§ 44-30-34. Nonresident partners. (a) Portion derived from Rhode Island sources. In determining Rhode Island income of a nonresident partner of any partnership, there shall be included only the portion derived from or connected with Rhode Island sources of the partner's distributive share of items of partnership income and deduction entering into his or her federal adjusted gross income, as such portion shall be determined under regulations of the tax administrator consistent with the applicable rules of § 44-30-32.

(b) Special rules as to Rhode Island sources. In determining the sources of a nonresident partner's income, no effect shall be given to a provision in the partnership agreement which:

(1) Characterizes payments to the partner as being for services or for the use of capital; or

(2) Allocates to the partner, as income from sources outside Rhode Island, a greater proportion of his or her distributive share of partnership income than the ratio of partnership income from sources outside Rhode Island to partnership income from all sources, except as authorized in subsection (d) of this section; or

(3) Allocates to the partner a greater proportion of a partnership item of deduction connected with Rhode Island sources than his or her proportionate share, for federal income tax purposes, of partnership deductions generally, except as authorized in subsection (d) of this section.

(c) Partner's modifications. Any modification described in subsection (b) or (c) of § 44-30-12 which relates to an item of partnership income or deduction, shall be made in accordance with the partner's distributive share for federal income tax purposes of the item to which the modification relates, but limited to the portion of the item derived from or connected with Rhode Island sources.

(d) Alternate methods. The tax administrator may, on application, authorize the use of any other methods of determining a nonresident's portion of partnership items derived from or connected with Rhode Island sources, and the modifications related thereto, that may be appropriate and equitable, on any terms and conditions that the tax administrator may require.

(e) Application of rules for resident partners to nonresident partners.

(1) A partner's distributive share of items shall be determined under § 44-30-15(a).

(2) The character of partnership items for a nonresident partner shall be determined under § 44-30-15(b).

(3) The effect of a special provision in a partnership agreement having the principal purpose of avoidance or evasion of Rhode Island personal income tax shall be determined under § 44-30-15(c).

History of Section. (P.L. 1971, ch. 8, art. 1, § 1; P.L. 1971, ch. 204, art. 3, § 1.)