Title 44
Taxation

Chapter 14
Taxation of Banks

§ 44-14-13. Business expenses deductible. [Effective until January 1, 2025.]

In computing net income there shall be allowed as deductions all the ordinary and necessary expenses paid or incurred by the taxpayer during the income period in carrying on its trade or business, except United States income and excess profits taxes and the tax imposed by this chapter. Without limiting the generality of the foregoing there shall be allowed as deductions: a reasonable allowance for salaries and other compensation for personal services actually rendered; rent; repairs; bad debts; interest; taxes, except United States income and excess profits taxes and the tax imposed by this chapter; losses sustained and not compensated for by insurance or otherwise; depreciation; depletion of mines, oil and gas wells, and timber; amortization of assets; amortization of premiums on “securities” as defined in § 44-14-2(5)(ii); and contributions to any corporation, association, or fund organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

§ 44-14-13. Business expenses deductible. [Effective January 1, 2025.]

(a) In computing net income there shall be allowed as deductions all the ordinary and necessary expenses paid or incurred by the taxpayer during the income period in carrying on its trade or business, except United States income and excess profits taxes and the tax imposed by this chapter. Without limiting the generality of the foregoing there shall be allowed as deductions: a reasonable allowance for salaries and other compensation for personal services actually rendered; rent; repairs; bad debts; interest; taxes, except United States income and excess profits taxes and the tax imposed by this chapter; losses sustained and not compensated for by insurance or otherwise; depreciation; depletion of mines, oil and gas wells, and timber; amortization of assets; amortization of premiums on “securities” as defined in § 44-14-2(5)(ii); and contributions to any corporation, association, or fund organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

(b) For tax years beginning on or after January 1, 2025, to the extent that a taxpayer subject to tax under this chapter has elected to allocate and apportion its net income pursuant to § 44-14-14.1(f)(1) and would be included in a unitary business, as defined in § 44-11-1(11), with one or more entities subject to tax under chapter 11 of this title if not for the exemptions from the definition of “corporation” set forth in § 44-11-1(4)(i), all business expense transactions between the taxpayer and the members of the unitary business shall be added to net income of the taxpayer subject to tax under this chapter; except that no such adjustment shall be required to the extent it would result in duplicate taxation in violation of law.

(c) The adjustments required in subsection (b) of this section shall add back otherwise deductible business expenses paid, accrued, or incurred to a related member, except that a deduction shall be permitted to the extent that either:

(1) The taxpayer establishes by clear and convincing evidence, as determined by the tax administrator, that the disallowance of the deduction is unreasonable; or

(2) The taxpayer and the tax administrator agree in writing to the application of an alternative method of apportionment. For purposes of this subsection, the add back of a business expense transaction will be considered unreasonable where the taxpayer establishes by clear and convincing evidence that the transaction was primarily entered into for a valid business purpose rather than to avoid payment of taxes due under this chapter, the business expense paid is pursuant to a written contract that reflects arm’s length terms, and that it is supported by documented economic substance. Nothing in this subsection shall be construed to limit or negate the tax administrator’s authority to otherwise enter into agreements and compromises otherwise allowed by law.