Assume that USMNC has 10% of its Plant, Property and Equipment, 50% of its sales, and 30% of its payroll in the U.S., with the remainder in European Country J. The U.S. has converted to a territorial tax system and joined the world in implanting a formulary apportionment approach to sourcing corporate income. The U.S. tax rate is 35% and Country J's tax rate is 20%.
The U.S. uses an equal-weighted 3-factor formula, which means that it claims jurisdiction over 30% of USMNC's income [(10% + 50% + 30%)/3]. Country J, in contrast, "double weights" sales (i.e., its apportionment formula weights sales at 50% and PPE and payroll at 25% each, rather than weighting each factor at 33% as in the U.S.). USMNC has worldwide net income of $800 million.
How much of USMNC's worldwide income will be taxed in Country J?