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Renaissance Zone Tax Incentives Guideline
• Rented property items which are required to be paid b. The property is acquired after the
Rented property must be valued at eight by the terms of the lease or other beginning of the tax period.
times its net annual rental rate. “Net arrangement. This does not include an c. The property is disposed of before the
annual rental rate” for any item of rented amount paid as a service charge, such end of the tax period.
property equals the annual rental rate paid as for utilities or janitorial services. If
less the aggregate annual subrental rates a payment includes both rent and other Example: The property values per month
received from subtenants, subject to the unsegregated charges, the amount of are as follows:
following: rent must be determined by considering January $ 2,000
1. Subrents are not deducted if they the relative values of the rent and the February 2,000
constitute income earned in the regular other items. March 3,000
course of the taxpayer’s trade or Rent does not include incidental April 3,500
business. day-to-day expenses, such as hotel May 4,500
2. If the subrents produce a negative accommodations or daily automobile June 10,000
or clearly inaccurate value for any rentals. July 15,000
item of property, another method If the use of the net annual rental rate August 17,000
that properly reflects the value of method produces a negative or clearly September 23,000
rented property may be required by inaccurate value, or where property is used October 25,000
the tax commissioner or requested by the taxpayer at no charge or rented at November 13,000
by the taxpayer. For this purpose, a nominal rate, the net annual rental rate December 2,000
the resulting value must not be less for the property must be determined on the Total $ 120,000
than an amount which bears the same basis of a reasonable market rental rate for The average value of the property for the
ratio to the annual rental rate paid for the property. tax period is $10,000 ($120,000 divided
the property as the fair market value • Leasehold improvements by 12).
of that portion of the property used Leasehold improvements are considered
by the taxpayer bears to the total fair property owned by the lessee regardless • Rented property
market value of the rented property. of whether the lessee is entitled to remove Averaging with respect to rented property
“Annual rental rate” means the amount the improvements or the improvements is automatically achieved by use of the
paid as rent for property for a twelve revert to the lessor when the lease expires. net annual rental rate method that must be
month period. If property is rented for a The leasehold improvements are valued at used to value rented property. See Rented
term of less than twelve rental months, original cost. property under Valuation of property
above.
the annual rental rate equals the rent paid
for the actual rental term during the tax Step 2—Calculate the average value of
period. If property is rented for a term of property. After determining the value of Alternative method
twelve or more months and the current property includable in the zone factor, the If the zone apportionment factor method does
tax period covers a period of less than value assigned to each item of property must not fairly represent the extent of the business
twelve months because of a reorganization be averaged. activity attributable to the zone project
property, the taxpayer may petition for (or
or change of accounting period, etc., the • Owned property the tax commissioner may require) another
rent paid for the short tax period must be In general, the value of each item of reasonable method to be applied to all or any
annualized. owned property must be averaged by part of the business. Other methods may
“Rent” means the actual sum of money adding the property’s values at the include the following:
or other consideration payable, directly beginning and ending of the tax period and
• Separate accounting.
or indirectly, by the taxpayer or for the dividing the result by two.
• Any other method that results in an
taxpayer’s benefit for the use of the The tax commissioner may require or equitable allocation and apportionment of
property, including the following: allow averaging on a monthly basis if the taxpayer’s income derived from the
a. Any amount payable for the use of real deemed necessary to properly reflect business.
or tangible personal property, or any the average value of the property
part thereof, whether designated as a for the tax period. This method will This procedure may be invoked only in cases
fixed sum of money or as a percentage generally be applied in the following involving unusual fact situations that, because
of sales, profits, or otherwise. cases: of their unique and nonrecurring nature,
produce incongruous results.
b. Any amount payable as additional a. There are substantial fluctuations in the
rent or in lieu of rent, such as interest, values of the property during the tax
taxes, insurance, repairs, or any other period.
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600 E. Boulevard Ave., Dept 127 | Bismarck, ND 58505-0599
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