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WAC 14601 Financial institutions-Income apportionment.
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
         
WAC: 458-20-14601 11/01/10 Financial institutions-Income apportionment WAC 458-20-14601 (Rule 14601) provides tax reporting instructions for financial institutions doing business both inside and outside the state of Washington. 

Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus provisions addressed in these rules, effective June 1, 2010.  The Department amended these rules to recognize that the guidance provided in the rules does not apply after May 31, 2010. 

  458-20-14601 10/01/10 Financial institutions-Income apportionment WAC 458-20-14601 (Rule 14601) provides tax reporting instructions for financial institutions doing business both inside and outside the state of Washington. 

Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus provisions addressed in these rules, effective June 1, 2010.  The Department is amending these rules to recognize that the guidance provided in the rules does not apply after May 31, 2010. 

  458-20-14601   05/15/1997 Financial institutions--Income apportionment.Effective 7/1/97
         
RCW:        
  82.04.030   1963 "Person," "company.
  82.04.080   1961 "Gross income of the business"
  82.04.290   1995 Tax on international investment management services or other business or service activities
  82.04.315   1982 Exemptions - International banking facilities
  82.04.460   2004 Business within and without state - Apportionment
         
ETA: 3076.2011 01/21/2011 Deductibility of Interest Received on Investments or Loans Primarily Secured by First Mortgages or Trust Deeds on Nontransient Residential Properties.
The Department issued ETA 3076.2011 Deductibility of Interest Received on Investments or Loans Primarily Secured by First Mortgages or Trust Deeds on Nontransient Residential Properties.  ETA 3076 previously cited to Lacey Nursing v. Department of Revenue, 128 Wn.2d 40, 53, 905 P.2d 338 (2000).  The Department updated the ETA to correct this citation to Lacey Nursing v. Department of Revenue, 103 Wn.App. 169, 11 P.3d 839 (2000). 
         
INDUSTRY GUIDES:      
         
SPECIAL NOTICES:      
Subject Title Reference:      
Financial Businesses 09/19/2013 Purchases of Standard Financial Information by Qualifying International Investment Management Companies
Financial Businesses 05/31/2012 New Law Limits First Mortgage Deduction for B&O Tax
Economic Nexus 05/28/2010 New "Economic Nexus" in Washington State May Impact "Foreign Corporations"
Economic Nexus 05/28/2010 New "Economic Nexus" in Washington State May Impact Financial Institutions Including Out-of-state Banks and Credit Card Issuers
Economic Nexus 05/28/2010 New "Economic Nexus" in Washington State May Impact Franchisors
Economic Nexus 05/28/2010 New Apportionment Method
Economic Nexus 05/28/2010 Tax Attorneys and CPAs New "Economic Nexus" in Washington State May Impact Your Clients
Economic Nexus 05/28/2010 Registered Out-of-state Businesses Currently not Reporting Income from Service Activities - New Apportionment for Certain Income
Financial Businesses 06/02/2010 Limits on Interest Deduction for First Mortgages
Economic Nexus 09/10/2010 B&O Tax Reporting Requirement Continues After Business Activity Stops (Trailing Nexus)
      01/28/2002 Taxability of Federal Instrumentalities and Federally Created Corporate Entities
Digital Goods/ Financial Businesses     05/31/2007 Limited Exemption for Electronically Delivered Standard Financial Information Effective August 1, 2007
         
DIRECTIVE: None      
         
RPM: None      
         
         
WTD: 20 WTD 124 01-006   B&O TAX - APPORTIONMENT - WHEN AVAILABLE.When a taxpayer renders services taxable under RCW 82.04.290, maintains places of business both within and without the state, and those places of business contribute to the rendition of those services, the taxpayer shall apportion to Washington the portion of its total income derived from services rendered in Washington.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - PLACE OF BUSINESS.For the purposes of RCW 82.04.460(1), a place of business does not mean a physical location.Rather, if a taxpayer conducts activities in a state sufficient to create nexus under Washington standards, then the taxpayer is deemed to have a "place of business" in that state for apportionment purposes.OVERRULING: Det. No. 86-297, 2 WTD 23 (1986); Det No. 92-117, 12 WTD 147 (1993).
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - SEPARATE ACCOUNTING PREFERRED.Separate accounting is the preferred method of apportioning income.However, if separate accounting is not accurate, then cost apportionment (formulary apportionment) shall be used.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - SEPARATE ACCOUNTING DISTINGUISHED FROM COST APPORTIONMENT.Cost apportionment is the formulary apportionment method used by Washington.Cost apportionment focuses on costs and uses a formula based on those costs to determine the income from Washington activities.This is distinctly different from separate accounting, which focuses on income.Therefore, separate accounting concepts are not applicable to cost apportionment.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - INCOME SUBJECT TO COST APPORTIONMENT -- RELATED BUSINESS ACTIVITIES.Only income from related activities partially performed in Washington and subject to the B&O tax under RCW 82.04.290 is apportionable under RCW 82.04.460.When a taxpayer engages in related business activities subject to the B&O tax under RCW 82.04.290, the total income from the related business activities is subject to apportionment.However, if a taxpayer engages in an unrelated, discreet, out-of-state business activity, then the income from that discreet, out-of-state business activity is not subject to Washington's business and occupation tax.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - INCOME SUBJECT TO COST APPORTIONMENT.When a bank, engages in lending activities and, related to that activity, it also engages in short-term and long-term interest rate swaps, servicing of loans, and sales of loans as well as receiving up-front fees, late-payment penalties, pre-payment payments, and interest, the income from these activities is related to the lending activity and is subject to apportionment.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT -COSTS USED TO CALCULATE COST APPORTIONMENT PERCENTAGE.The denominator of the cost apportionment formula is the total costs attributable to the related business activities partially performed in Washington.The numerator is the cost of doing the related business activities in Washington.The cost of doing business in Washington is not costs incurred in Washington, rather it is any cost, regardless of where incurred, that relates, directly or indirectly, to the Washington activities.OVERRULING: Det. No. 89-459, 8 WTD 227 (1989); Det. No. 93-172, 13 WTD 180 (1993); and Det. No. 94-031, 14 WTD 194 (1995), to the extent inconsistent with this determination.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - INTERIM APPORTIONMENT METHOD - FINANCIAL INSTITUTION.The decision in Det. No. 89-459A, 11 WTD 17 (1991) was intended to be an interim method of apportionment applicable only to financial institutions pending the adoption of a uniform rule.Det. No. 89-459A was overruled by Rule 14601, which became fully effective as of January 1, 2000.
  20 WTD 124 01-006   B&O TAX - APPORTIONMENT - FINANCIAL INSTITUTION.Because the location where a financial institution manages its borrowing activity is not indicative of the cost of doing business at that location, Det. No. 89-459A did not express a proper cost apportionment method under RCW 82.04.460(1) and is OVERRULED.
         
OTHER: