Income tax; unitary business; apportionment of income

(1) The entire federal taxable income of a unitary business operating both within and without this state is presumed to be subject to apportionment. Other than for adjustments required to be made under the Nebraska Revenue Act of 1967, for any income that is claimed to be not subject to apportionment, a taxpayer needs to show by a preponderance of the evidence (a) that the income is not a part of the unitary business and (b) that the taxpayer has not claimed the same income is part of the unitary business and subject to apportionment in another state with substantially the same law on apportionability of income.

(2) There shall be subtracted from federal taxable income any income that the taxpayer has shown is not subject to apportionment under subsection (1) of this section. The amount subtracted under this section shall be reduced, but not below zero, by a portion of the interest expense as determined under subsection (3) of this section and any expense incurred in the production of the income described in this section.

(3) The interest expense for the reduction required in subsection (2) of this section shall be determined by dividing the taxpayer's average investment in the activities producing the income by the taxpayer's average total assets and multiplying such ratio by the total interest deduction allowed in the computation of federal taxable income.

(4) For the purposes of this section, investment in activities producing the income described in this section shall mean the tax basis of the assets, both tangible and intangible, that are used in the activities or are the basis of the receipt of the described income.

(5) Whenever it is necessary to properly reflect the ratio of investment in the activities to total assets, the Tax Commissioner may permit or require the computation of the average provided for in subsection (3) of this section using amounts from interim balance sheets.

(6) The corporation may use, in lieu of the tax basis for the computation in subsection (3) of this section, the amounts from a balance sheet included with the federal return or as required to be reported to federal or state regulatory agencies if (a) such amounts are not materially different from tax basis, (b) the amounts are prepared consistently from year to year, and (c) absent a change in circumstances, the amounts are consistently used by the corporation from year to year. The Tax Commissioner may require a corporation to use the alternative amounts in order to maintain consistency or may require the corporation to show that the amounts used do not materially differ from the tax basis.