CORPORATE
FRANCHISE AND INCOME TAXES
Sourcing
Receipts in Sales-Factor Apportionment for Service Companies
Sales is the factor most likely to be
defined differently by the various states with regard to personal service
corporations.
Author:
JOHN P. CARBONE
JOHN
P. CARBONE, CPA, MBA, is Controller of Dulcian, Inc., an Oracle product
development and consulting company, in Iselin, New Jersey
(jcarbone@dulcian.com). He is a member of the Mercer Chapter of the New Jersey
Society of CPAs, the AICPA, and the Institute of Management Accountants, and
has served on the adjunct faculty staff at Mercer County Community College. The
opinions stated in this article are Mr. Carbone's, and do not necessarily
reflect the views of Dulcian, Inc.
EDITED
BY CHARLES M. STEINES, PHILIP M. TATAROWICZ, AND RICHARD W. TOMEO
With
the proliferation of computers, the growing use of the Internet, and the shift
in the U.S. from a manufacturing economy to a service economy, it is imperative
that tax practitioners be versed in the fundamentals of multistate taxation
with regard to the service industry. The U.S. economy has spawned a multitude
of technology consulting corporations, many of which – despite their small size
and modest capitalization – have significant profits and conduct their business
at various client sites across the country. Therefore, practitioners may find
themselves dealing with more and more clients exhibiting this type of profile.
1
One fundamental area of concern involves advising multistate professional
service organizations about allocation and apportionment for purposes of the
corporate net income tax. 2 When dealing with services,
the receipts (or sales) factor is by far the most difficult factor to delineate
and the most likely to be defined differently by the various states. In many
instances, assigning sales of services for purposes of determining each state's
sales factor may not be a well-defined task. Once it has been ascertained that
a transaction principally involves services (and not incidental services
associated with the sale of tangible property 3), the practitioner needs to
determine how the individual states direct the assignment.
As discussed in greater detail below, the Uniform Division of
Income for Tax Purposes Act (UDITPA) and the Multistate Tax Compact indirectly
address the sale of services by prescribing an "all or nothing"
assignment for receipts from transactions other than sales of tangible
property. The Multistate Tax Commission (MTC) refined this rule in regulations
providing for the assignment of service sales based on time spent in each state
where the service is performed. Individual states are free to accept, reject,
or modify the basic UDITPA rule and the MTC regulations. In addition, states
can develop their own rules that may be considerably more detailed than either
the UDITPA or MTC pronouncements. Further, it is not uncommon for states to
incorporate language into their laws or regulations to allow the taxpayer to
request an assignment method that it believes more closely represents the
economic realities underlying its sales transactions. Typically, the state's
tax authorities also have the power to impose a sourcing methodology to replace
an allocation that the state finds does not fairly represent the taxpayer's
business activity in the state. Thus, practitioners should exercise due
diligence when advising clients in this area.
In an analysis of these matters, it is useful to review generally
the three-factor apportionment formula and the history of some multistate
authority and guidance, along with highlights of various typical state
provisions and some specific examples involving the sourcing of sales for
purposes of determining the receipts factor.
The Commerce Clause
The Commerce Clause of the U.S. Constitution gives Congress the
power to regulate commerce between the states. Congress has conspicuously
avoided enacting a raft of laws defining interstate commerce. Therefore, much
of the work has been left to the courts. The U.S. Supreme Court has a long history
of struggling to analyze and implement the intention, scope, and application of
the Commerce Clause as it relates to the states' power to tax.
The most recent judicial interpretations allow for a reasonable
level of interstate taxation conducted within loose guidelines set by the
court. The result is a level of ambiguity vis-a-vis coordination among the
states. In Complete Auto Transit, Inc. v.
Brady, 4 the Supreme Court determined that a state tax would not violate
the Commerce Clause if the tax was:
(1) Applied to an activity with a substantial nexus to the taxing
state.
(2) Fairly apportioned.
(3) Not discriminatory.
(4) Fairly related to the services provided by the state.
Unlike federal taxation, in state taxation a practitioner
generally cannot rely on one central set of rules. Once tax nexus is
established with a state, the practitioner needs to research state-specific
rules as well as federal statutes and constitutional law. 5
Fair apportionment: the
three-factor formula.
Service-based businesses not only are increasing in number but
routinely reach out to do business in other states where their services are in
demand. Many of these new companies are technology-based consulting firms that
can generate significant revenue. Therefore, it is worth the effort for
consultants based in the company's home state to travel to customers in other
states. The same tax issues exist for virtually any other type of
service-provider that crosses state boundaries. Practitioners should understand
that much of this activity creates nexus for these companies in those other
states. Moreover, of course, this service income is not sheltered from taxation
in those states in the same way that income from sales of certain property is
sheltered under P.L. 86-272. 6 Sales of services are not
granted the federal protections afforded to sales of tangible personal
property.
Typically, taxable net income is apportioned to the various states
using a three-factor formula or some derivation thereof. Basically, pre-tax net
income is apportioned by multiplying the income by the average of the following
three factors:
(1) Receipts (or sales) in the state divided by receipts
everywhere.
(2) Property owned or leased in the state divided by property
everywhere.
(3) Payroll in the state divided by payroll everywhere. 7
Many states have adopted variations of this formula, e.g.,
weighting one factor or another more heavily. For example, New Jersey,
employing a common variation, now uses a "double weighted receipts
factor." This requires that the sales factor be counted twice, with the
total of the factors divided by four instead of three in order to obtain the
average. Other states have simply dropped one or two factors from the formula.
8
Within the context of providing a fair apportionment scheme, the
states are allowed reasonable latitude in defining each factor. This caveat
should not be taken lightly. States may have rules that, although
constitutionally allowable, are considerably varied in determining tax. For
example, many states, including New Jersey, allow apportionment only if the
taxpayer has a regular place of business outside the state. 9 New Jersey taxpayers that have no regular place of business
outside the state but, nevertheless, pay tax to one or more other states must calculate
their New Jersey tax on their entire net income and then apply for credits for
the taxes paid to other jurisdictions. 10
Models for Apportionment
States employ various apportionment methods in dealing with sales of services. Prior to Complete Auto, the states clamored for
uniformity of income taxation on multistate activity. In this regard, various
models have been developed in connection with the Uniform Division of Income
for Tax Purposes Act, the Multistate Tax Compact, and the Multistate Tax Commission.
Many states, to various degrees, have incorporated these models into their own
laws. Once it is established that a service is being rendered, the practitioner
then, of course, must determine how the particular state assigns the underlying
revenue for sales factor purposes.
Although UDITPA and the Multistate Tax Compact/Commission are
logical beginning points of study, the practitioner should recognize that they
do not represent a federal enactment, and that a state need not adopt any of
these guidelines. In addition, Multistate Tax Compact member states may rescind
their membership and depart from the Compact guidelines. Moreover, member
states are not precluded from passing laws or developing regulations that
interpret the Tax Compact (or UDITPA) in various ways.
Member states, however, clearly are interested in uniformity. To
that end, reasonable (although not necessarily perfect) representations of
UDITPA are usually embedded in their laws and regulations.
UDITPA.
The Uniform Division of Income for Tax Purposes Act was developed
by the National Conference of Commissioners on Uniform State Laws, and was
approved at its 66th annual conference in July 1957 and by the American Bar
Association's House of Delegates that same year. 11 UDITPA is a proposed framework for federal enactment. Because
Congress never acted on it, however, each state can accept, modify, or reject
it. Of the 45 states (and the District of Columbia) with corporate income
taxes, 23 have adopted UDITPA and most of the others have similar statutory
schemes. 12 The Commissioners' prefatory note to UDITPA encapsulates the
reasoning behind the Act's design:
"The Uniform Division of Income for Tax Purposes Act is
designed for enactment in those states which levy taxes on or measured by net
income. The need for a uniform method of division of income for tax purposes
among the several taxing jurisdictions has been recognized for many years and
has long been recommended by the Council of State Governments. There is no
other practical means of assuring that a taxpayer is not taxed on more than its
net income."
The sales factor under
UDITPA. In considering the sales factor in
connection with assigning to a state the receipts from sales of other than
tangible personal property, UDITPA directs the taxpayer to look at the
"income-producing activity." Under UDITPA, if the income-producing
activity is performed in one state, the sale is deemed to be in that state. If
the income-producing activity is performed in more than one state, the entire sale
is assigned to the state where the greatest cost
of performance was incurred (the "all or nothing" rule). UDITPA's
language, of course, does not specifically deal with the sale of services.
Rather, it refers to sales of "other than ... tangible personal
property." 13
Under UDITPA, the meaning of "income-producing activity"
can be somewhat ambiguous. In some instances, the income-producing activity
might be thought of as the lowest discrete level of service for which the
selling organization has the right to receive income. Still, this is only one
reasonable interpretation of "income-producing activity." When
determining the source of receipts from sales of services, specific state
statutes and regulations must be researched and analyzed. Even though many
states have similar provisions, subtle differences may yield substantially
different tax consequences.
Multistate Tax Compact and
Commission.
The Multistate Tax Compact was drafted in the mid-1960s as an
alternative to then-pending federal legislation. States may voluntarily
subscribe to the Compact, which became effective on 8/4/67. According to
Article 1 of the Compact, its purpose is to:
(1) "Facilitate proper determination of State and local tax
liability of multistate taxpayers, including the equitable apportionment of tax
bases and settlement of apportionment disputes."
(2) "Promote uniformity or compatibility in significant
components of tax systems."
(3) "Facilitate taxpayer convenience and compliance in the
filing of tax returns and in other phases of tax administration."
(4) "Avoid duplicative taxation."
The Multistate Tax Commission (MTC) consists of 43 states and the
District of Columbia, all of which participate at various levels (i.e., 21
"Compact members," one "sovereignty member," 19 "associate
members," and three "project members"). 14 The Compact-member states have adopted the Multistate Tax Compact
(which incorporates UDITPA), and they actively manage the MTC. The other levels
of membership do not require adoption of the Compact, may require little or no
financial support from the member, and do not involve managing the MTC.
MTC guidance. The Multistate Tax Compact incorporates UDITPA, and the MTC
suggests regulations that are meant to help interpret the Compact's intent.
Member states, however, are not bound to adopt the regulations. The
regulations, together with the MTC's audit manuals, may also be excellent
resources in seeking to understand how the MTC interprets UDITPA.
Sales Factor Under MTC
Regulations
The MTC offered guidance in determining the receipts factor for
sales of other than tangible personal property by issuing MTC Reg. IV.17. This
regulation is an interpretation of Multistate Tax Compact Article IV
("Division of Income"), which is based on UDITPA.
Generally, MTC Reg. IV.17(1) provides that "gross receipts
from transactions other than sales of tangible personal property" are
attributed to a state "if the income producing activity which gave rise to
the receipts is performed wholly within this state. Also, gross receipts are
attributed to this state if, with respect to a particular item of income, the
income producing activity is performed within and without this state but the
greater proportion of the income producing activity is performed in this state,
based on costs of performance." Initially, this regulation is little more
than a reiteration of UDITPA's general "all or nothing" rule for
receipts from transactions other than sales of tangible property. The language
does not specifically refer to services but, by default, sales of services
would come under this rule. Further reading of the regulation, however, reveals
a "special rule" for receipts from the performance personal services.
15
Sales of services.
With regard to the performance of services, MTC Reg. IV.17(4)(B)(c)
states generally that gross receipts "are attributable to this state to
the extent that such services are performed in this state." The regulation
goes on to say: "If services relating to a single item of income are
performed partly within and partly without this state, the gross receipts from
the performance of such services shall be attributable to this state only if
the greater proportion of the services was performed in the state, based on
costs of performance."
This last quoted language is similar to the general sourcing rule (in MTC Reg. IV.17(1), as quoted above) for
an income-producing activity performed both in and outside a state and,
initially, gives the impression that there is an "all or nothing"
assignment of receipts from the sale of services. That is, all the receipts
from a sale would be assigned to the state where the seller incurred the
greatest cost of performance for a multistate income-producing activity.
Further reading of MTC Reg. IV.17(4)(B)(c), however, provides the following
special rule for personal services:
"Usually, where services are performed partly within and
partly without this state, the services
performed in each state will constitute a separate income producing activity;
in such cases, the gross receipts from the performance of services attributable
to this state shall be measured by the ratio which the time spent in performing
the services in this state bears to the total time spent in performing the
services everywhere." (Emphasis added.)
Thus, an exception to the all-or-nothing rule exists for receipts
from the performance of services. The regulations distinguish this area based
on a finding that services provided in any single state "usually" are
an income-producing activity separate from the services performed in another
state. The total receipts from those services are assigned to the states in
proportion to the time spent in each state. Examples in the regulations
reinforce this conclusion.
Thus, based on the regulations, the MTC clearly intended to
provide an exception to the "all or nothing" rule when dealing with
receipts from the sale of services. 16
Some Typical State Variations
State departures from the logic of the UDITPA and MTC guidelines
should be recognized. Many states have differing views of what constitutes an
income-producing activity. In addition, although the basic three-factor formula
(or some variation) is common, the underlying data that is used in the formula
may differ significantly from state to state. The following discussion illustrates
some typical state deviations from UDITPA and the MTC regulations in
determining the source of receipts from sales of services. (Of the states
discussed below, New York does not subscribe to the MTC at all, California is a
member, and New Jersey, Maryland, and Pennsylvania are merely associate
members.)
California.
California has adopted UDITPA as interpreted under the MTC
regulations. Accordingly, California has a general rule for assigning receipts
from transactions other than sales of tangible property, and an exception for
services where the assignment is done according to a ratio based on time spent
in each state. 17
A personal service business generally charges its customers in one
of two ways, either based on time spent or for a fixed fee. Under a "time
and materials" contract, the income-producing activity that gives rise to
receipts might be considered the expending of a moment of time while working to
give the client whatever service the firm is engaged to provide. Usually, the service
provider furnishes hourly services of one or more individuals in labor
categories that are based on talent/skill levels. The fee is based on the
number of hours that a particular labor category works multiplied by the
billing rate for the category.
One approach that might be used in this type of contract is to
view each billable hour worked as the income-producing activity. Sales would
then be sourced to the state where the billable hour was performed under the
general UDITPA rule. This approach would tend to "specifically
identify" each service hour. Alternatively, if services associated with
the entire time-and-materials contract were viewed as performed partly within
and partly without California, the taxpayer would be required to assign all of
the revenues from the contract based on a time ratio under the MTC regulation's
special rule. The assignment could be quite different depending on the
weighting of where various labor categories provided the services.
The first approach would tend to match the actual billable hours
to the geographical situs of the services, while the second approach would
simply average the entire income from the contract across the states involved
according to a time ratio. The practitioner should quantify the two potential
outcomes and determine if petitioning the tax authorities for acceptance of a
position is a prudent step when there are significant differences in the
assignments.
Under a fixed-price contract in California, it is likely that the
special rule under the MTC regulations would be an appropriate assignment
method.
New Jersey.
In New Jersey, receipts from all services are assigned to the
state where the service is performed. 18 In this respect, New
Jersey's method resembles the special rule for services under the MTC regulations.
For a "time and materials" contract (as discussed
above), the taxpayer's accounting system can be implemented to track where the
billable service hours are performed and thereby allow the assignment of the
receipts to the proper state. When the taxpayer receives a fixed payment for
services performed in and outside New Jersey, the sales are assigned according
to "the cost of performance or amount of time spent in the performance of
such services or by some other reasonable method" that reflects the
economic realities of the situation. 19 Thus, New Jersey does not
subscribe to the "all or nothing" rule for services. Also, New Jersey
does not mandate that the sales be
prorated according to time spent within its borders. Accordingly, in contrast
to the MTC regulations for personal services, the sourcing may be based on
other ratios. Under the "economic realities" language, it is
reasonable to believe that New Jersey might accept a more complicated scheme
for assignment of revenues from a fixed-price contract to account for weighting
based on where various labor categories actually performed services under the
contract.
Maryland.
In Maryland, sales for all services are sourced in the state if
the receipts are derived from customers
in the state, 20 which the regulations define
as individuals or businesses that are "domiciled" in Maryland. 21 The regulations provide some examples, as follows.
Example. "An attorney, a partner in law firm A located in the
District of Columbia, renders legal advice to a domiciliary of Maryland.
Assuming sufficient nexus between the law firm and Maryland so as to require
the filing of a Maryland income tax return, the fee earned from the service
rendered to the Maryland domiciliary is included in the numerator of A's sales
factor." 22
The preceding example differs from the MTC regulations in that
where the service was performed does not matter. Rather, the market state
(i.e., Maryland) is what drives the assignment of the sale.
Example. "An accountant B, whose firm is located within Maryland,
performs accounting services for a resident of Pennsylvania. The fee earned
from these services is not included in the numerator of B's sales factor."
23
Clearly, the MTC regulations would identify the accountant's work
as personal services (presumably performed at the firm's office) and,
therefore, source the related receipts to Maryland. In contrast, however,
Maryland regulations instruct the taxpayer to do the exact opposite. Obviously,
while UDITPA and the MTC regulations strive for uniformity, applying those
rules to all states and assuming that will yield reasonable assignments is not
prudent.
Maryland has a special rule for sourcing receipts from services
regarding real property. Here, a customer – and thus the source of the receipt
– is deemed in or outside the state based on the situs of the property. 24
Example. "An architect contracts with a nonresident of this State to
design a shopping center in this State. The architect shall include in the
numerator of the sales factor all revenue received from the customer."
25
New York.
Under New York's regulations, the receipts from all services
performed in the state are sourced to New York. 26 For fixed-price contracts where services are performed in and
outside the state, a portion of the fee is attributed to New York based on the
relative value of, or the time spent in the performance of, those services in
New York (or by some other reasonable method). 27 This is similar to the MTC regulations' special rule for personal
services. New York applies its rules to all services and allows for sourcing
ratios based on elements other than time spent in the state (similar to New
Jersey, discussed above).
Pennsylvania.
Pennsylvania has adopted the "all or nothing" method for
sourcing receipts from sales of other than tangible personal property, and the
statute does not distinguish between services and other activities.
Specifically, such sales are sourced to Pennsylvania if "[t]he
income-producing activity is performed in this State; or ... [t]he
income-producing activity is performed both in and outside this State and a
greater proportion of the income-producing activity is performed in this State
than in any other state, based on costs of performance." 28
Thus, Pennsylvania has not adopted the interpretation of UDITPA as
articulated by the MTC with regard to the special rule for services. This might
allow for tax-planning opportunities given the possibility that services have
the potential to be completely excluded under the "all or nothing"
statute, resulting in a less-than-100% assignment across the states.
Conversely, this same statute can represent a risk due to the potential for
assignment of the entire receipt to Pennsylvania while, at the same time, part
of the receipt is assigned elsewhere under another taxing state's rules,
resulting in a more-than-100% assignment.
Consider, for example, a consulting firm that, for a fixed fee,
provides a service that is performed in both Pennsylvania and New Jersey. If
the bulk of the costs of performance were incurred in Pennsylvania, the entire
receipt would be sourced to Pennsylvania under that state's "all or
nothing" statutory language. In contrast, New Jersey would expect an
assignment of some part of that same lump-sum receipt based on a reasonable
apportionment method that represents the economic realities of the engagement.
Clearly, in this scenario, more than 100% of the receipt would be assigned to
the states involved. If the amounts were significant, the taxpayer might
consider requesting the use of a more equitable allocation method in the state
claiming 100% of the sale. Taxpayers and their advisers should keep in mind,
however, that where the opposite happens (i.e., no part of the sale is assigned
to a state), the tax authorities may impose reassignments more equitable to the
state. This possibility should be considered before taking seemingly aggressive
positions with regard to sales factor assignments. Nonetheless, practitioners
should have ample opportunities to develop reasonable tax planning strategies
that work towards limiting a firm's overall exposure to 100% sourcing of
receipts, while still meeting states' expectations. Merely minimizing
more-than-100% assignments alone can result in significant tax savings.
Conclusion
Assigning sales of services to various states for factor
apportionment purposes is not necessarily obvious or uniform. 29 Careful research and application of the relevant state rules are
required to properly handle service organization tax issues. The following
steps will help in determining the source of sales:
(1) Ascertain whether the transaction actually involves services
or tangible property.
(2) Understand the fundamental concepts regarding assignment of
service income under UDITPA and the MTC regulations.
(3) Determine the states that are involved in the transactions.
(4) Research the specific states' laws and regulations.
(5) Develop the proper tracking mechanisms within the taxpayer's
accounting systems and software in order to effectively track the metrics that
will be needed to assign sales at the end of the tax period. The system should
be implemented to capture all the information needed to comply with the rules
for each applicable state.
(6) Determine if petitioning the state tax authorities is appropriate
if significant disparities in sales assignments exist based on differing views
of how the overall transactions and underlying income-producing activities
might be construed by both the taxpayer and the state.
These steps will help ensure a more accurate determination of the
source of sales receipts when dealing with service organizations doing business
in multiple states.
Sidebar
Practice Note
A special rule in MTC Reg. IV.17 applies to the sourcing of
receipts from the performance of personal services. Under this rule, generally,
personal services provided in any single state are an income-producing activity
separate from the personal services performed in another state, and the total
receipts from those services are assigned to the states in proportion to the
time spent in each state. Many states – even those not subscribing to the MTC –
employ a similar approach.
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While an understanding of multistate taxation concepts is
essential, it is also helpful if accounting systems are in place that will
capture the relevant information. The accountant needs to implement a system to
allow for the proper reporting of income to the various states.
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Not only corporations, but also limited liability companies
(LLCs), partnerships, and sole proprietorships need to be sensitive to this
issue.
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In this regard, the Multistate
Tax Commission Audit Manual states: "Personal services involve the
creation of a product by employees of the taxpayer. An architect would perform
a service by creating blueprints for a structure. The services is the blueprint
work and the end product is the blueprints." MTC Audit Manual, "Sales/Receipts Factor," ¶1730.2(a).
The manual further states: "Taxpayers whose activity is principally that
of performing personal services present a different type of problem than do
those who render only incidental personal services. The auditor must first
identify the type of service involved and then assign the receipts from that service
among the states in a proper ratio." Id.,
¶1730.2(c).
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Complete Auto Transit, Inc.
v. Brady, 430 US 274,
51 L Ed 2d 326. See generally Lieberman, "Complete Auto Transit, Inc. v. Brady: How Many Parts Are
There?," 3 JMT 4 (Mar/Apr 1993).
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The appropriate rules then should be embedded in the accounting
system software. It is up to the practitioner or the internal accounting staff
to understand the rules in order to design and implement a system that will
capture the relevant data and meet the reporting needs of a multistate, service-providing
business.
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15 USC §§381-384 (the
"Interstate Commerce Tax Act"), restricts the power of the states to
tax interstate commerce. Specifically, it prohibits a state from levying a net
income tax on a business whose only activity in the state is the solicitation
of orders for sales of tangible personal property, provided the orders are sent
out of the state for acceptance and are filled by delivery from outside the
state. P.L. 86-272 does not protect other types of activities in a state and
does not apply to non-income taxes (e.g., sales or use taxes) or to the sale of
intangibles. See Wisconsin Dept. of
Revenue v. William Wrigley, Jr., Co., 505 US 214,
120 L Ed 2d 174, which generally is the only U.S. Supreme Court decision
relating to the interpretation of P.L. 86-272. The case offers guidance as to
which activities do or do not achieve tax nexus under P.L. 86-272. See Marcus
and Lieberman, "Does Wrigley
Clarify ‘Solicitation’ for Purposes of Taxing Interstate Commerce?," 2 JMT 148 (Sep/Oct 1992). See also Lieberman, "MTC
Guidelines on P.L. 86-272 Implement the U.S. Supreme Court's Decision in Wrigley," 5
JMT 52 (May/Jun 1995).
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Payroll sourced to a state for purposes of the payroll factor is
not necessarily the payroll that is subject to withholding tax in the state.
Also, withholding may apply for nonresident employees engaged in activities in
states where the employer-business has no offices or other facilities.
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See, e.g., Goodman, Marcus, Wethekam, Hughes, and Browdy,
"Single-Factor Sales Apportionment: A Tax Incentive for the Future," 7 JMT 196 (Nov/Dec 1997).
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N.J. Rev. Stat. §54:10A-6 provides, in part: "In the case of
a taxpayer which does not maintain a regular place of business outside this
State other than a statutory office, the allocation factor shall be 100%."
Under N.J. Admin. Code Reg. §18:7-7.2(a), a "regular place of
business" is "any bona fide office (other than a statutory office),
factory, warehouse, or other space of the taxpayer which is regularly
maintained, occupied and used by the taxpayer in carrying on its business and
in which one or more regular employees are in attendance."
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N.J. Admin. Code Reg. §18:7-8.3(b). The credit must be computed
using the lesser of the tax rates of the foreign state or the tax rate under
the N.J. Corporation Business Tax Act.
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Hellerstein and Hellerstein, State
and Local Taxation, Cases and Materials, Sixth Edition (West Publishing
Co., 1997), page 560.