1. (a) The apportionment formula for a taxpayer reporting income under the completed contract method is a fraction

   1. (1) the numerator of which is the sum of

      1. (A) the property factor as defined in AS 43.19.010, Article IV.10 - .12, and 15 AAC 19.141 - 15 AAC 19.202, and modified under (b)(1) and (b)(2) of this section;
      2. (B) the payroll factor as defined in AS 43.19.010, Article IV.13 - .14, and 15 AAC 19.211 - 15 AAC 19.241, and modified under (b)(3) and (b)(4) of this section, except that compensation paid an employee who performs construction contractor services is attributable to this state if the compensation is actually earned in the state, without regard to base of operations, residence of the employee, or place from which the service is controlled; and
      3. (C) the sales factor as defined in AS 43.19.010, Article IV.15 - .17, and 15 AAC 19.251 - 15 AAC 19.302, and modified under (b)(5) and (b)(6) of this section, except that gross revenues derived from the performance of contracts are attributable to this state if the construction projects are located in this state; and
   2. (2) the denominator of which is three.

2. (b) For purposes of this section, the property, payroll, and sales factors must be modified as follows:

   1. (1) the total rent expense attributable to contracts completed during the tax year and paid over the life of the completed contracts is included in the property factor;
   2. (2) rents paid during the year attributable to incomplete contracts are not included in the property factor until the year of completion;
   3. (3) the total payroll expense attributable to contracts completed during the tax year and paid over the life of the completed contracts is included in the payroll factor;
   4. (4) payroll expense paid during the tax year which is attributable to incomplete contracts is not included in the payroll factor until the year of completion;
   5. (5) the total gross revenues derived from contracts completed during the tax year are included in the sales factor; and
   6. (6) gross revenues attributable to incomplete contracts are not included in the sales factor until the year of completion.

(Eff. 1/12/83, Register 85; am 9/26/84, Register 91)