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CITY OF PHILADELPHIA BUSINESS PRIVILEGE TAX REGULATIONS - page 45 / 59

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(i)

Patent, copyright and trademark royalties are allocable to Philadelphia if, and to the extent that, the patent or copyright is utilized by the payor in Philadelphia.

(ii)

A patent is utilized in Philadelphia to the extent that it is employed in production, fabrication, manufacturing, or other processing in Philadelphia or to the extent that a patented product is produced in Philadelphia. If the basis of receipts from patent royalties does not permit allocation to specific areas or if the accounting procedures do not reflect areas of utilizations the patent is utilized in the jurisdiction in which the taxpayer's commercial domicile is located.

(iii)

A copyright is utilized in Philadelphia to the extent that printing or other publication originates in Philadelphia. If the basis of receipts from copyright royalties does not permit allocation to specific areas or if the accounting procedures do not reflect areas of utilization, the copyright is utilized in the jurisdiction in which the taxpayer's commercial domicile is located.

(iv)

A trademark is utilized in Philadelphia to the extent that the trademark is applied to the goods in Philadelphia, or if the trademark is not applied to the goods, to the extent that the goods are placed in a package or container bearing the trademark in Philadelphia. If the basis of receipts from trademark royalties does not permit allocation to specific areas or if the accounting procedures do not reflect areas of utilization, the trademark is utilized in the jurisdiction in which the taxpayer's commercial domicile is located.

(d)

SECTION 407. COMPUTATION OF TAXABLE NET INCOME OR LOSS.

(a)

If the net total amount of nonbusiness income, whether allocable within or without Philadelphia, is more than zero, the taxpayer shall deduct that amount from the adjusted net income (decrease the adjusted net income) to compute the apportionable net income or loss; or shall deduct that amount from the adjusted net loss (increase the adjusted net loss) to compute the apportionable net income or loss.

(b)

If the net total amount of nonbusiness income, whether allocable within or without Philadelphia, is less than zero, the taxpayer shall add that amount to the adjusted net income (increase the adjusted net income) to compute the apportionable net income or loss; or shall deduct that amount from the adjusted net loss (reduce the adjusted net loss) to compute the apportionable net income or loss.

After apportionment of net income to Philadelphia, nonbusiness income or losses allocable to Philadelphia shall be added to or deducted from apportioned net income or losses to determine taxable net income or loss in accordance with whichever one of the following rules is applicable:

(a) (b) (c) (d)

Nonbusiness income shall be added to apportioned net income. Nonbusiness income shall be added to apportioned net losses so as to reduce the net loss. Nonbusiness losses shall be deducted from apportioned net income. Nombusiness losses shall be added to apportioned net losses so as to increase the net loss.

(1)

(2)

43

(Rev. 08/01)

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