Special rules - Property factor

The following special subsections are established in respect to the property factor of the apportionment formula: 1. If the subrents taken into account in determining the net annual rental rate under section 81-03-09-20 produce a negative or clearly inaccurate value for any item of property, another method which will properly reflect the value of rented property may be required by the tax commissioner or requested by the taxpayer. In no case, however, shall such value be less than an amount which bears the same ratio to the annual rental rate paid by the taxpayer for such property as the fair market value of that portion of the property used by the taxpayer bears to the total fair market value of the rented property. Example: The taxpayer rents a ten-story building at an annual rental rate of one million dollars. Taxpayer occupies two stories and sublets eight stories for one million dollars a year. The net annual rental rate of the taxpayer must not be less than two-tenths of the taxpayer's annual rental rate for the entire year, or two hundred thousand dollars. 2. If property owned by others is used by the taxpayer at no charge or rented by the taxpayer for a nominal rate, the net annual rental rate for such property shall be determined on the basis of a reasonable market rental rate for such property.