Indiana ~ Corporate Income Tax: Alternative Three-Factor Apportionment Formula Not Allowed

CCH Tax Day Report

An out-of-state corporation (taxpayer) that manufactures and sells tobacco products across the United States was not permitted to utilize an alternative income apportionment formula because it failed to prove that the Indiana statutory apportionment formula did not fairly represent its income derived from sources within Indiana. The taxpayer argued that the majority of its income generating activity primarily occurred outside Indiana and, therefore, it filed an amended 2013 return utilizing the three factor apportionment formula. The taxpayer provided a third party economic analysis and a “separate accounting” analysis to show that Indiana’s statutory apportionment formula does not fairly represent the taxpayer’s Indiana income. However, the analyses were not sufficient to prove that the three factor apportionment formula would more accurately reflect its Indiana income. Therefore, the department concluded that Indiana’s statutory apportionment formula fairly represents the taxpayer’s Indiana income.

Letter of Findings No. 02-20160014, Indiana Department of Revenue, February 22, 2017, ¶402-557

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