Section R15-2D-902. Special Provisions for the Property Factor

The following special provisions apply to the property factor of the apportionment formula:

1.        If the subrents taken into account in determining the net annual rental rate under R15-2D-605 produce a negative or inaccurate value for any item of property, the Department shall require and the taxpayer shall use another method that will properly reflect the value of the rented property. In no case, however, shall the value be less than an amount that bears the same ratio to the annual rental rate paid by the taxpayer for the 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 10-story building at an annual rental rate of $1,000,000. Taxpayer occupies two stories and sublets eight stories for $1,000,000 a year. The net annual rental rate of the taxpayer shall not be less than 2/10ths of the taxpayer’s annual rental rate for the entire year, or $200,000.

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 the property shall be determined on the basis of a reasonable market rental rate for the property.

Historical Note

Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).