Form 510 - Maryland Pass-Through Entity Income Tax Return - 2012 Page 12
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132012
SCHEdULE A - COMPUTATION OF
FORM
510
APPORTIONMENT FACTOR
INSTRUCTIONS
incidental to the individual's service
Pass-through entities (PTEs) that
Maryland. If tangible personal property is
conduct business in more than one state
located in this State for a portion of the
within.
must allocate income if one or more of
tax year, only the income received for
Compensation is also included in the
that portion is included in the numerator.
the members are nonresident individuals
numerator if some part of the service is
or nonresident entities of Maryland.
performed within Maryland and the base of
Capital gains from the sale of real and
Partnerships may use separate accounting
tangible personal property are included
operations or place from which the service
or the apportionment method of alloca tion.
is controlled is in Maryland. If the base of
in the numerator if the property is located
S corporations must use the apportionment
in Maryland. Ordinary net gain or loss
operations or place from which the service
method unless the activity in Maryland is
is controlled is not in any state where the
derived from the sale of depreciable
nonunitary. If the activity within Maryland
assets is excluded from the factor.
service is performed but the individual’s
is nonunitary, S corporations may use
residence is in Maryland, the compensation
Other income items are included in
separate accounting.
is also included in the numerator.
accordance with the provisions previously
APPORTIONMENT FORMULA
OTHER APPORTIONMENT FORMULAS
stated depending on the nature and type
of each item.
NOTE: Double-weighted receipts factor
All factors of the apportionment formula
are developed as fractions, the numerator
provisions are not applicable for PTEs
PROPERTY FACTOR
The property
subject to the following apportionment
of which is the total of Maryland items
factor includes owned as well as rented
and the denominator is the total of items
formulas.
tangible personal property used in the
everywhere during the tax year. Each
trade or business during the tax year.
PTEs engaged primarily in leasing or
factor is calculated to six decimal places
Such properties are inventory, machinery
rental operations must use an equally
and
used
to
arrive
at
the
final
and equipment, buildings and land, and
weighted two-factor formula of receipts
apportionment factor. The items of both
other tangible assets. Property is included
and property. The receipts and property
numerator and denominator should
factors are calculated in accordance with
in the numerator if it has a situs within
reconcile to the items as categorized and
Maryland.
the provisions for those factors of the
reported on the federal income tax return.
three-factor formula, except that receipts
Property owned by the PTE is valued at
from intangible items are excluded.
THREE -FACTOR FORMULA
its original cost at the average of the tax
PTEs engaged primarily in certain
Multistate PTEs using the appor tionment
year beginning and ending amounts. If
method of allocation are gen erally
there are material changes during the tax
types of transportation operations
must use a one-factor formula as follows:
required to use a three-factor formula of
year and the yearly average is not a fair
representation, the average must be
property, payroll and double-weighted
• Trucking operations (motor freight
receipts. The sum of the property factor,
calculated on a monthly or daily basis.
carriers) must use total road mileage
payroll factor and twice the receipts factor
Property in transit is considered to be
traveled in Maryland divided by total
is divided by four to arrive at the final
road mileage traveled everywhere.
at its destination for purposes of the
apportionment formula. To review these
factor. Property under construction during
• Railroad operations must use total
rules, see Maryland Regulation 03.04.03.08.
the tax year is excluded from the factor
track mileage traveled in Maryland
Specific require ments regarding each
until actually placed in service.
divided by total track mileage traveled
factor are set forth as follows:
everywhere.
Property leased or rented by the PTE is
RECEIPTS FACTOR The receipts factor
included in the factor at a capitalized
• Shipping operations must use total
includes the amount of income reported
value. To arrive at the capitalized value,
voyage days in Maryland divided by
during the tax year as gross receipts or
expenses associated with the privilege of
total voyage days everywhere. Voyage
sales (less returns and allowances),
occupying or using the property, including
days are the number of days that ships
dividends, interest, gross rents, royalties,
such items as fixed rent, percentage rent,
spend in ports and on waterways.
capital gains and other income on the
real
estate
taxes,
insurance
and
federal return.
B a n k s
a n d
s i m i l a r
f i n a n c i a l
maintenance, are multiplied by eight.
institutions are subject to special
Gross receipts from sales of tangible
Expenses for gas, electricity, oil, water or
apportionment rules. To review these
personal property are included in the
other items normally consumed are
rules, see Maryland Regulation 03.04.08.
excluded.
numerator if the property is delivered or
shipped to a purchaser that takes
A i r l i n e
o p e r a t i o n s
s h o u l d
s e e
Lease or rental expense below the
possession in Maryland, regardless of
Administrative Release 22 on www.
market rate must be adjusted to reflect
f.o.b. point or other conditions of sale.
for instructions.
a reasonable market rate and then
Sales of tangible personal property to an
capitalized. Sublease income cannot be
Manufacturing
Corporations
are
out-of-state purchaser are also included in
used to arrive at the capitalized value of
subject to a special single-factor formula
the numerator if the purchaser takes
leased or rented property, but must be
based on receipts. The rules for calculating
possession in Maryland. Sales of property
included in the receipts factor.
the single-factor can be found in Maryland
in transit that are destined for Maryland
Regulation 03.04.03.10.
Improvements to the leased or rented
are included in the numerator.
property that revert to the owner at
In addition, S corporations that are
Gross receipts from service-related
expiration of the lease or rental term are
manufacturing corporations with more
activities are included in the numerator
amortized and not capitalized. The actual
than 25 employees, should complete Form
if the receipts are derived from customers
cost of the improvements is divided by
500MC if apportionment is required.
within this State. There are specific rules
the number of years remaining for the
SPECIAL RULES
to determine “Customers Within this
lease or rental term and the result is
State”. To review these rules see Maryland
included in the factor for each tax year.
If the apportionment formula does not
Regulation 03.04.03.08D.
fairly represent the extent of the PTE’s
Property that has remained idle and
Gross income from intangible items
activity within Maryland, the Maryland
has not produced any revenue for a period
Revenue Administration Division may alter
such as dividends, interest, royalties and
of five or more years is not included in
the formula or components accordingly.
capital gains from the sale of intangible
the factor.
property are included in the numerator
The PTE’s share of receipts, property and
PAYROLL FACTOR
All compensation is
based upon the average of the property
payroll of a partnership or joint venture is
to be included in the numerator, both
and payroll factors.
included in the entity’s factors as if they
when the individual’s service is performed
were the direct receipts, property and
Gross receipts from the rental, leasing
entirely within Maryland, and when the
payroll of the entity. The partnership
or licensing of real or tangible
individual’s service is performed both
share is included only to the extent of the
personal property are included in the
within and without Maryland but the
numerator if the property is located in
factors required for the PTE.
service performed outside Maryland is
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