Instructions For Schedules O And P (Form N-30) - Allocation And Apportionment Of Income

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INSTRUCTIONS
SCHS. O & P (FORM N-30)
STATE OF HAWAII — DEPARTMENT OF TAXATION
(REV. 2005)
INSTRUCTIONS FOR SCHEDULES O AND P (FORM N-30)
ALLOCATION AND APPORTIONMENT OF INCOME
Corporations who qualify and elect to report and pay income tax on the basis of a percentage of gross sales made during the tax year, as provided in Article III, section 2 of the
Multistate Tax Compact, Chapter 255, Hawaii Revised Statutes (HRS), and section 235-71(e), HRS, Hawaii Income Tax Law, need not use Schedules O and P but must use and file
Short Form N-310, copies of which may be obtained by contacting the Department of Taxation, or at
GENERAL INSTRUCTIONS
owned or controlled directly or indirectly by the
unitary business income. Dividends, interest,
same interests.
royalties, nonunitary business income, rents,
Corporations which must file Allocation and
and capital gains and losses which are not an in-
The following instructions set forth in general
Apportionment of Income Schedules O and P,
tegral part of the unitary operations, are to be al-
the adjustments to be made to arrive at the tax-
Form N-30:
located specifically according to location or situs
able income of a corporation carrying on a uni-
Every corporation carrying on a business
of property or according to the domicile of the
tary business within and without Hawaii. They do
within and without Hawaii must file Allocation
taxpayer.
not purport to set forth each and every adjust-
and Apportionment of Income Schedules O and
ment to be made. Specific questions should be
Line 12. Enter here the non-business or
P, Form N-30, unless the corporation qualifies
submitted in writing for rulings.
nonunitary dividends included on Form N-30,
and elects to use Short Form N-310. See Part II
page 1, line 8, and included on line 2 above.
Uniform Division of Income for Tax Purposes,
DIRECTIONS FOR COMPLETING
Lines 13, 14, and 15. Enter the net amount
Chapter 235, HRS, and Subchapter 2, Title 18,
SCHEDULE O ADJUSTMENTS FOR HAWAII
from interest, royalties, and nonunitary business
Chapter 235, Hawaii Administrative Rules.
TAXABLE INCOME.
income (including rentals). If the related ex-
A foreign corporation carrying on a trade or
penses exceed the total of each such income, no
Question (e). Explain with references to the
business within Hawaii and subject to tax will be
deduction may be claimed.
laws or regulations of another state any inconsis-
entitled to exclude from the measure of the tax
tencies in the determination of non-business in-
Line 20. Enter here the net loss from busi-
that portion of its income less related expenses
come and in the denominators of the factors due
ness, other than unitary business, including rent-
which is attributable to sources without Hawaii.
to a difference in state laws or regulations. Show
als.
A domestic corporation will exclude from the
the amount of inconsistency on a state-by-state
measure of the tax that portion of its income and
Line 21. Enter here the net loss, other than
basis. Corporations that change the way the fol-
related expenses attributable to sources in an-
those from sales of depreciable property, result-
lowing items were treated in prior year tax re-
other jurisdiction provided that such income is
ing from the sale or exchange of assets not con-
turns must disclose the nature and extent of
subjected to an income tax by such other jurisdic-
nected with unitary business. Losses on sales of
these changes on a separate sheet as an attach-
tion. A foreign corporation shall be deemed to be
depreciable property are considered to be part of
ment to Schedule O. Disclose any changes to:
the unitary business.
carrying on a trade or business within Hawaii if its
classification of income as business or
net income is subject to the taxing jurisdiction of
Line 24. From Schedule P (Apportionment
non-business income;
Hawaii by reason of its engaging in activities in
Formula) line 5, enter the average percent and
Hawaii, or causing transactions to be conducted
valuation of property or inclusion of
multiply the amount shown on line 23 by this av-
in Hawaii with the object of gain, profit, or eco-
property in the property factor;
erage percent. This is the apportioned income
nomic benefit, whether or not such activities or
from the unitary business subject to Hawaii in-
determination of the amount of
transactions are in, or connected with, interstate
come tax.
compensation paid used in the payroll
or foreign commerce.
Line 26. Enter the portion of line 24, if any,
factor; or
Only those entities which are located in any of
that is net capital gain attributable to the unitary
inclusion of gross receipts in the sales
the states of the United States, the District of Co-
business. Also, enter the amount on line 26, if
factor.
lumbia, the Commonwealth of Puerto Rico, or
any, on Form N-30, page 2, Schedule J, line 13.
any Territory or Possession of the United States
Disclose only inconsistencies in the denomi-
INCOME WHOLLY ATTRIBUTABLE TO
shall be considered and included as part of the
nators of the three factors that materially affect
HAWAII.
unitary business. Accordingly, only the business
the apportionment percentage.
income of those domestic entities shall be con-
Foreign and domestic corporations must allo-
Line 1. Enter here the amount of taxable in-
sidered and included in the apportionment of in-
cate to Hawaii all gains (or losses) resulting from
come shown on Hawaii Form N-30, Schedule J,
come. Where a business is deemed to be uni-
the sale or exchange of real estate and other tan-
line 1.
tary, the taxpayer shall be required to file a com-
gible assets which have a tax situs in Hawaii.
Line 2. Enter here the dividends from N-30,
bined return and the combined income shall be
The amount of net capital gain as shown on
Schedule C, line 11.
apportioned to the State of Hawaii based upon
Schedule O, page 2, line 31(b) is taxed at the
the factors of property, payroll and sales. See
rate of 4%. Income from nonunitary business ac-
Line 3. Enter deductions taken for federal
Tax Information Release No. 97-2 (Revised) for
tivities conducted within Hawaii, royalties and
tax purposes but not allowable or allowable only
more information.
rentals from property owned within Hawaii, and
in part, for Hawaii tax purposes.
intangibles having a business situs in Hawaii
A unitary business is a business carried on by
Line 4. Enter here the deduction for charita-
must be allocated to Hawaii.
a group of entities that includes the taxpayer
ble contributions included on line 1. The Hawaii
where there are flows of value among the entities
deduction for charitable contributions will be
Allocation of capital gains and losses. Capi-
resulting from (1) functional integration, (2) cen-
tal gains and losses from the sales of real prop-
taken on line 35.
tralization of management, or (3) economies of
erty located in Hawaii are allocable to Hawaii.
Line 5. Other adjustments. List all other ad-
scale. Generally, if the operation of a business
Capital gains and losses from the sales of
ditions here.
within Hawaii is integrated with, is dependent on,
tangible personal property are allocable to Ha-
Line 7. Enter here the amount of dividends
or contributes to the operation of the business
waii if: (1) The property had a situs in Hawaii at
received included on Form N-30, page 1, line 8.
outside Hawaii, the entire business is unitary in
the time of the sale; or (2) The taxpayer’s com-
character. A unitary group is a group of entities
Line 8. Enter here any interest received on
mercial domicile is in Hawaii and the taxpayer is
carrying on a unitary business, but does not in-
obligations of the United States included on
not taxable in the state in which the property had
clude (1) any foreign affiliate of the taxpayer; or (2)
Form N-30, page 1, line 8.
a situs.
any entity that is not related to the taxpayer within
Line 9. Enter here other deductions or ad-
Except in the case of the sale of a partnership
the meaning of IRC section 267(b) and (c). A for-
justments.
interest, capital gains and losses from the sales
eign affiliate of a taxpayer is a person, other than
of intangible property are allocable to Hawaii if
ADJUSTMENTS TO ARRIVE AT UNITARY
the taxpayer, if no part of the business income of
the taxpayer’s commercial domicile is in Hawaii.
BUSINESS INCOME SUBJECT TO TAX.
the person is subject to federal income tax under
the Internal Revenue Code of 1986, as amended,
Gain or loss from the sale of a partnership in-
After Hawaii adjustments, the following de-
whether or not the person and the taxpayer are
terest is allocable to Hawaii in the ratio of the
ductions or exclusions must be made to arrive at
original cost of the partnership tangible personal

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