Credits for certain nonresident taxpayers

Sec. 8. (a) A nonresident taxpayer filing separately or a combined return is entitled to a credit against its FIT liability in the amount of direct

net income tax, a franchise tax, or other tax measured by net income that is due for a taxable year to the nonresident taxpayer's domiciliary state if:

(1) the receipt of interest or other income from a loan or loan transaction is attributed both to the taxpayer's domiciliary state under

that state's laws and also to Indiana under IC 6-5.5-4; and

(2) the principal amount of the loan is at least two million dollars ($2,000,000).

(b) The credit is available only in regard to loans which are in a principal amount of two million dollars ($2,000,000) or more as expressed

in the loan document. There may be instances when a corporation extends many loans but only some of the loans meet the two million dollar

($2,000,000) qualifying limit. To determine the amount of tax attributable to the qualified loans, divide the receipts attributable to the qualified loans

by the total receipts and multiply that fraction expressed as a percentage by the amount of the FIT due.

(c) The amount of the credit is equal to the lesser of the actual taxes paid to the domiciliary state for the loan transaction or the amount

due to Indiana on the loan transaction.

(d) If the nonresident taxpayer's domiciliary state grants a credit for taxes paid to other states, the credit available for the purposes of

Indiana's FIT is the net tax paid to the domiciliary state. The credit granted by Indiana's FIT must be reduced by the amount of credit granted by

the taxpayer's domiciliary state.

(e) Rather than applying the credit, if the domiciliary state's method of calculating the tax base is similar to Indiana's method, but the

domiciliary state's tax rate is higher than Indiana's tax rate, the nonresident corporation has the option of excluding the receipts attributable to Indiana

from the numerator and denominator of the apportionment formula. However, the taxpayer must include in the return an estimate of the total of those

receipts.

(f) The following are examples of credits for certain nonresident taxpayers:

(1) A nonresident taxpayer makes a two million dollar ($2,000,000) loan and the receipts from the loan are attributable to both Indiana

and the taxpayer's domiciliary state. The domiciliary state grants a credit for taxes due to the state of Indiana. Assume both Indiana and the

domiciliary state have the same tax rate. If the nonresident corporation owes taxes to Indiana in the amount of five thousand dollars ($5,000) and

the domiciliary state grants a credit for such five thousand dollars ($5,000), then the tax liability to Indiana is five thousand dollars ($5,000), and

the amount of the Indiana credit is zero (0).

(2) A nonresident taxpayer makes a two million dollar ($2,000,000) loan and the receipts from the loan are attributable to both Indiana

and the taxpayer's domiciliary state. The domiciliary state grants a credit for taxes due to the state of Indiana. If the nonresident taxpayer owes taxes

to Indiana in the amount of four thousand dollars ($4,000) and the taxpayer owes its domiciliary state a five thousand dollar ($5,000) tax liability,

the domiciliary state would grant a credit only to the extent of the four thousand dollar ($4,000) tax due. The amount of Indiana's potential credit

granted is reduced by four thousand dollar [sic.] ($4,000). Therefore, zero (0) credit is available to be used against the taxpayer's Indiana

four thousand dollar ($4,000) tax liability.

(3) A nonresident taxpayer makes a two million dollar ($2,000,000) loan and the receipts from the loan are attributable to both Indiana

and the taxpayer's domiciliary state. The domiciliary state does not grant a credit for taxes due to the state of Indiana. If the nonresident taxpayer

owes taxes to Indiana in the amount of five thousand dollars ($5,000) and the taxpayer owes a three thousand dollar ($3,000) tax liability to its

domiciliary state, the five thousand dollar ($5,000) Indiana tax liability would be reduced by three thousand dollars

($3,000).