The bill amends taxation laws for banks, particularly focusing on deductions, apportionment, and allocation of income. It revises Section 44-14-13 to allow deductions for ordinary and necessary business expenses, with exclusions such as U.S. income and excess profits taxes and the tax imposed by the chapter itself. It also specifies conditions for adding back transactions between a taxpayer and unitary business members to the taxpayer's net income, with exceptions to prevent double taxation. Adjustments are required for business expenses paid to a related member unless there's clear evidence of a valid business purpose or an alternative apportionment method is agreed upon. Section 44-14-14.1 outlines how banks should allocate and apportion net income for tax purposes using a three-factor formula based on receipts, property, and payroll, with provisions for alternative methods if the standard does not fairly represent business activity in the state.
Additionally, the bill introduces a new section allowing banks to elect a receipts factor for income allocation and apportionment, effective for tax years beginning on or after January 1, 2025. It also requires a combined reporting study for banking institutions that are part of a unitary business, comparing the tax owed under combined reporting to current requirements. The bill imposes new reporting requirements and penalties for banking institutions, and mandates the tax administrator to analyze the implications of changing to a combined reporting method by March 15, 2027. Furthermore, it amends the controller's duties, including the creation of a special fund for deferred contributions and the implementation of a direct deposit payroll system. The provisions related to financial institution taxpayers and the combined reporting study will take effect on January 1, 2025, while those regarding the controller's duties will take effect upon passage.
Statutes affected: 7927 SUB A: 35-6-1