Section 9-122. ALLOCATION AND APPORTIONMENT

 

122.1The measure of the franchise tax shall be that portion of the net income of the corporation, financial institution, or unincorporated business that is fairly attributable to any trade or business engaged in or carried on within the District, as defined in the Act, and such other net income as is derived from sources within the District.

 

122.2The portion of net income which is "fairly attributable" to any trade or business or other net income as derived from sources within the District shall be determined by allocation and apportionment, as prescribed in this section.

 

122.3If the entire net income is derived from engaging in a trade or business within the District or from sources within the District, all of that income shall be apportioned entirely to the District.

 

122.4If the net income is derived from engaging in a trade or business partly within and partly without the District or from sources both within and outside the District, that income shall be allocated and apportioned in accordance with the specific provisions or formulae prescribed in this chapter.

 

122.5For purposes of allocation and apportionment of income under this chapter, a taxpayer is taxable in another State if in that State the taxpayer is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax.

 

122.6For the purposes of this chapter, the word "sales" means all gross receipts of the taxpayer (including any dividends, interest, royalties, etc., considered to be business income) not allocated under § 124.

 

122.7The word "allocated," as used in reference to non-business income and deductions from the income, means a determination based upon actual figures specifically applicable to such income and deductions.

 

122.8The word "apportioned," as used in reference to net business income, means a ratable portion determined on a percentage basis.

 

122.9[Deleted] 32 DCR 1354, 1357 (March 8, 1985).

 

122.10The provisions of §§ 122 through 129 shall be applicable in any case in which the liability of the taxpayer to the District for corporation or unincorporated business franchise tax under the Act has not been finally determined for any year by one of the following means:

 

(a) Separate accounting (if trade or business is not unitary in nature);

 

(b) The application of a period of limitations prescribed in the Act; and

 

(c) A decision of a court which has become final.

 

122.11All income received by financial institutions (except dividends of corporations or financial institutions), however categorized, shall be deemed to be business income.

 

122.12If a financial institution's only place(s) of business is (are) in the District, it shall allocate all business income to the District.

 

122.13For purposes of allocation and apportionment under § 122, the following words shall have the meanings set forth in this subsection:

 

(a) "Business income" means as follows:

 

(1) Income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitutes integral parts of the taxpayer's regular trade or business operations;

 

(2) Income of any type or class and from any source, such as manufacturing income, compensation from services, sales income, interest, dividends, rents, royalties, gains, operating or non-operating income, etc., is business income if it arises from transactions and activities occurring in the regular course of a trade or business;

 

(3) The critical element in determining whether income is business or non-business shall be the identification of the underlying transactions and activities which are elements of a particular trade or business; and

 

(4) In general, all transactions and activities of the taxpayer which are dependent upon or contribute to the operations of the taxpayer's economic enterprise as a whole constitute the taxpayer's trade or business and shall be transactions and activities arising in the regular course of, and shall constitute integral parts of, the trade or business;

 

(b) "Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed;

 

(c) "Compensation" means wages, salaries, commissions and any other form of remuneration paid or accrued to employees for personal services;

 

(d) "Non-business income" means all income other than business income;

 

(e) "Transportation company" means any person engaged in the transportation of persons or goods or property of others for hire; and

 

(f) "State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.

 

source

Commissioners' Order 56-1431 effective July 24, 1956, 16 DCRR §§ 309.2. 309.4, and 309.5; as amended by Commissioners' Order 61-1214 effective July 14, 1961; by Commissioners' Order 65-742 effective June 3, 1965; by the Third Amendment to the Revenue Act of 1975 Act, D.C. Law 1-61, 22 DCR 4383 (February 12, 1976); by Final Rulemaking published at 28 DCR 5393 (December 18, 1981), incorporating text of Proposed Rulemaking published at 28 DCR 4112, 4113 (September 18, 1981); by Final Rulemaking published at 30 DCR 1922, 1925 (April 29, 1983); and by Final Rulemaking published at 32 DCR 1354, 1356 (March 8, 1985).