Section 57-38-01.3 - Adjustments to taxable income for corporations1. The taxable income of a corporation as computed pursuant to the provisions of the Internal Revenue Code of 1954, as amended, must be:a. Reduced by any interest received from obligations of the United States that is included in taxable income or in the computation thereof on the federal return.b. Reduced by any other income included in the taxable income, or in the computation thereof, on the federal return which is exempt from taxation by this state because of the provisions of the Constitution of North Dakota or the Constitution of the United States.c. Increased by the amount of any income taxes, including income taxes of foreign countries, or franchise or privilege taxes measured by income, to the extent that such taxes were deducted to determine federal taxable income.d. Increased by the amount of any interest and dividends from foreign securities and from securities of state and their political subdivisions exempt from federal income tax, provided that interest upon obligations of the state of North Dakota or any of its political subdivisions may not be included.e. Reduced by the amount of net income not allocated and apportioned to this state under the provisions of chapter 57-38.1, but only to the extent that the amount of net income not allocated and apportioned to this state under the provisions of that chapter is not included in any adjustment made pursuant to the preceding subdivisions.f. Repealed by S.L. 2003, ch. 529, § 3.g. Increased by the amount of any special deductions and net operating loss deductions to the extent that these items were deducted in determining federal taxable income.h. Reduced by dividends paid, as defined in section 561 of the Internal Revenue Code of 1986, as amended, by a regulated investment company or a fund of a regulated investment company as defined in section 851(a) or 851(g) of the Internal Revenue Code of 1986, as amended, except that the deduction for dividends paid is not allowed with respect to dividends attributable to any income that is not subject to taxation under this chapter when earned by the regulated investment company. Sections 852(b)(7) and 855 of the Internal Revenue Code of 1986, as amended, apply for computing the deduction for dividends paid. A regulated investment company is not allowed a deduction for dividends received as defined in sections 243 through 245 of the Internal Revenue Code of 1986, as amended.i. Except for a cooperative described in this subsection, increased by the amount of the deduction allowable under section 199 of the Internal Revenue Code [26 U.S.C. 199], but only to the extent of the deduction taken to determine federal taxable income. For a cooperative that has elected to pass the deduction through to its patrons under section 199(d)(3), of the Internal Revenue Code [26 U.S.C. 199(d)(3)], the increase under this subsection does not include the amount passed through to its patrons.j. For taxable years 2005 and 2006, increased by the amount of extraterritorial income as defined in section 114 of the Internal Revenue Code [26 U.S.C. 114], that is excluded under sections 101(d), 101(e), and 101(f) of Pub. L. 108-357 [118 Stat. 1418], but only to the extent the income was excluded in determining federal taxable income.k. Reduced, for an interest charge domestic international sales corporation without economic substance owned by individuals or passthrough entities, by the amount of actual or deemed distributions of the interest charge domestic international sales corporation to its owners. For purposes of this subsection, "without economic substance" means, in the case of an interest charge domestic international sales corporation subject to Internal Revenue Code section 992, that the interest charge domestic international sales corporation has elected to use intercompany pricing rules of Internal Revenue Code section 994, rather than the Internal Revenue Code section 482 method. For purposes of this subsection, a passthrough entity means an entity that for the applicable tax year is treated as an S corporation under this chapter or a cooperative, general partnership, limited partnership, limited liability partnership, trust, or limited liability company that for the applicable tax year is not taxed as a corporation under this chapter.l. Increased by the amount of the dividends paid deduction otherwise allowed under section 857 of the Internal Revenue Code of 1986, as amended, if the real estate investment trust is a captive real estate investment trust.(1) For purposes of this subdivision:(a) "Captive real estate trust" means a real estate investment trust the shares or beneficial interests of which are not regularly traded on an established securities market, and more than fifty percent of the voting power or value of the beneficial interests or shares of the real estate investment trust are owned or controlled, directly, indirectly, or constructively, by a single entity that is: [1] Treated as an association taxable as a corporation under the Internal Revenue Code of 1986, as amended; and[2] Not exempt from federal income taxation under section 501(a) of the Internal Revenue Code of 1986, as amended.(b) "Listed Australian property trust" means an Australian unit trust registered as a managed investment scheme under the Australian Corporations Act in which the principal class of units is listed on a recognized stock exchange in Australia, and is regularly traded on an established securities market, or an entity organized as a trust, provided that a listed Australian property trust owns or controls, directly or indirectly, seventy-five percent or more of the voting power or value of the beneficial interests or shares of such trust.(c) "Qualified foreign entity" means a corporation, trust, association, or partnership organized outside the laws of the United States, and which satisfies all of the following criteria: [1] At least seventy-five percent of the entity's total asset value at the close of its taxable year is represented by real estate assets as defined in section 856(c)(5)(B) of the Internal Revenue Code of 1986, as amended, including shares or certificates of beneficial interest in any real estate investment trust, cash and cash equivalents, and United States government securities;[2] The entity is not subject to tax on amounts distributed to its beneficial owners or is exempt from entity level taxation;[3] The entity distributes at least eighty-five percent of its taxable income, as computed in the jurisdiction in which it is organized, to the holders of its shares or certificates of beneficial interest on an annual basis;[4] Not more than ten percent of the voting power or value in the entity is held directly or indirectly or constructively by a single entity or individual, or the shares or beneficial interests of such entity are regularly traded on an established securities market; and[5] The entity is organized in a country that has a tax treaty with the United States.(d) "Real estate investment trust" has the meaning ascribed in section 856 of the Internal Revenue Code of 1986, as amended.(2) For the purposes of applying subparagraph a of paragraph 1, the following entities are not considered an association taxable as a corporation: (a) A real estate investment trust other than a captive real estate investment trust;(b) A qualified real estate investment trust subsidiary under subsection i of section 856 of the Internal Revenue Code of 1986, as amended, other than a qualified real estate investment trust subsidiary of a captive real estate investment trust;(c) A listed Australian property trust; and(d) A qualified foreign entity.(3) A real estate investment trust that is intended to be regularly traded on an established securities market and that satisfies the requirements of sections 856(a)(5), 856(a)(6), and 856(h)(2) of the Internal Revenue Code of 1986, as amended, shall not be deemed a captive real estate investment trust within the meaning of this subdivision.(4) A real estate investment trust that does not become regularly traded on an established securities market within one year of the date on which it first became a real estate investment trust shall be deemed not to have been regularly traded on an established securities market, retroactive to the date it first became a real estate investment trust, and shall file an amended return reflecting the retroactive designation for any tax year or part-year occurring during its initial year of status as a real estate investment trust. For purposes of this subdivision, a real estate investment trust becomes a real estate investment trust on the first day that it has both met the requirements of section 856 of the Internal Revenue Code of 1986, as amended, and has elected to be treated as a real estate investment trust under section 856(c) (1) of the Internal Revenue Code of 1986, as amended.(5) For purposes of this subdivision, the constructive ownership rules of section 318(a) of the Internal Revenue Code of 1986, as amended, as modified by section 856(d)(5) of the Internal Revenue Code of 1986, as amended, apply in determining the ownership of stock, assets, or net profits of any person. Provided, however, that each adjustment in the above subdivisions authorized under law is allowed only to the extent that the adjustment is allocated and apportioned to North Dakota income.
2. The tax commissioner is hereby authorized to prescribe rules and regulations to prevent requiring income that had been previously taxed under this chapter from being taxed again because of the provisions of this chapter and to prescribe rules and regulations to prevent any income from becoming exempt from taxation because of the provisions of this chapter if it would otherwise have been subject to taxation under the provisions of this chapter.3. The sum calculated pursuant to subsection 1 must be reduced by the amount of any net operating loss that is attributable to North Dakota sources, including a net operating loss calculated under chapter 57-35.3 for tax years beginning before January 1, 2013. If the net operating loss that is attributable to North Dakota sources exceeds the sum calculated pursuant to subsection 1, the excess may be carried forward for the same time period that an identical federal net operating loss may be carried forward. If a corporation uses an apportionment formula to determine the amount of income that is attributable to North Dakota, the corporation must use the same formula to determine the amount of net operating loss that is attributable to North Dakota. In addition, no deduction may be taken for a carryforward when determining the amount of net operating loss that is attributable to North Dakota sources.Amended by S.L. 2013 , ch. 449( SB 2325 ), § 8, eff. 1/1/2013.