5 Del. Admin. Code § 1403-5.0 - Allocation of Income and Expenses for Purposes of Determining Delaware Tax Liability of Foreign Bank Limited Purpose Branch or Foreign Bank Agency

5.1 Method of Allocation.

5.1.1 Although technically a part of the foreign bank, a Delaware foreign bank limited purpose branch or foreign bank agency is to be treated for purposes of assessing and collecting the Delaware Bank Franchise Tax on taxable income (5 Del.C. § 1101 et seq.) as if it were a bank having separate corporate existence (§ 1101(a)). To that end, and in order to derive the amount of "net operating income before taxes" for purposes of § 1101(a), a foreign bank limited purpose branch or foreign bank agency shall maintain at all times separate books of account in its Delaware office which fully segregate and portray:

5.1.1.1 With respect to income:

5.1.1.1.1 all receipts directly attributable to an asset carried on the books of the foreign bank limited purpose branch or foreign bank agency; and

5.1.1.1.2 all receipts arising from a transaction entered into or a service provided by the foreign bank limited purpose branch or foreign bank agency within the State of Delaware; provided, that the foreign bank limited purpose branch or foreign bank agency may exclude from its accounting of income otherwise properly allocated to Delaware such receipts as are directly or indirectly subject to taxation in any state other than Delaware by reason of either:

(1) the existence of a taxable nexus under the laws of any such state between such state and the transaction of service giving rise to such receipts; or

(2) the required inclusion under the laws of any such state of such receipts in the numerator of a receipts factor of a formula used to calculate the income of the foreign bank subject to tax in such state.

5.1.1.2 With respect to expenses:

5.1.1.2.1 all costs directly incurred in the start up, maintenance and operation of the Delaware office;

5.1.1.2.2 all other costs attributable to the generation of income allocated to Delaware pursuant to subsection 5.1.1.1 above; and

5.1.1.2.3 to the extent not included in paragraph 5.1.1.2.1 and 5.1.1.2.2 of this subsection 5.1.1.2 above, an aliquot portion of indirect costs incurred by the foreign bank (in both the United States and the home country) with respect to the start up, maintenance and operation of the foreign bank limited purpose branch or foreign bank agency.

Costs under subparagraphs 5.1.1.2.2 and 5.1.1.2.3 of this subsection 5.1.1.2 shall be allocated to Delaware in the same ratio as the gross receipts of the foreign bank are allocated to Delaware, or in such other fair, equitable and consistent manner as the Commissioner shall, upon request of a foreign bank limited purpose branch or foreign bank agency, approve.

5.2 Commissioner's Right of Examination

5.2.1 The Commissioner shall have the right from time to time to examine the books and records of a foreign bank limited purpose branch or foreign bank agency for the purpose of determining whether all or any portion of the income of the foreign bank limited purpose branch or foreign bank agency has been properly allocated to Delaware, and to issue such findings and orders as he deems necessary and appropriate regarding the reallocation of income which he shall find to have been improperly allocated to a state or states other than Delaware.

Notes

5 Del. Admin. Code § 1403-5.0