2010) All apportionable income ofcorporations other than public utilities and excluded corporations shall beapportioned to this State by multiplying the income by a fraction, thenumerator of which is the property factor plus the payroll factor plus twicethe sales factor, and the denominator of which is four. Provided, that wherethe sales factor does not exist, the denominator of the fraction shall be thenumber of existing factors and where the sales factor exists but the payrollfactor or the property factor does not exist, the denominator of the fractionshall be the number of existing factors plus one.

(i)         (Effective fortaxable years beginning on or after January 1, 2010) All apportionableincome of corporations other than public utilities, excluded corporations, andqualified capital intensive corporations shall be apportioned to this State bymultiplying the income by a fraction, the numerator of which is the propertyfactor plus the payroll factor plus twice the sales factor, and the denominatorof which is four. If the sales factor does not exist, the denominator of thefraction is the number of existing factors and if the sales factor exists butthe payroll factor or the property factor does not exist, the denominator ofthe fraction is the number of existing factors plus one.

(j)        (1)        Theproperty factor is a fraction, the numerator of which is the average value ofthe corporation's real and tangible personal property owned or rented and usedin this State during the income year and the denominator of which is theaverage value of all the corporation's real and tangible personal propertyowned or rented and used during the income year.

(2)        Property owned bythe corporation is valued at its original cost. Property rented by thecorporation is valued at eight times the net annual rental rate. Net annualrental rate is the annual rental rate paid by the corporation less any annualrental rate received by the corporation from subrentals except that subrentalsshall not be deducted when they constitute apportionable income. Any propertyunder construction and any property the income from which constitutesnonapportionable income shall be excluded in the computation of the propertyfactor.

(3)        The average value ofproperty shall be determined by averaging the values at the beginning and endof the income year, but in all cases the Secretary of Revenue may require theaveraging of monthly or other periodic values during the income year ifreasonably required to reflect properly the average value of the corporation'sproperty. A corporation that ceases its operations in this State before the endof its income year because of its intention to dissolve or to relinquish itscertificate of authority, or because of a merger, conversion, or consolidation,or for any other reason whatsoever shall use the real estate and tangiblepersonal property values as of the first day of the income year and the lastday of its operations in this State in determining the average value ofproperty, but the Secretary may require averaging of monthly or other periodicvalues during the income year if reasonably required to reflect properly theaverage value of the corporation's property.

(k)       (1)        Thepayroll factor is a fraction, the numerator of which is the total amount paidin this State during the income year by the corporation as compensation, andthe denominator of which is the total compensation paid everywhere during theincome year. All compensation paid to general executive officers and allcompensation paid in connection with nonapportionable income shall be excludedin computing the payroll factor. General executive officers shall include thechairman of the board, president, vice‑presidents, secretary, treasurer,comptroller, and any other officers serving in similar capacities.

(2)        Compensation is paidin this State if:

a.         The individual'sservice is performed entirely within the State; or

b.         The individual'sservice is performed both within and without the State, but the serviceperformed without the State is incidental to the individual's service withinthe State; or

c.         Some of the serviceis performed in this State and (i) the base of operations or, if there is nobase of operations, the place from which the service is directed or controlledis in this State, or (ii) the base of operations or the place from which theservice is directed or controlled is not in any state in which some part of theservice is performed, but the individual's residence is in this State.

(l)        (1)        Thesales factor is a fraction, the numerator of which is the total sales of thecorporation in this State during the income year, and the denominator of whichis the total sales of the corporation everywhere during the income year.Notwithstanding any other provision under this Part, the receipts from anycasual sale of property shall be excluded from both the numerator and thedenominator of the sales factor. Where a corporation is not taxable in anotherstate on its apportionable income but is taxable in another state only becauseof nonapportionable income, all sales shall be treated as having been made inthis State.

(2)        Sales of tangiblepersonal property are in this State if the property is received in this Stateby the purchaser. In the case of delivery of goods by common carrier or byother means of transportation, including transportation by the purchaser, theplace at which the goods are ultimately received after all transportation hasbeen completed shall be considered as the place at which the goods are receivedby the purchaser. Direct delivery into this State by the taxpayer to a personor firm designated by a purchaser from within or without the State shallconstitute delivery to the purchaser in this State.

(3)        Other sales are inthis State if:

a.         The receipts arefrom real or tangible personal property located in this State; or

b.         The receipts arefrom intangible property and are received from sources within this State; or

c.         The receipts arefrom services and the income‑producing activities are in this State.

(m)       All apportionableincome of a railroad company shall be apportioned to this State by multiplyingthe income by a fraction, the numerator of which is the "railway operatingrevenue" from business done within this State and the denominator of whichis the "total railway operating revenue" from all business done bythe company as shown by its records kept in accordance with the standardclassification of accounts prescribed by the Interstate Commerce Commission.

"Railway operatingrevenue" from business done within this State shall mean "railwayoperating revenue" from business wholly within this State, plus the equalmileage proportion within this State of each item of "railway operatingrevenue" received from the interstate business of the company. "Equalmileage proportion" shall mean the proportion which the distance ofmovement of property and passengers over lines in this State bears to the totaldistance of movement of property and passengers over lines of the companyreceiving such revenue. "Interstate business" shall mean"railway operating revenue" from the interstate transportation ofpersons or property into, out of, or through this State. If the Secretary of Revenuefinds, with respect to any particular company, that its accounting records arenot kept so as to reflect with exact accuracy such division of revenue by Statelines as to each transaction involving interstate revenue, the Secretary ofRevenue may adopt such regulations, based upon averages, as will approximatewith reasonable accuracy the proportion of interstate revenue actually earnedupon lines in this State. Provided, that where a railroad is being operated bya partnership which is treated as a corporation for income tax purposes andpays a net income tax to this State, or if located in another state would be sotreated and so pay as if located in this State, each partner's share of the netprofits shall be considered as dividends paid by a corporation for purposes ofthis Part and shall be so treated for inclusion in gross income, deductibility,and separate allocation of dividend income.

(n)        All apportionableincome of a telephone company shall be apportioned to this State by multiplyingthe income by a fraction, the numerator of which is gross operating revenuefrom local service in this State plus gross operating revenue from tollservices performed wholly within this State plus the proportion of revenue frominterstate toll services attributable to this State as shown by the records ofthe company plus the gross operating revenue in North Carolina from otherservice less the uncollectible revenue in this State, and the denominator ofwhich is the total gross operating revenue from all business done by thecompany everywhere less total uncollectible revenue. Provided, that where atelephone company is required to keep its records in accordance with thestandard classification of accounts prescribed by the Federal CommunicationsCommission the amounts in such accounts shall be used in computing theapportionment fraction as provided in this subsection.

(o)        All apportionableincome of a motor carrier of property shall be apportioned by multiplying theincome by a fraction, the numerator of which is the number of vehicle miles inthis State and the denominator of which is the total number of vehicle miles ofthe company everywhere. The words "vehicle miles" shall mean milestraveled by vehicles owned or operated by the company hauling property for a chargeor traveling on a scheduled route.

(p)        All apportionableincome of a motor carrier of passengers shall be apportioned by multiplying theincome by a fraction, the numerator of which is the number of vehicle miles inthis State and the denominator of which is the total number of vehicle miles ofthe company everywhere. The words "vehicle miles" shall mean milestraveled by vehicles owned or operated by the company carrying passengers for afare or traveling on a scheduled route.

(q)        All apportionableincome of a telegraph company shall be apportioned by multiplying the income bya fraction, the numerator of which is the property factor plus the payrollfactor plus the sales factor and the denominator of which is three.

The property factor shall beas defined in subsection (j) of this section, the payroll factor shall be asdefined in subsection (k) of this section, and the sales factor shall be asdefined in subsection (l) of this section.

(r)        All apportionableincome of an excluded corporation and of all other public utilities shall beapportioned by multiplying the income by the sales factor as determined undersubsection (l) of this section.

(s)        All apportionableincome of an air or water transportation corporation shall be apportioned by afraction, the numerator of which is the corporation's revenue ton miles in thisState and the denominator of which is the corporation's revenue ton mileseverywhere. The term "revenue ton mile" means one ton of passengers,freight, mail, or other cargo carried one mile. In making this computation, apassenger is considered to weigh two hundred pounds.

(s1)      (Effective fortaxable years beginning on or after January 1, 2010; see Editor's note forcontingent repeal) All apportionable income of a qualified capital intensivecorporation shall be apportioned by multiplying the income by the sales factoras determined under subsection (l) of this section. A "qualified capitalintensive corporation" is a corporation that satisfies all of theconditions of this subsection. A corporation that is subject to this subsectionmust list on its return the property, payroll, and sales factors it used indetermining whether it is a qualified capital intensive corporation. If thecorporation fails to invest one billion dollars ($1,000,000,000) in privatefunds within nine years as required by subdivision (2) of this subsection, thebenefit of this subsection expires and the corporation must apportion income asit would otherwise be required to do under this section absent this subsection.The conditions are:

(1)        The corporation'sproperty factor as a percentage of the sum of the factors in the formula setout in subsection (i) of this section, including the doubling of the salesfactor, exceeds seventy‑five percent (75%) or the corporation's averageproperty factor for the preceding three years as a percentage of the averagesum of the factors in the formula set out in subsection (i) of this section,including the doubling of the sales factors, for the preceding three yearsexceeds seventy‑five percent (75%).

(2)        The Secretary ofCommerce makes a written determination that the corporation has invested or isexpected to invest at least one billion dollars ($1,000,000,000) in privatefunds to construct a facility in this State within nine years after the timethat construction begins. For the purposes of this subsection, costs ofconstruction include costs of acquiring and improving land for the facility,costs for renovations or repairs to existing buildings, and costs of equippingor reequipping the facility.

(3)        The corporationmaintains the average number of employees it has at the facility during thefirst two years after the facility is placed in service for the remainder oftime in which the corporation must complete the investment required undersubdivision (2) of this subsection.

(4)        The facility thatsatisfies the condition of subdivision (2) of this subsection is located in acounty that was designated as a development tier one or two area at the timeconstruction of the facility began.

(5)        The corporationsatisfies a wage standard at the facility that satisfies the condition ofsubdivision (2) of this subsection. For the purposes of this subdivision, thewage standard that must be satisfied is the one established under G.S. 105‑129.83(c).

(6)        The corporationprovides health insurance for all of its full‑time employees at thefacility that satisfies the condition of subdivision (2) of this subsection.For the purposes of this subdivision, a company provides health insurance if itsatisfies the provisions of G.S. 105‑129.83(d).

(t)         Repealed bySession Laws 2007‑491, s. 2, effective January 1, 2008. Forapplicability, see Editor's note.

(t1)       AlternativeApportionment Method. – A corporation that believes the statutory apportionmentmethod that otherwise applies to it under this section subjects a greaterportion of its income to tax than is attributable to its business in this Statemay make a written request to the Secretary for permission to use analternative method. The request must set out the reasons for the corporation'sbelief and  propose an alternative method.

The statutory apportionmentmethod that otherwise applies to a corporation under this section is presumedto be the best method of determining the portion of the corporation's incomethat is attributable to its business in this State. A corporation has theburden of establishing by clear, cogent, and convincing proof that the proposedalternative method is a better method of determining the amount of thecorporation's income attributable to the corporation's business in this State.

The Secretary must issue awritten decision on a corporation's request for an alternative apportionmentmethod. If the decision grants the request, it must describe the alternativemethod the corporation is authorized to use and state the tax years to whichthe alternative method applies. A decision may apply to no more than three taxyears. A corporation may renew a request to use an alternative apportionmentmethod by following the procedure in this subsection. A decision of theSecretary on a request for an alternative apportionment method is final and isnot subject to administrative or judicial review. A corporation authorized touse an alternative method may apportion its income in accordance with thealternative method or the statutory method. A corporation may not use analternative apportionment method except upon written order of the Secretary,and any return in which any alternative apportionment method, other than themethod prescribed by statute, is used without permission of the Secretary isnot a lawful return.  (1939, c. 158, s. 311; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c.752, s. 3; 1953, c. 1302, s. 4; 1955, c. 1350, s. 18; 1957, c. 1340, s. 4;1959, c. 1259, s. 4; 1963, c. 1169, s. 2; c. 1186; 1967, c. 1110, s. 3; 1973,c. 476, s. 193; c. 1287, s. 4; 1981 (Reg. Sess., 1982), c. 1212; 1987, c. 804,s. 2; 1987 (Reg. Sess., 1988), c. 994, s. 1; 1993, c. 532, s. 12; 1995, c. 350,s. 3; 1996, 2nd Ex. Sess., c. 14, s. 5; 1998‑98, s. 69; 1999‑369,s. 5.4; 2000‑126, s. 5; 2001‑327, s. 1(c); 2002‑126, s.30G.1(a); 2003‑349, ss. 1.2, 1.3; 2003‑416, ss. 5(a)‑5(h);2004‑170, s. 15; 2005‑435, s. 53; 2007‑491, ss. 2, 12; 2009‑54,ss. 1, 2, 6; 2009‑445, ss. 4, 5.)

State Codes and Statutes

Statutes > North-carolina > Chapter_105 > GS_105-130_4

§ 105‑130.4.  Allocationand apportionment of income for corporations.

(a)        As used in thissection, unless the context otherwise requires:

(1)        "Apportionableincome" means all income that is apportionable under the United StatesConstitution.

(2)        "Commercialdomicile" means the principal place from which the trade or business ofthe taxpayer is directed or managed.

(3)        "Compensation"means wages, salaries, commissions and any other form of remuneration paid toemployees for personal services.

(4)        "Excluded corporation"means any corporation engaged in business as a building or constructioncontractor, a securities dealer, or a loan company or a corporation thatreceives more than fifty percent (50%) of its ordinary gross income fromintangible property.

(5)        "Nonapportionableincome" means all income other than apportionable income.

(6)        "Publicutility" means any corporation that is subject to control of one or moreof the following entities: the North Carolina Utilities Commission, the FederalCommunications Commission, the Interstate Commerce Commission, the FederalEnergy Regulatory Commission, or the Federal Aviation Agency; and that owns oroperates for public use any plant, equipment, property, franchise, or licensefor the transmission of communications, the transportation of goods or persons,or the production, storage, transmission, sale, delivery or furnishing ofelectricity, water, steam, oil, oil products, or gas. The term also includes amotor carrier of property whose principal business activity is transportingproperty by motor vehicle for hire over the public highways of this State.

(7)        "Sales"means all gross receipts of the corporation except for the following receipts:

a.         Receipts from acasual sale of property.

b.         Receipts allocatedunder subsections (c) through (h) of this section.

c.         Receipts exempt fromtaxation.

d.         The portion ofreceipts realized from the sale or maturity of securities or other obligationsthat represents a return of principal.

(8)        "Casual sale ofproperty" means the sale of any property which was not purchased, producedor acquired primarily for sale in the corporation's regular trade or business.

(9)        "State"means any state of the United States, the District of Columbia, theCommonwealth of Puerto Rico, any territory or possession of the United States,and any foreign country or political subdivision thereof.

(b)        A corporationhaving income from business activity which is taxable both within and withoutthis State shall allocate and apportion its net income or net loss as providedin this section. For purposes of allocation and apportionment, a corporation istaxable in another state if (i) the corporation's business activity in thatstate subjects it to a net income tax or a tax measured by net income, or (ii)that state has jurisdiction based on the corporation's business activity inthat state to subject the corporation to a tax measured by net incomeregardless whether that state exercises its jurisdiction. For purposes of thissection, "business activity" includes any activity by a corporationthat would establish a taxable nexus pursuant to 15 United States Code section381.

(c)        Rents and royaltiesfrom real or tangible personal property, gains and losses, interest, dividends,patent and copyright royalties and other kinds of income, to the extent thatthey constitute nonapportionable income, less related expenses shall beallocated as provided in subsections (d) through (h) of this section.

(d)       (1)        Netrents and royalties from real property located in this State are allocable tothis State.

(2)        Net rents androyalties from tangible personal property are allocable to this State:

a.         If and to the extentthat the property is utilized in this State, or

b.         In their entirety ifthe corporation's commercial domicile is in this State and the corporation isnot organized under the laws of, or is not taxable in, the state in which theproperty is utilized.

(3)        The extent ofutilization of tangible personal property in a state is determined bymultiplying the rents and royalties by a fraction, the numerator of which isthe number of days of physical location of the property in the state during therental or royalty period in the income year and the denominator of which is thenumber of days of physical location of the property everywhere during allrental or royalty periods in the income year. If the physical location of theproperty during the rental or royalty period is unknown or unascertainable bythe corporation, tangible personal property is utilized in the state in whichthe property was located at the time the rental or royalty payer obtainedpossession.

(e)       (1)        Gainsand losses from sales or other disposition of real property located in thisState are allocable to this State.

(2)        Gains and lossesfrom sales or other disposition of tangible personal property are allocable tothis State if

a.         The property had asitus in this State at the time of the sale, or

b.         The corporation'scommercial domicile is in this State and the corporation is not taxable in thestate in which the property has a situs.

(3)        Gains and lossesfrom sales or other disposition of intangible personal property are allocableto this State if the corporation's commercial domicile is in this State.

(f)         Interest and netdividends are allocable to this State if the corporation's commercial domicileis in this State. For purposes of this section, the term "netdividends" means gross dividend income received less related expenses.

(g)       (1)        Royaltiesor similar income received from the use of patents, copyrights, secret processesand other similar intangible property are allocable to this State:

a.         If and to the extentthat the patent, copyright, secret process or other similar intangible propertyis utilized in this State, or

b.         If and to the extentthat the patent, copyright, secret process or other similar intangible propertyis utilized in a state in which the taxpayer is not taxable and the taxpayer'scommercial domicile is in this State.

(2)        A patent, secretprocess or other similar intangible property is utilized in a state to theextent that it is employed in production, fabrication, manufacturing,processing, or other use in the state or to the extent that a patented productis produced in the state. If the basis of receipts from such intangibleproperty does not permit allocation to states or if the accounting proceduresdo not reflect states of utilization, the intangible property is utilized inthe state in which the taxpayer's commercial domicile is located.

(3)        A copyright isutilized in a state to the extent that printing or other publication originatesin the state. If the basis of receipts from copyright royalties does not permitallocation to states or if the accounting procedures do not reflect states ofutilization, the copyright is utilized in the state in which the taxpayer'scommercial domicile is located.

(h)        The income lessrelated expenses from any other activities producing nonapportionable income orinvestments not otherwise specified in this section is allocable to this Stateif the business situs of the activities or investments is located in thisState.

(i)         (Effective fortaxable years beginning before January 1, 2010) All apportionable income ofcorporations other than public utilities and excluded corporations shall beapportioned to this State by multiplying the income by a fraction, thenumerator of which is the property factor plus the payroll factor plus twicethe sales factor, and the denominator of which is four. Provided, that wherethe sales factor does not exist, the denominator of the fraction shall be thenumber of existing factors and where the sales factor exists but the payrollfactor or the property factor does not exist, the denominator of the fractionshall be the number of existing factors plus one.

(i)         (Effective fortaxable years beginning on or after January 1, 2010) All apportionableincome of corporations other than public utilities, excluded corporations, andqualified capital intensive corporations shall be apportioned to this State bymultiplying the income by a fraction, the numerator of which is the propertyfactor plus the payroll factor plus twice the sales factor, and the denominatorof which is four. If the sales factor does not exist, the denominator of thefraction is the number of existing factors and if the sales factor exists butthe payroll factor or the property factor does not exist, the denominator ofthe fraction is the number of existing factors plus one.

(j)        (1)        Theproperty factor is a fraction, the numerator of which is the average value ofthe corporation's real and tangible personal property owned or rented and usedin this State during the income year and the denominator of which is theaverage value of all the corporation's real and tangible personal propertyowned or rented and used during the income year.

(2)        Property owned bythe corporation is valued at its original cost. Property rented by thecorporation is valued at eight times the net annual rental rate. Net annualrental rate is the annual rental rate paid by the corporation less any annualrental rate received by the corporation from subrentals except that subrentalsshall not be deducted when they constitute apportionable income. Any propertyunder construction and any property the income from which constitutesnonapportionable income shall be excluded in the computation of the propertyfactor.

(3)        The average value ofproperty shall be determined by averaging the values at the beginning and endof the income year, but in all cases the Secretary of Revenue may require theaveraging of monthly or other periodic values during the income year ifreasonably required to reflect properly the average value of the corporation'sproperty. A corporation that ceases its operations in this State before the endof its income year because of its intention to dissolve or to relinquish itscertificate of authority, or because of a merger, conversion, or consolidation,or for any other reason whatsoever shall use the real estate and tangiblepersonal property values as of the first day of the income year and the lastday of its operations in this State in determining the average value ofproperty, but the Secretary may require averaging of monthly or other periodicvalues during the income year if reasonably required to reflect properly theaverage value of the corporation's property.

(k)       (1)        Thepayroll factor is a fraction, the numerator of which is the total amount paidin this State during the income year by the corporation as compensation, andthe denominator of which is the total compensation paid everywhere during theincome year. All compensation paid to general executive officers and allcompensation paid in connection with nonapportionable income shall be excludedin computing the payroll factor. General executive officers shall include thechairman of the board, president, vice‑presidents, secretary, treasurer,comptroller, and any other officers serving in similar capacities.

(2)        Compensation is paidin this State if:

a.         The individual'sservice is performed entirely within the State; or

b.         The individual'sservice is performed both within and without the State, but the serviceperformed without the State is incidental to the individual's service withinthe State; or

c.         Some of the serviceis performed in this State and (i) the base of operations or, if there is nobase of operations, the place from which the service is directed or controlledis in this State, or (ii) the base of operations or the place from which theservice is directed or controlled is not in any state in which some part of theservice is performed, but the individual's residence is in this State.

(l)        (1)        Thesales factor is a fraction, the numerator of which is the total sales of thecorporation in this State during the income year, and the denominator of whichis the total sales of the corporation everywhere during the income year.Notwithstanding any other provision under this Part, the receipts from anycasual sale of property shall be excluded from both the numerator and thedenominator of the sales factor. Where a corporation is not taxable in anotherstate on its apportionable income but is taxable in another state only becauseof nonapportionable income, all sales shall be treated as having been made inthis State.

(2)        Sales of tangiblepersonal property are in this State if the property is received in this Stateby the purchaser. In the case of delivery of goods by common carrier or byother means of transportation, including transportation by the purchaser, theplace at which the goods are ultimately received after all transportation hasbeen completed shall be considered as the place at which the goods are receivedby the purchaser. Direct delivery into this State by the taxpayer to a personor firm designated by a purchaser from within or without the State shallconstitute delivery to the purchaser in this State.

(3)        Other sales are inthis State if:

a.         The receipts arefrom real or tangible personal property located in this State; or

b.         The receipts arefrom intangible property and are received from sources within this State; or

c.         The receipts arefrom services and the income‑producing activities are in this State.

(m)       All apportionableincome of a railroad company shall be apportioned to this State by multiplyingthe income by a fraction, the numerator of which is the "railway operatingrevenue" from business done within this State and the denominator of whichis the "total railway operating revenue" from all business done bythe company as shown by its records kept in accordance with the standardclassification of accounts prescribed by the Interstate Commerce Commission.

"Railway operatingrevenue" from business done within this State shall mean "railwayoperating revenue" from business wholly within this State, plus the equalmileage proportion within this State of each item of "railway operatingrevenue" received from the interstate business of the company. "Equalmileage proportion" shall mean the proportion which the distance ofmovement of property and passengers over lines in this State bears to the totaldistance of movement of property and passengers over lines of the companyreceiving such revenue. "Interstate business" shall mean"railway operating revenue" from the interstate transportation ofpersons or property into, out of, or through this State. If the Secretary of Revenuefinds, with respect to any particular company, that its accounting records arenot kept so as to reflect with exact accuracy such division of revenue by Statelines as to each transaction involving interstate revenue, the Secretary ofRevenue may adopt such regulations, based upon averages, as will approximatewith reasonable accuracy the proportion of interstate revenue actually earnedupon lines in this State. Provided, that where a railroad is being operated bya partnership which is treated as a corporation for income tax purposes andpays a net income tax to this State, or if located in another state would be sotreated and so pay as if located in this State, each partner's share of the netprofits shall be considered as dividends paid by a corporation for purposes ofthis Part and shall be so treated for inclusion in gross income, deductibility,and separate allocation of dividend income.

(n)        All apportionableincome of a telephone company shall be apportioned to this State by multiplyingthe income by a fraction, the numerator of which is gross operating revenuefrom local service in this State plus gross operating revenue from tollservices performed wholly within this State plus the proportion of revenue frominterstate toll services attributable to this State as shown by the records ofthe company plus the gross operating revenue in North Carolina from otherservice less the uncollectible revenue in this State, and the denominator ofwhich is the total gross operating revenue from all business done by thecompany everywhere less total uncollectible revenue. Provided, that where atelephone company is required to keep its records in accordance with thestandard classification of accounts prescribed by the Federal CommunicationsCommission the amounts in such accounts shall be used in computing theapportionment fraction as provided in this subsection.

(o)        All apportionableincome of a motor carrier of property shall be apportioned by multiplying theincome by a fraction, the numerator of which is the number of vehicle miles inthis State and the denominator of which is the total number of vehicle miles ofthe company everywhere. The words "vehicle miles" shall mean milestraveled by vehicles owned or operated by the company hauling property for a chargeor traveling on a scheduled route.

(p)        All apportionableincome of a motor carrier of passengers shall be apportioned by multiplying theincome by a fraction, the numerator of which is the number of vehicle miles inthis State and the denominator of which is the total number of vehicle miles ofthe company everywhere. The words "vehicle miles" shall mean milestraveled by vehicles owned or operated by the company carrying passengers for afare or traveling on a scheduled route.

(q)        All apportionableincome of a telegraph company shall be apportioned by multiplying the income bya fraction, the numerator of which is the property factor plus the payrollfactor plus the sales factor and the denominator of which is three.

The property factor shall beas defined in subsection (j) of this section, the payroll factor shall be asdefined in subsection (k) of this section, and the sales factor shall be asdefined in subsection (l) of this section.

(r)        All apportionableincome of an excluded corporation and of all other public utilities shall beapportioned by multiplying the income by the sales factor as determined undersubsection (l) of this section.

(s)        All apportionableincome of an air or water transportation corporation shall be apportioned by afraction, the numerator of which is the corporation's revenue ton miles in thisState and the denominator of which is the corporation's revenue ton mileseverywhere. The term "revenue ton mile" means one ton of passengers,freight, mail, or other cargo carried one mile. In making this computation, apassenger is considered to weigh two hundred pounds.

(s1)      (Effective fortaxable years beginning on or after January 1, 2010; see Editor's note forcontingent repeal) All apportionable income of a qualified capital intensivecorporation shall be apportioned by multiplying the income by the sales factoras determined under subsection (l) of this section. A "qualified capitalintensive corporation" is a corporation that satisfies all of theconditions of this subsection. A corporation that is subject to this subsectionmust list on its return the property, payroll, and sales factors it used indetermining whether it is a qualified capital intensive corporation. If thecorporation fails to invest one billion dollars ($1,000,000,000) in privatefunds within nine years as required by subdivision (2) of this subsection, thebenefit of this subsection expires and the corporation must apportion income asit would otherwise be required to do under this section absent this subsection.The conditions are:

(1)        The corporation'sproperty factor as a percentage of the sum of the factors in the formula setout in subsection (i) of this section, including the doubling of the salesfactor, exceeds seventy‑five percent (75%) or the corporation's averageproperty factor for the preceding three years as a percentage of the averagesum of the factors in the formula set out in subsection (i) of this section,including the doubling of the sales factors, for the preceding three yearsexceeds seventy‑five percent (75%).

(2)        The Secretary ofCommerce makes a written determination that the corporation has invested or isexpected to invest at least one billion dollars ($1,000,000,000) in privatefunds to construct a facility in this State within nine years after the timethat construction begins. For the purposes of this subsection, costs ofconstruction include costs of acquiring and improving land for the facility,costs for renovations or repairs to existing buildings, and costs of equippingor reequipping the facility.

(3)        The corporationmaintains the average number of employees it has at the facility during thefirst two years after the facility is placed in service for the remainder oftime in which the corporation must complete the investment required undersubdivision (2) of this subsection.

(4)        The facility thatsatisfies the condition of subdivision (2) of this subsection is located in acounty that was designated as a development tier one or two area at the timeconstruction of the facility began.

(5)        The corporationsatisfies a wage standard at the facility that satisfies the condition ofsubdivision (2) of this subsection. For the purposes of this subdivision, thewage standard that must be satisfied is the one established under G.S. 105‑129.83(c).

(6)        The corporationprovides health insurance for all of its full‑time employees at thefacility that satisfies the condition of subdivision (2) of this subsection.For the purposes of this subdivision, a company provides health insurance if itsatisfies the provisions of G.S. 105‑129.83(d).

(t)         Repealed bySession Laws 2007‑491, s. 2, effective January 1, 2008. Forapplicability, see Editor's note.

(t1)       AlternativeApportionment Method. – A corporation that believes the statutory apportionmentmethod that otherwise applies to it under this section subjects a greaterportion of its income to tax than is attributable to its business in this Statemay make a written request to the Secretary for permission to use analternative method. The request must set out the reasons for the corporation'sbelief and  propose an alternative method.

The statutory apportionmentmethod that otherwise applies to a corporation under this section is presumedto be the best method of determining the portion of the corporation's incomethat is attributable to its business in this State. A corporation has theburden of establishing by clear, cogent, and convincing proof that the proposedalternative method is a better method of determining the amount of thecorporation's income attributable to the corporation's business in this State.

The Secretary must issue awritten decision on a corporation's request for an alternative apportionmentmethod. If the decision grants the request, it must describe the alternativemethod the corporation is authorized to use and state the tax years to whichthe alternative method applies. A decision may apply to no more than three taxyears. A corporation may renew a request to use an alternative apportionmentmethod by following the procedure in this subsection. A decision of theSecretary on a request for an alternative apportionment method is final and isnot subject to administrative or judicial review. A corporation authorized touse an alternative method may apportion its income in accordance with thealternative method or the statutory method. A corporation may not use analternative apportionment method except upon written order of the Secretary,and any return in which any alternative apportionment method, other than themethod prescribed by statute, is used without permission of the Secretary isnot a lawful return.  (1939, c. 158, s. 311; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c.752, s. 3; 1953, c. 1302, s. 4; 1955, c. 1350, s. 18; 1957, c. 1340, s. 4;1959, c. 1259, s. 4; 1963, c. 1169, s. 2; c. 1186; 1967, c. 1110, s. 3; 1973,c. 476, s. 193; c. 1287, s. 4; 1981 (Reg. Sess., 1982), c. 1212; 1987, c. 804,s. 2; 1987 (Reg. Sess., 1988), c. 994, s. 1; 1993, c. 532, s. 12; 1995, c. 350,s. 3; 1996, 2nd Ex. Sess., c. 14, s. 5; 1998‑98, s. 69; 1999‑369,s. 5.4; 2000‑126, s. 5; 2001‑327, s. 1(c); 2002‑126, s.30G.1(a); 2003‑349, ss. 1.2, 1.3; 2003‑416, ss. 5(a)‑5(h);2004‑170, s. 15; 2005‑435, s. 53; 2007‑491, ss. 2, 12; 2009‑54,ss. 1, 2, 6; 2009‑445, ss. 4, 5.)


State Codes and Statutes

State Codes and Statutes

Statutes > North-carolina > Chapter_105 > GS_105-130_4

§ 105‑130.4.  Allocationand apportionment of income for corporations.

(a)        As used in thissection, unless the context otherwise requires:

(1)        "Apportionableincome" means all income that is apportionable under the United StatesConstitution.

(2)        "Commercialdomicile" means the principal place from which the trade or business ofthe taxpayer is directed or managed.

(3)        "Compensation"means wages, salaries, commissions and any other form of remuneration paid toemployees for personal services.

(4)        "Excluded corporation"means any corporation engaged in business as a building or constructioncontractor, a securities dealer, or a loan company or a corporation thatreceives more than fifty percent (50%) of its ordinary gross income fromintangible property.

(5)        "Nonapportionableincome" means all income other than apportionable income.

(6)        "Publicutility" means any corporation that is subject to control of one or moreof the following entities: the North Carolina Utilities Commission, the FederalCommunications Commission, the Interstate Commerce Commission, the FederalEnergy Regulatory Commission, or the Federal Aviation Agency; and that owns oroperates for public use any plant, equipment, property, franchise, or licensefor the transmission of communications, the transportation of goods or persons,or the production, storage, transmission, sale, delivery or furnishing ofelectricity, water, steam, oil, oil products, or gas. The term also includes amotor carrier of property whose principal business activity is transportingproperty by motor vehicle for hire over the public highways of this State.

(7)        "Sales"means all gross receipts of the corporation except for the following receipts:

a.         Receipts from acasual sale of property.

b.         Receipts allocatedunder subsections (c) through (h) of this section.

c.         Receipts exempt fromtaxation.

d.         The portion ofreceipts realized from the sale or maturity of securities or other obligationsthat represents a return of principal.

(8)        "Casual sale ofproperty" means the sale of any property which was not purchased, producedor acquired primarily for sale in the corporation's regular trade or business.

(9)        "State"means any state of the United States, the District of Columbia, theCommonwealth of Puerto Rico, any territory or possession of the United States,and any foreign country or political subdivision thereof.

(b)        A corporationhaving income from business activity which is taxable both within and withoutthis State shall allocate and apportion its net income or net loss as providedin this section. For purposes of allocation and apportionment, a corporation istaxable in another state if (i) the corporation's business activity in thatstate subjects it to a net income tax or a tax measured by net income, or (ii)that state has jurisdiction based on the corporation's business activity inthat state to subject the corporation to a tax measured by net incomeregardless whether that state exercises its jurisdiction. For purposes of thissection, "business activity" includes any activity by a corporationthat would establish a taxable nexus pursuant to 15 United States Code section381.

(c)        Rents and royaltiesfrom real or tangible personal property, gains and losses, interest, dividends,patent and copyright royalties and other kinds of income, to the extent thatthey constitute nonapportionable income, less related expenses shall beallocated as provided in subsections (d) through (h) of this section.

(d)       (1)        Netrents and royalties from real property located in this State are allocable tothis State.

(2)        Net rents androyalties from tangible personal property are allocable to this State:

a.         If and to the extentthat the property is utilized in this State, or

b.         In their entirety ifthe corporation's commercial domicile is in this State and the corporation isnot organized under the laws of, or is not taxable in, the state in which theproperty is utilized.

(3)        The extent ofutilization of tangible personal property in a state is determined bymultiplying the rents and royalties by a fraction, the numerator of which isthe number of days of physical location of the property in the state during therental or royalty period in the income year and the denominator of which is thenumber of days of physical location of the property everywhere during allrental or royalty periods in the income year. If the physical location of theproperty during the rental or royalty period is unknown or unascertainable bythe corporation, tangible personal property is utilized in the state in whichthe property was located at the time the rental or royalty payer obtainedpossession.

(e)       (1)        Gainsand losses from sales or other disposition of real property located in thisState are allocable to this State.

(2)        Gains and lossesfrom sales or other disposition of tangible personal property are allocable tothis State if

a.         The property had asitus in this State at the time of the sale, or

b.         The corporation'scommercial domicile is in this State and the corporation is not taxable in thestate in which the property has a situs.

(3)        Gains and lossesfrom sales or other disposition of intangible personal property are allocableto this State if the corporation's commercial domicile is in this State.

(f)         Interest and netdividends are allocable to this State if the corporation's commercial domicileis in this State. For purposes of this section, the term "netdividends" means gross dividend income received less related expenses.

(g)       (1)        Royaltiesor similar income received from the use of patents, copyrights, secret processesand other similar intangible property are allocable to this State:

a.         If and to the extentthat the patent, copyright, secret process or other similar intangible propertyis utilized in this State, or

b.         If and to the extentthat the patent, copyright, secret process or other similar intangible propertyis utilized in a state in which the taxpayer is not taxable and the taxpayer'scommercial domicile is in this State.

(2)        A patent, secretprocess or other similar intangible property is utilized in a state to theextent that it is employed in production, fabrication, manufacturing,processing, or other use in the state or to the extent that a patented productis produced in the state. If the basis of receipts from such intangibleproperty does not permit allocation to states or if the accounting proceduresdo not reflect states of utilization, the intangible property is utilized inthe state in which the taxpayer's commercial domicile is located.

(3)        A copyright isutilized in a state to the extent that printing or other publication originatesin the state. If the basis of receipts from copyright royalties does not permitallocation to states or if the accounting procedures do not reflect states ofutilization, the copyright is utilized in the state in which the taxpayer'scommercial domicile is located.

(h)        The income lessrelated expenses from any other activities producing nonapportionable income orinvestments not otherwise specified in this section is allocable to this Stateif the business situs of the activities or investments is located in thisState.

(i)         (Effective fortaxable years beginning before January 1, 2010) All apportionable income ofcorporations other than public utilities and excluded corporations shall beapportioned to this State by multiplying the income by a fraction, thenumerator of which is the property factor plus the payroll factor plus twicethe sales factor, and the denominator of which is four. Provided, that wherethe sales factor does not exist, the denominator of the fraction shall be thenumber of existing factors and where the sales factor exists but the payrollfactor or the property factor does not exist, the denominator of the fractionshall be the number of existing factors plus one.

(i)         (Effective fortaxable years beginning on or after January 1, 2010) All apportionableincome of corporations other than public utilities, excluded corporations, andqualified capital intensive corporations shall be apportioned to this State bymultiplying the income by a fraction, the numerator of which is the propertyfactor plus the payroll factor plus twice the sales factor, and the denominatorof which is four. If the sales factor does not exist, the denominator of thefraction is the number of existing factors and if the sales factor exists butthe payroll factor or the property factor does not exist, the denominator ofthe fraction is the number of existing factors plus one.

(j)        (1)        Theproperty factor is a fraction, the numerator of which is the average value ofthe corporation's real and tangible personal property owned or rented and usedin this State during the income year and the denominator of which is theaverage value of all the corporation's real and tangible personal propertyowned or rented and used during the income year.

(2)        Property owned bythe corporation is valued at its original cost. Property rented by thecorporation is valued at eight times the net annual rental rate. Net annualrental rate is the annual rental rate paid by the corporation less any annualrental rate received by the corporation from subrentals except that subrentalsshall not be deducted when they constitute apportionable income. Any propertyunder construction and any property the income from which constitutesnonapportionable income shall be excluded in the computation of the propertyfactor.

(3)        The average value ofproperty shall be determined by averaging the values at the beginning and endof the income year, but in all cases the Secretary of Revenue may require theaveraging of monthly or other periodic values during the income year ifreasonably required to reflect properly the average value of the corporation'sproperty. A corporation that ceases its operations in this State before the endof its income year because of its intention to dissolve or to relinquish itscertificate of authority, or because of a merger, conversion, or consolidation,or for any other reason whatsoever shall use the real estate and tangiblepersonal property values as of the first day of the income year and the lastday of its operations in this State in determining the average value ofproperty, but the Secretary may require averaging of monthly or other periodicvalues during the income year if reasonably required to reflect properly theaverage value of the corporation's property.

(k)       (1)        Thepayroll factor is a fraction, the numerator of which is the total amount paidin this State during the income year by the corporation as compensation, andthe denominator of which is the total compensation paid everywhere during theincome year. All compensation paid to general executive officers and allcompensation paid in connection with nonapportionable income shall be excludedin computing the payroll factor. General executive officers shall include thechairman of the board, president, vice‑presidents, secretary, treasurer,comptroller, and any other officers serving in similar capacities.

(2)        Compensation is paidin this State if:

a.         The individual'sservice is performed entirely within the State; or

b.         The individual'sservice is performed both within and without the State, but the serviceperformed without the State is incidental to the individual's service withinthe State; or

c.         Some of the serviceis performed in this State and (i) the base of operations or, if there is nobase of operations, the place from which the service is directed or controlledis in this State, or (ii) the base of operations or the place from which theservice is directed or controlled is not in any state in which some part of theservice is performed, but the individual's residence is in this State.

(l)        (1)        Thesales factor is a fraction, the numerator of which is the total sales of thecorporation in this State during the income year, and the denominator of whichis the total sales of the corporation everywhere during the income year.Notwithstanding any other provision under this Part, the receipts from anycasual sale of property shall be excluded from both the numerator and thedenominator of the sales factor. Where a corporation is not taxable in anotherstate on its apportionable income but is taxable in another state only becauseof nonapportionable income, all sales shall be treated as having been made inthis State.

(2)        Sales of tangiblepersonal property are in this State if the property is received in this Stateby the purchaser. In the case of delivery of goods by common carrier or byother means of transportation, including transportation by the purchaser, theplace at which the goods are ultimately received after all transportation hasbeen completed shall be considered as the place at which the goods are receivedby the purchaser. Direct delivery into this State by the taxpayer to a personor firm designated by a purchaser from within or without the State shallconstitute delivery to the purchaser in this State.

(3)        Other sales are inthis State if:

a.         The receipts arefrom real or tangible personal property located in this State; or

b.         The receipts arefrom intangible property and are received from sources within this State; or

c.         The receipts arefrom services and the income‑producing activities are in this State.

(m)       All apportionableincome of a railroad company shall be apportioned to this State by multiplyingthe income by a fraction, the numerator of which is the "railway operatingrevenue" from business done within this State and the denominator of whichis the "total railway operating revenue" from all business done bythe company as shown by its records kept in accordance with the standardclassification of accounts prescribed by the Interstate Commerce Commission.

"Railway operatingrevenue" from business done within this State shall mean "railwayoperating revenue" from business wholly within this State, plus the equalmileage proportion within this State of each item of "railway operatingrevenue" received from the interstate business of the company. "Equalmileage proportion" shall mean the proportion which the distance ofmovement of property and passengers over lines in this State bears to the totaldistance of movement of property and passengers over lines of the companyreceiving such revenue. "Interstate business" shall mean"railway operating revenue" from the interstate transportation ofpersons or property into, out of, or through this State. If the Secretary of Revenuefinds, with respect to any particular company, that its accounting records arenot kept so as to reflect with exact accuracy such division of revenue by Statelines as to each transaction involving interstate revenue, the Secretary ofRevenue may adopt such regulations, based upon averages, as will approximatewith reasonable accuracy the proportion of interstate revenue actually earnedupon lines in this State. Provided, that where a railroad is being operated bya partnership which is treated as a corporation for income tax purposes andpays a net income tax to this State, or if located in another state would be sotreated and so pay as if located in this State, each partner's share of the netprofits shall be considered as dividends paid by a corporation for purposes ofthis Part and shall be so treated for inclusion in gross income, deductibility,and separate allocation of dividend income.

(n)        All apportionableincome of a telephone company shall be apportioned to this State by multiplyingthe income by a fraction, the numerator of which is gross operating revenuefrom local service in this State plus gross operating revenue from tollservices performed wholly within this State plus the proportion of revenue frominterstate toll services attributable to this State as shown by the records ofthe company plus the gross operating revenue in North Carolina from otherservice less the uncollectible revenue in this State, and the denominator ofwhich is the total gross operating revenue from all business done by thecompany everywhere less total uncollectible revenue. Provided, that where atelephone company is required to keep its records in accordance with thestandard classification of accounts prescribed by the Federal CommunicationsCommission the amounts in such accounts shall be used in computing theapportionment fraction as provided in this subsection.

(o)        All apportionableincome of a motor carrier of property shall be apportioned by multiplying theincome by a fraction, the numerator of which is the number of vehicle miles inthis State and the denominator of which is the total number of vehicle miles ofthe company everywhere. The words "vehicle miles" shall mean milestraveled by vehicles owned or operated by the company hauling property for a chargeor traveling on a scheduled route.

(p)        All apportionableincome of a motor carrier of passengers shall be apportioned by multiplying theincome by a fraction, the numerator of which is the number of vehicle miles inthis State and the denominator of which is the total number of vehicle miles ofthe company everywhere. The words "vehicle miles" shall mean milestraveled by vehicles owned or operated by the company carrying passengers for afare or traveling on a scheduled route.

(q)        All apportionableincome of a telegraph company shall be apportioned by multiplying the income bya fraction, the numerator of which is the property factor plus the payrollfactor plus the sales factor and the denominator of which is three.

The property factor shall beas defined in subsection (j) of this section, the payroll factor shall be asdefined in subsection (k) of this section, and the sales factor shall be asdefined in subsection (l) of this section.

(r)        All apportionableincome of an excluded corporation and of all other public utilities shall beapportioned by multiplying the income by the sales factor as determined undersubsection (l) of this section.

(s)        All apportionableincome of an air or water transportation corporation shall be apportioned by afraction, the numerator of which is the corporation's revenue ton miles in thisState and the denominator of which is the corporation's revenue ton mileseverywhere. The term "revenue ton mile" means one ton of passengers,freight, mail, or other cargo carried one mile. In making this computation, apassenger is considered to weigh two hundred pounds.

(s1)      (Effective fortaxable years beginning on or after January 1, 2010; see Editor's note forcontingent repeal) All apportionable income of a qualified capital intensivecorporation shall be apportioned by multiplying the income by the sales factoras determined under subsection (l) of this section. A "qualified capitalintensive corporation" is a corporation that satisfies all of theconditions of this subsection. A corporation that is subject to this subsectionmust list on its return the property, payroll, and sales factors it used indetermining whether it is a qualified capital intensive corporation. If thecorporation fails to invest one billion dollars ($1,000,000,000) in privatefunds within nine years as required by subdivision (2) of this subsection, thebenefit of this subsection expires and the corporation must apportion income asit would otherwise be required to do under this section absent this subsection.The conditions are:

(1)        The corporation'sproperty factor as a percentage of the sum of the factors in the formula setout in subsection (i) of this section, including the doubling of the salesfactor, exceeds seventy‑five percent (75%) or the corporation's averageproperty factor for the preceding three years as a percentage of the averagesum of the factors in the formula set out in subsection (i) of this section,including the doubling of the sales factors, for the preceding three yearsexceeds seventy‑five percent (75%).

(2)        The Secretary ofCommerce makes a written determination that the corporation has invested or isexpected to invest at least one billion dollars ($1,000,000,000) in privatefunds to construct a facility in this State within nine years after the timethat construction begins. For the purposes of this subsection, costs ofconstruction include costs of acquiring and improving land for the facility,costs for renovations or repairs to existing buildings, and costs of equippingor reequipping the facility.

(3)        The corporationmaintains the average number of employees it has at the facility during thefirst two years after the facility is placed in service for the remainder oftime in which the corporation must complete the investment required undersubdivision (2) of this subsection.

(4)        The facility thatsatisfies the condition of subdivision (2) of this subsection is located in acounty that was designated as a development tier one or two area at the timeconstruction of the facility began.

(5)        The corporationsatisfies a wage standard at the facility that satisfies the condition ofsubdivision (2) of this subsection. For the purposes of this subdivision, thewage standard that must be satisfied is the one established under G.S. 105‑129.83(c).

(6)        The corporationprovides health insurance for all of its full‑time employees at thefacility that satisfies the condition of subdivision (2) of this subsection.For the purposes of this subdivision, a company provides health insurance if itsatisfies the provisions of G.S. 105‑129.83(d).

(t)         Repealed bySession Laws 2007‑491, s. 2, effective January 1, 2008. Forapplicability, see Editor's note.

(t1)       AlternativeApportionment Method. – A corporation that believes the statutory apportionmentmethod that otherwise applies to it under this section subjects a greaterportion of its income to tax than is attributable to its business in this Statemay make a written request to the Secretary for permission to use analternative method. The request must set out the reasons for the corporation'sbelief and  propose an alternative method.

The statutory apportionmentmethod that otherwise applies to a corporation under this section is presumedto be the best method of determining the portion of the corporation's incomethat is attributable to its business in this State. A corporation has theburden of establishing by clear, cogent, and convincing proof that the proposedalternative method is a better method of determining the amount of thecorporation's income attributable to the corporation's business in this State.

The Secretary must issue awritten decision on a corporation's request for an alternative apportionmentmethod. If the decision grants the request, it must describe the alternativemethod the corporation is authorized to use and state the tax years to whichthe alternative method applies. A decision may apply to no more than three taxyears. A corporation may renew a request to use an alternative apportionmentmethod by following the procedure in this subsection. A decision of theSecretary on a request for an alternative apportionment method is final and isnot subject to administrative or judicial review. A corporation authorized touse an alternative method may apportion its income in accordance with thealternative method or the statutory method. A corporation may not use analternative apportionment method except upon written order of the Secretary,and any return in which any alternative apportionment method, other than themethod prescribed by statute, is used without permission of the Secretary isnot a lawful return.  (1939, c. 158, s. 311; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c.752, s. 3; 1953, c. 1302, s. 4; 1955, c. 1350, s. 18; 1957, c. 1340, s. 4;1959, c. 1259, s. 4; 1963, c. 1169, s. 2; c. 1186; 1967, c. 1110, s. 3; 1973,c. 476, s. 193; c. 1287, s. 4; 1981 (Reg. Sess., 1982), c. 1212; 1987, c. 804,s. 2; 1987 (Reg. Sess., 1988), c. 994, s. 1; 1993, c. 532, s. 12; 1995, c. 350,s. 3; 1996, 2nd Ex. Sess., c. 14, s. 5; 1998‑98, s. 69; 1999‑369,s. 5.4; 2000‑126, s. 5; 2001‑327, s. 1(c); 2002‑126, s.30G.1(a); 2003‑349, ss. 1.2, 1.3; 2003‑416, ss. 5(a)‑5(h);2004‑170, s. 15; 2005‑435, s. 53; 2007‑491, ss. 2, 12; 2009‑54,ss. 1, 2, 6; 2009‑445, ss. 4, 5.)