(1) The completed contract method of accounting requires that the reporting
of income (or loss) be deferred until the year the construction project is
completed or accepted. Accordingly, a separate computation is made for each
such contract completed during the income year regardless of whether the
project is located within or without this state, in order to determine the
amount of income which is attributable to sources within this state. The amount of income from each contract
completed during the income year apportioned to this state, plus other business
income apportioned to this state by the regular three-factor formula such as
interest income, rents, royalties, income from short-term contracts, etc., plus
all non-business income allocated to this state is the measure of income for
the income year.
(2) The amount of income (or loss) from each contract which is derived from
sources within this state using the completed contract method of accounting is
computed as follows:
(a) In the income year the contract is completed the income (or loss) therefrom is determined.
(b) The income (or loss) determined in (2) (a) is apportioned to this state
by the following method:
(i) A fraction is determined for each year the contract was in
progress. The numerator is the amount
of construction costs paid or accrued each year the contract was in progress
and the denominator is the total of all such construction costs for the
project.
(ii) Each percentage determined in (2) (a) (i) is multiplied by the
apportionment formula percentage for that particular year as determined in ARM
42.26.903.
(iii) The percentages determined in (ii) for each year the contract was in progress are totaled. The amount of total income (or loss) from
the contract is multiplied by the total percentage. The resulting income (or loss) is the amount of business income
from such contract derived from sources within this state.