Nev. Rev. Stat. § 363D.120 — Businesses constituting passive entities

1.  For the purposes of this chapter, a
business is a “passive entity” only if:
(a) The business is a limited-liability company,
general partnership, limited-liability partnership, limited partnership or
limited-liability limited partnership, or a trust, other than a business trust;
(b) During the period for which the gross revenue
of the business entity is reported pursuant to NRS 363D.160 , at least 90 percent of the
business entity’s federal gross income consists of the following income:
(1) Dividends, interest, foreign currency
exchange gains, periodic and nonperiodic payments with respect to notional
principal contracts, option premiums, cash settlements or termination payments
with respect to a financial instrument, and income from a limited-liability
company;
(2) Capital gains from the sale of real
property, gains from the sale of commodities traded on a commodities exchange
and gains from the sale of securities; and
(3) Royalties, bonuses or delay rental
income from mineral properties and income from other nonoperating mineral
interests; and
(c) The business entity does not receive more
than 10 percent of its federal gross income from conducting an active trade or
business.
2.  As used in paragraph (b) of subsection
1, the term “income” does not include any:
(a) Rent; or
(b) Income received by a nonoperator from mineral
properties under a joint operating agreement if the nonoperator is a member of
an affiliated group and another member of that group is the operator under that
joint operating agreement.
3.  For the purposes of paragraph (c) of
subsection 1:
(a) Except as otherwise provided in this
subsection, a business entity is “conducting an active trade or business” if:
(1) The activities being carried on by the
business entity include one or more active operations that form a part of the
process of earning income or profit, and the business entity performs active
management and operating functions; or
(2) Any assets, including, without
limitation, royalties, patents, trademarks and other intangible assets, held by
the business entity are used in the active trade or business of one or more
related business entities.
(b) The ownership of a royalty interest or a
nonoperating working interest in mineral rights does not constitute the conduct
of an active trade or business.
(c) The payment of compensation to employees or
independent contractors for financial or legal services reasonably necessary
for the operation of a business does not constitute the conduct of an active
trade or business.
(d) Holding a seat on the board of directors of a
business entity does not by itself constitute the conduct of an active trade or
business.
(e) Activities performed by a business entity
include activities performed by persons outside the business entity, including
independent contractors, to the extent that those persons perform services on
behalf of the business entity and those services constitute all or any part of
the business entity’s trade or business.

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