Section 7701.4 - ApportionmentAn institution may apportion its taxable amount of shares determined under section 701.1 in accordance with this subsection if the institution is subject to tax in another state based on or measured by net worth, gross receipts, net income or some similar base of taxation, or if it could be subject to such tax, whether or not such a tax has in fact been enacted. The following shall apply:
(1)(i) For calendar years beginning prior to January 1, 2014, the taxable amount of shares shall be apportioned in accordance with a fraction, the numerator of which is the sum of the payroll factor, the receipts factor and the deposits factor, and the denominator of which is three. If one of the factors is inapplicable, the denominator is two. If two of the factors are inapplicable, the denominator is one.(ii) For the calendar year beginning January 1, 2014, and each calendar year thereafter, the taxable amount of sharesshall be apportioned based upon the receipts factor and the payroll and deposits factors shall be disregarded.(2) The payroll factor is a fraction, the numerator of which is the total wages paid in this Commonwealth and the denominator of which is the total wages paid in all states. Wages are paid in a state if paid to an employe having a regular presence therein.(3) The receipts factor is a fraction, the numerator of which is total receipts located in this Commonwealth and the denominator of which is the total receipts located in all states. The method of calculating receipts for purposes of the denominator shall be the same as the method used in determining receipts for purposes of the numerator. The location of receipts shall be determined as follows: (i) The numerator of the receipts factor shall include receipts from the lease or rental of real property owned by the institution if the property is located within this Commonwealth or receipts from the sublease of real property if the propertyis located within this Commonwealth.(ii) The following shall apply to receipts from the lease or rental of tangible personal property owned by the institution: (A) Except as provided under clause (B), the numerator of the receipts factor shall include receipts from the lease or rental of tangible personal property owned by the institution if the property is located within this Commonwealth when it is first placed in service by the lessee.(B) The following shall apply: (I) Receipts from the lease or rental of transportation property owned by the institution shall be included in the numerator of the receipts factor to the extent that the property is used in this Commonwealth.(II) The extent an aircraft shall be deemed to be used in this Commonwealth and the amount of receipts that shall be included in the numerator of this Commonwealth's receipts factor shall be determined by multiplying all the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in this Commonwealth and the denominator of which is the total number of landings of the aircraft.(III) A motor vehicle shall be deemed to be used wholly in the state in which it is registered.(IV) If the extent of the use of transportation property within this Commonwealth cannot be determined, the property shall be deemed to be used wholly in the state in which the property has its principal base of operations.(iii) The following shall apply to interest, fees and penalties in connection with loans secured by real property: (A) The following shall apply to a calculation under this subparagraph:(I) The numerator of the receipts factor shall include interest, fees and penalties imposed in connection with loans secured by real property if the property is located within this Commonwealth.(II) If the real property under subclause (I) is located both within this Commonwealth and one or more other states, the receipts under this subsection shall be included in the numerator of the receipts factor if more than fifty per cent of the fair market value of the real property is located within this Commonwealth.(III) If more than fifty per cent of the fair market value of real property under subclause (I) is not located within any single state, the receipts under this subsection shall be included in the numerator of the receipts factor if the borrower is located in this Commonwealth.(B) The determination of whether real property securing a loan is located within this Commonwealth shall be made as of the time the original agreement was made and all subsequent substitutions of collateral shall be disregarded.(iv) The numerator of the receipts factor shall include interest, fees and penalties imposed in connection with loans not secured by real property if the borrower is located in this Commonwealth.(v) The numerator of the receipts factor shall include net gains from the sale of loans. Net gains from the sale of a loan shall include income recorded under the coupon stripping rules of section 1286 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1286). The following shall apply:(A) The amount of net gains, equal to zero or above, fromthe sale of loans secured by real property included in the numerator shall be determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor under subparagraph (iii) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property.(B) The amount of net gains, equal to zero or above, from the sale of loans not secured by real property included in the numerator shall be determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor under subparagraph (iv) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans not secured by real property.(vi) The numerator of the receipts factor shall include interest, fees and penalties charged to credit, debit or similar cardholders, including annual fees and overdraft fees, if the billing address of the cardholder is in this Commonwealth.(vii) The numerator of the receipts factor shall include net gains, equal to zero or above, from the sale of credit card receivables multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor under subparagraph (vi) and the denominator of which is the institution's total amount of interest and fees or penalties in the nature of interest from credit card receivables and fees charged to cardholders.(viii) For card issuer's reimbursement fees, the numerator of the receipts factor shall include: (A) All credit card issuer's reimbursement fees multiplied by a fraction, the numerator of which is the amount of fees, interest and penalties charged to credit cardholders included in the numerator of the receipts factor under subparagraph (vi) and the denominator of which is the institution's total amount fees, interest and penalties charged to credit cardholders.(B) All card issuer's reimbursement fees, except as provided under clause (A), multiplied by a fraction, the numerator of which is the amount of the fees, interest and penalties charged to all other cardholders included in the numerator of the receipts factor under subparagraph (vi) and the denominator of which is the institution's total amount of fees, interest and penalties charged to all other cardholders.(ix) The following shall apply to receipts from merchant's discounts:(A) If the institution can readily determine the location of the merchant and if the merchant is in this Commonwealth, the numerator of the receipts factor shall include receipts from merchant discount.(B) If the institution cannot readily determine the location of the merchant, the numerator of the receipts factor shall include the receipts from the merchant discount multiplied by a fraction: (I) For a merchant discount related to the use of a credit card, the numerator of which shall be the amount of fees, interest and penalties charged to credit cardholders that is included in the numerator of the receipts factor under subparagraph (vi) and the denominator of which is the institution's total amount of fees, interest and penalties charged to credit cardholders.(II) For a merchant discount related to the use of a debitcard, the numerator of which shall be the amount of fees, interest and penalties charged to debit cardholders that is included in the numerator of the receipts factor under subparagraph (vi) and the denominator of which is the institution's total amount of fees, interest and penalties charged to debit cardholders.(III) For a merchant discount related to the use of cards, except as provided under subclauses (I) and (II), the numerator of which shall be the amount of fees, interest and penalties charged to all other cardholders that is included in the numerator of the receipts factors under subparagraph (vi) and the denominator of which is the institution's total amount of fees, interest and penalties charged to all other cardholders.(x) The receipts factor shall include Automated Teller Machine fees that are not forwarded directly to another bank. The following shall apply:(A) The numerator of the receipts factor shall include fees charged to a cardholder for the use at an Automated Teller Machine of a card issued by the institution if the cardholder's billing address is in this Commonwealth.(B) The numerator of the receipts factor shall include fees charged to a cardholder, other than the institution's cardholder, for the use of the card at an Automated Teller Machine owned or rented by the institution, if the Automated Teller Machine is in this Commonwealth.(xi) The following shall apply to loan servicing fees:(A)(I) The numerator of the receipts factor shall include loan servicing fees derived from loans secured by real property multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor under subparagraph (iii) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property.(II) The numerator of the receipts factor shall include loan servicing fees derived from loans not secured by real property multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor under subparagraph (iv) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans not secured by real property.(B) If the institution receives loan servicing fees for servicing the secured or the unsecured loans of another institution, the numerator of the receipts factor shall include loan servicing fees if the borrower is located in this Commonwealth.(xii) The numerator of the receipts factor shall include receipts from services not otherwise apportioned under this section if the recipient of the services receives all of the benefit of the services in this Commonwealth. If the recipient of the services receives some of the benefit of the services in this Commonwealth, the receipts shall be included in the numerator of the apportionment factor in proportion to the extent that the recipient receives benefit of the services in this Commonwealth.(xiii) The following shall apply to receipts from an institution's investment assets and activity and trading assets and activity: (A) Interest, dividends, net gains equal to zero or above, and other income from investment assets and activities and from trading assets and activities shall be included in the receipts factor. Investment assets and activities and trading assets and activities shall include investment securities, trading account assets, Federal funds, securities purchased and sold under agreements to resell or repurchase, options, futures contracts, forward contracts and notional principal contracts such as swaps, equities and foreign currency transactions. For the investment and trading assets and activities under subclauses (I) and (II), the receipts factor shall include the amounts under subclauses (I) and (II). The following shall apply: (I) The receipts factor shall include the amount by which interest from Federal funds sold and securities purchased under resale agreements exceeds interest expense on Federal funds purchased and securities sold under repurchase agreements.(II) The receipts factor shall include the amount by which interest, dividends, gains and other income from investment and trading assets and activities, including assets and activities in the matched book, in the arbitrage book and foreign currency transactions, exceed amounts paid in lieu of interest, amounts paid in lieu of dividends and losses from the assets and activities.(B) The numerator of the receipts factor shall include the receipts under clause (A) that are attributable to this Commonwealth using one of the following alternative methods:(I) Method 1. The numerator shall be determined by multiplying the total amount of receipts under clause (A) by a fraction, the numerator of which is the total amount of all other receipts attributable to this Commonwealth and the denominator of which is the total amount of all other receipts.(II) Method 2. The numerator shall be determined by multiplying the total amount of receipts under clause (A) by a fraction, the numerator of which is the average value of the assets which generate the receipts which are properly assigned to a regular place of business of the institution within this Commonwealth and the denominator of which is the average value of all such assets.(C) Upon the election by the institution to use one of the methods under clause (B) for tax imposed for a taxable year beginning after December 31, 2016, the institution shall use the method on all subsequent returns unless the institution receives prior permission from the Department of Revenue to use a different method.(D) The following shall apply:(I) An institution electing to use Method 2 shall have the burden of proving that an investment asset or activity or trading asset or activity was properly assigned to a regular place of business outside of this Commonwealth by demonstrating that the day-to-day decisions regarding the asset or activity occurred at a regular place of business outside this Commonwealth.(II) If the day-to-day decisions regarding an investment asset or activity or trading asset or activity occur at more than one regular place of business and one regular place of business is in this Commonwealth and one regular place of business is outside this Commonwealth, the asset or activity shall be considered to be located at the regular place of business of the institution where the investment or trading policies or guidelines with respect to the asset or activity are established.(III) Unless the institution demonstrates to the contrary, the investment or trading policies and guidelines under subclause (II) shall be presumed to be established at the commercial domicile of the institution. (E) [Repealed by 2017 Amendment.] (xiv) The following shall apply to receipts from the sale or disposition of property:(A) The numerator of the receipts factor shall include receipts from the sale or disposition of tangible personal property if the property is delivered or shipped to a purchaser within this Commonwealth regardless of the f.o.b. point or other conditions of the sale.(B) The numerator of the receipts factor shall include all receipts from the sale or disposition of real property if the property is located in this Commonwealth.(C) The numerator of the receipts factor shall include all receipts from the sale or disposition of intangible property if: (I) the commercial domicile of the purchaser or recipient of the property is located in this Commonwealth; or (II) if the purchaser or recipient does not have a commercial domicile, the billing address of the purchaser or recipient is located in this Commonwealth.(xv) The following shall apply to receipts not provided for under this paragraph:(A) The numerator of the receipts factor for receipts not otherwise apportioned under this section shall include receipts if: (I) the benefit to the customer is received in this Commonwealth; or(II) if the billing address of the customer is located within this Commonwealth; and: (a) the location where the benefit to the customer is received cannot be determined;(b) the commercial domicile of the customer is in this Commonwealth; or(c) the customer does not have a commercial domicile.(B) If receipts subject to this paragraph are not received from a customer, the receipts shall be excluded from both the numerator and denominator of the receipts factor.(xvi) For purposes of determining the location where benefits are received from under subparagraphs (xii) and (xv), if a service or other activity generating the receipts provides benefits to two or more recipients located in different states or provides benefits to a recipient in more than one state, the location where benefits are received may be estimated using reasonable procedures to estimate the locations in which benefits are received.(xvii) Receipts which would be assigned under this section to a state in which the institution is not subject to a business privilege tax, a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business or a corporate stock tax or shares tax of the type imposed under this article shall be included in the numerator of the receipts factor, if the institution's commercial domicile is in this Commonwealth.(4) The deposits factor is a fraction, the numerator of which is the average value of deposits located in this Commonwealth during the taxable year and the denominator of which is the average value of the total deposits during the taxable year. The average value of deposits is to be computed on a quarterly basis. Deposits are located in the state in which the institution maintains an office which properly treats the deposits as a liability on its books or records. A deposit is considered to be properly treated as a liability on the books or records of the office with which it has a greater portion of contact. In determining whether a deposit has a greater portion of contact with a particular office, consideration is given to: (i) Whether the deposit account was opened at or transferred to that office by or at the direction of the depositor, regardless of where subsequent deposits or withdrawals are made.(ii) Whether employes regularly connected with that office are primarily responsible for servicing the depositor's general banking and other financial needs.(iii) Whether the deposit was solicited by an employe regularly connected with that office, regardless of where such deposit was actually solicited.(iv) Whether the terms governing the deposit were negotiated by employes regularly connected with that office, regardless of where the negotiations were actually conducted.(v) Whether essential records relating to the deposit are kept at that office and whether the deposit is serviced at that office.Amended by P.L. TBD 2016 No. 84, § 15.5, eff. 7/13/2016.Amended by P.L. 270 2013 No. 52, § 23, eff. 7/9/2013.1971, March 4, P.L. 6, No. 2, art. VII, § 701.4, added 1994, June 16, P.L. 279, No. 48, § 17, effective July 1, 1994.