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CITY OF PHILADELPHIA BUSINESS PRIVILEGE TAX REGULATIONS - page 46 / 59

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SECTION 408. APPORTIONMENT OF INCOME BY ALL PERSONS OTHER THAN PERSONS WHO ARE SUBJECT TO A TAX PURSUANT TO ARTICLES VII (BANK SHARES TAX), VIII (TITLE INSURANCE AND TRUST COMPANIES SHARES TAX), IX (INSURANCE PREMIUMS TAX) OR XV (MUTUAL THRIFT INSTITUTIONS TAX) OF THE REFORM CODE OF 1971, AND PRIVATE BANKS.

Except as otherwise provided, a taxpayer's net income after adjustments and allocation shall be apportioned to Philadelphia in accordance with a formula composed of a property factor, a payroll factor and a receipts factor.

  • (1)

    Property Factor.

    • (a)

      General. The property factor of the apportionment formula shall include all real and tangible personal property owned and rented by the taxpayer and used during the income year or period in the regular course of the taxpayer's trade or business. The term "real and tangible personal property" includes land, buildings, machinery, stocks of goods, equipment, and other real and tangible personal property but does not include coin or currency. The property factor shall include the average value of property includible in the factor.

Property shall be included in the property factor if it is actually used or is available for or capable of being used during the income period. Property held as reserves or standby facilities or property held as a reserve source of materials shall be included in the factor. For example, a plant temporarily idle or raw material reserves not currently being processed are includible in the factor. Property or equipment under construction during the tax period (except inventoriable goods in process) shall be excluded from the factor until such property is actually used for the production of income. If the property is partially used for the production of income while under construction, the value of the property to the extent used shall be included in the property factor. Property held for the production of income shall remain in the property factor until its permanent withdrawal is established by an identifiable event such as its sale or the lapse of an extended period of time (normally, five years) during which the property is held for sale.

Property used in connection with the production of nonbusiness income shall be excluded from the property factor. Property used both in the regular course of taxpayer's trade or business and in the production of nonbusiness income shall be included in the factor only to the extent the property is used in the regular course of taxpayer's trade or business.

Property used in connection with the production of receipts, net income, gains or losses taken as an adjustment to net income (or loss) shall be excluded from the property factor to the extent the property is so used. The method of determining that portion of the value to be included in the factor will depend upon the facts of each case.

(b)

Numerator. The numerator of the property factor shall include the average value of the real and tangible personal property owned or rented by the taxpayer and used within Philadelphia during the income period. This amount will be tangible personal property owned plus the value of real and tangible personal property rented (as determined pursuant to subsection (1)(d)(ii)). Taxpayer's property in transit between locations of the taxpayer shall be considered to be at the destination for purposes of the property factor. Property in transit between a buyer and seller which is included by a taxpayer in the

44

(Rev. 08/01)

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