Nevada § 363C.093 - Businesses constituting passive entities

§ 363C.093. Businesses constituting passive entities

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.