Income Taxes: Principles of Formulary Apportionment discusses the apportionment of income for state tax purposes and provides insight into the history and issues of relevant methods.  Written by John S. Warren, Esq., Loeb & Loeb, this Portfolio examines the movement for uniformity, discusses the apportionment formula and prerequisites to formula application, and relates the application of apportionment to combined reports. Because most states have either adopted the practices of the Uniform Division of Income for Tax Purposes Act (UDITPA) as their exclusive or optional method, or they have adopted UDITPA with some changes, this Portfolio zeroes in on the three-factor formula contained in UDITPA, analyzing important variations from (and distortions of) this formula.  It identifies such variations as the burden of proof, the uditpa approach to distortion, industry-wide variances, and apportionment of deferred income.  

Income Taxes: Principles of Formulary Apportionment  also provides detailed examinations of key factors, including 

• The property factor: theories of the property factor, exclusion of intangibles, property used in the unitary business, and the location of property,
• The payroll factor: employee v. independent contractor, employees producing nonbusiness income, computation of included amounts, location of payroll, verification of payroll factor, and nonjurisdictional payroll, and
• The sales factor: included receipts, excluded receipts, situs and sourcing of sales of tangible personal property, receipts from other than sales of goods, nonjurisdictional sales, and excess weighting of the sales factor. 

Income Taxes: Principles of Formulary Apportionment allows you to benefit from: 

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
• Invaluable practice documents including tables, charts and lists.
• Plain-English guidance from world-class experts.
• Real-world and in-depth analysis that lets you explore various options.
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
• Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

Detailed Analysis

1150.01. INTRODUCTION

1150.02. THE UNIFORMITY MOVEMENT

1150.03. THE APPORTIONMENT FORMULA

1150.04. PREREQUISITES TO FORMULA APPLICATION

1150.05. THE PROPERTY FACTOR

Introductory Material

A. Theories of the Property Factor

B. Exclusion of Intangibles

C. Property Used in the Unitary Business

D. Location of Property

1. Property in Transit

2. Movable Property

3. Nonjurisdictional Property

4. Electronically Transmitted Property

E. Value of Property

1. Determining Original Cost

2. Valuation of Rented Property

1150.06. THE PAYROLL FACTOR

Introductory Material

A. Employee v. Independent Contractor

B. Employees Producing Nonbusiness Income

C. Computation of Included Amounts

D. Location of Payroll

E. Verification of Payroll Factor

F. Nonjurisdictional Payroll

1150.07. THE SALES FACTOR

Introductory Material

A. Included Receipts

1. Sales of Goods

2. Performance of Services

3. Rental and Licensing Income

4. Excise and Sales Taxes

5. Capital Gains

6. Service and Carrying Charges

7. Interest Income

B. Excluded Receipts

1. Nonbusiness Receipts

2. Receipts from Occasional Sales

3. Unattributable Receipts from Sale of Intangible Property

C. Situs and Sourcing of Sales of Tangible Personal Property

1. Pre-UDITPA Rules

a. Origin Rule

b. Destination Rule

c. Solicitation Rule

2. UDITPA Sourcing Standards

3. U.S. Government Sales

4. Throwback Rule

a. Nowhere Income

b. Throwout Rule

5. Dock Sales

6. Drop Shipment Sales

7. Throwback of Foreign Sales to Port State

D. Receipts from Other Than Sales of Goods

1. Income Producing Activity

2. Costs of Performance

3. Throwout of Passive Income

4. Allocation of Advertising Revenue: Print Media v. Electronic Media

E. Nonjurisdictional Sales

F. Excess Weighting of the Sales Factor

1150.08. APPLICATION TO COMBINED REPORTS

Introductory Material

A. Comparison of Combined Report and Consolidated Return

B. Division of In-State Taxable Income

1. Methodology of In-State Division

C. Sales Throwback in Combined Report Cases

D. Apportionment of Dividends in Non–Combination States

1150.09. DISTORTION AND FORMULA VARIANCES

Introductory Material

A. Burden of Proof

B. The UDITPA Approach to Distortion

C. Industry-wide Variances

1. Airlines

2. Financial Institutions

3. Transportation and Pipeline Industries

4. Professional Athletic Teams

D. Apportionment of Deferred Income

Working Papers

Table of Worksheets

Worksheet 1 Uniform Division of Income for Tax Purposes Act - Annotated

Worksheet 2 Multistate Tax Commission Regulations - Excerpts

Bibliography

Bibliography