Sec. 2.4. (a) For purposes of section 2(o) of this chapter, a corporation is a foreign operating corporation for a particular taxable year if it has eighty percent (80%) or more of its total business activity occurring outside the United States during the taxable year.

     (b) For purposes of determining the amount of a corporation’s business activity that occurs within the United States, the department shall determine the sum of that corporation’s United States property factor and its United States payroll factor and divide that sum by two (2). If the quotient exceeds two-tenths (0.2), then less than eighty percent (80%) of the corporation’s business shall be considered to have occurred outside the United States. If the quotient equals or is less than two-tenths (0.2), then eighty percent (80%) or more of the corporation’s business shall be considered to have occurred outside the United States. If a corporation’s United States property factor or its United States payroll factor has a denominator of zero (0), then the sum of the two (2) factors shall be divided by one (1) and not by two (2).

Terms Used In Indiana Code 6-3-2-2.4

  • corporation: includes all corporations, associations, real estate investment trusts (as defined in the Internal Revenue Code), joint stock companies, whether organized for profit or not-for-profit, any receiver, trustee or conservator thereof, business trusts, Massachusetts trusts, any proprietorship or partnership taxable under Section 1361 of the Internal Revenue Code, and any publicly traded partnership that is treated as a corporation for federal income tax purposes under Section 7704 of the Internal Revenue Code. See Indiana Code 6-3-1-10
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Personal property: includes goods, chattels, evidences of debt, and things in action. See Indiana Code 1-1-4-5
  • Personal property: All property that is not real property.
  • Property: includes personal and real property. See Indiana Code 1-1-4-5
  • United States: includes the District of Columbia and the commonwealths, possessions, states in free association with the United States, and the territories. See Indiana Code 1-1-4-5
  • Year: means a calendar year, unless otherwise expressed. See Indiana Code 1-1-4-5
     (c) The United States property factor of a corporation is a fraction. The numerator of the fraction is the average value of the corporation’s real and tangible personal property owned or rented and used in the United States during the taxable year, and the denominator of the fraction is the average value of all the corporation’s real and tangible personal property owned or rented and used anywhere in the world during the taxable year. Property owned by the corporation shall be valued at its original cost. Property rented by the corporation shall be valued at eight (8) times the net annual rental rate. The corporation’s net annual rental rate is the annual rental rate paid by the corporation less any annual rental rate received by the corporation from subrentals. The average value of property shall be determined by averaging the values at the beginning and ending of the taxable year, but the department may require the averaging of monthly values during the taxable year if reasonably required to reflect properly the average value of the corporation’s property.

     (d) The United States payroll factor of a corporation is a fraction. The numerator of the fraction is the total compensation to individuals paid in the United States during the taxable year by the corporation, and the denominator of the fraction is the total compensation to individuals paid anywhere in the world during the taxable year by the corporation. Compensation to an individual is paid in the United States if:

(1) the individual’s service is performed entirely within the United States;

(2) the individual’s service is performed both within and outside the United States, but the service performed outside the United States is incidental to the individual’s service within the United States; or

(3) the individual is a resident of the United States, some of the service is performed in the United States, and:

(A) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the United States; or

(B) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is not in a jurisdiction that is outside the United States and that is where some part of the service is performed.

As added by P.L.75-1985, SEC.5.

  Previous section
Next section  
 Chapter 2 Contents