Section 280-RICR-20-25-8.8 - Combined Reporting Requirement for C-corporations and Combined Groups - Factor-Based Nexus Approach for Tax Years Beginning on or after January 1, 2015A. For tax years beginning on or after January 1, 2015, all C-corporations that do business in Rhode Island and are members in a combined group are subject to combined reporting, whether the combined group does business in multiple states or only in Rhode Island.B. In such situations, the C-corporation must, for Rhode Island tax purposes, include in its combined report the income and apportionment factors of all members in its combined group. As long as one member in a combined group has corporate income tax nexus with Rhode Island and also engages in activities that exceed the protection of 15 U.S.C. §§ 381 - 384 ( Public Law 86-272), then all members in the combined group, including those protected from state taxation by 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) and those that do not have nexus with Rhode Island, must be included when calculating the combined group's net income and apportionment factors. The Rhode Island receipts of a combined group member that lacks nexus with Rhode Island or that is protected from Rhode Island taxation by 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) must always be included in the numerator of an apportionment fraction on the combined return, as set forth in Part 9 of this Subchapter (Apportionment of Net Income). C. The purpose of apportionment in the context of a combined report is to determine the combined group's Rhode Island source income, which is taxable. In determining the combined group's taxable income in this manner, the Division of Taxation is merely measuring the in-state activities of the combined group, and not imposing a tax on members in the combined group that lack nexus with Rhode Island or that are protected from Rhode Island taxation by 15 U.S.C. §§ 381 - 384 ( Public Law 86-272). After determining through such an apportionment formula the amount of a combined group's net income apportioned to Rhode Island, combined group net income is solely attributed to and tax is solely imposed on those members in the combined group that have corporate income tax nexus with Rhode Island. D. Examples 1. Corporations M, N, and O, all foreign corporations, are engaged in a unitary business and are members in the same combined group. Only Corporation M has nexus with Rhode Island. The combined group of Corporations M, N, and O must file a combined report with Rhode Island as a single taxpayer, including the receipts of Corporations N and O that are attributable to Rhode Island in the numerator of the combined group's apportionment formula, without regard to whether Corporations N or O have nexus with Rhode Island or are protected from state taxation under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272). The apportioned Rhode Island income will then be attributed to taxable members in the combined group, as set forth in Part 9 of this Subchapter (Apportionment of Net Income).2. Books.com is a corporation operating a website and internet business headquartered in New York with no physical presence in Rhode Island. It has an affiliated corporation, Booksellers, Inc. which has three stores in Rhode Island. The two corporations share common ownership, cross marketing, book return policy, and gift card/customer loyalty program, and are therefore engaged in a unitary business. As a result, the businesses are subject to mandatory combined reporting in Rhode Island and must file a combined return as a combined group. The Rhode Island sales of Books.com would be included in the numerator of the combined group's sales factor. In order to determine the amount of the combined group's net income apportioned to Rhode Island, it is not necessary for the Books.com corporation to have nexus with Rhode Island.280 R.I. Code R. § 280-RICR-20-25-8.8