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North Dakota Office of State Tax Commissioner

2003 Schedule RZ instructions

Specific line

Example of monthly averaging

paid for the rented property as the fair

Assume the following property values

instructions

market value of that portion of the

determined as of the end of each month:

rented property used by the taxpayer

bears to the total fair market value of

Lines 10a through 10e

January

2,000

the rented property.

February

2,000

In Column A (Total North Dakota property),

March

3,000

enter on the applicable line the average

Annual rental rate. Generally, the annual

April

3,500

value of the business’s tangible assets that

rental rate means the amount paid as rent

May

4,500

are owned and located in North Dakota. In

for the rented property for a twelve month

June

10,000

Column B (Zone project property only),

period. If the property is rented for a term

July

15,000

enter the portion of the amount in Column

of less than twelve months, the annual

August

17,000

A that is physically located and used at the

rental rate equals the rent paid for the

September

23,000

zone project location.

actual rental term during the tax year. If

October

25,000

property is rented for a term of twelve or

Determining the average value of owned

November

13,000

more months and the current tax year

property. The average value of owned

December

2,000

covers a period of less than twelve months

property must be determined by adding the

Total

$ 120,000

because of a reorganization or change of

original cost (or other basis used for

accounting period, etc., the rent paid for

The average value of the property for

federal income tax purposes) of the

the short tax year must be annualized.

the tax year is $10,000 ($120,000

property as properly reported on the books

divided by 12).

of the business on the first and last days of

Rent. Rent means the actual sum of

the tax year and dividing the sum by two.

money or other consideration payable,

Line 10f

Depreciation, amortization, and depletion

directly or indirectly, by you or for your

Rented property

must be disregarded. Include capital

benefit for the use of the rented property,

For rented property, enter in Column A

additions or improvements made during

including the following:

(Total North Dakota property) the amount

the tax year in this calculation. Also note

•

Any amount payable for the use of real

determined by multiplying the net annual

the following:

or tangible personal property, or any

rental rate by eight. In Column B (Zone

•

Inventory of stock of goods must be

part thereof, whether designated as a

project property only), enter the portion of

valued using the valuation method used

fixed sum of money or as a percentage

the amount in Column A that is attributable

for federal income tax purposes.

of sales, profits, or otherwise.

to the rented property physically located

•

Property acquired by gift or inheritance

•

and used at the zone project location.

Any amount payable as additional rent

must be valued at its basis for

or in lieu of rent, such as interest, taxes,

Note: Leasehold improvements are

depreciation purposes under federal

insurance, repairs or any other items

considered property owned by the lessee

income tax law.

which are required to be paid by the

regardless of whether the lessee is entitled

•

Leasehold improvements are considered

terms of the lease or other arrangement.

to remove the improvements or the

property owned by the lessee regardless

This does not include an amount paid as

improvements revert to the lessor when the

of whether the lessee is entitled to

a service charge, such as for utilities or

lease expires. See the instructions to lines

remove the improvements or the

janitorial services. If a payment

10a through 10e.

improvements revert to the lessor when

includes both rent and other

the lease expires. Value at the original

Net annual rental rate. The net annual

unsegregated charges, the amount of

cost of the improvements.

rental rate for an item of rented property

rent must be determined by considering

equals the annual rental rate that you paid

the relative values of the rent and the

Monthly averaging exception. If the

less any subrents that you received from

other items.

averaging method described above does

subtenants. If you received subrents, the

not properly reflect the average value of

Rent does not include incidental day-to-

following apply:

the property, the tax commissioner may

day expenses, such as hotel

• Do not deduct the subrents from the

require or allow averaging on a monthly

accommodations or daily automobile

annual rental rate if they constitute

basis. This method will generally be

rentals.

income earned in the regular course of

applied in the following situations:

your business.

Exception to net annual rental rate

•

There are substantial fluctuations in the

method. If the use of the net annual rental

• If the subrents produce a negative or

values of the property during the tax

rate method produces a negative or clearly

clearly inaccurate value for any item of

year.

inaccurate value, or where rented property

rented property, another method that

•

The property is acquired after the

is used by the taxpayer at no charge or

properly reflects the value of the rented

beginning of the tax year.

rented at a nominal rate, the net annual

property may be required by the tax

•

The property is disposed of before the

rental rate for the property must be

commissioner or requested by you. For

end of the tax year.

determined on the basis of a reasonable

this purpose, the resulting value must

market rental rate for the property.

not be less than an amount which bears

the same ratio to the annual rental rate

Log - Schedule Rz Instructions Renaissance Zone Act Exemptions And Tax Credits - North Dakota Office Of State Tax Commissioner - 2003 Page 16

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