D.C. Municipal Regulations (Last Updated: September 13, 2017) |
Title 9. TAXATION AND ASSESSMENTS |
Chapter 9-1. INCOME AND FRANCHISE TAXES |
Section 9-161. COMBINED REPORTING: WATER'S-EDGE DETERMINATION
-
161.1Water’s-edge determination. Absent an election to report based upon a worldwide unitary combined reporting basis, taxpayer members of a unitary group shall determine each of their apportioned shares of the net business income or loss of the combined group on a water’s-edge unitary combined reporting basis. In determining tax on a water’s-edge unitary combined reporting basis, members shall take into account all or a portion of the income and apportionment factors as required under D.C. Official Code § 47-1810.07 (2005 Repl.) as follows:
(a) One hundred percent (100%) included. All the income and apportionment factors must be included for the following members:
(1) Domestic corporations and entities.
(2) Any member, regardless of where it is incorporated or formed, if the average of its property, payroll, and sales factors within the United States is twenty percent (20%) or more;
(3) Domestic international sales corporations (DISC) described in I.R.C. §§ 991-994, foreign sales corporations (FSC) described in I.R.C. §§ 921-927, and export trade corporations (ETC) described in I.R.C. §§ 970-972; and
(4) Any member doing business in a tax haven, as defined in D.C. Official Code § 47-1801.04(49) (2005 Repl.).
(b) Partially included. The following members that are not described above are included only to the extent of any U.S. source income and factors:
(1) Any member shall include its business income that is effectively connected or treated as effectively connected with the conduct of a trade or business within the United States and, for that reason, is subject to federal income taxation;
(2) Controlled foreign corporation (CFC) defined in I.R.C. § 957, if they have Subpart F income defined in I.R.C. § 952.
(3)Any member that is a resident of a country that does not have a comprehensive income tax treaty with the United States and earns more than twenty percent (20%) of its income, directly or indirectly, from intangible property or service-related activities that are deductible against the business income of the other members of the water’s-edge group, to the extent of that income and the apportionment factors related thereto.