(2) As used in this section, ''net investment income'' means taxable investment income as defined in paragraph two of subsection (a) of section 804 of the Federal Internal Revenue Code. To the extent that the following items are deducted or excluded in computing such taxable investment income, there shall not be deducted or excluded in computing net investment income:

1. (a) dividends received,
2. (b) taxes on or measured by investment income, franchise taxes for the privilege of doing business and capital stock taxes imposed by any state,
3. (c) interest from bonds, notes, and evidences of indebtedness of any state, including this commonwealth, and
4. (d) premium taxes.

(3) Net investment income shall be adjusted as follows:

Dividends included therein shall be deducted other than dividends from or on account of the ownership of shares in a corporate trust, as defined in section one of chapter sixty-two, engaged in business in the commonwealth, or deemed distributions and actual distributions, except actual distributions out of previously taxed income, from a DISC which is not a wholly owned DISC, or any class of stock if the insurer owns less than fifteen per cent of the voting stock of the corporation paying such dividend.

(4) Net investment income, as adjusted by this section shall be apportioned to this commonwealth by multiplying such income by the lesser of twenty per cent or the percentage which is the sum of ninety per cent of the insurer's premium factor and ten per cent of the insurer's payroll factor, as hereinafter defined.

1. (a) The premium factor is a fraction, the numerator of which is the sum of life insurance premiums, annuity considerations and accident and health premiums received during the taxable year with respect to direct business in the commonwealth, and in addition all such life insurance premiums, annuity considerations and accident and health premiums received during the taxable year with respect to direct business in other jurisdictions unless the insured at the time of payment of the premiums therefor is a resident of a state or county in which such company is subject to an insurance excise, and the denominator of which is the sum of all life insurance premiums, annuity considerations and accident and health premiums received during the taxable year with respect to direct business, exclusive in each case of premiums and annuity considerations waived, dividends applied to shorten endowment or premium paying periods, and dividends applied to purchase paid-up additions and annuities.
2. (b) The payroll factor is a fraction, the numerator of which is the compensation paid in this commonwealth during the taxable year by the insurer and the denominator of which is total compensation paid everywhere during the taxable year. As used in this section ''compensation'' shall mean wages, salaries, commissions and any other form of remuneration paid to employees for personal services and all commissions for the sale of insurance paid to persons whether or not employees of the insurer. The determination of compensation paid in this commonwealth shall be made in accordance with the provisions of subdivisions (1), (2) and (3) of subsection (e) of section thirty-eight.