CCH Axcess Tax

Mineral Interest Income

Louisiana Form IT-565, page 1, includes all mineral interest income and expense included on Federal Form 1065. Depletion is calculated under Louisiana law and is included on Form IT-565, page 1, line 23. Form IT-565, Schedule H, details the mineral interest expenses included on Form IT-565, Page 1. Mineral interest income (loss) is allocated to the partners based on the profit/loss ratios or special allocation codes.

Intangible Drilling Costs

The intangible drilling costs are NOT included on Louisiana Form IT-565, page 1 as a deduction nor are they included on Form IT-565, Schedule H. The Louisiana source amount is reported as a separately stated item on the partner's Louisiana Schedule K-1 Equivalent NOT included in ordinary income (loss).

Apportionment

For nonresident partners with multi-state mineral interest income (loss), two methods are available to allocate mineral interest income (loss) as part of ordinary income (loss) to the nonresident partner's Louisiana Schedule K-1 Equivalent.

Method 1: Apportionment of Mineral Interest Income (Loss) - Mineral interest income (loss) included on Louisiana Form IT-565, page 1 is included on Louisiana Form IT-565B with total ordinary income (loss) subject to apportionment. The total net income (loss) from Louisiana sources on Form IT-565B, line 8, is allocated to the nonresident partner's Louisiana Schedule K-1 Equivalent, ordinary income (loss) using the profit/loss ratios or using the special allocation code 20104. Intangible drilling costs, which are not included on Form IT-565, are not apportioned and therefore reported as a separated reported item on the Louisiana Schedule K-1 Equivalent, sourced by F/S and state code entries on the federal Income/Deductions category, Depletion worksheet.
Method 2: Net Other Allocable Income Mineral Interest Income (Loss) - To exclude mineral interest income (loss) from apportionment, on the federal Depletion worksheet enter F/S and/or state codes to identify Louisiana source properties. On the Louisiana Allocation/Apportionment worksheet, NonBusiness section, mark the "Treat Mineral Interest Income (Loss) as Other Net Allocable Income" field and report the amounts on Form IT-565B, lines 4c and 7c.

Mineral interest income (loss) is assumed to originate in the state entered on the federal General category, Basic Data worksheet, General Information section if the "State" field on federal Depletion worksheet is blank and is reported on Form IT-565B based on the following entries:

Line 4c:

F/S code	State Code
Blank	Other than LA
F	Blank
S	Other than LA

Line 7c:

Blank	Blank or LA (see Note)
F	LA
S	Blank or LA (see Note)

Note: Blank only if "LA" is the Home State Code entered on the federal General category, Basic Data worksheet, General Information section, else "LA" must be entered as the state code.

Additional net other allocable income can be entered on Louisiana Allocation/Apportionment worksheet, Nonbusiness Income section, Other Net Allocable Income - Adjustment fields. Entries in the Other Net Allocable Income - Override fields will override the calculated amounts for Form IT-565B, lines 4c and 7c for mineral interest income (loss) when the Nonbusiness Income section, Treat Mineral Interest Income (Loss) as Other Net Allocable Income field is marked.

Special allocation code 20118 is available to allocate the portion of income (loss) from Louisiana sources on Form IT-565B, line that is NOT mineral interest income (loss) to the nonresident partner's Louisiana Schedule K-1 Equivalent. Special allocation code 20118 may be used in the instance when mineral interest properties entered on the federal Depletion worksheets have already been specially allocated and other income (loss) from Louisiana sources included in Form IT-565B, line 8 still needs to be specially allocated. Special allocation code 20104 will allocate the total income (loss) from Louisiana sources from Form IT-565B, line 8 to the nonresident partner's Louisiana Schedule K-1 Equivalent.

The Louisiana Income/Deductions worksheet, Distributive Share of Income section, Schedule K-1 Distributable Items, provides for additional overrides and special allocation codes for the resident and nonresident partners for mineral interest items.