Or. Admin. R. 150-314-0076

Current through Register Vol. 63, No. 6, June 1, 2024

Section 150-314-0076 - Modified Factors for Carriers of Freight or Passengers: Special Rules - Railroads

(1) In General. Where a railroad has income from sources both within and without this state, the amount of apportionable income from sources within this state must be determined pursuant to ORS 314.610 to 314.665 except as modified by this rule. In such cases, the first step is to determine what portion of the railroad's income constitutes apportionable income and which portion constitutes nonapportionable income under ORS 314.610 and OAR 150-314-0335 and 150-314-0337. Nonapportionable income is directly allocable to specific states under ORS 314.625 to 314.645. Apportionable income is apportioned among the states in which the business is conducted pursuant to the property, payroll, and sales apportionment factors set forth in this rule. The sum of (1) the items of nonapportionable income directly allocated to this state, plus (2) the amount of apportionable income attributable to this state constitutes the amount of the taxpayer's entire net income which is subject to tax by this state.

(2) Apportionable and Nonapportionable Income. For definitions, rules, and examples for determining apportionable and nonapportionable income, see OAR 150-314-0335 and 150-314-0337.

(3) Apportionment of Apportionable Income. Apportionable income is apportioned to this state by use of the formula provided in ORS 314.650 as it applies to the tax year involved. For tax years beginning on or after July 1, 2005, ORS 314.650 provides for apportionment using only the sales factor.

(a) In General. The property factor must be determined in accordance with ORS 314.655, the payroll factor in accordance with ORS 314.660, and the sales factor in accordance with ORS 314.665, except as modified in this rule.

(b) The Property Factor.

(A) Property Valuation. Owned property is valued at its original cost and property rented from others is to be valued at eight (8) times the net annual rental rate in accordance with ORS 314.655 and OAR 150-314-0400. Railroad cars owned and operated by other railroads and temporarily used by the taxpayer in its business and for which a per diem or mileage charge is made are not included in the property factor as rented property. Railroad cars owned and operated by the taxpayer and temporarily used by other railroads in their business and for which a per diem charge is made by the taxpayer are included in the property factor of the taxpayer.

(B) General Definitions. The following definitions are applicable to the numerator and denominator of the property factor:

(i) "Original cost" is deemed to be the basis of the property for federal income tax purposes (prior to any federal income tax adjustments except for subsequent capital additions, improvements thereto or partial dispositions); or, if the property has no such basis, the valuation of such property for Interstate Commerce Commission purposes. If the original cost of property is unascertainable under the foregoing valuation standards, the property is included in the property factor at its fair market value as of the date of acquisition by the taxpayer. (OAR 150-314-0398)

(ii) "Rent" does not include the per diem and mileage charges paid by the taxpayer for the temporary use of railroad cars owned or operated by another railroad.

(iii) The "value" of owned real and tangible personal property means its original cost. (ORS 314.655 and OAR 150-314-0398)

(iv) "Average value" of property means the amount determined by averaging the values at the beginning and ending of the tax period, but the department may require the averaging of monthly values during the tax period or such averaging as necessary to properly reflect the average value of the railroad's property. (ORS 314.655 and OAR 150-314-0406)

(v) The "value" of rented real and tangible personal property means the product of eight (8) times the net annual rental rate. (ORS 314.655 and OAR 150-314-0400)

(vi) "Net annual rental rate" means the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals.

(vii) "Property used during the tax period" includes property which is available for use in the taxpayer's trade or business during the tax period.

(viii) A "locomotive-mile" is the movement of a locomotive (a self-propelled unit of equipment designed solely for moving other equipment) a distance of one mile under its own power.

(ix) A "car-mile" is a movement of a loaded or unloaded unit of car equipment a distance of one mile.

(C) The Denominator and Numerator of the Property Factor. The denominator of the property factor is the average value of all of the taxpayer's real and tangible personal property owned or rented and used during the tax period. The numerator of the property factor is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax period. In determining the numerator of the property factor, all property except mobile or movable property such as passenger cars, freight cars, locomotives, and freight containers which are located within and without this state during the tax period is included in the numerator of the property factor in accordance with ORS 314.655 and OAR 150-314-0396. Mobile or movable property such as passenger cars, freight cars, locomotives, and freight containers which are located within and without this state during the tax period is included in the numerator of the property factor in the ratio which "locomotive-miles" and "car-miles" in the state bear to the total everywhere.

(c) The Payroll Factor. The denominator of the payroll factor is the total compensation paid everywhere by the taxpayer during the tax period for the production of apportionable income (ORS 314.660 and OAR 150-314-0415). The numerator of the payroll factor is the total amount paid in this state during the tax period by the taxpayer for compensation. With respect to all personnel except the engine crew and train crew performing services on interstate trains, compensation paid to such employees is included in the numerator as provided in ORS 314.660 and OAR 150-314-0417. With respect to the engine crew and train crew performing services on interstate trains, compensation paid to such employees is included in the numerator of the payroll factor in the ratio which their services performed in this state bear to their services performed everywhere. Compensation for services performed in this state is deemed to be the compensation reported or required to be reported by such employees for determination of their income tax liability to this state.

(d) The Sales Factor.

(A) In General. All sales derived from transactions and activities in the regular course of the trade or business of the taxpayer which produces apportionable income are included in the denominator of the sales factor. (ORS 314.665 and OAR 150-314-0425) Per diem and mileage charges that are collected by the taxpayer are excluded from both the numerator and denominator of the sales factor. The numerator of the sales factor is the total sales of the taxpayer in this state during the tax period. The total sales of the taxpayer in this state during the tax period, other than sales from hauling freight, passengers, mail, and express, are attributable to this state in accordance with ORS 314.665 and OAR 150-314-0429.

(B) Numerator of Sales Factor from Freight, Mail, and Express. The total sales of the taxpayer in this state during the tax period for the numerator of the sales factor from hauling freight, mail, and express are attributable to this state as follows:

(i) All sales from shipments which both originate and terminate within this state; and

(ii) That portion of the sales from each movement or shipment passing through, into, or out of this state is determined by the ratio which the miles traveled by such movement or shipment in this state bears to the total miles traveled by such movement or shipment from point of origin to destination.

(C) Numerator of Sales Factor from Passengers. The numerator of the sales factor includes:

(i) All sales from the transportation of passengers (including mail and express handled in passenger services) which both originate and terminate within this state; and

(ii) That portion of sales from the transportation of interstate passengers (including mail and express handled in passenger service) determined by the ratio which revenue passenger miles in this state bear to the total everywhere.

Or. Admin. R. 150-314-0076

1-65; 12-70; 12-19-75; 12-31-82; 12-31-83; RD 12-1985, f. 12-16-85, cert. ef. 12-31-85; RD 3-1992, f. 5-28-92, cert. ef. 6-1-92; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; REV 10-2007, f. 12-28-07, cert. ef. 1-1-08; Renumbered from 150-314.280-(H), REV 33-2016, f. 8-12-16, cert. ef. 9/1/2016; REV 68-2017, amend filed 12/22/2017, effective1/1/2018

Statutory/Other Authority: ORS 305.100

Statutes/Other Implemented: ORS 314.280