Section 1 Model Definition of “Receipts” Regulations

This project was approved by the Executive Committee at its meeting on July 31, 2014. The Uniformity Committee subsequently met to discuss the project and consider the scope as well as the make-up of a working group.
Project Description

Sec. 1 Model Definition of “Receipts” Regulations

This project was approved by the Executive Committee at its meeting on July 31, 2014. The Uniformity Committee subsequently met to discuss the project and consider the scope as well as the make-up of a working group. The working group will draft model regulations to implement changes to the definition of “receipts” under Article IV, Section 1 (g) of the Multistate Tax Compact [UDITPA] that were adopted by the Commission in July 2014. The statutory language is as follows:  
 
“(g) “Receipts” means all gross receipts of the taxpayer that are not allocated under paragraphs of this article, and that are received from transactions and activity in the regular course of the taxpayer’s trade or business; except that receipts of a taxpayer from hedging transactions and from the maturity, redemption, sale, exchange, loan or other disposition of cash or securities, shall be excluded.”

 



 UDITPA Section 1 Work Group Meeting
 Reference Information

Drafting Resources:

Issues for Consideration:

 

- Definitions 

- Should there be definitions for terms such as hedging transactions, maturity, redemption,
  sale, exchange, loan, or "other disposition of cash or securities"?

Definitions of "Hedging"January 8, 2015
Definition of Terms v.1December 18, 2014
Definition of Terms v.2December 18, 2014
CA Treasury Function TermsDecember 3, 2014

 

 - Accounts receivable

- Should sales (or other defined dispositions) of accounts receivable be included within the

   definition of “receipts”?

 

 - "Regular Course of Business"

- How should receipts that are received with varying regularity across lines of business be treated?

 

- Is a rule required to clarify how receipts from intangible (or other?) assets not held in the
  regular course of business should be included/excluded from the definition of receipts?  

 

 - Exclusions

- Should there be a definition of receipts that fit only the functional test (and therefore 

  would be excluded from the definition of receipts under the model)?

 

 - Receipts of Brokers

- How should receipts of brokers (or sales of securities in the ordinary course of business)
  be treated in general?
 

 - Should there be a specific rule   for the treatment of such receipts in a combined return
    with other receipts of non-brokers? 

 

- Are additional definitions required for the sale or other disposition of securities by brokers
  in the ordinary course of business? 

 

- Are rules required to address the problem of churning and what should those rules be?
 

 

 - Nonapportionable Receipts

 

- What should the definition of receipts that are nonapportionable (that meet neither the functional
   or transactional test) be?  Such receipts are excluded from the definition of receipts under the model.

 - Recommendations to Uniformity on other issues (not within the scope of this group),
   such as regulations under Sections 17 or 18.

- Rule for including functional receipts when not doing so would distort (Sec. 18)

- Rule for churning when it comes to treatment of broker receipts (If to be addressed under
  Section 18 rather than Section 1).

Factoring receivables for accrual taxpayers.

Agendas from previous meetings, materials, and other project related information:

  • Agenda, August 20, 2015, August 27, 2015, September 3, 10, 17 & 24, 2015 
  • Redlined draft of Section 1, current as of December 3, 2015 (PDF) - for presentation to Uniformity Committee
  • Fully integrated redlined draft (Section 1 and Section 17), current as of December 3, 2015 (PDF)
  • Redlined draft of Section 1, current as of November 30, 2015 (PDF) - for presentation to Uniformity Committee
  • Working Drafts of Section 1 - current as of October 12, 2015
  • Suggested Hedging Language for UDITPA Section 1
  • Commodities Future Trading Commission - "hedging" definitions
  • Definitions and Synonyms for consideration
  • Draft highlighting terms "trade or business," "unitary business," "business"
  • Draft highlighting the references to Sec. 1(g) and to other provisions within Sec. 17 involving the exclusion of receipts from the receipts factor
  • Proposed edits to working drafts dated May 21, 2015, to ensure language is consistent with cases cited iMemo dated May 3, 2012
  • Working Drafts of Section 1 - current as of October 6, 2015
PDF: Clean and Redlined
Word: Clean and Redlined