Section 280-RICR-20-25-9.9 - Three-Factor Apportionment Using Sales, Property and PayrollA. Applicability of Three-Factor Apportionment. This apportionment Rule applies to the following taxpayers, unless the taxpayer is eligible to use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6 and §§ 9.10 and 9.11 of this Part: 1. 2015 and Thereafter. For tax years beginning on or after January 1, 2015, any taxpayer that derives income from sources both within and outside of this state or engages in any activities or transactions both within and outside of this state for the purpose of profit or gain, but which is not: b. a combined group with a C corporation member, orc. a member in a combined group with a C corporation member.2. Pre-2015. For tax years beginning before January 1, 2015, all taxpayers that derive their income from sources both within and outside of this state for the purpose of profit or gain. a. Note: With respect to the corporate income tax responsibilities of C corporations for tax years beginning on or after January 1, 2015, such taxpayers must refer to and comply with § 9.8 of this Part. B. Three-Factor Apportionment - Formula. For all taxpayers to whom this § 9.9 of this Part applies, income shall be apportioned to this state by means of an apportionment formula to be computed as a simple arithmetical mean of three (3) fractions, as follows: 1. Property. The first fraction shall represent that part held or owned within this state of the average net book value of the total tangible property (real estate and tangible personal property) held or owned by the taxpayer during the taxable year, without deduction on account of any encumbrance thereon. Included in this property factor are the following: c. Leasehold improvements,e. Construction in progress to the extent shown as a capital asset on the books of the corporation, andf. Rental property (capitalized times 8).2. Sales. The second fraction shall represent that part of the taxpayer's total receipts from sales or other sources during the taxable year which is attributable to the taxpayer's activities or transactions within this state during the taxable year. Under the three-factor apportionment formula applicable in § 9.9 of this Part, taxpayers determining sales attributable to Rhode Island for transactions other than sales of tangible personal property shall adhere to cost of performance sourcing principles, and not the market-based sourcing principles that apply in the context of single sales factor apportionment. Under cost of performance sourcing principles, gross receipts from transactions other than sales of tangible personal property are attributed to this state if the income-producing activity which gave rise to the receipts is performed wholly within this state. Also, gross receipts are attributed to this state if, with respect to a particular item of income, the income-producing activity is performed within and without this state but the greater portion of the income-producing activity is performed within this state, based on costs of performance. In all cases where a three-factor apportionment formula applies, the sales fraction shall continue to be determined in the same manner that applied in Rhode Island prior to the introduction of mandatory unitary combined reporting. Taxpayers' receipts from sales include, but are not limited to, receipts from the following:a. Gross sales of tangible personal property (inventory sold in the ordinary course of business) where: (1) Shipments are made to points within this state; or (2) Shipments are made from an office, store, warehouse, factory or other place of storage in this state and the selling entity does not have corporate income tax nexus in the state of delivery.b. Gross income from services performed within this state; c. Gross income from rentals from property situated within this state;d. Net income from the sale of real and personal property, other than inventory sold in the ordinary course of business as described in paragraph § 9.9(B)(1) of this Part, or other capital assets located in the state;e. Net income from the sale or other disposition of securities or financial obligations;f. Gross income from all other receipts within this state; g. Dividends less exclusions for Rhode Island purposes, such as dividends received from shares of stock of any payee liable for taxes as outlined in R.I. Gen. Laws Chapters 44-11, 44-13 and 44-14 and dividends excluded for federal tax purposes;h. Interest less exclusion for Rhode Island purposes, such as interest on certain obligations of the United States and its possessions or interest on obligations of Rhode Island Public Service Corporations;k. Net Capital Gain as reported for federal tax purposes; l. Net Ordinary Gain as reported for federal tax purposes; n. Income exempt from federal taxation but taxable for Rhode Island purposes, such as income from obligations from other states. 3. Payroll. The third fraction shall represent that part of the total wages, salaries, and other compensation to officers, employees, and agents paid or incurred by the taxpayer during the taxable year which is attributable to services performed in connection with the taxpayer's activities or transactions within this state during the taxable year. 280 R.I. Code R. § 280-RICR-20-25-9.9