Section 280-RICR-20-25-15.8 - ApportionmentA. Apportionment shall be governed by the Division's Combined Reporting (Part 10 of this Subchapter) and Apportionment of Net Income (Part 9 of this Subchapter) regulations, which shall treat the Net 965 Income like dividend income and apply as follows: 1. A taxpayer that recognizes Net 965 Income and uses a single sales factor to apportion income shall include in receipts for apportionment purposes the Net 965 Income amount, as reduced by any DRD granted under this regulation. The taxpayer shall treat the entirety of such amount as receipts from the taxpayer's activities or transactions outside of Rhode Island and therefore shall include such amount in the denominator but not numerator of the single sales factor.a. Example: Mike Corp and November Corp are C corporation members of a Rhode Island combined group. Oscar Corp is a foreign corporation that is not a member of the combined group, is owned 70% by Mike Corp, and is not engaged in a unitary business with Mike Corp and November Corp. In tax year 2017 Mike Corp recognizes for federal tax purposes $200,000 in 965 Income and $50,000 in 26 U.S.C. § 965(c) deductions attributable to Oscar Corp, resulting in Net 965 Income of $150,000. For Rhode Island tax purposes, the $150,000 of 965 Net Income is included in the combined return of Mike Corp and November Corp which the combined group properly offsets with an 80% DRD of 80% x $150,000 = $120,000, such that the income attributable to 26 U.S.C. § 965 included in the Rhode Island apportioned tax base is $150,000 - $120,000 = $30,000. Mike Corp, and thus the combined group, include in the single sales factor $30,000 as a non-Rhode Island receipt, included in the denominator but not the numerator of the factor.2. A taxpayer that recognizes Net 965 Income and uses three-factor apportionment shall include as receipts in the sales factor of the apportionment factor the Net 965 Income amount, reduced by any DRD granted under this regulation. The taxpayer shall treat the entirety of such amount as receipts from the taxpayer's activities or transactions outside of Rhode Island and therefore shall include such amount in the denominator but not numerator of the sales factor. The Net 965 Income shall not affect the taxpayer's computation of the payroll factor or the property factor, subject to the taxpayer's right to request alternative apportionment under R.I. Gen. Laws § 44-11-15. a. Example: Domestic limited partnership Papa, LP owns a 35% interest in foreign corporation Quebec Corp. Papa LP in tax year 2017 for federal income tax purposes recognizes $250,000 in 965 Income attributable to Quebec Corp, offset by 26 U.S.C. § 965(c) deductions totaling $100,000, resulting in Net 965 Income of $150,000. Papa, LP includes $150,000 with no DRD offset in its Rhode Island income subject to apportionment. Papa, LP receives no DRD because it is a pass-through entity that is not entitled to a DRD under Rhode Island law. Papa, LP in the sales factor of its three-factor apportionment factor includes $150,000 as a non-Rhode Island receipt included in the denominator but not the numerator, but Papa, LP's payroll and property factors are unaffected by the 965 Income or its ownership interest in Quebec Corp.3. No portion of Net 965 Income may be included in sales factor receipts for purposes of single sales factor apportionment or three-factor apportionment unless it is included in apportionable Rhode Island taxable income and is not eliminated by a combined return intercompany elimination or offset by a DRD.280 R.I. Code R. § 280-RICR-20-25-15.8