| Corporation/Partnership Apportionment |
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| New information |
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Schedule AP is now used for all corporations and partnerships that are doing business in more than one state. Use this form if you are filing one of the following forms: corporate excise and income tax (Forms 20, 20-I, and 20-S); insurance excise tax (Form 20-INS); or partnership information return (Form 65). There will no longer be a separate apportionment schedule for each form type. Be sure to follow these instructions as many of the line numbers have changed.
General information
These instructions are a guide, not a complete statement of Oregon Revised Statutes (ORS) or Oregon Department of Revenue Administrative Rules (OAR). For more information, refer to the laws and rules on our website.
Apportionment and allocation. Apportionment is dividing business income among the states by use of a formula. Allocation is the assignment of specific nonbusiness income to a state. Most business entities having unitary business activities, as defined in ORS 317.705, both inside and outside Oregon must use the apportionment and allocation methods provided in the Uniform Division of Income for Tax Purposes Act (ORS 314.605 through 314.690). Certain types of business entities are required to use modified apportionment factors as specified below.
Modified factors. The following businesses use modified apportionment factors as provided in the following OARs and ORSs:
| Airlines | OAR 150-314.280-(I) | | Electricity and natural gas | OAR 150-314.665(2)-(C)
| | Forest products industry | ORS 314.650(2) | | Financial corporations | OAR 150-314.280-(N) | | Health care service contractors | OAR 150-314.280-(E) | | Insurance companies | ORS 317.660 | | Interstate broadcasters | ORS 314.682–314.686 | | | OAR 150-314.684(4) | | | OAR 150-314.686 | | Interstate river transportation companies | OAR 150-314.280-(L)
| | Long-term construction contractors | OAR 150-314.615-(F) | | Movie and television production companies | OAR 150-314.615-(H) | | Publishing companies | OAR 150-314.670-(A) | | Railroads | OAR 150-314.280-(H) | | Sea transportation companies | OAR 150-314.280-(K)
| | Title insurance companies incorporated in Oregon | OAR 150-314.280-(E)
| | Trucking companies | OAR 150-314.280-(J) |
Oregon income is the total of the business entity’s apportioned and allocated income assigned to Oregon. Schedule AP must be completed by each business carrying on a unitary business both inside and outside Oregon. If another method of assigning income is proposed, Schedule AP still must be completed. A full explanation of the other method must be made.
Utility and telecommunication taxpayers. Taxpayers primarily engaged in utilities and telecommunications as defined in ORS 314.280(3)(e) may elect to use the alternative apportionment method provided in ORS 314.650 (1999 edition). You must check the box on the following forms if you are making this election: Form 20, question M; Form 20-I, question L; or Form 20-S, question J.
Forest products industry taxpayers. For tax years beginning on or after July 1, 2005, taxpayers in the forest products industry that own or manage at least 300,000 but not more than 400,000 acres and process at least 20 percent of the total wood chip supply for papermaking from sawmill residue generated within the state are required to use the alternative apportionment method provided in ORS 314.650. You must check the box on the following forms if you meet this requirement: Form 20, question M; Form 20-I, question L; or Form 20-S, question J.
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| Schedule AP-1—Line instructions |
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Consolidated returns. The denominators of the property, payroll, and sales factors include only amounts from corporations that are included in the consolidated federal return and are part of the unitary group. The numerators of the factors must include the Oregon property, payroll, and sales from each of the corporations taxable by Oregon.
Rounding. When computing the property, payroll, and sales factor percentages, as well as the Oregon apportionment or alternative apportionment, round the percentage to four decimal places. For example, 12.34558 percent should be 12.3456 percent.
Line instructions
Property factor (all companies except insurance companies). Enter all owned or rented business property in column B of Schedule AP-1. Enter business property owned or rented within Oregon in column A. See ORS 314.655 and administrative rules.
Lines 1 through 5. Value owned property at original cost. Show the average value during the taxable year of real and tangible personal property used in the business. This is the average of property values at the beginning and end of the tax period. An average of the monthly values may be required if a more reasonable value results.
Line 6. Value rented property at eight times the annual rental value. Reduce the annual rental value by nonbusiness sub rentals.
Real estate income (insurance companies only).
Line 7.
- Life companies—Annual statement, page E-01, Schedule A, part 1, column 15 minus column 16, and page E-03, Schedule A, part 3, column 16 minus column 17.
- P&C companies—Annual statement, Schedule A, part 1, pages E-01 and E-03, column 15 minus column 16, and Schedule A, part 3, column 16 minus column 17.
If you have income from a joint venture, partnership, or LLC, include real estate income and interest included on:
- Life companies—Annual statement, page 8, exhibit of net investment income, line 8, column 1 of the Net Investment Income schedule.
- P&C companies—Annual statement, page 12, exhibit of net investment income, line 8, column 1 of the Underwriting and Investment Exhibit.
Real estate interest (insurance companies only).
Line 8.
- Life companies— Annual statement, page 8, exhibit of net investment income, line 3, column 1.
- P&C companies— Annual statement, page 12, exhibit of net investment income, line 3, column 1.
Line 9.
All companies except insurance companies total lines 1 through 6. Insurance companies only total lines 7 and 8.
Payroll factor (all companies).
Lines 10 and 11. Assign payroll to Oregon if:
- The services are performed entirely inside Oregon; or
- The services are both inside and outside Oregon but those services outside are only incidental; or
- Some of the services are performed in Oregon and (a) the base of operation or control is located in Oregon, or (b) the base of operation or control is not in any state in which the services are performed, and the employee’s residence is in Oregon. See ORS 314.660 and administrative rules.
Insurance companies should use the wage and commission amounts from the annual statement.
Sales factor (all companies except insurance companies complete lines 13 through 17).
Assign sales to Oregon if:
- Lines 13 and 14. The property is shipped or delivered to a purchaser in Oregon other than the United States Government; or
- Lines 15 and 16. The property is shipped from a warehouse or other place of storage in Oregon; and (a) the purchaser is the United States Government or (b) the business is not taxable in the state of the purchaser. See ORS 314.665(3) for exception.
See ORS 314.620 and Public Law 86-272 to determine if a business is taxable in another state. Charges for services are Oregon sales if a greater proportion of the income-producing activity is performed in Oregon than in any other state, based on cost of performance. See ORS 314.665 and administrative rules. Gross receipts from the sale, exchange, or redemption of intangible assets cannot be included in the sales factor if not derived from your primary business activity. For taxpayers other than financial organizations, as defined in ORS 317.010(11), the net gain from sales, exchanges, or redemption of intangible assets that are not derived from your primary business activity are included in the sales factor if the gains are business income.
Insurance sales factor (insurance companies only).
Lines 18 through 20. Use total premiums written including Oregon premiums written.
- Life companies—Annual statement, “Premiums and Annuity Considerations,” page 62, schedule T, lines 38 and 95. Insurance premiums include life insurance in column 2, annuity considerations in column 3, and accident and health insurance premiums in column 4.
- P&C companies—Annual statement, “Schedule of Premiums Written,” page 104, schedule T, lines 38 and 59, columns 2 and 8. Finance and service charges are included in the apportionment factor for premiums.
ORS 317.660 provides that the insurance sales factor does not include reinsurance accepted and there is no deduction of reinsurance ceded. If the exclusion of reinsurance premiums results in an apportionment formula that does not fairly represent the extent of the insurance company’s activity in Oregon, you may include reinsurance premiums in the insurance sales factor. You must request and receive permission from the Oregon Department of Revenue to include these premiums in the insurance factor before you file your return. Send your request to the Oregon Department of Revenue, 955 Center Street NE, Salem OR 97301-2555.
Apportionment percentage
Line 21.
All companies except insurance companies total lines 13 through 17. Insurance companies total lines 18 through 20.
Line 22.
Use the worksheets to compute your Oregon apportionment percentage.
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| Schedule AP-2—Taxable income computation |
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Line 1. Enter amount from Form 20, line 13; Form 20-I, line 15; Form 20-S, line 4; Form 20-INS, line 19; Form 65—add the income (loss) from the federal Schedule K, lines 1-11.
Lines 2 and 7. Business and nonbusiness income (all companies except insurance companies). “Business income” is income arising from transactions and activities in the regular course of the taxpayer’s business. It includes income from tangible and intangible property related to the regular business operation.
Examples of business income are:
- Sales of products or services;
- Rents, if property rental is a related business activity;
- Royalties, if the patent, processes, etc., were developed by or used in the business operation;
- Gain or loss on the disposal of business property; and
- Interest income on trade receivables or installment contracts arising out of the business or from the investment of working capital.
“Nonbusiness income” means all income other than business income. Rents, royalties, gains or losses, and interest also can be nonbusiness income if they arise from investments not related to the taxpayer’s business. Nonbusiness income is allocated to a particular state based upon the source of the income. Gain or loss from the sale of a partnership interest may be allocable to Oregon [ORS 314.635(4)]. A schedule of nonbusiness income must be attached to the return. The amounts allocable to Oregon must be added to Oregon’s apportioned income. See ORS 314.610 and administrative rules.
Line 3. Subtract: Gains from prior year installment sales included in line 1. OAR 150-314.615-(G) requires that installment gains be apportioned to Oregon using the average percent from the year of the sale rather than the year payment is received.
Line 8. Add: Gains from prior year installment sales apportioned to Oregon. Multiply the installment gains subtracted on line 3 by the average percent from the year of the sale.
Line 10. Net loss and net capital loss deduction (all companies except partnerships). See instructions for Form 20, line 14.
Line 11. Carry this amount to the appropriate line on your tax return: Form 20, line 15; Form 20-I, line 16; Form 20-S, line 6; or Form 20-INS, line 21.
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| Schedule AP and Worksheet |
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