280-20-25 R.I. Code R. § 10.5

Current through June 12, 2024

Section 280-RICR-20-25-10.5 - Definitions

A. "Affiliated group" means the same as it does in Internal Revenue Code (IRC) 26 U.S.C. § 1504.

B. "Apportionment" means, for purposes of Rhode Island's combined reporting requirements, the formula used to determine the amount of a combined group's income that is to be taxed under the Rhode Island corporate income tax. The term "allocation" is used interchangeably with the term "apportionment" and shall have the same meaning and effect.

C. "Captive REIT" means, as further defined in R.I. Gen. Laws § 44-11-1(a), a corporation, trust or association:

1. that is considered a real estate investment trust for the taxable year under IRC 26 U.S.C. § 856;

2. that is not regularly traded on an established securities market; and

3. more than fifty percent (50%) of the voting power or value of the beneficial interests or shares of which at any time during the last half of the taxable year, is owned or controlled, directly or indirectly, by a single entity that is subject to the provisions of Subchapter C of the Internal Revenue Code.

D. "Combined group" means a group of two or more entities treated as C corporations for federal income tax purposes in which more than fifty percent (50%) of the voting stock of each member entity is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, or by one or more of the member corporations, and that are engaged in a unitary business. In this regulation, the term "combined group" may refer to an affiliated group making the federal consolidated group election for Rhode Island combined reporting purposes.

E. "Combined reporting" means the corporate taxation framework under which a corporation must report on its Rhode Island corporate income tax return not only its own income, but also the combined income of the other corporations, or affiliates, that are under common ownership and part of a unitary business.

F. "Common ownership" means that more than fifty percent (50%) of the voting control of each member of the group is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, whether or not the owner or owners are members of the combined group.

G. "Consolidated return" means a return filed with the Internal Revenue Service on a consolidated basis by an affiliated group of corporations under terms of IRC 26 U.S.C. § 1501 et seq.

H. "Corporate income tax rate" means the Rhode Island corporate income tax rate that applies to a corporation's taxable income apportioned to Rhode Island.

I. "Corporation" has the meaning set forth in R.I. Gen. Laws § 44-11-1(4), and for purposes of mandatory unitary combined reporting under the Rhode Island General Laws, includes an LLC, partnership, or other entity electing to be taxed as a corporation for federal tax purposes. Although a partnership or other pass-through entity may not always be considered a corporation includible in the combined group on an entity basis as a member when a partnership or other pass-through entity is directly or indirectly held by a corporation, the business conducted by such a partnership or pass-through entity is considered the business of the corporation to the extent of the corporation's distributive share of the partnership or pass-through entity income.

J. "Cost of performance sourcing" means the sourcing method used for gross receipts from transactions other than sales of tangible personal property under the three-factor apportionment formula in R.I. Gen. Laws § 44-11-14(a). Entities that are treated as C corporations for federal income tax purposes shall use the market-based sourcing method instead of the cost-of-performance sourcing method. (See "market-based sourcing" method below.)

K. "Designated Agent" means the member of the combined group - or the member's designee - which represents the combined group and whose myriad responsibilities include filing the combined return.

L. "Division of Taxation" means the Rhode Island Department of Revenue, Division of Taxation. The Division may also be referred to in this regulation as the "Division of Taxation", "Tax Division", or "Division".

M. "Estimated tax payments" means, for purposes of Rhode Island combined reporting, the amount computed according to R.I. Gen. Laws § 44-26-2.1(m) that must be paid by, or on behalf of, a combined group subject to Rhode Island combined reporting.

N. "Everywhere" as used in this regulation to describe sales does not include sales of a foreign corporation in a place that is located outside the United States.

O. "FAS 109" means Financial Accounting Standard 109, "Accounting for Income Taxes."

P. "Federal income tax treaty" means a comprehensive income tax treaty between the United States and a foreign jurisdiction, other than a foreign jurisdiction which is defined as a tax haven

Q. "Foreign corporation" means, for purposes of combined reporting, a corporation incorporated in or organized under the laws of a jurisdiction other than the United States. (See also "non-U.S. corporation" below.)

R. "Foreign jurisdiction" means, for purposes of combined reporting, a jurisdiction other than the United States.

S. "Intangible property" within the meaning of this regulation generally includes, without limitation, copyrights; patents; trademarks; trade names; brand names; franchises; licenses; trade secrets; trade dress; information; know-how; methods; programs; procedures; systems; formulas; processes; technical data; designs; licenses; literary, musical, or artistic compositions; information; ideas; contract rights including broadcast rights; agreements not to compete; goodwill and going concern value; securities; and computer software. Intangible property is also referred to in this regulation as "intangible personal property" or "intangibles".

T. "Intangibles add-back" means related-party interest and intangibles which a corporation must add back to Rhode Island income for purposes of determining its Rhode Island corporate income tax liability.

U. "Internal Revenue Code" means the most current edition of Title 26 of the United States Code (26 U.S.C.). (It is abbreviated in this regulation as IRC.)

V. "Internal Revenue Service" means the bureau of the U.S. Treasury that is responsible for the determination, assessment, and collection of internal revenue in the United States. (It is also referred to in this regulation as the IRS.)

W. "Jobs Development Act" means the Rhode Island corporate income tax rate reduction enacted in 1994 and available to eligible entities under R.I. Gen. Laws § 42-64.5-1 et seq.

X. "Life sciences tax rate reduction" means the Rhode Island corporate income tax rate reduction enacted as "The I-195 Redevelopment Act of 2011" and available to eligible entities under R.I. Gen. Laws § 42-64.14-1 et seq.

Y. "Market-based sourcing" means the sourcing method used for gross receipts from transactions other than sales of tangible personal property under the single sales factor apportionment formula set forth at R.I. Gen. Laws § 44-11-14(b). For tax years beginning on or after January 1, 2015, market-based sourcing is the method that all entities treated as C corporations for federal income tax purposes must use to determine how to treat a corporation's sales of services and/or intangible personal property - whether or not they are part of a combined group.

Z. "Member" means, for purposes of Rhode Island combined reporting, a corporation included in a unitary business.

AA. "Non-U.S. corporation" means any corporation not incorporated in the United States of America. (See also "foreign corporation" above.)

BB. "Partnership" means an association of two or more persons to carry on as co-owners a business for profit, and which is treated as a partnership for Rhode Island tax purposes, or which would be treated as a partnership for Rhode Island tax purposes if doing business in Rhode Island. The term "Partnership" may include a general or limited partnership, or organization of any kind treated as a partnership for tax purposes under the laws of this state.

CC. "Pass-through entity" means a corporation that for the applicable tax year is treated as an S corporation under IRC 26 U.S.C. § 1362(a), and a general partnership, limited partnership, limited liability partnership, trust, or limited liability company that for the applicable tax year is not taxed as a corporation for federal tax purposes under the state's check-the-box regulation.

DD. "Person" means any individual, firm, partnership, general partner of a partnership, limited liability company, registered limited liability partnership, foreign limited liability partnership, association, corporation regardless of whether the corporation is or will be taxed under R.I. Gen. Laws Chapter 44-11, company, syndicate, estate, trust, business trust, trustee, trustee in bankruptcy, receiver, executor, administrator, assignee or organization of any kind.

EE. "Receipts factor" - See "sales factor" below.

FF. "R.I. Gen. Laws" means the General Laws of Rhode Island of 1956, as amended.

GG. "Single sales factor" means, effective for apportionment purposes for tax years beginning on or after January 1, 2015, the sole factor that must be used by all entities treated as C corporations for federal income tax purposes and that are or will be taxed under the Rhode Island business corporation tax (R.I. Gen. Laws Chapter 44-11) - whether or not they are part of a combined group. The sales factor may also be referred to in this regulation as the "receipts factor" or "gross receipts factor" or "total receipts".

HH. "Sourcing" - See "cost of performance sourcing" and "market-based sourcing" above.

II. "Tax Administrator" means the person within the Rhode Island Department of Revenue, Division of Taxation, as described in R.I. Gen. Laws § 44-1-1 et seq.

JJ. "Tax Division" - See "Division of Taxation" above.

KK. "Taxpayer" means and includes any person that is or will be taxed under Rhode Island General Laws. For tax years beginning on or after January 1, 2015, a combined group is included within the definition of "taxpayer".

LL. "Taxpayer member" means, for purposes of this regulation, a corporation which is a member of a combined reporting group which is required to file a tax return in this state.

MM. "Tax haven" means a jurisdiction that, during the tax year in question has no, or nominal effective tax on the relevant income and;

1. has laws or practices that prevent effective exchange of information for tax purposes with other governments on taxpayers benefiting from the tax regime;

2. has a tax regime which lacks transparency. A tax regime lacks transparency if the details of legislative, legal or administrative provisions are not open and apparent or are not consistently applied among similarly situated taxpayers, or if the information needed by tax authorities to determine a taxpayer's correct tax liability, such as accounting records and underlying documentation, is not adequately available;

3. facilitates the establishment of foreign-owned entities without the need for a local substantive presence, or prohibits these entities from having any commercial impact on the local economy;

4. explicitly or implicitly excludes the jurisdiction's resident taxpayers from taking advantage of the tax regime's benefits, or prohibits enterprises that benefit from the regime from operating in the jurisdiction's domestic market; or

5. has created a tax regime which is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial/other services sector relative to its overall economy.

NN. "Tax treaty" - see "Federal income tax treaty" above.

OO. "Three-factor apportionment" means the apportionment formula set forth in R.I. Gen. Laws § 44-11-14(a). The three-factor apportionment formula takes into account the property factor, the payroll factor, and the sales factor of the trade or business of the taxpayer.

PP. "Unitary business" means the activities of a group of two (2) or more corporations under common ownership that are sufficiently interdependent, integrated or interrelated through their activities so as to provide mutual benefit and produce a significant sharing or exchange of value among them or a significant flow of value between the separate parts. The term "unitary business" shall be construed by Rhode Island to the broadest extent permitted under the United States Constitution.

QQ. "United States" means the fifty (50) states of the United States, the District of Columbia, and the United States' territories and possessions.

RR. "United States Code" means the consolidation and codification by subject matter of the general and permanent laws of the United States, as prepared and published by the Office of the Law Revision Counsel of the U.S. House of Representatives. (It is abbreviated in this regulation as U.S.C. or USC.)

SS. "Voting stock" means shares of capital stock of a corporation entitled to vote generally in the election of directors.

TT. "Water's edge rules" means the rules, described elsewhere in this regulation, under which some or all of a foreign corporation's income derived from a unitary business carried on in part in Rhode Island is not subject to combination because of the degree of the corporation's activities outside the United States.

UU. "Worldwide" - See "water's edge rules" above.

280 R.I. Code R. § 280-RICR-20-25-10.5