HAR § 18-235-21-04 — Proration of deductions

(a) In most cases an allowable deduction of a taxpayer will be applicable only to the business income arising from a particular trade or business or to a particular item of nonbusiness income. In some cases an allowable deduction may be applicable to the business incomes of more than one trade or business, or to several items of nonbusiness income, or both. In such cases the deduction shall be prorated among the trades or businesses and the items of nonbusiness income in a manner which fairly distributes the deduction among the classes of income to which it is applicable. (b) In filing returns with this State, if the taxpayer departs from or modifies the manner of prorating any deduction used in returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification. (c) If the returns or reports filed by a taxpayer with all states to which the taxpayer reports under Article IV of the Multistate Tax Compact or the Uniform Division of Income for Tax Purposes Act are not uniform in the application or proration of any deduction, the taxpayer shall disclose in its return to this State the nature and extent of the variance.