Colo. Code Regs. 39-22-303.5-3
Current through Register Vol. 47, No. 23, December 10, 2024
Rule 39-22-303.5-3 - Apportionment and AllocationThe provisions of this rule apply to income tax years commencing on or after January 1, 2009, but prior to January 1, 2019.
(1)Apportionment. If the business activity in respect to any trade or business of a taxpayer occurs both within and without this state, and if by reason of such business activity the taxpayer is taxable in another state, the portion of the net income (or net loss) arising from such trade or business that is derived from sources within this state shall be determined by apportionment in accordance with § 39-22-303.5(4), C.R.S.(2)Allocation. Unless electing to treat all income as business income (see Rule 39-22-303.5 -8), any taxpayer subject to the taxing jurisdiction of this state shall allocate all of its nonbusiness income or loss within or without this state in accordance with § 39-22-303.5(5), C.R.S.(3)Combined Report. If a particular trade or business is carried on by a taxpayer and one or more affiliated corporations, nothing in these rules shall preclude the use of a "combined report" whereby the entire business income of such trade or business is apportioned in accordance with § 39-22-303, § 39-22-303.5, or § 39-22-303.7, C.R.S. However, the income in the combined report may be required to be calculated pursuant to 1 CCR 201-2, Rule 39-22-303.6 -3 paragraph (4) of and pursuant to any applicable special rules for allocation and apportionment of corporate income.(4)Consistency and Uniformity in Reporting. In filing returns with this state, if the taxpayer departs from or modifies the manner in which income has been classified as business income or nonbusiness income, except for nonbusiness income with respect to which an election has been made pursuant to § 39-22-303.5(6), C.R.S., in the returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification.(5)Taxable in Another State.(a)In general. Under § 39-22-303.5(3)(b), C.R.S., the taxpayer is subject to the allocation and apportionment provisions of this section if it has income from business activity that is taxable both within and without this state. A taxpayer's income from business activity is taxable without this state if such taxpayer, by reason of such business activity (i.e., the transactions and activity occurring in the regular course of a particular trade or business), is taxable in another state within the meaning of § 39-22-303.5(3)(c), C.R.S.(b)Applicable tests. A taxpayer is taxable within another state if it meets either one of two tests: (1) If by reason of business activity in another state the taxpayer is subject to one of the types of taxes specified in § 39-22-303.5(3)(c)(I), C.R.S., namely: a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, a corporate stock tax, or other similar tax; or (2) If by reason of such business activity another state has jurisdiction to subject the taxpayer to a net income tax, regardless of whether or not the state imposes such a tax on the taxpayer.(c)Producing nonbusiness income. A taxpayer is not taxable in another state with respect to a particular trade or business merely because the taxpayer conducts activities in such other state pertaining to the production of nonbusiness income or business activities relating to a separate trade or business.(d) A taxpayer is "subject to" one of the taxes specified in § 39-22-303.5(3)(c)(I), C.R.S., if it carries on business activities in such state and such state imposes such a tax thereon. Any taxpayer that asserts that it is subject to one of the taxes specified in § 39-22-303.5(3)(c)(I), C.R.S., in another state shall furnish to the executive director upon his or her request evidence to support such assertion. The executive director may request that such evidence include proof that the taxpayer has filed the requisite tax return in such other state and has paid any taxes imposed under the law of such other state; the taxpayer's failure to produce such proof may be taken into account in determining whether the taxpayer in fact is subject to one of the taxes specified in § 39-22-303.5(3)(c)(I), C.R.S., in such other state.(e)Voluntary tax payment. If the taxpayer voluntarily files and pays one or more of such taxes when not required to do so by the laws of that state or pays a minimal fee for qualification, organization or for the privilege of doing business in that state, but (i) does not actually engage in business activity in that state, or(ii) does actually engage in some business activity, not sufficient for nexus, and the minimum tax bears no relation to the taxpayer's business activity within such state, the taxpayer is not "subject to" one of the taxes specified within the meaning of § 39-22-303.5(3)(c)(I), C.R.S.(f)Taxability. The concept of taxability in another state is based upon the premise that every state in which the taxpayer is engaged in business activity may impose an income tax even though every state does not do so. In states that do not, other types of taxes may be imposed as a substitute for an income tax. Therefore, only those taxes enumerated in § 39-22-303.5(3)(c)(I), C.R.S., that may be considered as basically revenue raising rather than regulatory measures shall be considered in determining whether the taxpayer is "subject to" one of the taxes specified in § 39-22-303.5(3)(c)(I), C.R.S., in another state. By way of illustration and not of limitation, regulatory measures could include fees charged out-of-state cigarette and tobacco vendors for access to the state's market or out-of-state alcoholic beverage vendors to ensure compliance with local liquor laws.(g) The second test, that of § 39-22-303.5(3)(c)(II), C.R.S., applies if the taxpayer's business activity is sufficient to give the state jurisdiction to impose a net income tax by reason of such business activity under the Constitution and statutes of the United States. Jurisdiction to tax is not present where the state is prohibited from imposing the tax by reason of the provision of Public Law 86-272, 15 U.S.C.A., paragraphs 381-385. In the case of any "state" as defined in § 39-22-303.5(1)(e), C.R.S., other than a state of the United States or political subdivision of such state, the determination of whether such "state" has jurisdiction to subject the taxpayer to a net income tax shall be made as though the jurisdictional standards applicable to a state of the United States applies in that "state". If jurisdiction is otherwise present, such "state" is not considered as without jurisdiction by reason of the provisions of a treaty between that state and the United States.Colorado Register, Vol 37, No. 14. July 25, 2014, effective 8/14/201437 CR 18, September 25, 2014, effective 10/15/201437 CR 19, October 10,2014, effective 10/30/201437 CR 22, November 25, 2014, effective 12/16/201438 CR 04, February 25, 2015, effective 3/17/201538 CR 07, April 10, 2015, effective 4/30/201538 CR 11, June 10, 2015, effective 6/30/201538 CR 22, November 25, 2015, effective 12/15/201538 CR 24, December 25, 2015, effective 1/14/201638 CR 24, December 25, 2015, effective 1/19/201639 CR 01, January 10, 2016, effective 1/30/201639 CR 16, August 25, 2016, effective 9/14/201640 CR 08, April 25, 2017, effective 5/15/201740 CR 12, June 25, 2017, effective 7/15/201740 CR 16, August 25, 2017, effective 9/14/201740 CR 23, December 10, 2017, effective 1/1/201841 CR 14, July 25, 2018, effective 8/14/201841 CR 20, October 25, 2018, effective 11/14/201842 CR 02, January 25, 2019, effective 12/18/201842 CR 02, January 25, 2019, effective 12/18/2018, expires 4/17/201942 CR 06, March 25, 2019, effective 4/14/201943 CR 04, February 25, 2020, effective 3/16/202043 CR 13, July 10, 2020, effective 6/2/202043 CR 17, September 10, 2020, effective 9/30/202044 CR 03, February 10, 2021, effective 3/2/202144 CR 07, April 10, 2021, effective 4/30/202144 CR 08, April 25, 2021, effective 5/15/202145 CR 01, January 10, 2022, effective 1/30/202245 CR 04, February 25, 2022, effective 3/17/202245 CR 05, March 10, 2022, effective 3/30/202246 CR 11, June 10, 2023, effective 5/2/202346 CR 09, May 10, 2023, effective 5/30/2023