G. Allocation and Apportionment Procedures (G.S. 105-130.4)

1. Preliminary Statement
   A corporation which is taxable both within and without North Carolina is required to allocate and apportion its entire net income or loss to North Carolina in accordance with the statutory formula under G.S. 105-130.4.
   
   No corporation is allowed to use any alternative formula or method of reporting its income to North Carolina except upon written order of the Tax Review Board. Any return in which any formula or method other than as prescribed by statute is used without the permission of such Board is not a lawful return.
2. Alternate Apportionment Formula
   If any corporation believes that the statutory allocation formula allocates a greater portion of its income than is reasonably attributable to business or earning in this State may request the Tax Review Board for permission to use an adjusted allocation formula which it believes would more properly allocate its income to North Carolina.
   
   The petition must be filed with the Board not later than 90 days after the regular or extended due date of the tax return. Taxpayers should address all correspondence in connection with such petitions to the Secretary of the Tax Review Board, Revenue Building, Raleigh, North Carolina 27604.
3. Statutory Procedures for Reporting Net Income or Loss to North Carolina
   1. Determine Net Income Everywhere
      The corporation should determine its net income or loss from its entire operations conducted everywhere during the income year in accordance with the instructions given in subject: "Computation of Net Income." In computing such net income only contributions to donees outside North Carolina are deductible. Contributions to qualified North Carolina donees are deductible only from total income allocated to North Carolina, computed in Step h.
   2. Determine Nonbusiness Income
      The corporation should review its entire net income or loss as computed in Step a to determine whether any items of nonbusiness income, loss and expense qualify for direct allocation to North Carolina and other states pursuant to G.S. 105-130.4, subdivisions (d) through (h). To qualify for direct allocation, such income, loss and expense must have been realized or incurred in a business activity unrelated to and not constituting an integral part of the corporation's regular trade or business conducted everywhere during the income year. Any expenses directly and/or indirectly related to a nonbusiness activity must be considered in the computation of nonbusiness income to be allocated. (See Subject: "Attribution of Expenses to Nontaxable Income and to Nonbusiness Income and Property".)
   3. Determine Apportionable Business Income
      The corporation determines its apportionable business income or loss by deducting all nonbusiness income or loss directly allocable to North Carolina and other states (computed in Step b) from its entire net income or loss (computed in Step a).
   4. Compute Apportionment Factors
      The corporation is required to determine and compute the apportionment factor applicable to its principal business operations conducted everywhere during the income year. The value of nonbusiness property and items of nonbusiness income, loss and expense directly allocable to North Carolina and other states must be excluded in computing the apportionment factors.
   5. Apportion Business Income to North Carolina
      The corporation determines the amount of its apportionable business income or loss attributable to North Carolina by applying the factor computed in Step d to the total business income or loss as computed in Step c.
   6. Determine Total Income Allocable to North Carolina
      The corporation should review the total amount of non-business income or loss as computed in Step b and list separately the amount of such income or loss directly allocable to North Carolina. This amount, added to the amount of business income or loss apportioned to this State in Step e, represents the total amount of the corporation's entire net income or loss to North Carolina.
   7. Tax Credit Addback and Percentage Depletion Deduction Before Net Economic Loss Deduction
      The amount of any tax credit claimed against the corporation's income tax liability must be added to the amount of income allocated and apportioned to North Carolina. Also, the amount of percentage depletion over cost depletion on North Carolina property must be deducted before claiming any net economic loss carryover deduction.
   8. Determine Total North Carolina Income Before Deductions for Contributions to North Carolina Donees
      To determine total North Carolina income before the deduction for contributions to North Carolina donees, the corporation deducts the allowable portion of any net economic loss for a prior year or years from the total income determined in Step g.
   9. Determine Total Net Taxable Income in North Carolina
      Finally, the corporation arrives at its net taxable income in North Carolina by deducting contributions made to qualified North Carolina donees from the amount of total North Carolina income as computed in Step h.