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2020 Tennessee Code
Title 67 - Taxes and Licenses
Chapter 4 - Privilege and Excise Taxes
Part 21 - Franchise Tax Law of 1999
§ 67-4-2118. Apportionment — Financial Institutions
Universal Citation: TN Code § 67-4-2118 (2020)
- Notwithstanding any other provision of this part, a financial institution that is not filing a combined report and that has business activity both in and outside Tennessee, and that is paying tax based on its net worth, shall apportion its tax base to Tennessee by multiplying net worth by the quotient of the institution's total receipts attributable to the transaction of business in Tennessee, as determined under subsection (c), divided by the institution's total receipts attributable to transacting business in all taxing jurisdictions, as determined under subsection (c). “Receipts” includes all gross income derived from transactions and activities in the regular course of business, except that the receipts from the disposition of assets, such as securities and money market transactions, are included to the extent of the net taxable gain on such transactions.
- A unitary group shall have net worth apportioned to Tennessee based on the apportioned net worth of the unitary group, as determined under subsection (a), including the receipts of those members of the unitary business that would not be subject to taxation in this state, if considered apart from the unitary group.
- “Receipts,” as used in this section, shall be attributed to Tennessee as follows:
- Receipts from the lease or rental of real or tangible personal property shall be attributed to Tennessee, if the property is located in Tennessee;
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- Interest income and other receipts from assets, in the nature of loans or installment sales contracts that are primarily secured by or deal with real or tangible personal property, shall be attributed to Tennessee, if the security or sale property is located in Tennessee. If any part of the sale property or property standing as security for the payment of the debt is located part in and part outside the state, only such proportion of the interest income or other receipts shall be attributed to Tennessee as the value of the property in the state bears to the whole property;
- “Value” means only that value that the property would command at a fair and voluntary sale. Value shall be determined at the time the loan is made and shall not vary from year to year. In the event additional real or tangible personal property is pledged as security or otherwise covered under a loan or installment sales contract after the time the loan is made, the ratio based on the value of the property in the state compared to the whole property shall be adjusted;
- Interest income and other receipts from consumer loans not secured by real or tangible personal property shall be attributed to Tennessee, if the loan is made to a resident of Tennessee, whether at a place of business, by a traveling loan officer, by mail, by telephone or by other electronic means;
- Interest income and other receipts from commercial loans and installment obligations not secured by real or tangible personal property shall be attributed to Tennessee, if the proceeds of the loan are to be applied in Tennessee. If it cannot be determined where the funds are to be applied, the receipts are to be attributed to the state in which the business applied for the loan. As used in this subdivision (c)(4), “applied for” means initial inquiry, including customer assistance in preparing the loan application, or submission of a completed loan application, whichever occurs first. For attribution purposes, “loan” does not include demand deposit accounts, federal funds, certificates of deposit, and other similar wholesale banking instruments issued by other financial institutions;
- All receipts and fee income from the issuance of letters of credit, acceptance of drafts, and other devices for assuring or guaranteeing a loan or credit shall be attributed in the same manner as interest income and other receipts from the loan are attributed, as set out in either subdivision (c)(2), (c)(3) or (c)(4);
- Interest income, merchant discount, other receipts, including service charges from financial institution credit card and travel and entertainment credit card receivables and credit card holders, and fees shall be attributed to the state to which the card charges and fees are regularly billed;
- Receipts from the sale of an asset, tangible or intangible, shall be attributed in the same manner that the income from the asset would be attributed under this section;
- Receipts equal to the net gain or income from the sale of a security made by a person who is a dealer in such security within the meaning of 26 U.S.C. § 475 shall be attributed to Tennessee if such person's customer is located in Tennessee and the receipt is not otherwise attributed under subdivision (c)(7). For purposes of this subdivision (c)(8), a customer is in this state if the customer is an individual, trust, or estate that is a resident of this state and, for all other customers, if the customer's commercial domicile is in this state. Unless the dealer has actual knowledge of the residence or commercial domicile of a customer during a taxable year, the customer shall be deemed to be a customer in this state if the billing address of the customer, as shown in the records of the dealer, is in this state;
- Receipts from the performance of fiduciary and other services shall be attributed in accordance with § 67-4-2111(i)(1)(C);
- Receipts from the issuance of traveler's checks, money orders or United States savings bonds shall be attributed to the state where such items are purchased;
- Receipts from a participating financial institution's portion of participation loans shall be attributed as otherwise provided under this subsection (c). A participation loan is any loan in which more than one (1) lender is a creditor to a common borrower; and
- Any other receipts of gross income not specifically attributed to Tennessee or to another taxing jurisdiction when applying this subsection (c) shall be attributed to Tennessee in the same proportion that aggregate receipts are attributed to Tennessee under subdivisions (c)(1)-(11).
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- The financial institution affiliated group shall prepare a pro forma consolidated balance sheet, in accordance with generally accepted accounting principles, in which transactions and holdings between members of the group and holdings in nondomestic persons have been eliminated;
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- For tax years beginning on or after January 1, 2008, the consolidated net worth of the financial institution affiliated group shall be the difference between total assets, less the sum of total liabilities shown on the consolidated balance sheet prepared pursuant to subdivision (d)(1), and twenty percent (20%) of the financial institution affiliated group's securities classified as held to maturity or available for sale as shown on the group's accounting statements, prepared in accordance with generally accepted accounting principles, at the close of business on the last day of the tax year, as shown by a pro forma consolidated balance sheet;
- For tax years beginning on or after January 1, 2009, the consolidated net worth of the financial institution affiliated group shall be the difference between total assets, less the sum of total liabilities shown on the consolidated balance sheet prepared pursuant to subdivision (d)(1), and twelve and one-half percent (12.5%) of the financial institution affiliated group's securities classified as held to maturity or available for sale as shown on the group's accounting statements, prepared in accordance with generally accepted accounting principles, at the close of business on the last day of the tax year, as shown by a pro forma consolidated balance sheet;
- For tax years beginning on or after January 1, 2010, the consolidated net worth of the financial institution affiliated group shall be the difference between total assets, less the sum of total liabilities shown on the consolidated balance sheet prepared pursuant to subdivision (d)(1), and five percent (5%) of the financial institution affiliated group's securities classified as held to maturity or available for sale as shown on the group's accounting statements, prepared in accordance with generally accepted accounting principles, at the close of business on the last day of the tax year, as shown by a pro forma consolidated balance sheet; and
- For tax years beginning on or after January 1, 2011, the consolidated net worth of the financial institution affiliated group shall be the difference between total assets, less the sum of total liabilities shown on the consolidated balance sheet prepared pursuant to subdivision (d)(1);
- Each member of the group shall apportion its net worth to Tennessee by multiplying the net worth of the entire financial institution affiliated group, as computed under subdivision (d)(2), by a fraction, the numerator of which is the total gross receipts of the member attributable to Tennessee during the tax period, and the denominator of which is the aggregate gross receipts of all members of the group during the tax period. For purposes of this subdivision (d)(3), receipts shall be determined as follows:
- Dividends and receipts resulting from transactions between members of the group shall be excluded from both the numerator and denominator;
- If the member is a financial institution, then for purposes of calculating the member's numerator, receipts shall be attributed to Tennessee in a manner consistent with subsection (c);
- If a member is not a financial institution, then for purposes of calculating the member's numerator, receipts shall be attributed to Tennessee in a manner consistent with § 67-4-2111(h)-(j); and
- The denominator shall consist of the total gross receipts of all members of the group during the tax period, and shall be determined by adding the total gross receipts derived from the activities enumerated in subdivisions (c)(1)-(11) by the group's financial institution members, and the total gross receipts of the group's nonfinancial institution members, as determined in accordance with § 67-4-2111(g)(1) and (4) during the tax period; and
- The unitary members of the financial institution affiliated group shall report and pay the franchise tax computed under this section on a combined return. As such, the unitary group shall pay franchise tax on the greater of the unitary group's combined apportioned equity, or the unitary group's combined minimum tax base, calculated in accordance with § 67-4-2108. The nonunitary members of the financial institution affiliated group shall report and pay the franchise tax computed under this section on a separate entity basis. As such, the nonunitary members shall pay franchise tax on the greater of apportioned net worth, as calculated on a consolidated basis, or the nonunitary member's minimum tax base, as determined in accordance with § 67-4-2108.
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