Effective 28 Aug 1993

148.630. Net income and gross income defined — deductions authorized — net income computation — business activity taxable in another state, apportionment, manner — property factor defined — payroll factor defined — receivables factor defined — deposits factor defined. — 1. "Gross income" shall include all gains, profits, earnings and other income of the taxpayer from whatever sources derived during the income period, including but not limited to interest from obligations issued by the United States government or any political subdivision or any instrumentality thereof, or any state or political subdivision thereof, or issued by any foreign country or nation or political subdivision thereof; all rents, compensation for services, commissions, brokerage and other fees; all gains or profits from the sale or other disposition of any property, real or personal, tangible or intangible; and all recoveries on losses sustained in the ordinary course of business subsequent to May 25, 1982; provided, however, that recoveries on such losses sustained during any prior income period within which the deductions, as permitted by subsection 3 of this section, exceeded the taxpayer's gross income for said income period, computed in accordance with this subsection, shall not be included in the taxpayer's gross income for the income period in which they were received to the extent of such excess. Interest or dividends received on shares of* stock of any wholly owned subsidiary of associations or credit unions shall not be included in gross income.

2. "Net income" means gross income as defined in subsection 1 of this section minus the deductions allowed in subsection 3 of this section.

3. In computing net income there shall be allowed as deductions all ordinary and necessary expenses paid or incurred by the taxpayer during the income period in carrying on its trade or business. Without limiting the generality of the foregoing, there shall be allowed as deductions a reasonable allowance for salaries and other compensation for personal services actually rendered; rents, repairs, bad debts; interest; dividends; cost of insurance and advertising; all taxes paid or accrued during the income period to the United States and all taxes paid or accrued on real estate or tangible personal property owned by the taxpayer and held for lease or rental to others, to the state of Missouri, or any political subdivision thereof; all contributions paid or accrued pursuant to the unemployment compensation law of Missouri; reasonable allowances for depreciation and depletion; amortization of premiums on bonds, debentures, notes or other securities or evidences of indebtedness; a reasonable allowance for payments or contributions to or on account of any pension or retirement fund or plan for its officers or employees; contributions to any corporation, association or fund organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, no part of the net earnings of which inure to the benefit of any private shareholder or individual; losses from the sale or disposition of any property, real or personal, tangible or intangible; and all other losses sustained during the income period not compensated for by insurance.

4. Net income shall be computed in accordance with the method of accounting regularly employed in keeping the books of the taxpayer, unless such method does not clearly reflect the income, in which case the computation shall be made in accordance with such method as in the opinion of the director does clearly reflect the income.

5. When the income of a taxpayer is derived from business activity conducted within and without this state and the business activity is taxable in another state, then income shall be apportioned to this state by multiplying the gross income minus the deduction in subsection 3 of this section by a fraction, the numerator of which is the sum of the property factor, the payroll factor, the receivables factor and the deposits factor, and the denominator of which is four reduced by the number of factors which have a denominator of zero.

6. For purposes of subsection 5 of this section, the property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the income year, and the denominator is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the income year. Property owned by the taxpayer shall be valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. The net annual rental rate is the total rental rate paid by the taxpayer, less total annual rental rates received by the taxpayer from subrentals. The average value of property owned by the taxpayer shall be determined by averaging the values at the beginning and ending of the income year, but the director of revenue may require averaging by monthly values if reasonably required to reflect the average value of the taxpayer's property for the income year.

7. For purposes of subsection 5 of this section, the payroll factor is a fraction, the numerator of which is the total amount paid in this state during the income year by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the income year by the taxpayer. Compensation is paid in this state if:

(1) The employee's service is performed entirely within this state;

(2) The employee's service is performed both within and without this state, but the service performed without this state is incidental to the employee's service within this state; or

(3) The employee's services are performed both within and without this state, and:

(a) The employee's base of operations is in this state; or

(b) There is no base of operations in any state in which some part of the service is performed, but the place from which the service is directed or controlled is in this state; or

(c) The base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed but the employee's residence is in this state.

8. For purposes of subsection 5 of this section, the receivables factor is a fraction, the numerator of which is the average of contract obligations owing to the taxpayer on an open account held by an office, facility or branch within this state during the income year, and the denominator is the average of contract obligations owing to the taxpayer everywhere during the income year.

9. For purposes of subsection 5 of this section, the deposits factor is a fraction, the numerator of which is the average of deposits held by an office, facility or branch of the taxpayer within this state during the income year, and the denominator of which is the average deposits held everywhere by the taxpayer during the income year.

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(L. 1982 H.B. 949 & 1350, A.L. 1993 H.B. 105 & 480)

*Word "or" appears in original rolls.