Form 40 - Corporation Income Tax Return - 2011 Page 5
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8North Dakota Office of State Tax Commissioner
2011 Form 40, page 5
Name as shown on return
Federal employer I.D.
Schedule WE: Water's edge method income schedule
Worksheets
(LZ) 1
1
containing
Federal taxable income
(Consolidated Federal Form 1120, line 30)
details of lines
2
Income or loss not included in line 1 from affiliated corporations required to file a
2, 3, 4 and 5 are
2
federal income tax return
required
3
3
Income or loss from Foreign Sales Corporations and Interest Charge DISCs
(Attach worksheet)
4
Income or loss from Internal Revenue Code of 1986, as amended, Section 936
4
Possession Corporations
(Attach worksheet)
5
Reversal of intercompany eliminations between water's edge corporations and
5
non-water's edge corporations
(Attach worksheet)
6
6
Intercompany eliminations for water's edge group corporations
)
(Attach worksheet)
7
7
Total foreign dividends included in line 1
(Attach worksheet)
8
8
Taxable income or loss included on lines 1 or 2 from 80/20 corps.
(Attach worksheet)
9
9
Balance
(Add lines 1-5 then subtract lines 6, 7 and 8)
10
10
Foreign dividends to be included in water's edge income
(Multiply line 7 by 30%) (See general definitions)
11
11
Total net book income of 80/20 corporations
(Attach worksheet)
12
12
Net book income of 80/20 corporations to be included in water's edge income
(Multiply line 11 by 30%)
13
Total water' s edge income
(Add lines 9, 10 and 12. Enter amount here and on Form 40, page 1, line 1, and
(WE) 13
mark circle c or c1 on Form 40, page 1, line 1)
Water's edge method election instructions
A corporation electing the water's edge
• For the taxable years beginning prior to
A corporation required to file its North
method must comply with all of the following
January 1, 2011, a domestic disclosure
Dakota return using the worldwide unitary
spreadsheet was required. However, for
combined report method must do so unless it
• The election must be made on the return as
years after December 31, 2010, the
elects to apportion its income using the
originally and timely filed;
requirement to file a domestic disclosure
water's edge method.
spreadsheet was repealed.
A corporation elects and maintains the water's
• The water's edge election is binding for five
edge method election by marking the circle
consecutive taxable years upon making the
A corporation electing the water's edge
election. Each subsequent year the water's
method must include only the apportionment
entitled "Water's Edge Method" on page 1,
edge circle is marked does NOT constitute
factors and statutory adjustments of the
line 1, and completing Schedule WE.
a new five year election; and
water's edge group.
Schedule WE general definitions
etc. between water's edge corporations and
income computed under sections 951 through
"Water's edge group" includes affiliated
80/20 corporations that have been eliminated in
corporations incorporated in the U.S.,
954 of the Internal Revenue Code (IRC) of
excluding 80/20 corporations, affiliated
preparing the consolidated federal return must
1986, as amended. IRC section 78 gross up is
corporations incorporated in a possession of
be reversed.
not a foreign dividend.
the U.S., IC DISCs, FSCs, export trade
corporations and foreign affiliated corporations
"Intercompany eliminations for water's edge
"Net book income of an 80/20 corporation"
which meet a defined minimum of U.S.
group corporations" are eliminations of
means net book income for financial statement
activity.
intercompany transactions between companies
purposes. However, a corporation's net book
included in line 1 and companies included in
income cannot be offset by a net book loss
line 2.
from another 80/20 corporation.
"Affiliated corporation" means a parent
corporation and any corporation of which more
than fifty percent of the voting stock is owned
"80/20 corporation" is a corporation that is
"Rescission of a water's edge election". A
directly or indirectly by the parent corporation
incorporated in the U.S., is eligible to be
corporation's water's edge election is rescinded
or another member of the water's edge group.
included in the federal consolidated return as
if:
defined in N.D.C.C. § 57-38.4-01(5) and has
"Reversal of intercompany eliminations
eighty percent or more of its average property
• It has had more than 50% of its voting stock
and payroll assigned to locations in foreign
acquired by a nonaffiliated corporation;
between water's edge corporations and
countries.
80/20 corporations" means the reversal of
eliminations made between water's edge
• It was formed as the result of a
corporations and 80/20 corporations that are
"Foreign dividends" means any dividend
reorganization or spinoff and is no longer a
included in the federal consolidated return.
received by a member of the water's edge group
member of the water's edge group; or
Dividends, interest, royalties, capital gains and
from any affiliated corporation incorporated
losses, intercompany profit on sales,
outside the fifty states and District of
• It is completely liquidated. The water's
Columbia, including amounts included in
edge election of any corporation receiving
liquidated assets is not affected.
Additional Information Regarding The Water's Edge Method Is Contained In N.D.C.C. ch. 57-38.4 and N.D. Admin. Code ch. 81-03-05.2
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