Corporate Close-Up: Another One Bites the Dust? North Dakota Repeals MTC Compact Election

Fourteen states claimed to be party to the Mulitstate Tax Compact, six of which (including North Dakota) claimed to conform to all materials provisions of the MTC, according to Bloomberg BNA 2015 Survey of State Tax Departments.

But beginning in 2015, North Dakota, under the recently enacted S.B. 2292, repealed specific parts of Article III, removing the option for taxpayers to choose between the state apportionment provision and use of the MTC rules. Also, the apportionment formula and arbitration provisions were repealed from Articles IV and IX, respectively.

The legislation also changed the way corporations apportion income to North Dakota. The bill phases in a single-sales factor via a voluntary election. The option is restricted to entities that are not pass-through entities and is applicable to companies filing consolidated returns or companies in a unitary group.

The election, which is binding for five consecutive taxable years, requires specific apportionment formulas for those years. The first two years beginning after Dec. 31, 2015, a double weighted sales factor is used. The taxable year beginning after Dec. 31, 2017 uses a six-time weighted sales factor. For taxable years beginning after Dec. 31, 2018, the single-sales factor is utilized.

Continue the discussion on Bloomberg BNA: How will use of a single-sales factor apportionment formula and repeal of the ability to use the MTC

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