"Foreign source income" is taxable income from sources
outside the United States as defined in section
862 of the internal revenue code. "Foreign
source income" includes, but is not limited to, interest, dividends (including
Sec. 78 "gross-up,") compensation for personal services, rents and royalties,
and net income from the sale of property. "Foreign source income" is gross
income, less expenses, losses, and other deductions properly apportioned or
allocated thereto and a ratable part of any other expenses, losses, or
deductions that cannot be allocated to some item or class of gross
income.
IRC Sec. 78 dividend shall be subtracted from federal taxable
income in accordance with 39-22-304(3)(j), C.R.S.
(1) If a taxpayer elects to claim foreign
income taxes as a deduction for federal income tax purposes, such deductions
shall also be allowed for Colorado income tax purposes.
Colorado modifications to federal taxable income shall
include any foreign source income and related foreign income taxes included in
a combined report but not included in the federal return.
(2)
(a) If
a federal election is made to claim foreign taxes as a credit, a percentage of
foreign source income shall be excluded from Colorado income subject to
apportionment and from the numerator and denominator of the receipts factor.
For purposes of this rule, foreign tax includes tax paid or
accrued, deemed paid, or carried over or carried back to the tax year, per the
federal income tax return. Not included are taxes carried over from, or carried
back to, a tax year beginning before Jan. 1, 1986.
The foreign source income exclusion shall be the lesser
of:
(i) Foreign source income
(Excluding Sec. 78 Dividend), or
(ii) The product of Foreign Taxes Paid ("FT")
and the Foreign Source Income (Excluding Sec. 78 Dividend) ("FSI net §78")
divided by the product of the effective federal corporation tax rate ("Fed
Rate") and the Foreign Source Income (Including Sec.78 Dividend) ("FSI"). This
is expressed as the following formula:
(FT X "FSI net §78") / (Fed Rate X FSI)
The effective federal corporation tax rate means the combined
taxpayer's federal corporate income tax (calculated in accordance with section
11(a) and (b) of the
internal revenue code for such tax year) divided by the combined taxpayer's
federal taxable income. As a formula:
Effective federal corporate tax rate = federal corporate
income tax / federal corporate taxable income
Modifications computed per this rule shall be claimed as
"other" additions or subtractions in the modification section of the Colorado
corporate income tax return.
(b) For tax years commencing prior to January
1, 2000, the denominator of the formula in subsection (a)(ii) will use 46% in
place of the effective federal corporation tax rate.
(3) When determining foreign source income
for a foreign corporation, such income shall not include any income of the
foreign corporation that is derived from the conduct of a trade or business
within the United States.
(4) The
excess, if any, of a taxpayer's foreign source income over the foreign source
income exclusion shall not be included in the numerator of the Colorado
receipts factor (see §
39-22-303.6(4)(b),
C.R.S.).
Notes
39-22-303(10)
Colorado
Register, Vol 37, No. 14. July 25, 2014, effective
8/14/2014
37
CR 18, September 25, 2014, effective
10/15/2014
37
CR 19, October 10,2014, effective 10/30/2014
37
CR 22, November 25, 2014, effective
12/16/2014
38
CR 04, February 25, 2015, effective
3/17/2015
38
CR 07, April 10, 2015, effective 4/30/2015
38
CR 11, June 10, 2015, effective 6/30/2015
38
CR 22, November 25, 2015, effective
12/15/2015
38
CR 24, December 25, 2015, effective
1/14/2016
38
CR 24, December 25, 2015, effective
1/19/2016
39
CR 01, January 10, 2016, effective
1/30/2016
39
CR 16, August 25, 2016, effective
9/14/2016
40
CR 08, April 25, 2017, effective
5/15/2017
40
CR 12, June 25, 2017, effective
7/15/2017
40
CR 16, August 25, 2017, effective
9/14/2017
40
CR 23, December 10, 2017, effective
1/1/2018
41
CR 14, July 25, 2018, effective
8/14/2018
41
CR 20, October 25, 2018, effective
11/14/2018
42
CR 02, January 25, 2019, effective
12/18/2018
42
CR 02, January 25, 2019, effective
12/18/2018, expires
4/17/2019
42
CR 06, March 25, 2019, effective
4/14/2019
43
CR 04, February 25, 2020, effective
3/16/2020
43
CR 13, July 10, 2020, effective
6/2/2020
43
CR 17, September 10, 2020, effective
9/30/2020
44
CR 03, February 10, 2021, effective
3/2/2021
44
CR 07, April 10, 2021, effective
4/30/2021
44
CR 08, April 25, 2021, effective
5/15/2021
45
CR 01, January 10, 2022, effective
1/30/2022
45
CR 04, February 25, 2022, effective
3/17/2022
45
CR 05, March 10, 2022, effective
3/30/2022
46
CR 11, June 10, 2023, effective
5/2/2023
46
CR 09, May 10, 2023, effective
5/30/2023
