NRS 363C.093 Businesses constituting passive entities.

479 words·~2 min read·/nv/chapter-363c-commerce-tax/363c-093·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

1. For the purposes of this chapter, a business is a “passive entity” only if:

(a)The business is a limited-liability company, general partnership, limited-liability partnership, limited partnership or limited-liability limited partnership, or a trust, other than a business trust;

(b)During the period for which the gross revenue of the business entity is reported pursuant to NRS 363C.200 , at least 90 percent of the business entity’s federal gross income consists of the following income:

(1)Dividends, interest, foreign currency exchange gains, periodic and nonperiodic payments with respect to notional principal contracts, option premiums, cash settlements or termination payments with respect to a financial instrument, and income from a limited-liability company;

(2)Capital gains from the sale of real property, gains from the sale of commodities traded on a commodities exchange and gains from the sale of securities; and

(3)Royalties, bonuses or delay rental income from mineral properties and income from other nonoperating mineral interests; and

(c)The business entity does not receive more than 10 percent of its federal gross income from conducting an active trade or business.

2. As used in paragraph

(b)of subsection 1, the term “income” does not include any:

(a)Rent; or

(b)Income received by a nonoperator from mineral properties under a joint operating agreement if the nonoperator is a member of an affiliated group and another member of that group is the operator under that joint operating agreement.

3. For the purposes of paragraph

(c)of subsection 1:

(a)Except as otherwise provided in this subsection, a business entity is “conducting an active trade or business” if:

(1)The activities being carried on by the business entity include one or more active operations that form a part of the process of earning income or profit, and the business entity performs active management and operating functions; or

(2)Any assets, including, without limitation, royalties, patents, trademarks and other intangible assets, held by the business entity are used in the active trade or business of one or more related business entities.

(b)The ownership of a royalty interest or a nonoperating working interest in mineral rights does not constitute the conduct of an active trade or business.

(c)The payment of compensation to employees or independent contractors for financial or legal services reasonably necessary for the operation of a business does not constitute the conduct of an active trade or business.

(d)Holding a seat on the board of directors of a business entity does not by itself constitute the conduct of an active trade or business.

(e)Activities performed by a business entity include activities performed by persons outside the business entity, including independent contractors, to the extent that those persons perform services on behalf of the business entity and those services constitute all or any part of the business entity’s trade or business.