South Dakota ~ Franchise, Corporate Income Taxes: Apportionment Provisions Amended

South Dakota Gov. Dennis Daugaard has signed legislation amending the state’s bank franchise (income) tax provisions regarding the apportionment of income. The denominator of the property factor is amended to include the average value of property used “everywhere,” instead of property “in all the states of the United States, the District of Columbia, and any territory or political subdivision.” Similarly, the denominator of the payroll factor is amended to include the total compensation paid “everywhere,” instead of compensation paid “in all the states of the United States, the District of Columbia, and any territory or political subdivision.”

The denominator of the receipts factor is amended to include total receipt of the financial institution “everywhere” during the tax period, instead of “in all the states of the United States, the District of Columbia, and any territory or political subdivision.” Further, “fees and penalties in the nature of interest” will now be included in the receipts factor if secured by real property located within South Dakota, and also if the borrower’s billing address is within the states. Next, the receipts factor is amended to include net gains from the sale of loans secured by real property multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor and the denominator is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property. Further, the numerator of the receipts factor is amended to include interest and fees or penalties in the nature of interest from credit card receivables, and receipts from fees charged to card holders if the billing address of the card holder is in South Dakota. Also, net gains from the sale of credit card receivables will be included in the receipts factors. In addition, affiliated service income will be included in the numerator of the service factor if the income relates to credit card receivables from customers in the state.

Finally, provisions regarding the exclusion of factors when the factor or factors amount to less than 30% of the final average ratio, and separate accounting when the taxpayer petitions for it or the secretary requires it, are repealed.

H.B. 1201, Laws 2014, effective January 1, 2015

 

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