Indiana explains how to apportion joint venture income between Indiana and other states.

Most states figure the income a company has from doing business in the state by applying a three-factor formula. They look at the percentages of the company’s total sales, property and payroll that are in the state. It is this income that is then subject to state income tax.

However, when the income comes from a partnership in which a company doing business in the state is a partner, does one look at the sales, property and payroll of the partnership or the company that is a partner when deciding how to apportion income? The Indiana tax court addressed the issue in Hunt Corp. v. Department of State Revenue on April 20. It said to look at the three factors at the partner level. That’s because the state treats partnerships as transparent.

However, the court said the rule was different before 1984. Before then, the state allocated income to Indiana by looking at the three factors at the level of the partnership because partnerships were treated as taxable entities.