316 NAC 24-056. CORPORATION AS PARTNER IN A PARTNERSHIP OR JOINT VENTURE

REG-24-056 CORPORATION AS PARTNER IN A PARTNERSHIP OR JOINT VENTURE 056.01 When a partnership has sufficient contacts with a corporate partner such that it would be considered unitary if it was a corporation that was at least 50 percent owned by that partner then the partnership will be considered unitary with the corporate partner regardless of the actual ownership share of the partner. 056.01A This determination will have to be made separately for each partner and will be based on the requirements of Reg-24-053. 056.02 When a corporation and a partnership are considered unitary, the apportionment factors of the corporation will be adjusted to include a portion of the sales factor of the partnership. The percentage of the sales factor included will be the percentage of profits or losses of that corporation. The percentage will be applied to each denominator and each state's numerator equally. 056.03 Intercompany transactions will be eliminated. The elimination of intercompany transactions will be based on the percentage of the ownership of the corporation, except all sales from the partnership to the corporation will be eliminated to the extent of the corporation's share of total sales of the partnership. If all of the sales from the partnership to the corporation are not eliminated, the remaining sales in each state will be the same percentage of the sales in the state before any eliminations. Any partnership agreements that identify particular activities to a specific partner will be given no effect in the determination of the income of each partner subject to tax in Nebraska. 056.04 Example. (Illustration only.) X multistate corporation is domiciled outside Nebraska and is a partner in AX, a multistate partnership. X has a 40 percent interest in the profits or losses of AX. X and AX are unitary, not considering the attribute of ownership. Corporation X has sales of $10,000,000, $1,000,000 of which were to Partnership AX. Partnership AX has sales of $2,000,000, $900,000, of which were to Corporation X. Corporation X has apportionable income of $3,000,000, exclusive of its interest in AX's income, and Partnership AX has apportionable income totaling $500,000. 056.05 The denominator to be used in a combined report of income with the corporate return is calculated as follows: Sales Corporation X $10,000,000. Partnership AX 800,000. * Less intercompany sales eliminations:Corporation X sales to AX ($1,000,000 x 40% ownership interest) (400,000) Partnership AX sales to Corporation X, $900,000, limited to 40% ownership interest of $2,000,000 total sales, (800,000) Totals $9,600,000 *$2,000,000 x 40% = $800,000 056.06 The expanded apportionment factor will be applied to the apportionable income of Corporation X calculated as follows: Apportionable income: $ 3,000,000 Corporation X 200,000 Partnership AX: $500,000 x 40% ownership interest Combined apportionable taxable income(equals Corporation X's total federal taxable income) $ 3,200,000 056.07 When a corporation engages in a partnership with which it is unitary as defined above, its apportionment formula shall be determined in accordance with this regulation. (Sections 77-2734.14, 77-2734.15 and 77-2734.16, R.R.S. 1996. November 11, 1998.)