Trends and Developments in Alternative Appointment of State Income

In 1957 the National Conference of Commissioners on Uniform State Laws (NCCUSL) adopted the Uniform Division of Income for Tax Purposes Act to set forth a uniform model approach for allocation and apportionment of multistate income. That original model statute used a three-factor apportionment formula that consisted of equally weighted sales, property and payroll factors. The NCCUSL also anticipated the need for a relief provision that would allow for an alternative apportionment method when the statutory method failed to produce a result that fairly represented the extent of a taxpayer’s business activity in a particular state. The NCCUSL accordingly included section 18 of UDITPA, which provided that if the allocation and apportionment provisions of UDITPA do not fairly represent the extent of a taxpayer’s business activity in a state, the taxpayer may petition for—or the tax administrator may require—a different apportionment method to effectuate an equitable allocation and apportionment of the taxpayer’s income. Most states have adopted some version of section 18.