Form K-120s - Kansas Partnership Or S Corporation Income Booklet - 2013 Page 13
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16INSTRUCTIONS FOR FORM K-120S AS
You must complete and enclose Part III, of Form 120S AS
LINE A—Property Factor. The property factor shall include all
with your Kansas return if the taxpayer is doing business within
real and tangible personal property owned or rented and used
and outside of Kansas and utilizing the apportionment formula
during the income year to produce business income. Property
to determine Kansas income.
used in connection with the production of nonbusiness income
shall be excluded from the factor. Property shall be included in
PART III—APPORTIONMENT FORMULA
the property factor if it is actually used or is available for or capable
of being used during the income year for the production of
Part III is to be used by corporations which derive income
business income. Property used in the production of business
from sources both within and without Kansas for the purpose of
income shall remain in the property factor until its permanent
allocating and apportioning income. All business income is
apportionable to Kansas by one of the following methods:
withdrawal is established by an identifiable event such as its
sale or conversion to the production of nonbusiness income.
•
The majority of taxpayers will multiply business income by a
The numerator of the property factor shall include the average
fraction, the numerator of which is the property factor plus
value of the taxpayer’s real and tangible personal property owned
the payroll factor plus the sales factor, and the denominator
and used in Kansas during the income year for the production of
of which is three.
income, plus the value of rented real and tangible personal
•
Railroads will multiply business income by a fraction, the
property so used. Property owned by the taxpayer in transit between
numerator of which is the freight car miles in this state and
locations of the taxpayer shall be considered to be at the
the denominator of which is the freight car miles everywhere.
destination for purposes of the property factor. Property in transit
•
Interstate motor carriers will multiply business income by a
between a buyer and seller which is included by a taxpayer in the
fraction, the numerator of which is the total number of miles
denominator of its property factor in accordance with its regular
operated in this state and the denominator of which is the
accounting practices shall be included in the numerator according
total number of miles operated everywhere.
to the state of destination. The value of mobile or movable property,
•
A qualifying taxpayer may elect to multiply business income
such as construction equipment, trucks and/or leased electronic
by a fraction, the numerator of which is the property factor
equipment which are located within and without Kansas during
plus the sales factor, and the denominator of which is two. A
the income year, shall be determined for purposes of the
qualifying taxpayer is any taxpayer whose payroll factor for a
numerator of the factor on the basis of total time within Kansas
taxable year exceeds 200% of the average of the property
during the income year. Property owned by the taxpayer shall be
factor and the sales factor. For additional information relating
valued at its original cost. As a general rule, “original cost” is
to this method and to determine if you are qualified, you may
deemed to be the basis of the property for federal income tax
review K.S.A. 79-3279. If you qualify to use this method you
purposes at the time of acquisition by the taxpayer and adjusted
are required to complete, for the first year, the payroll
by subsequent capital additions or improvements thereto and
information on Form 120S AS, Part III, line B or Form K-121S,
partial disposition thereof, by reason of sale, exchange,
Part II, Section 2.
abandonment, etc. Property rented by the taxpayer is valued at
eight times the net annual rental rate. As a general rule, the
•
Single Factor Apportionment – all years beginning after
average value of property owned by the taxpayer shall be
12/31/01, and at the election of the taxpayer made at the
determined by averaging the values at the beginning and ending
time of filing of the original return, the qualifying business
of the income year. However, the Director of Taxation may require
income of any investment funds service corporation
or allow averaging by monthly values if such method of averaging
organized as a corporation or S corporation which maintains
is required to properly reflect the average value of the taxpayer’s
its primary headquarters and operations or is a branch facility
that employs at least 100 individuals on a full-time equivalent
property for the income year.
basis in this state and has any investment company fund
LINE B—Payroll Factor. The payroll factor shall include the
shareholders residenced in this state shall be apportioned
total amount paid by the taxpayer for compensation during the tax
to this state as provided in this subsection, as follows:
period. The total amount “paid” to the employees is determined
upon the basis of the taxpayer’s accounting method. If the
By multiplying the investment funds service corporation’s
taxpayer has adopted the accrual method of accounting, all
qualifying business income from administration, distribution
compensation properly accrued shall be deemed to have been
and management services provided to each investment
company by a fraction, the numerator of which shall be the
paid. Notwithstanding the taxpayer’s method of accounting, at
average of the number of shares owned by the investment
the election of the taxpayer, compensation paid to employees
company’s fund shareholders residenced in this state at
may be included in the payroll factor by use of the cash method if
the beginning of and at the end of the investment company’s
the taxpayer is required to report such compensation under such
taxable year that ends with or within the investment funds
method for unemployment compensation purposes. The term
service corporation’s taxable year, and the denominator of
“compensation” means wages, salaries, commissions and any
which shall be the average of the number of shares owned
other form of remuneration paid to employees for personal
by the investment company’s fund shareholders everywhere
services. Payments made to an independent contractor or any
at the beginning of and at the end of the investment
other person not properly classifiable as an employee are
company’s taxable year that ends with or within the
excluded. Only amounts paid directly to employees are included
investment funds service corporation’s taxable year.
in the payroll factor. The compensation of any employee on account
of activities which are connected with the production of
Descriptions of each of the factors in the three-factor formula
nonbusiness income shall be excluded from the factor. The
follow. The laws applicable to these factors are contained in K.S.A.
denominator of the payroll factor is the total compensation paid
79-3280 through K.S.A. 79-3287. The applicable regulations are
everywhere during the income year.
contained in K.A.R. 92-12-84 through K.A.R. 92-12-103. These
laws and regulations are in the Policy Information Library at:
The numerator of the payroll factor is the total amount paid in
Kansas during the income year by the taxpayer for compensation.
Page 9
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