The current method of apportioning
seats in the House of Representatives of the United States, the so-called "method of equal proportions," does not even aim to make the populations of congressional districts as equal as possible.
The same concept applies in apportioning
unrelated-person interest under the asset value method.
The Treasury regulations generally provide three methods for allocating and apportioning
section 863(b) income: the 50/50 method, the independent factory price (IFP) method, and the books-and-records method.
Although some tax advisers question the Constitutionality of a single sales factor in apportioning
a net-worth tax, the courts, to date, have not provided guidance.
Moreover, the IRS itself has recognized the appropriateness of allocating and apportioning
stock losses to the same class of income that a stock gain would have produced, at least in respect of the oil and gas industry.
The state supreme court affirmed the Oregon Tax Court's decision that a company may include gross receipts from its investment securities in the sales factor when apportioning
income for corporate excise tax purposes.
Section 864(e) of the Code provides that the taxable income of each member of an affiliated group from sources outside the United States must be determined by allocating and apportioning
interest expense for each member as if all members of such group were a single corporation.
Originally, the drafters of the interest allocation rules intended that a taxpayer that elected the fair market value (FMV) method of apportioning
interest expense would be required to retain that method.
In contrast, most states have directly or indirectly adopted the UDITPA principle of first bifurcating income into "business" and "nonbusiness" components, and then apportioning
only business income to each state in which the corporation is subject to tax while allocating each item of nonbusiness income to a specific state.
The new regulations retain the structure of the prior regulations by apportioning
the taxpayer's income from Possession Purchase Sales on the basis of a business activity fraction.
Thus, we understand the thinking that led to the development of the sales and gross income methods of apportioning
research expenses as tenuous proxies for identifying the income attributable to the intangible.
The provision regarding apportioning
income applies to tax years beginning after 1997.