Title 19: Department of Finance

Chapter 1: Amnesty Program

Subchapter A: General Amnesty Program

§ 1-01 General.

(a) A three-month tax amnesty program shall commence on November 1, 1985, and end on January 31, 1986, which shall coincide with the three-month amnesty program established by the State Tax Commission pursuant to Chapter 66 of the Laws of 1985. (Chapter 765 of the Laws of 1985, § 84(a))
  1. The amnesty program shall apply to eligible taxpayers owing certain taxes administered by the Commissioner of Finance which are imposed or authorized by Subchapter 2 of Chapter 6 of Title 11, Chapter 5 of Title 11, former Parts I-VI of Title T, and Chapter 19 of Title 11 of the Administrative Code of the City of New York (see: 19 RCNY § 1-02 – Taxes Covered). Amnesty shall apply to those tax liabilities prior to January 1, 1985, as defined in 19 RCNY § 1-03. (Chapter 765 of the Laws of 1985, § 84(a)) The taxpayer must specify the tax period of each tax (“designated tax”) hereinafter for which amnesty is requested. (Chapter 765 of the Laws of 1985, § 84(a))
  2. The amnesty program provides that civil and criminal penalties will be waived upon timely written application by an eligible taxpayer, payment of tax and interest due and the filing of any required returns. (See: 19 RCNY § 1-04 – Taxpayer Eligibility and 19 RCNY § 1-05 – Requirements for Amnesty.) (Chapter 765 of the Laws of 1985, § 84(b))

   (1) Civil penalties which may be waived under amnesty include any amount imposed for the failure to comply with a provision of the Administrative Code. This includes, but is not limited to, the following:

      (i) General Corporation Taxes and Unincorporated Business Taxes. All civil penalties and additions to tax defined in Chapters 5 and 6 of Title 11 of the Administrative Code of New York City.

      (ii) Resident Personal Income Tax and Non-Resident Earnings Tax. All civil penalties and additions to tax defined in former Parts I-VI of Title T and Chapter 19 of Title 11 of the Administrative Code of New York City (excluding penalties imposed under §§ 11-1785(g) and 11-1927(g) of such titles, relating to willful failure to collect and pay over taxes).

   (2) Criminal penalties directly relating to violations of the Administrative Code or Penal Law with respect to a designated tax will be barred once amnesty is granted. (See also 19 RCNY § 1-06 – Effect of Amnesty.)

  1. A taxpayer is not eligible for amnesty if:

   (1) the taxpayer is the subject of a criminal investigation or the party to a criminal litigation, or

   (2) the taxpayer is a party to civil litigation, in relation to the designated tax. (See: 19 RCNY § 1-04 – Taxpayer Eligibility.) (See also 19 RCNY § 1-02(b) – Taxes Covered – for taxpayer eligibility for amnesty for certain taxes.) (Chapter 765 of the Laws of 1985, § 84(c))

§ 1-02 Taxes Covered.

Under the New York City Amnesty Program, penalties relating to the following taxes may be waived:

  1. General corporation tax. Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code of New York City.
  2. Unincorporated business tax. Chapter 5 of Title 11 of the Administrative Code of New York City.
  3. Resident personal income taxes and non-resident earnings taxes. Former Parts I-VI of Title T and Chapter 19 of Title 11 of the Administrative Code of New York City.

Note: All amnesty applications, returns and payments pertaining to these taxes, for taxable years ending prior to January 1, 1985, must be filed with the New York State Department of Taxation and Finance since these taxes are administered by the New York State Tax Commission and are included in the State’s amnesty program. However, the penalties imposed under §§ 11-1785(g) and 11-1927(g) of the Administrative Code (relating to willful failure to collect and pay over tax) are not covered under amnesty.

§ 1-03 Tax Periods Covered.

The amnesty program shall apply to tax liabilities for taxable periods ending prior to January 1, 1985. (Chapter 765 of the Laws of 1985, § 84(a))

§ 1-04 Taxpayer Eligibility.

(a)  General.

   (1) Amnesty shall not be granted to any taxpayer who is the subject of any criminal investigation being conducted by any agency of the City of New York or of the State or any political subdivision thereof, who is a party to any civil or criminal litigation which is pending on the date of the taxpayer’s application in any court of this State or the United States for nonpayment, delinquency or fraud in relation to the taxes (plus interest thereon) with respect to which amnesty is sought, or employs more than 500 employees in the United States on the date of taxpayer application. A civil litigation shall not be deemed to be pending if the taxpayer withdraws from such litigation prior to the granting of amnesty. (Chapter 765 of the Laws of 1985, § 84(c))

   (2) A taxpayer’s eligibility is determined separately in relation to each designated tax. Thus, a taxpayer may be ineligible for amnesty for one designated tax, but may be eligible for amnesty for another designated tax.

Example: A taxpayer is under criminal investigation relating only to his 1982 unincorporated business tax liability. Although he is not eligible for that designated tax (1982 Unincorporated Business Tax), he may be eligible for amnesty for his 1983 Unincorporated Business Tax liability.

   (3) A taxpayer’s eligibility is determined as of the date of application.

  1. Eligibility for amnesty for penalties relating to taxes imposed under Chapters 5 and 6 of Title 11 of the Administrative Code (hereinafter “restricted tax types”) is restricted to taxpayers that have 500 or fewer employees in the United States on the date of their application. (Chapter 765 of the Laws of 1985, § 84(g))

   (1) A taxpayer applying for amnesty from penalties imposed under Chapters 5 and 6 of Title 11 of the Administrative Code must certify on its application that it has in its employ 500 or fewer persons in the United States on the date of its application.

   (2) If it is determined that a taxpayer had more than 500 employees in the United States on the date of its application, amnesty will be denied or revoked.

   (3) For purposes of determining the number of employees:

      (i) the term employee shall have the same meaning as for Federal withholding tax purposes (Treas. Reg. § 31.3401(c)-1), and

      (ii) in the case of a taxpayer filing for amnesty for a designated tax which involves a tax reported on a combined basis, the number of employees includes all employees of all of the corporations included in the combined group on the date of the taxpayer’s application.

  1. Criminal investigation.

   (1) The Commissioner of Finance in cooperation with investigating agencies, shall prepare a confidential list of those taxpayers who are ineligible because they are the subject of an active criminal investigation relating directly to any covered taxes.

   (2) Every application for amnesty shall be compared with the list and any application for a designated tax subject to an active criminal investigation shall be denied.

   (3) (i) Upon the denial of an application under paragraph (2) of this subdivision, all material submitted (application, returns and payment) must be returned to the applicant, and no identifiable information submitted in connection with the application shall be kept by the Commissioner.

      (ii) The Commissioner shall indicate on the denial letter sent to the applicant (see: subdivision (c) of 19 RCNY § 1-09) that such application was timely received, but is denied due to an ongoing criminal investigation. The denial letter is the only evidence that a timely application was made for the designated tax, and must be produced by the taxpayer to substantiate any subsequent claims for amnesty for such designated tax.

   (4) (i) An applicant denied amnesty under paragraph (2) of this subdivision shall have 30 days in which to protest the denial (see subdivision (c) of 19 RCNY § 1-09).

      (ii) The Commissioner of Finance shall not be required to disclose the particulars of a pending criminal investigation upon which an amnesty denial was based. He shall, however, upon a protest under subparagraph (i) of this paragraph, confirm that the taxpayer is on the confidential list described in paragraph (1) of this subdivision and that amnesty was properly denied, and so certify to the taxpayer.

      (iii) Upon a subsequent finding of no criminal liability, whether through a prosecution not resulting in a conviction or by the investigating agency otherwise terminating the investigation, the applicant has 30 days to apply for amnesty for the amount, tax and tax period previously denied. The applicant must re-submit its application, returns and payment along with the denial letter.

   (5) The return under paragraph (3) of this subdivision of any application, payment or returns submitted under the amnesty program shall not be considered a rejection or refusal of payment or returns for any other purpose.

  1. Criminal litigation.

   (1) A taxpayer is ineligible for amnesty for any designated tax which directly relates to any crime for which the taxpayer is being prosecuted or has been convicted.

   (2) A prosecution

      (i) begins once an indictment, complaint or information has been filed against the taxpayer and the defendant has been arrested or served a summons, or an arrest warrant has been issued and the defendant has been notified of such fact, whichever is earlier in regard to such accusatory instrument and

      (ii) continues until the time to appeal has expired or the appellate process has been exhausted.

   (3) A taxpayer who is ineligible pursuant to paragraph (1) of this subdivision shall not make an application for amnesty for the tax and tax periods involved. If such ineligible taxpayer nevertheless makes an ineligible application, the application, returns and payment will not be returned. They will be treated as if they were received apart from an amnesty application. Penalties will not be waived and there will not be a bar to any civil, administrative or criminal action proceeding relating thereto.

  1. Civil litigation.

   (1) A taxpayer is ineligible for amnesty for any designated tax which directly relates to a pending civil litigation.

   (2) Civil litigation includes only those court proceedings instituted by the taxpayer. Generally, this includes a proceeding under Article 78 of the Civil Practice Laws and Rules, an order to show cause or a declaratory judgment action.

   (3) Civil litigation does not include:

      (i) a proceeding that the Commissioner instituted or joined as a plaintiff, or

      (ii) an administrative proceeding filed by the taxpayer with the Commissioner of Finance.

   (4) A civil litigation shall not be deemed to be pending if the taxpayer withdraws from such litigation. (Chapter 765 of the Laws of 1985, § 84(c).)

      (i) The taxpayer must submit proof of withdrawal from the litigation along with the amnesty application, returns and payment.

      (ii) “Proof of withdrawal” includes a stipulation to discontinue the lawsuit.

   (5) Any application, returns or payment received will not be returned to a taxpayer who is denied amnesty based on paragraph (1) of this subdivision.

  1. If because of an applicant’s failure to supply complete and accurate information, amnesty is erroneously granted to an ineligible applicant, as defined in subdivisions (b), (c), (d) and (e) of this section, amnesty will be revoked and materials submitted will be kept by the Commissioner of Finance. All materials will be treated as if they were received apart from an amnesty application. Penalties will not be waived and there will not be a bar to any civil, administrative or criminal action or proceeding relating thereto.

§ 1-05 Requirements for Amnesty.

(a) General. Prior to January 31, 1986, a taxpayer must:

   (1) file an application specifying both the tax and tax period(s) for which amnesty is sought,

   (2) file previously unfiled or amended returns or assessment documents, whichever is applicable, and

   (3) pay the tax and interest due. (Chapter 765 of the Laws of 1985, § 84(b).)

  1. Applications.

   (1) An amnesty application form should be used, or the taxpayer may apply in a letter. Any application must include:

      (i) the taxpayer’s name and address.

      (ii) the tax and tax periods for which amnesty is requested.

      (iii) the taxpayer’s tax identification number. The application must also include a certification that the taxpayer employs 500 or fewer persons in the United States on the date of its application.

   (2) (i) A taxpayer that is withdrawing from a civil litigation must submit proof of withdrawal from such litigation.

      (ii) A taxpayer involved in an administrative proceeding must file a full or partial withdrawal for the periods/issues for which amnesty is requested. The application, if granted, shall serve as an automatic dismissal with prejudice of the periods/issues for which amnesty is requested. The taxpayer’s protest rights for the remaining periods/issues will remain intact.

   (3) An amnesty application must be postmarked or received by the last day of the amnesty period.

  1. Returns. The taxpayer must submit the following documents:

   (1) previously unfiled returns

   (2) amended returns, or

   (3) an assessment document, or whichever is appropriate.

  1. Payment.

   (1) The taxpayer must pay the tax and interest due prior to the end of the amnesty period, or as determined in subparagraph (i) of paragraph (3) of this sub- division.

      (i) “Tax due” means the amount of tax previously finally determined to be due or assessed or, in the case of no final determination, the amount the taxpayer determines to be due. The amount of tax which any return filed under amnesty shows to be due, or the amount of tax which a return would have shown to be due but for a mathematical error, shall be deemed to be assessed on the date of filing the return.

      (ii) “Interest due” means the amount of interest computed from the due date of the tax to the date of payment. Interest is computed on the amount of tax due only, it does not include interest on penalty.

  1. Example: A taxpayer was issued a notice of deficiency for $2,000 tax, plus interest and penalty in June 1984. (a) If the taxpayer did not timely protest (petition for hearing), the amount of tax due became final. In order to make proper payment under amnesty, the taxpayer must pay the full $2,000 plus interest due. (b) If the taxpayer timely petitioned for hearing and is awaiting a hearing, the amount of tax due is not yet finally determined. A proper payment under amnesty is the amount of tax the taxpayer determines to be due, plus interest.
  2. Example: A taxpayer is currently being audited. Although the audit will not be completed until after the amnesty period ends, the auditor has determined that at least $2,500 additional tax is due. Since the amount of tax is not yet finally determined, a proper payment under amnesty is the amount of tax the taxpayer determines to be due, plus interest due.

   (2) If the taxpayer paid the tax or interest due prior to the amnesty period, only the remaining unpaid amount, if any, must be paid.

   (3) If the taxpayer does not calculate interest, or otherwise underpays the amount of tax and interest due, the Commissioner will bill the taxpayer for the amount due under amnesty. (“Amnesty Statement”)

      (i) Payment of the “Amnesty Statement” is required by the date stated thereon, or by the end of the amnesty period, whichever is later.

      (ii) Failure to pay the amount determined to be due by the Commissioner by the date determined in subparagraph (i) of this paragraph shall result in a denial of amnesty.

   (4) Notwithstanding paragraphs (1), (2), and (3) of this subdivision, where full payment during amnesty is certified by the taxpayer to create a severe financial hardship, an installment payment plan may be authorized. (See: 19 RCNY § 1-07 – Installment Payments.)

  1. Places to apply. Amnesty applications, returns and payments pertaining to the General Corporation Tax and Unincorporated Business Tax must be filed with

   New York City Amnesty    31 Chambers Street    Room 209    New York, N.Y. 10007

Amnesty applications, returns and payments pertaining to the Resident Personal Income Tax and Non-Resident Earnings Tax must be filed with the New York State Department of Taxation and Finance Amnesty Program.

§ 1-06 Effect of Amnesty.

(a)  General.

   (1) Once amnesty is granted, all penalties (as described in 19 RCNY § 1-01) are waived and any civil, administrative or criminal proceeding is barred relating to the designated tax. (Chapter 765 of the Laws of 1985, § 84(b))

   (2) The waiver of penalties and prohibition against prosecution applies only to those amounts of tax and interest for which amnesty was granted. Penalties will be imposed and proceedings will not be barred relating to any amounts of tax in excess of the amnesty payments which are later determined to be due.

Example: A taxpayer applied for and received amnesty for a 1982 unin- corporated business tax liability in the amount of $2,000 tax plus interest. After the end of the amnesty period, it is finally determined that the taxpayer actually owed $3,000 tax plus interest. Since the amount due was not finally determined prior to amnesty, the amount paid under amnesty was valid and amnesty is not revoked on the $2,000 plus interest. However, penalties may be imposed and civil, administrative or criminal proceedings may be brought against the taxpayer as to the $1,000 tax plus interest.

  1. Criminal proceeding. Any criminal prosecution directly relating to the designated tax is barred once amnesty is granted. This includes applicable criminal offenses defined in either the Administrative Code or the Penal Law.

Example: In 1983 a taxpayer, subject to the General Corporation Tax, failed to file any return or pay over the tax to the Commissioner of Finance. The eligible taxpayer applies for amnesty, files the required returns and makes full payment of tax and interest due. Amnesty is granted. Criminal prosecution for the failure to file a return or pay over tax for 1983 under § 11-686 of the Administrative Code is now barred.

§ 1-07 Installment Payments.

(a) General. An amnesty installment payment plan is available if payment of tax and interest in full pursuant to 19 RCNY § 1-05 would create a severe financial hardship.
  1. Application for installment payments. The taxpayer must:

   (1) submit a statement certifying the fact that full payment would create a severe financial hardship, and

   (2) pay at least 50 percent of the computed liability upon application. “Computed liability” means the tax due plus interest, if known.

  1. Payment terms.

   (1) Fifty percent of the computed liability is due upon application, and the balance is to be paid in two equal installments, in 30 day intervals from the date of initial payment.

   (2) The Commissioner of Finance will issue an Amnesty Statement at the end of the payment period (or at the end of the amnesty period, whichever is later) for any amount still due.

   (3) The taxpayer must pay the amount due within the time stated on the statement or by the end of the amnesty period, whichever is later, or amnesty will be denied.

§ 1-08 Refunds or Credits.

(a) No refund or credit shall be granted of any penalty paid prior to the time a taxpayer makes a timely request for amnesty. (Chapter 765 of the Laws of 1985, § 84(d).) Whether a payment has been applied to penalty shall be determined under the Commissioner of Finance's current procedures.
  1. No refund or credit shall be granted of any designated tax plus interest paid under amnesty, unless the Commissioner of Finance redetermines the amount due on its own motion. (Chapter 765 of the Laws of 1985, § 84(c).)

§ 1-09 Denial or Revocation of Amnesty.

(a) Amnesty will be denied or revoked if a taxpayer:

   (1) is ineligible, or

   (2) fails to pay all tax and interest due. (Chapter 765 of the Laws of 1985, § 84(b).)

    1. All payments made in connection with an amnesty application are final and will not be returned upon a denial or revocation of amnesty. However, in the case of an application that is denied because of a pending criminal investigation, the application, payment and returns will be returned to the applicant. (See: 19 RCNY § 1-04(c)(3).)

   (2) Payments made in connection with a denied or revoked amnesty application will be credited to the taxpayer’s open account.

  1. If a taxpayer disagrees with a denial or revocation of amnesty, he must submit a statement of disagreement setting forth all relevant facts within thirty days after the date of the mailing of the letter of denial or revocation. The letter should be sent to: New York City Tax Amnesty, 31 Chambers Street, Room 209, New York, N.Y. 10007.
  2. The Commissioner of Finance shall not be required to disclose the particulars of a pending criminal investigation upon which an amnesty denial was based. He shall however, upon request by the taxpayer in subdivision (c) of this section, confer with the investigating agency to ensure an investigation was pending and amnesty was properly denied, and so certify to the taxpayer.

§ 1-10 Secrecy.

(a) All returns, applications and any other documents filed under amnesty shall not be disclosed except as provided in §§ 11-688, 11-538, 11-1797(e) or 11-1942 of the Administrative Code. (Chapter 765 of the Laws of 1985, § 84(h).)
  1. Notwithstanding subdivision (a) of this section, to the extent the information received under amnesty is subject to an exchange agreement with the Internal Revenue Service, New York State Department of Taxation and Finance, or another state’s tax administrator, the information will be disclosed.

Subchapter B: Three Month Amnesty Program

§ 1-11 General.

(a) A three-month tax amnesty shall commence on September 1, 1994, and end on November 30, 1994, as established under Local Law 23 of 1994. The provisions of this subchapter B shall govern the administration of this amnesty program and none of the provisions of subchapter A of this Chapter 1 shall have any application to this amnesty program.
  1. The amnesty program shall apply to eligible taxpayers owing the commercial rent or occupancy tax imposed by Chapter 7 of Title 11, the utility tax imposed by Chapter 11 of Title 11, the real property transfer tax imposed by Chapter 21 of Title 11, and the hotel room occupancy tax imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York and administered by the Commissioner of Finance (see: 19 RCNY § 1-13, infra, Eligibility). Amnesty shall apply:

   (1) in the case of the commercial rent or occupancy tax, to tax liabilities for tax periods ending on or before May 31, 1993;

   (2) in the case of the utility tax, to tax liabilities for tax periods ending on or before March 31, 1994;

   (3) in the case of the real property transfer tax, to tax liabilities with respect to all taxable events occurring before April 1, 1994; and

   (4) in the case of the hotel room occupancy tax, to tax liabilities for tax periods ending on or before February 28, 1994. The taxpayer must specify the amount of tax and the tax period or taxable event (hereinafter a “designated tax”) for which amnesty is requested. (Administrative Code § 11-125(a), as added by Local Law 23 of 1994.)

  1. “Taxpayer” shall mean, for purposes of this subchapter, a person liable for the commercial rent or occupancy tax, utility tax, or real property transfer tax or a person liable for, or liable to collect and pay over, the hotel room occupancy tax.

§ 1-12 Effect of Amnesty.

(a) Under the amnesty program, civil and criminal penalties will be waived upon timely written application by an eligible taxpayer, payment of tax and interest due, and the filing of any required returns. Once amnesty is granted, all penalties (as described in paragraphs (1) and (2) of this subdivision) are waived and any civil, administrative or criminal proceeding is barred relating to the designated tax. (Administrative Code § 11-125(b), as added by Local Law 23 of 1994) (see: 19 RCNY § 1-13, infra, Eligibility and 19 RCNY § 1-14, infra, Requirements for Amnesty.)

   (1) Civil penalties that may be waived under amnesty include, but are not limited to, all civil penalties imposed on taxpayers pursuant to Chapters 7, 11, 21 and 25 of Title 11 of the Administrative Code.

   (2) Criminal penalties that may be waived under amnesty include applicable criminal offenses defined in the Administrative Code.

  1. The waiver of penalties and prohibition against prosecution apply only to the designated tax and interest for which amnesty is granted. Penalties will be imposed and proceedings will not be barred relating to any amounts of tax that are later determined to be due in excess of the amnesty payments.

Example: A taxpayer applies for and receives amnesty for a 1992 commercial rent or occupancy tax liability in the amount of $2,000 of tax plus interest. After the end of the amnesty period, it is finally determined that the taxpayer actually owed $3,000 of tax plus interest. Since the amount due was not finally determined prior to amnesty, the amount paid under amnesty was valid and amnesty is not revoked on the $2,000 of tax plus interest. However, penalties may be imposed and civil, administrative and criminal proceedings may be brought against the taxpayer as to the $1,000 of tax plus interest.

  1. Criminal proceeding. Any criminal prosecution of the taxpayer for nonpayment, deliquency or fraud relating to the designated tax is barred once amnesty is granted. This includes applicable criminal offenses defined in the Administrative Code.

Example: On June 20, 1992, a taxpayer subject to the commercial rent or occupancy tax, willfully made and subscribed to a false return filed with the Commissioner of Finance for the tax year ending May 31, 1992. The taxpayer applies for amnesty, files the required returns and makes full payment of tax and interest due. Amnesty is granted. Criminal prosecution for willfully subscribing to and filing a false return for the tax year ending May 31, 1992 under § 11-4009 of the Administrative Code will be barred.

§ 1-13 Eligibility.

(a) General.

   (1) Amnesty shall not be granted to any taxpayer who is the subject of any criminal investigation being conducted by any agency of the City of New York or of New York State or any political subdivision thereof, or who is a party to any civil or criminal litigation pending in any court of this State or the United States on the date of the taxpayer’s application, for nonpayment, deliquency or fraud in relation to the designated tax (plus interest thereon) with respect to which amnesty is sought. A civil litigation shall not be deemed to be pending if the taxpayer withdraws from such litigation prior to the granting of amnesty. (Administrative Code § 11-125(c), as added by Local Law 23 of 1994.)

   (2) A taxpayer’s eligibility is determined as of the date of application.

   (3) A taxpayer’s eligibility is determined separately in relation to each designated tax. Thus, a taxpayer may be ineligible for amnesty for one designated tax, but may be eligible for amnesty for another designated tax.

Example 1: A taxpayer has instituted an Article 78 proceeding to appeal a decision of the New York City Tax Appeals Tribunal relating to a commercial rent or occupancy tax deficiency for the years ending May 31, 1991 and May 31, 1992. In June 1991, the taxpayer sold a controlling interest in a corporation owning real property in New York City but did not file a real property transfer tax return reporting the transfer and did not pay the real property transfer tax. Although the taxpayer is ineligible for amnesty for commercial rent or occupancy tax for these tax periods unless the taxpayer withdraws the Article 78 proceeding (see subdivision (d) of this section), the taxpayer is eligible for amnesty for the real property transfer tax.

Example 2: A taxpayer is under criminal investigation relating only to his commercial rent or occupancy tax liability for the period ending May 31, 1992. Although he is not eligible for amnesty for that designated tax, he may be eligible for amnesty for his commercial rent or occupancy tax liability for the period ending May 31, 1993.

  1. Criminal investigation.

   (1) The Commissioner of Finance, in cooperation with investigating agencies, shall prepare a confidential list of those taxpayers who are ineligible because they are the subject of a pending criminal investigation relating directly to any tax listed in subdivision (b) of 19 RCNY § 1-11, supra.

   (2) Every application for amnesty shall be compared with the list and any application for amnesty for a designated tax subject to a pending criminal investigation shall be denied.

  1. Criminal litigation.

   (1) A taxpayer is ineligible for amnesty for any designated tax that directly relates to any crime for which the taxpayer is being prosecuted or has been convicted.

   (2) A prosecution:

      (i) begins once (A) an indictment, complaint or information has been filed against the taxpayer and the defendant has been arrested or served a summons, or (B) an arrest warrant has been issued and the defendant has been notified of such fact, whichever is earlier in regard to such accusatory instrument; and

      (ii) continues until the time to appeal has expired or the appellate process has been exhausted. (See: 19 RCNY § 1-17, infra, Denial or Revocation of Amnesty.)

  1. Civil litigation.

   (1) A taxpayer is ineligible for amnesty for any designated tax that is directly the subject of a pending civil litigation in any court of this State or the United States.

   (2) Civil litigation includes only those court proceedings instituted by the taxpayer. Generally, this includes a proceeding under Article 78 of the Civil Practice Law and Rules, an order to show cause, or a declaratory judgment action.

   (3) Civil litigation does not include:

      (i) a proceeding that the Commissioner of Finance instituted or joined as a plaintiff;

      (ii) an administrative proceeding filed by the taxpayer with the New York City Tax Appeals Tribunal; or

      (iii) a request for a conciliation conference filed by the taxpayer with the Conciliations Bureau of the Department of Finance.

(See: paragraph (5) of this subdivision (d), infra.)

   (4) A taxpayer will be eligible for amnesty for any designated tax that is directly the subject of a pending civil litigation provided the taxpayer withdraws from such litigation as a prerequisite to the granting of amnesty.

      (i) The taxpayer must submit proof of withdrawal from the litigation along with the amnesty application, returns and payment.

      (ii) “Proof of withdrawal” includes a stipulation to discontinue the lawsuit with prejudice.

   (5) A taxpayer involved in an administrative proceeding described in subparagraphs (ii) and (iii) of paragraph (3) of this subdivision, must file a withdrawal for the designated tax for which amnesty is requested.

§ 1-14 Requirements for Amnesty.

(a) General. On or before November 30, 1994, a taxpayer must:

   (1) file an application specifying both the tax and tax period(s) for which amnesty is sought,

   (2) submit previously unfiled or amended returns or, if the taxpayer is requesting amnesty on an outstanding assessment, copies of the assessment documents, and

   (3) pay the tax and interest due. (Administrative Code § 11-125(b), as added by Local Law 23 of 1994.) For purposes of this section, an assessment document is any document that finally fixes the amount of tax due or would so fix the amount of tax after the passage of a stated period of time.

  1. Applications.

   (1) An amnesty application form should be used, but the taxpayer may apply in a letter. Any application must include:

      (i) the taxpayer’s name and address.

      (ii) the amount of tax and tax periods for which amnesty is requested.

      (iii) the taxpayer’s tax identification number.

   (2) (i) A taxpayer that is withdrawing from a civil litigation must submit proof of withdrawal from such litigation. (See: 19 RCNY § 1-13(d)(4), supra.)

      (ii) A taxpayer involved in an administrative proceeding described in subparagraphs (ii) and (iii) of paragraph (3) of subdivision (d) of 19 RCNY § 1-13, supra, must file a withdrawal for the designated tax for which amnesty is requested. The application, if granted, shall serve as an automatic dismissal with prejudice of the proceeding regarding the designated tax for which amnesty is requested. A taxpayer may request amnesty for less than the full amount of tax shown to be due in the assessment document provided the amount for which amnesty is requested is the full amount of tax assessed with respect to one or more identifiable and severable adjustments to the taxpayer’s liability.

Example: A taxpayer was issued a notice of deficiency for $2,000 of commercial rent or occupancy tax plus interest and penalty for the tax year ending May 31, 1992. A disallowance of a subtenant deduction resulted in $1,500 of the deficiency and the inclusion in base rent of amounts paid on behalf of the landlord resulted in the remaining $500 of the deficiency. The taxpayer filed a timely petition with the New York City Tax Appeals Tribunal. The taxpayer may request amnesty with respect to the $1,500 resulting from the disallowance of the subtenant deduction by withdrawing the petition as to that portion of the deficiency and may continue to protest the remaining $500 of the deficiency. Amnesty will not be available with respect to that remaining $500 of the deficiency.

   (3) An amnesty application must be postmarked or received by the Department of Finance by the last day of the amnesty period.

   (4) Returns. The taxpayer must submit those of the following documents that are relevant with regard to the designated tax:

      (i) previously unfiled returns,

      (ii) amended returns, or

      (iii) if the taxpayer is requesting amnesty on an outstanding assessment, an assessment document.

  1. Payment.

   (1) The taxpayer must pay the tax and interest due prior to the end of the amnesty period, or as determined in subparagraph (i) of paragraph (3) of this sub- division.

      (i) “Tax due” means the amount of tax previously finally determined to be due or shown to be due in any assessment document or, in the absence of a final determination, the amount the taxpayer determines to be due. The amount of tax which any return filed under amnesty shows to be due, or the amount of tax which a return would have shown to be due but for a mathematical error, shall be deemd to be assessed on the date of filing the return. If a taxpayer withdraws in whole or in part from an administrative proceeding to obtain amnesty for a designated tax, the tax due shall mean the amount shown to be due in the assessment document that is the subject of the administrative proceeding as to which amnesty is requested. (See: subparagraph (ii) of paragraph (2) of subdivision (b) of 19 RCNY § 1-14, supra, with regard to partial payments.)

      (ii) “Interest due” means the amount of interest computed from the due date of the tax to the date of payment or such other date specified by statute.

Example 1: A taxpayer was issued a notice of deficiency for $2,000 of tax, plus interest and penalty, on June 21, 1993.

         (a) If the taxpayer did not timely file a petition with the New York Tax Appeals Tribunal or request a conference with the Conciliations Bureau, the amount of tax due became final on September 20, 1993. In order to make proper payment under amnesty, the taxpayer must pay the full $2,000 of tax plus interest due.

         (b) If the taxpayer timely filed a petition for a hearing or timely filed a request for a Conciliations conference and is awaiting a hearing or conference, the taxpayer may withdraw from the administrative proceeding on that petition or conciliation request to obtain amnesty. A proper payment under amnesty is the amount of tax shown to be due on the notice of deficiency that is the subject of the petition or request, plus interest. (See: subparagraph (ii) of paragraph (2) of subdivision (b) of 19 RCNY § 1-14, supra, with regard to partial payments.)

Example 2: A taxpayer is currently being audited. Although the audit will not be completed until after the amnesty period ends, the auditor has determined that at least $2,500 of additional tax is due. Since the amount of tax is not yet finally determined, a proper payment under amnesty is the amount of tax the taxpayer determines to be due, plus interest due on that amount.

   (2) If the taxpayer paid the tax or interest due prior to the amnesty period, only the remaining unpaid amount, if any, must be paid.

   (3) If the taxpayer does not calculate interest, or otherwise underpays the amount of tax and interest due, the Commissioner of Finance will bill the taxpayer for the amount due under amnesty.

      (i) Payment of the bill described above is required by the end of the amnesty period or by the date stated on the bill, if later.

      (ii) Failure to pay the amount determined to be due by the Commissioner of Finance by the date specified in subparagraph (i) of this paragraph will result in a denial of amnesty.

   (4) Notwithstanding paragraphs (1), (2), and (3) of this subdivision, where the taxpayer certifies that full payment with the amnesty application will create a severe financial hardship, an installment payment plan may be authorized. (See: 19 RCNY § 1-15, infra, Installment Payments.)

  1. Places to apply. Amnesty applications, returns and payments pertaining to the commercial rent or occupancy tax, the utility tax, the real property transfer tax and the hotel room occupancy tax must be filed with the New York City Department of Finance at the following addresses: for commercial rent or occupancy tax: Commercial Rent Tax Amnesty, P.O. Box 029197, Brooklyn, NY 11202-9197; for utility tax: Automated Tax Processing Unit, Utility Tax Section, 25 Elm Place – 3rd Fl., Brooklyn, NY 11201; for real property transfer tax: Real Property Transfer Tax Amnesty, 345 Adams St., Brooklyn, NY 11201; and for Hotel Room Occupancy Tax: Hotel Room Occupancy Tax Amnesty, 345 Adams St., Brooklyn, NY 11201.

§ 1-15 Installment Payments.

(a) General. An amnesty installment payment plan is available if the payment of tax and interest in full pursuant to 19 RCNY § 1-14, supra, would create a severe financial hardship.
  1. Application for installment payments. To apply for permission to pay under an amnesty installment payment plan the taxpayer must:

   (1) submit a statement certifying under penalties of perjury the fact that full payment would create a severe financial hardship and setting forth the reasons therefor;

   (2) pay at least 50 percent of the designated tax plus interest upon application; and

   (3) submit a written agreement signed by the taxpayer extending the period for assessing the designated tax.

  1. Payment terms.

   (1) Fifty percent of the designated tax plus interest is due upon application. When amnesty is granted, the Commissioner of Finance will issue a statement providing that the balance is to be paid in two equal installments, in 30 day intervals from the date of initial payment.

   (2) The Commissioner of Finance will issue a bill at the end of the payment period specified in the statement described in paragraph (1) of this subdivision for any amount still due.

   (3) The taxpayer must pay any remaining amount due by the end of the amnesty period or by the date stated on the bill, if later, or amnesty will be denied.

§ 1-16 Refunds or Credits.

(a) No refund or credit shall be granted of any designated tax or interest paid under this amnesty program, unless the Commissioner of Finance redetermines the amount due on his or her own motion. (Administrative Code § 11-125(e), as added by Local Law 23 of 1994.)
  1. No refund or credit shall be granted of any penalty paid prior to the time a taxpayer makes a timely request for amnesty. (Administrative Code § 11-125(d), as added by Local Law 23 of 1994.) Whether a payment has been applied to a penalty shall be determined under the Commissioner of Finance’s current procedures.

§ 1-17 Denial or Revocation of Amnesty.

(a) Amnesty will be denied or revoked if a taxpayer:

   (1) is ineligible;

   (2) fails to pay all of the designated tax and interest due (Administrative Code § 11-125(b), as added by Local Law 23 of 1994); or

   (3) requests amnesty for a tax or period not described in subdivision (b) of 19 RCNY § 1-11, supra.

    1. If a taxpayer is ineligible for amnesty, the Commissioner of Finance will issue a statement stating that the application for amnesty has been denied and the reason for the denial (the “denial letter”). The denial letter is the only evidence that a timely application was made for the designated tax, and must be produced by the taxpayer to substantiate any subsequent claims for amnesty for that designated tax. If a taxpayer’s amnesty is revoked, the Commissioner of Finance will issue a letter stating that revocation of amnesty has occurred and the reason for the revocation (“letter of revocation”).

   (2) If a taxpayer disagrees with a denial or revocation of amnesty, the taxpayer must submit a statement of disagreement setting forth all relevant facts within 30 days after the date of the mailing of the letter of denial or revocation. The letter should be sent to the New York City Department of Finance at the following addresses: for commercial rent or occupancy or utility taxes: Operations Division – 3rd Fl., 25 Elm Place, Brooklyn, NY 11201, Attn: Howard Reiss; and for real property transfer or hotel room occupancy taxes: Amnesty Unit, 345 Adams St. – 5th Fl., Brooklyn, NY 11201, Attn: Abdel Ibrahim.

   (3) Except as provided in subdivision (c) of this section, all payments made in connection with an amnesty application are final and will not be returned upon a denial or revocation of amnesty. Payments made in connection with a denied or revoked amnesty application will be credited to the taxpayer’s open account.

   (4) The application for amnesty, returns and payment of a taxpayer ineligible for amnesty under subdivisions (c) and (d) of 19 RCNY § 1-13, supra, will not be returned. A taxpayer who is ineligible pursuant to subdivision (c) of 19 RCNY § 1-13, supra, is not permitted to make an application for amnesty for the designated tax involved. If such an ineligible taxpayer nevertheless makes an application, the application, returns, and payment will not be returned and they will be treated as if received apart from an amnesty application.

  1. Denial of Amnesty Due to Pending Criminal Investigation.

   (1) If a taxpayer is the subject of a pending criminal investigation, the Commissioner of Finance shall indicate on the denial letter sent to the applicant that such application was timely received, but is denied due to a pending criminal investigation. In the case of an application that is denied because of a pending criminal investigation, all materials submitted (the application, payment and returns) will be returned to the applicant and no identifiable information submitted in connection with the application shall be kept by the Commissioner of Finance.

   (2) (i) An applicant denied amnesty under paragraph (1) of this subdivision shall have 30 days in which to protest the denial.

      (ii) The Commissioner of Finance shall not be required to disclose the particulars of a pending criminal investigation upon which an amnesty denial was based. The Commissioner of Finance shall, however, upon a protest under subparagraph (i) of this paragraph, confirm that the taxpayer is on the confidential list described in subdivision (b) of 19 RCNY § 1-13, supra, and that amnesty was properly denied, and so certify to the taxpayer.

      (iii) Upon a subsequent finding of no criminal liability, whether through a prosecution not resulting in a conviction or by the investigating agency otherwise terminating the investigation, the applicant will be notified and has 30 days to apply for amnesty for the amount of designated tax previously denied. The applicant must re-submit its application, returns and payment along with the denial letter.

   (3) The return of any application, payment, or returns submitted under the amnesty program under paragraph (1) of this subdivision shall not be considered a rejection or refusal of payment or returns for any other purpose.

  1. Revocation of Amnesty Erroneously Granted. If, because of an applicant’s failure to supply complete and accurate information, amnesty is erroneously granted to an ineligible applicant, as defined in subdivision (a), (b), (c) and (d) of 19 RCNY § 1-13, supra, amnesty will be revoked and, except with respect to an applicant who is ineligible for amnesty under subdivision (b) of 19 RCNY § 1-13, materials submitted will be kept by the Commissioner of Finance and all materials will be treated as if they were received apart from an amnesty application.
  2. Effect of Denial or Revocation of Amnesty. Except as provided in subdivision (c) of this section, if amnesty is denied or revoked, penalties will not be waived and any civil, administrative or criminal action or proceeding relating to the designated tax involved will not be barred.

§ 1-18 Secrecy.

(a) No returns, applications or other documents filed under amnesty may be disclosed except as provided in §§ 11-1116, 11-2115 or 11-2516 of the Administrative Code, as applicable. (Administrative Code § 11-125(h), as added by Local Law 23 of 1994.)
  1. Notwithstanding subdivision (a) of this section, to the extent the information received under amnesty is subject to an exchange agreement with the Internal Revenue Service, New York State Department of Taxation and Finance, or another state’s tax administrator, the information will be disclosed consistent with such agreements.

Subchapter C: 2003 General Amnesty Program

§ 1-19 General.

(a)  On a date as designated by the Commissioner, a three-month tax amnesty program shall commence as established under § 11-127(a) of the Administrative Code of the City of New York as enacted by Chapter 63 of the Laws of New York of 2003. The provisions of this subchapter C shall govern the administration of this amnesty program and none of the provisions of subchapters A or B of this chapter 1 shall have any application to this amnesty program.
  1. The amnesty program shall apply to eligible taxpayers owing the following taxes imposed under Title 11 of the Administrative Code and administered by the Commissioner of Finance: the unincorporated business tax (Chapter 5), the general corporation tax (Subchapter 2 of Chapter 6), the banking corporation tax (Part 4 of Subchapter 3 of Chapter 6), the commercial rent or occupancy tax (Chapter 7), the commercial motor vehicle tax (Chapter 8), the tax upon foreign and alien insurers (Chapter 9), the utility tax (Chapter 11), the horse race admissions tax (Chapter 12), the cigarette tax (Chapter 13), the tax on the transfers of taxicab licenses (Chapter 14), the tax on coin operated amusement devices (Chapter 15), the real property transfer tax (Chapter 21), the tax on retail licensees of the State Liquor Authority (Chapter 24), the hotel room occupancy tax (Chapter 25) and the annual vault charge (Chapter 27). See § 1-21 Eligibility, infra.
  2. Except with respect to the commercial rent or occupancy tax, amnesty will be available for all tax years ending on or before December 31, 2001. Except with respect to the commercial rent or occupancy tax, with respect to all taxes imposed on a basis other than an annual basis or on the basis of a transaction, amnesty shall be available for all periods or transactions ending or occurring on or before December 31, 2001. Amnesty shall be available with respect to the commercial rent or occupancy tax for taxable years ending on or before May 31, 2001.
  3. Definitions. For purposes of this subchapter:

      (i) “Designated taxes” shall mean the amount and type of tax for the tax period or taxable event for which amnesty is requested. (Administrative Code § 11-127(a))

      (ii) “Taxpayer” shall mean a person liable for payment or collection of any of the taxes or charges enumerated in subdivision (b) of this section.

      (iii) “Eligible taxpayer” shall mean any taxpayer other than a taxpayer described in subdivision (a) of 19 RCNY § 1-21, infra.

§ 1-20 Effect of Amnesty.

(Administrative Code § 11-127(b))
  1. Under the amnesty program, the granting of amnesty will have the following effect:

   (1) Interest relating to the designated tax in excess of the required interest payment will be waived. See, 19 RCNY § 1-22(c) Payment, infra.

   (2) Civil penalties relating to the designated tax will be waived, including, but not limited to, all civil penalties imposed on taxpayers pursuant to the provisions of Title 11 of the Administrative Code described in subdivision (b) of 19 RCNY § 1-20, supra.

   (3) Criminal penalties prescribed by Chapter 40 of the Administrative Code as they relate to the designated tax will be waived.

   (4) Civil, administrative and criminal proceedings relating to the designated tax will be barred.

Example: On June 20, 1999, a taxpayer subject to the commercial rent or occupancy tax, willfully made and subscribed to a false return filed with the Commissioner of Finance for the tax year ending May 31, 1999. The taxpayer applies for amnesty, files the required returns and makes full payment of the correct amount of tax and required interest due. Amnesty is granted. Civil and criminal penalties will be waived. Criminal prosecution for willfully subscribing to and filing a false return for the tax year ending May 31, 1999 under § 11-4009 of the Administrative Code will be barred.

  1. The waiver of penalties and prohibition against prosecution apply only to the designated taxes for which amnesty is granted. The granting of amnesty does not preclude the assessment of additional tax for the same period within the otherwise applicable period for assessment of additional tax. Penalties may be imposed and proceedings will not be barred with respect to any amounts that are later determined to be due in excess of the designated tax and interest for which amnesty was granted. (Administrative Code § 11-127(b))

Example: A taxpayer applies for and is granted amnesty for a 1999 commercial rent or occupancy tax liability in the amount of $2,000 plus interest reported on a return filed with the amnesty application. After the end of the amnesty period following an audit of the return filed, it is finally determined that the taxpayer actually owed $3,000 of tax plus interest. Penalties may be imposed and civil, administrative and criminal proceedings may be brought against the taxpayer with respect to the additional $1,000 of tax plus interest from the date payment was originally due to the date payment is actually made. The full amount of interest accrued on the additional $1,000 of tax will be assessed as well.

  1. An application for amnesty will not extend or toll any limitations period for assessment of additional tax or for protesting any proposed assessment of tax.

§ 1-21 Eligibility.

(a)  General. Amnesty shall be available for any taxpayer liable for any designated tax described in subdivision (b) of 19 RCNY § 1-19, supra, for the periods described in subdivision (c) of 19 RCNY § 1-19, supra, other than:

   (1) Any taxpayer with respect to a designated tax if the taxpayer received a benefit under the amnesty program established by § 11-125 of the Administrative Code or the amnesty program established by § 84 of Chapter 765 of the Laws of New York of 1985, for that same tax or charge for the same or any other tax period or for the same or any other transaction.

   (2) any taxpayer who is the subject of any criminal investigation with respect to a designated tax being conducted by any agency of the City of New York or of New York State or any other political subdivision of New York State. The Commissioner of Finance, in cooperation with investigating agencies, shall prepare a confidential list of those taxpayers who are ineligible because they are the subject of a pending criminal investigation relating directly to any tax listed in subdivision (b) of 19 RCNY § 1-19, supra. Every application for amnesty shall be compared with the list and any application for amnesty by a taxpayer subject to a pending criminal investigation shall be denied.

   (3) any taxpayer who is the subject of any criminal litigation for nonpayment, delinquency or fraud with respect to a designated tax that is pending in any court of New York State or the United States on the date of the taxpayer’s application. A litigation begins once (i) an indictment, complaint or information has been filed against the taxpayer and the defendant has been arrested or served a summons, or (ii) an arrest warrant has been issued and the defendant has been notified of such fact, whichever is earlier in regard to such accusatory instrument; and continues until the time to appeal has expired or the appellate process has been exhausted. See 19 RCNY § 1-24Denial or Revocation of Amnesty, infra. Any such taxpayer is eligible for amnesty for any other eligible tax or period not covered by the criminal litigation.

   (4) any taxpayer that has been convicted of a crime relating to a designated tax. Any such taxpayer is eligible for amnesty for any other eligible tax or period not covered by the criminal conviction.

   (5) any taxpayer with respect to liabilities for a designated tax or charge to the extent that the taxpayer’s liability for such taxes or charges was the subject of an audit pending with the Department of Finance on March 10, 2003.

      (i) For purposes of this paragraph (5), a taxpayer’s liability for taxes or charges will be considered to be the subject of an open audit on March 10, 2003, and thus ineligible for amnesty, if the Department has sent the taxpayer a written notification, dated on or before March 10, 2003, of the Department’s intent to review the taxpayer’s liability for that tax and period including the following:

         (A) a letter requesting an audit appointment;

         (B) an information and document request;

         (C) an inquiry letter;

         (D) a notice of proposed tax adjustments unless the taxpayer has paid the amount proposed in full on or before March 10, 2003; or

         (E) any other written document that includes the taxpayer’s name, taxpayer identification number, the tax and tax years, periods or transactions in question indicating the Department’s intent to review the taxpayer’s liability for that tax and year, period or transaction.

      (ii) An audit will not be considered to be open if the Department has sent the taxpayer, or the taxpayer’s duly authorized representative, a written notification, dated on or before March 10, 2003, that the matter has been finally closed including the following:

         (A) consent determination;

         (B) settlement or closing agreement signed by the taxpayer;

         (C) notice of determination; or

         (D) other written notification that the case was closed or that the returns were accepted as filed with no adjustment.

      (iii) A written notification described in subparagraph (ii) will not be considered a notification of a final closure of a matter if the document described in subparagraph (ii) contained an exception for additional adjustments based on final Federal or New York State changes and if

         (A) there was a Federal or New York State audit of the taxpayer affecting all or a portion of the same period pending on March 10, 2003,

         (B) the taxpayer was a party to an administrative or court proceeding pending on March 10, 2003 protesting an adjustment made by the Internal Revenue Service or New York State affecting all or a portion of the same period, or

         (C) there was a final determination of a Federal or New York State change affecting all or a portion of the same period that either was not reported to the Department as required by the appropriate provision of the Administrative Code or was reported to the Department with a statement by the taxpayer that the taxpayer disagreed with the determination. The provisions of subparagraphs (i) and (ii) of this paragraph will apply in determining whether a Federal or New York State audit was pending on March 10, 2003.

      (iv) A taxpayer will be ineligible for amnesty with respect to a matter that was the subject of an open audit as provided in this paragraph regardless of whether the audit was closed after March 10, 2003.

   (6) Any taxpayer with respect to a designated tax that is the subject of an administrative proceeding or civil litigation commenced in the Department’s Counciliation Bureau, the New York City Tax Appeals Tribunal or any court of this state to which the taxpayer is a party and that is pending on the date of the taxpayer’s amnesty application, unless the taxpayer withdraws from the entire proceeding or litigation, with prejudice, prior to the granting of amnesty or agrees, as a condition of amnesty, to withdraw from the entire proceeding or litigation, with prejudice. The preceding sentence does not apply to any proceeding or litigation that involves a designated tax that was the subject of an audit pending with the Department on March 10, 2003 as described in paragraph (5) of this subdivision. Amnesty is not available with respect to* any such matter. See 19 RCNY § 1-22(a)(4) and 19 RCNY § 1-24(a)(4), infra.

   (7) any taxpayer with respect to liabilities for designated taxes to the extent that the taxpayer’s liability for such taxes is the subject of an installment agreement with the Department of Finance on the date that the amnesty program described in subdivision (a) of 19 RCNY § 1-19, supra, begins.

  1. Except as provided in paragraphs (5), (6) and (7) of subdivision (a) of this section, taxpayer’s eligibility is determined as of the date of application.
  2. Except as provided in paragraphs (2) and (6) of subdivision (a) of this section, a taxpayer’s eligibility is determined separately in relation to each designated tax. Thus, a taxpayer may be ineligible for amnesty for one designated tax, but may be eligible for amnesty for another designated tax. With respect to a designated tax that is the subject of a pending administrative proceeding or litigation, the taxpayer must withdraw or discontinue, or agree to withdraw from or discontinue, with prejudice, the entire proceeding or case as a condition of the granting of amnesty.

Example 1: A taxpayer was granted amnesty in 1994 with respect to its liability for commercial rent or occupancy tax for the tax years ending May 31, 1991 and 1992. The taxpayer is eligible for amnesty under the program established pursuant to 19 RCNY § 1-19 or 19 RCNY § 1-26 for its liability for any tax other than the commercial rent or occupancy tax. The taxpayer is not eligible for amnesty for the commercial rent or occupancy tax for any period, including periods ending after 1994.

Example 2: On March 10, 2003, a taxpayer was being audited by the Audit Division of the Department with respect to its liability for general corporation tax for the tax years ending on December 31, 1998, 1999 and 2000. In June 1999, the taxpayer sold a controlling interest in a corporation owning real property in New York City but did not file a real property transfer tax return reporting the transfer and did not pay the real property transfer tax. The taxpayer is not being audited for this transaction. Although the taxpayer is ineligible for amnesty for general corporation tax for the tax years ending in 1998, 1999, and 2000, the taxpayer may be eligible for amnesty for the real property transfer tax. The taxpayer may also be eligible for other periods under the general corporation tax.

  1. A taxpayer whose outstanding liability with respect to a designated tax is limited to penalties and interest is eligible for amnesty with respect to the unpaid amounts. See 19 RCNY § 1-22(c) Payment, and 19 RCNY § 1-23Refunds or Credits, infra.

§ 1-22 Requirements for Amnesty.

(Administrative Code § 11-127(b) and (c))
  1. General. Within the three-month amnesty period, a taxpayer must:

   (1) file an application specifying both the tax and tax period(s) for which amnesty is sought on the form designated for that purpose by the Department of Finance;

   (2) submit previously unfiled or amended returns, including unfiled reports of federal or state changes or, if the taxpayer is requesting amnesty on an outstanding assessment, copies of the assessment documents. For purposes of this section, an assessment document is any document that finally fixes the amount of tax due or would so fix the amount of tax after the passage of a stated period of time, e.g., a notice of determination, notice of tax due, or a warrant;

   (3) pay the tax and required interest prior to the end of the amnesty period or the date specified on the tax amnesty bill mailed to the taxpayer, if the taxpayer calculated the interest due incorrectly or otherwise erroneously determined the amount due; and

   (4) withdraw from any pending administrative proceeding or litigation, with prejudice, or stipulate to discontinue or withdraw from such administrative proceeding or litigation, with prejudice, upon the granting of amnesty, if the matter is the subject of an administrative proceeding or civil litigation commenced in the Department’s Conciliation Bureau, the New York City Tax Appeals Tribunal or any court of this state to which such taxpayer is a party and that is pending on the date of the taxpayer’s amnesty application. See 19 RCNY § 1-21(a)(6), infra. The taxpayer must submit with the amnesty application proof of discontinuance of, or withdrawal from, the entire proceeding or litigation, with prejudice, or a stipulation agreeing to discontinue or withdraw from the entire proceeding or litigation with prejudice contingent upon the granting of amnesty. See 19 RCNY § 1-21(a)(6), supra and 19 RCNY § 1-24(a)(4) infra. Taxpayers requesting amnesty with respect to a designated tax that is the subject of a pending administrative proceeding or litigation cannot withdraw or discontinue the proceeding or litigation in part so as to be eligible for amnesty with respect to a portion of the subject matter of the proceeding or litigation while retaining the option of continuing the proceeding or litigation as to the remainder. A taxpayer also cannot request that a proceeding be bifurcated to achieve the same result.

    1. Amnesty applications must be sent to the address designated on the application form developed for that purpose by the Department of Finance or, in the discretion of the Commissioner of Finance, may be submitted electronically under procedures established by the Commissioner of Finance for that purpose.

   (2) An amnesty application must be postmarked by the United States postal service or received by the Department of Finance by the last day of the amnesty period. For purposes of this paragraph, all references to postmarks shall include the recordings or markings by a designated delivery service treated as postmarks under the taxes specified in subdivision (b) of 19 RCNY § 1-19 for which amnesty is being requested. An amnesty application submitted by electronic means must be received by midnight, i.e., 12:00 am, of the day following the last day of the amnesty period.

  1. Payment.

   (1) The taxpayer must pay the tax due and required interest prior to the end of the amnesty period, or by the date stated on any tax amnesty bill sent to the taxpayer.

      (i) Except as provided in the following sentence, “tax due” means, for purposes of this subchapter, the amount of tax shown to be due in the assessment document, or, in the absence of an assessment document, the amount the taxpayer shows to be due on returns filed with the application. If the taxpayer files with the amnesty application a previously unfiled return for a designated tax that also is the subject of an assessment document issued by the Department, the “tax due” shall mean the amount shown as due on the return filed by the taxpayer. The amount of tax that a return filed under amnesty shows to be due, or the amount of tax that a return would have shown to be due but for a mathematical error, shall be deemed to be assessed on the date of filing the return. If a taxpayer withdraws from, or discontinues, an administrative proceeding or litigation to obtain amnesty for a designated tax, or stipulates that it will withdraw from or discontinue a proceeding or litigation upon the granting of amnesty, the tax due shall mean the amount shown to be due in the assessment document that is the subject of the administrative proceeding.

      (ii) “Required Interest” for purposes of this subchapter, the required interest payment for each designated tax means the excess of:

         (A) interest calculated as provided by the Administrative Code to the date of payment, over

         (B) interest, if any, calculated as provided by the applicable provisions of the Administrative Code for the designated tax to the date three years prior to the first day of the amnesty program established by the Commissioner of Finance under subdivision (a) section 127 of the Administrative Code.

Example 1: The amnesty program begins on November 1, 2003. A taxpayer applies for amnesty with respect to general corporation tax for the tax years ending on December 31, 1999 and 2000 and files returns showing a liability for each year of the minimum tax. On December 15, 2003, the taxpayer pays the tax. The required interest with respect to the 1999 tax year would be calculated by determining the interest accrued from the day the tax was due, March 15, 2000, to the date the tax is paid, December 15, 2003, and subtracting the amount of interest for the period beginning March 15, 2000 through November 1, 2000, the date three years prior to the amnesty start date. With respect to the 2000 calendar tax year, the interest would be calculated by determining the interest accrued from March 15, 2001 to December 15, 2003, the date the tax is paid. No reduction in interest is available for this taxable year under the amnesty program.

Example 2: A taxpayer was issued a notice of determination with respect to the general corporation tax for the calendar year 1995 for $2,000, plus interest and penalty, on June 21, 1998. If the taxpayer did not timely file a petition with the New York City Tax Appeals Tribunal or request a conference with the Conciliations Bureau, the amount of general corporation tax became finally assessed on September 20, 1998. If the taxpayer timely filed a petition for a hearing or timely filed a request for a Conciliation conference and is awaiting a hearing or conference, the taxpayer must withdraw from the administrative proceeding to obtain amnesty. In either event, a proper payment under amnesty is the $2,000 shown to be due on the notice of determination, plus the required interest as calculated in subparagraph (ii) of paragraph (1) of subdivision (c) of this section.

   (2) If a taxpayer has paid a portion of the tax or interest due prior to the amnesty period, only the remaining unpaid amount of tax due and required interest, if any, must be paid.

   (3) If a taxpayer does not calculate interest, or otherwise underpays the amount of tax due and required interest, the Commissioner of Finance will bill the taxpayer for the amount due under amnesty.

   (4) Payment of the full amount of tax due and required interest as defined in paragraph (1) of this subdivision (c) is a condition of amnesty. Failure to pay the amount of tax due and required interest by the date specified in paragraph (1) of this subdivision (c) will result in a denial of amnesty.

   (5) A taxpayer may not request amnesty with respect to any designated tax that is the subject of an offer in compromise accepted by the Department of Finance. A taxpayer that has made an offer in compromise that is pending with the Department may withdraw the offer and apply for amnesty. If a taxpayer requests amnesty with respect to a designated tax that is the subject of an offer in compromise pending with the Department of Finance, the taxpayer must withdraw the offer, or the offer will be deemed to have been withdrawn, and payment of the full amount of tax due and required interest as described in paragraph (1) of this subdivision will be required as a condition of amnesty.

§ 1-23 Refunds or Credits.

(Administrative Code § 11-127(g))
  1. No refund or credit shall be granted of any designated tax or interest paid under this amnesty program unless the Commissioner of Finance redetermines the amount due on his or her own motion.
  2. No refund or credit shall be granted of any penalty or interest paid prior to the time a taxpayer makes a timely request for amnesty. (Administrative Code § 11-127(f)) Whether a payment has been applied to a tax, penalty or interest shall be determined under the Commissioner of Finance’s current procedures.

§ 1-24 Denial or Revocation of Amnesty.

(a)  Amnesty will be denied or revoked if a taxpayer:

   (1) is ineligible;

   (2) fails to pay all of the designated tax and required interest. See 19 RCNY § 1-22(c), supra;

   (3) requests amnesty for a tax or period not described in subdivision (b) of 19 RCNY § 1-19, supra; or

   (4) fails to withdraw from or discontinue an administrative proceeding or civil litigation, with prejudice. See 19 RCNY § 1-22(a)(4), supra.

  1. General Procedure for Denial.

   (1) If amnesty is denied for any of the reasons set forth in subdivision (a) of this section, the Commissioner of Finance with issue a statement stating that the application for amnesty has been denied and the reason for the denial (the “denial letter”). The denial letter is the only evidence that a timely application was made for the designated tax, and must be produced by the taxpayer to substantiate any subsequent claims for amnesty for that designated tax. See subparagraph (ii) of paragraph (1) of subdivision (c) of this section, infra. If a taxpayer’s amnesty is revoked, the Commissioner of Finance will issue a letter stating that amnesty has been revoked and the reason for the revocation (“letter of revocation”).

   (2) All payments made in connection with an amnesty application are final and will not be returned upon a denial or revocation of amnesty. Payments made in connection with a denied or revoked amnesty application will be credited to the taxpayer’s liability for the designated tax or any other liability of the taxpayer as permitted by law.

   (3) Except as provided in subdivision (c) of this section, the application for amnesty and returns submitted of a taxpayer ineligible for amnesty or for whom amnesty is denied or revoked, will not be returned. A taxpayer who is ineligible pursuant to paragraph (3) of subdivision (a) of 19 RCNY § 1-21, supra, (a taxpayer that is the subject of criminal litigation) is not permitted to make an application for amnesty for the designated tax involved. If such an ineligible taxpayer nevertheless makes an application, the application and returns will not be returned and they will be treated as if received apart from an amnesty application. Moreover, the retention by the Department of any amount paid with an amnesty application submitted by a taxpayer that is the subject of a pending criminal litigation and whose amnesty application is denied on that basis will not constitute a settlement, compromise or any other agreement by the Department to discontinue or forego any criminal prosecution of the taxpayer.

   (4) If a taxpayer disagrees with a denial or revocation of amnesty, the taxpayer must submit a statement of disagreement setting forth all relevant facts within 30 days after the date of the letter of denial or revocation. The letter should be sent to the New York City Department of Finance at the following address:

      Office of Legal Affairs       345 Adams Street      Brooklyn, NY 11201       Attn: Amnesty Appeals

  1. Denial of amnesty due to pending criminal investigation.

   (1) If a taxpayer is the subject of a pending criminal investigation, the Commissioner of Finance shall indicate on the denial letter sent to the applicant that such application was timely received, but is denied due to a pending criminal investigation. In the case of an application that is denied because of a pending criminal investigation, all materials submitted other than any payment will be returned to the applicant and no identifiable information submitted in connection with the application shall be kept by the Commissioner of Finance. The return of any application or returns submitted under the amnesty program shall not be considered a rejection of returns for any other purpose. Moreover, the retention by the Department of any amount paid with an amnesty application submitted by a taxpayer that is the subject of a pending criminal investigation and whose amnesty application is denied on that basis will not constitute a settlement, compromise or any other agreement by the Department to discontinue or forego any criminal investigation of the taxpayer.

   (2) The Commissioner of Finance shall not be required to disclose the particulars of a pending criminal investigation upon which an amnesty denial was based. The Commissioner of Finance shall, however, upon a protest under paragraph (4) of subdivision (b) of this section, confirm that the taxpayer is on the confidential list described in paragraph (2) of subdivision (a) of 19 RCNY § 1-21supra, and that amnesty was properly denied, and so certify to the taxpayer.

   (3) Upon a subsequent finding of no criminal liability, whether through a prosecution not resulting in a conviction or by the investigating agency otherwise terminating the investigation, the applicant will be notified and will have 30 days to apply for amnesty for the amount of designated tax previously denied. If the taxpayer has not been officially notified of the termination of the criminal investigation, the resubmission must be within five years and 30 days of the date of the denial letter. The applicant must re-submit its application and returns, make any payment if not previously made, and submit a copy of the denial letter.

  1. Denial of amnesty due to pending criminal prosecution. If the taxpayer’s application is denied due to a pending criminal prosecution, the taxpayer may resubmit the application if this criminal action does not result in conviction. The resubmission must be within 30 days of the conclusion of the prosecution. The applicant must re-submit its application and returns and make any payment if not previously made, and submit a copy of the denial letter.
  2. Revocation of amnesty erroneously granted. If, because of a taxpayer’s failure to supply complete and accurate information, amnesty is erroneously granted to an ineligible applicant, as defined in 19 RCNY § 1-21, supra, amnesty will be revoked and, except with respect to an applicant who is ineligible for amnesty under paragraph (2) of subdivision (a) of 19 RCNY § 1-21, (a taxpayer under criminal investigation), materials submitted will be kept by the Commissioner of Finance and all materials will be treated as if they were received apart from an amnesty application. Furthermore, if the taxpayer submits a fraudulent return as part of its application for amnesty, amnesty may be revoked.
  3. Effect of denial or revocation of amnesty. If amnesty is denied or revoked, penalties will not be waived and any civil, administrative or criminal action or proceeding relating to the designated tax involved will not be barred.

§ 1-25 Secrecy.

(a)  No returns, applications or other documents filed under amnesty may be disclosed except as provided in the provisions relating to the secrecy of reports or returns under the chapters of the Administrative Code specified in subdivision (b) of 19 RCNY § 1-19 of this subchapter. (Administrative Code § 11-127)
  1. Notwithstanding subdivision (a) of this section, to the extent the information received under amnesty is subject to an exchange agreement with the Internal Revenue Service, New York State Department of Taxation and Finance, or another state’s tax administrator, the information may be disclosed consistent with such agreements.

§ 1-26 Bed and Breakfast Amnesty Program.

(a)  A three-month amnesty program will commence on such date as designated by the Commissioner for all operators of hotels having fewer than ten rooms, including but not limited to bed and breakfast establishments and hotels operated in private residences. This amnesty program shall apply with respect to liabilities for hotel room occupancy tax on hotel occupancies occurring prior to the day the amnesty program under this section begins. Except as provided in this section, all of the provisions applicable to the amnesty program established under 19 RCNY § 1-19, supra, shall apply to the amnesty program established under this section.
  1. In addition to the other requirements of this subchapter, an operator seeking amnesty under this section must register with the Department as a hotel operator if such person has not already done so. An amnesty program established under this section shall provide that upon submission of such written application and upon evidence of payment to the city of hotel room occupancy taxes and interest as provided in subdivision (c) of this section:

   (1) the Commissioner of Finance shall waive any applicable penalties, and no civil, administrative or criminal action or proceeding shall be brought against such operator with respect to the taxes so paid,

   (2) the Commissioner of Finance shall waive any liability of such operator for taxes required to be collected by such operator for hotel room occupancies occurring prior to the first day of the twelfth month preceding the day the amnesty program established under this section begins, in hotels having fewer than ten rooms, including but not limited to bed and breakfast establishments and hotels operated in a private residence, and any applicable interest.

  1. To be eligible under this section, an operator is required to pay hotel room occupancy taxes, and interest thereon, that such operator was required to collect for all hotel room occupanies in hotels having fewer than ten rooms, including but not limited to bed and breakfast establishments and hotels operated in a private residence, during the period commencing on the first day of the twelfth month preceding the day the amnesty program established under this section begins. Failure to pay all such taxes and interest shall result in a denial of amnesty.
  2. Notwithstanding any provision of subdivision (a) of 19 RCNY § 1-21, supra, amnesty may be granted under this section to any taxpayer who had an audit of hotel room occupancy tax pending with the Department of Finance on March 10, 2003 and to any taxpayer who is a party to an administrative proceeding or civil litigation commenced in the Department’s conciliation bureau, the tax appeals tribunal or any court of this state with respect to any hotel room occupancy tax audit pending with the Department on March 10, 2003, provided the taxpayer withdraws from or discontinues such proceeding or litigation, with prejudice, prior to the granting of amnesty. See 19 RCNY § 1-21(a)(6), supra.

Chapter 2: Annual Vault Charge [Repealed]

§ 2-01 Definitions. [Repealed]

*§ 2-02 Imposition of Charge. [Repealed]* ::

§ 2-03 Rates of Annual Vault Charge. [Repealed]

*§ 2-04 Determination of Size, Dimensions and Depth of Vault. [Repealed]* ::

§ 2-05 Person Liable for Payment of Annual Vault Charge. [Repealed]

*§ 2-06 Vaults Made Unavailable for Use or Occupancy – Refunds. [Repealed]* ::

§ 2-07 Exemptions. [Repealed]

*§ 2-08 Application for Exemption. [Repealed]* ::

§ 2-09 Presumptions and Burdens of Proof. [Repealed]

*§ 2-10 Filing of Returns. [Repealed]* ::

§ 2-11 Extension of Time for Filing of Returns. [Repealed]

*§ 2-12 Payment of the Annual Vault Charge. [Repealed]* ::

§ 2-13 Penalties and Interest. [Repealed]

*§ 2-14 Records to be Kept. [Repealed]* ::

§ 2-15 Determination of Vault Charge. [Repealed]

*§ 2-16 Refunds. [Repealed]* ::

§ 2-17 Proceedings to Recover Annual Vault Charge. [Repealed]

*§ 2-18 General Powers of Commissioner of Finance. [Repealed]* ::

§ 2-19 Notices. [Repealed]

*§ 2-20 Statute of Limitations. [Repealed]* ::

Chapter 3: Banking Corporations

§ 3-01 Imposition of Tax.

(a) Introduction.

   (1) Nature of tax. (Administrative Code, § 11-639(a); § 11-646(f)) Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code of the City of New York (referred to hereinafter in these regulations as the “banking corporation tax law”) imposes a tax on every banking corporation, as defined in 19 RCNY § 3-01(b), for the privilege of doing business in New York City in a corporate or organized capacity for all or any part of each of its fiscal or calendar years. (See: 19 RCNY § 3-01(c) – Corporations subject to tax.) Also, certain corporations, including bank holding companies, are required or in the discretion of the Commissioner of Finance may be required or permitted to make a combined return with related corporations taxable under the banking corporation tax law. (See: 19 RCNY § 3-05(b) of these regulations – Combined returns.)

   (2) Amount of tax. (Administrative Code, § 11-641; § 11-643.5)

      (i) The banking corporation tax law imposes a tax which is the greater of the “basic tax” or the “alternative minimum tax.” The basic tax is measured by “entire net income,” which is the same as the Federal taxable income which the taxpayer is required to report to the United States Treasury Department, with certain adjustments, and is imposed at the rate of nine percent on entire net income, or portion thereof allocated to New York City. (See: 19 RCNY § 3-03(b) of these regulations – Basic tax – measured by entire net income.) The alternative minimum tax is measured by the greatest of three bases and is the tax when such alternative minimum tax results in a tax greater than the basic tax. The bases for computing the alternative minimum tax are:

         (A) (a) except for a corporation organized under the laws of a country other than the United States, and except as provided in subparagraph (ii) of this paragraph, 0.1 of a mill upon each dollar of taxable assets, or portion thereof allocated to New York City (See: 19 RCNY § 3-03(e) of these regulations – Alternative minimum tax measured by taxable assets); or (b) for a corporation organized under the laws of a country other than the United States, 2.6 mills upon each dollar of the taxpayer’s issued capital stock or portion thereof allocated to New York City, on the last day of its taxable year (See: 19 RCNY § 3-03(f) of these regulations – Alternative minimum tax measured by issued capital stock);

         (B) three percent of alternative entire net income, or portion thereof allocated to New York City. (See: 19 RCNY § 3-03(d) of these regulations – Alternative minimum tax measured by alternative entire net income.); and

         (C) $125 (See: 19 RCNY § 3-03(g) of these regulations – Alternative minimum tax measured by the fixed minimum amount.)

      (ii) A taxpayer which has an outstanding net worth certificate issued to the Federal Deposit Insurance Corporation or to the Federal Savings and Loan Insurance Corporation and which meets certain other requirements is not subject to the alternative minimum tax measured by taxable assets for that portion of the taxable year in which such certificate is outstanding and such requirements are met. (See: 19 RCNY § 3-03(e)(1) of these regulations – Computation of the alternative minimum tax measured by taxable assets.)

  1. Definitions.

   General. Generally, any term used in these regulations, unless defined specifically herein or a different meaning is clearly required, shall have the same meaning as when used in a comparable context in:

      (i) the laws of the United States relating to Federal income taxes and the Federal income tax regulations promulgated thereunder, or

      (ii) Subchapter 5 of Chapter 6 of Title 11 of the Administrative Code and the regulations promulgated thereunder. Any reference herein to the laws of the United States shall mean the provisions of the Internal Revenue Code, and amendments thereto, and other provisions of the laws of the United States relating to Federal income taxes, as the same are effective for the taxable year.

   Automated teller machine.

      (i) The term “automated teller machine” means an electronic device, either on-line or off-line, that is not manned, except as provided in subparagraph (ii) of this definition, and which permits one or more of the following:

         (A) deposits;

         (B) withdrawals;

         (C) transfers of funds from one account to another;

         (D) loan repayments;

         (E) disbursements of funds pursuant to prearranged lines of credit; or

         (F) balance inquiries.

      (ii) An electronic device may be manned by employees of the bank for the following purposes:

         (A) to demonstrate equipment;

         (B) to provide information;

         (C) to repair and service the electronic equipment; or

         (D) to act as security guards.

   Bank. The term “bank” means a banking corporation as defined in subparagraph (i), (ii), (iii), (iv), (v), (vi), (vii), or (ix) of 19 RCNY § 3-01(b) “Banking Corporation.”

   Bank holding company. (Administrative Code, § 11-646(f)(1)). The term “bank holding company” means any corporation subject to Article 3-A of the New York State Banking Law, or registered under the Federal Bank Holding Company Act of 1956, as amended, or registered as a savings and loan holding company (but excluding a diversified savings and loan holding company) under the Federal National Housing Act, as amended. For purposes of these regulations the term “bank holding company” does not include a bank.

   Banking business. (Administrative Code, § 11-640(b))

      (i) The term “banking business” means the business a corporation may be created to do under Article 3 (Banks and Trust Companies), Article 3-B (Subsidiary Trust Companies), Article 5 (Foreign Banking Corporations and National Banks), Article 5-A (New York Business Development Corporation), Article 6 (Savings Banks) or Article 10 (Savings and Loan Associations) of the New York State Banking Law or the business a corporation is authorized to do by such article. With respect to a national banking association, Federal savings bank, Federal savings and loan association or production credit association, the term “banking business” means the business a national banking association, Federal savings bank, Federal savings and loan association or production credit association may be created to do under the laws of the United States or the business a national banking association, Federal savings bank, Federal savings and loan association or production credit association is authorized to do by the laws of the United States or the laws of New York State.

      (ii) the term “banking business” also means such business as any corporation organized under the authority of the United States or organized under the laws of any other state or country has authority to do which is substantially similar to the business which a corporation may be created to do under Article 3, 3-B, 5, 5-A, 6 or 10 of the New York State Banking Law or any business which a corporation is authorized to do by such article.

   Banking Corporation. (Administrative Code, § 11-640(a) and (d))

      (i) Every corporation organized under the laws of New York State which is authorized to do a banking business or a corporation organized under the laws of New York State which is doing a banking business is a banking corporation. Banking corporations organized in New York State include commercial banks, trust companies, limited purpose trust companies, subsidiary trust companies, savings banks, savings and loan associations, Agreement corporations having an agreement or undertaking with the Federal Reserve Board under § 25 of the Federal Reserve Act and the New York Business Development Corporation.

      (ii) Every corporation organized under the laws of any other state which is doing a banking business is a banking corporation. Banking corporations organized in any other state include commercial banks, trust companies, savings banks, savings and loan associations and Agreement corporations having an agreement or undertaking with the Federal Reserve Board under § 25 of the Federal Reserve Act.

      (iii) Every corporation organized under the laws of any other country which is doing a banking business is a banking corporation. Banking corporations organized in any other country include commercial banks and trust companies.

      (iv) Every national banking association organized under the authority of the United States which is doing a banking business is a banking corporation.

      (v) Every Federal savings bank which is doing a banking business is a banking corporation.

      (vi) Every Federal savings and loan association which is doing a banking business is a banking corporation.

      (vii) Every production credit association created under the Federal Farm Credit Act of 1933, all of whose stock held by the Federal Production Credit Corporation has been retired, which is doing a banking business is a banking corporation.

      (viii) The Mortgage Facilities Corporation created by Chapter 564 of the Laws of 1956 of New York State is a banking corporation.

      (ix) Every other corporation organized under the authority of the United States, including an Edge Act Corporation organized under § 25(a) of the Federal Reserve Act, which is doing a banking business is a banking corporation.

      (x) (A) (a) Any corporation whose voting stock is 65 percent or more owned or controlled, directly or indirectly, by a bank holding company or by a corporation described in any of the foregoing subparagraphs of this definition is a banking corporation if the requirements set forth in this subparagraph (x)(A)(a) are met. The corporation whose voting stock is so owned or controlled must be principally engaged in a business which:

               (1) might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or by a national banking association, or

               (2) is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in paragraph (8) of subsection (c) of Section (4) of the Federal Bank Holding Company Act of 1956, as amended (12 U.S.C. § 1843(c)(8)).

            (b) For purposes of subparagraph (x)(A)(a) of this definition, the phrase “business which might be lawfully conducted” means the nature of business, regardless of where such business is conducted, that a corporation organized pursuant to Article 3 of the New York State Banking Law or a national banking association having its principal office in New York State may conduct:

               (1) without the need for a specific grant of authorization by the appropriate regulatory authorities or

               (2) with a specific grant of authorization if such corporation or association has in fact received such authorization from the appropriate regulatory authority.

            (c) The test of ownership for purposes of this subparagraph (x)(A) is actual beneficial ownership rather than mere record title as shown by the stock books of the issuing corporation. A corporation may be the actual beneficial owner of voting stock of another corporation even though it has conferred the right to vote such stock on others, by means of a proxy, voting trust or otherwise. The term “control” for purposes of this subparagraph (x)(A) refers to all cases where one corporation directly or indirectly possesses the power to dictate or influence the management and policies of another corporation, whether through the ownership of the voting stock of such corporation or the ownership of the voting stock of another corporation which possesses that power. The decision as to whether or not a corporation is controlled by another corporation will be determined by the facts in each case.

Example: Corporation X owns 60 percent of the voting stock of Corporation Y. The remaining stock of Corporation Y is owned by three employees of Corporation X. These employees have agreed in writing to sell their stock to Corporation X when they leave the corporation. As part of the agreement, the employees have given Corporation X their voting proxy. Corporation X owns or controls 65 percent or more of the voting stock of Corporation Y.

            (d) The provision of this subparagraph (x)(A) are illustrated in the following examples.

Example 1: A federal bank holding company doing business in New York City own 100% of the voting stock of Bank A and 60% of Bank B. The bank holding company also owns 100% of the voting stock of Corporation C. Corporation C owns 70% of the voting stock of Corporation D. Bank A owns 80% of the voting stock of Corporation E. Bank B owns 100% of the voting stock of Corporation F. Corporation E owns 70% of the voting stock of Corporation G and Corporation F owns 30% of the voting stock of Corporation G. This can be diagrammed as follows:

http://library.amlegal.com/nxt/gateway.dll?f=id$id=rules0-0-0-256-img$3.0$p=

Both Banks A and B are commercial banks organized under the laws of New York State and subject to Article 3 of the New York State Banking Law. Corporations D, E and F are principally engaged in New York City in a business which might be lawfully conducted by Bank A or B. Corporation G is principally engaged in New Jersey in a business which might be lawfully conducted by Bank A or B. Corporation C is not principally engaged in a business which might be lawfully conducted by Bank A or B or by a national banking association or is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in Section 4(c)(8) of the Federal Bank Holding Company Act of 1956. The bank holding company owns or controls, directly or indirectly:

100% of Bank A60% of Bank B 100% of Corporation C 70% of Corporation D (100% of C x 70% of D) 80% of Corporation E (100% of A x 80% of E) 60% of Corporation F (60% of B 0 100% of F) 74% of Corporation G (100% of A x 80% of E x 70% of G) (60% of B x 100% of F x 30% of G)

Banks A and B are banking corporations because they are commercial banks organized under the laws of New York State. Corporations D, E and G are banking corporations because 65% or more of their voting stock is owned or controlled, directly or indirectly by the bank holding company and they are principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law. Although the bank holding company owns 100% of the voting stock of Corporation C, it is not a banking corporation because it is not principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or by a national banking association or which is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in Section 4(c)(8) of the Federal Bank Holding Company Act of 1956. Corporation F is a banking corporation because Bank B owns 100% of its voting stock and it is principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law.

Example 2: A savings and loan holding company registered under the Federal National Housing Act owns 100% of the voting stock of Corporation L, 80% of the voting stock of Corporation M and 100% of the voting stock of Savings and Loan Association N. This can be diagrammed as follows:

http://library.amlegal.com/nxt/gateway.dll?f=id$id=rules0-0-0-258-img$3.0$p=

Corporation L is principally engaged in a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law and is therefore a banking corporation. Corporation M is principally engaged in a business which might be lawfully conducted by a savings bank but is not a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or by a national banking association or is so closely related to banking or managing or controlling banks as to be a proper incident thereto, as set forth in Section 4(c)(8) of the Federal Bank Holding Company Act of 1956. Accordingly, Corporation M is not a banking corporation.

         (B) Any corporation described in subparagraph (x)(A) of this definition which was subject to the tax imposed by Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code (the general corporation tax) for its taxable year ending during 1984 may, on or before the due date for filing its return (determined with regard to extensions of time for filing) for its taxable year ending during 1985, make a one-time election to continue to be taxable under Subchapter 2. Such election shall continue to be in effect until revoked by the taxpayer. In no event shall such election or revocation be for a part of a taxable year. The election is made by the filing of a tax return pursuant to Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code, and the revocation is made by the filing of a return pursuant to such Code.

         (C) For purposes of this subparagraph, the phrase “principally engaged in a business” means that a corporation derives more than 50 percent of its gross receipts from such business during its taxable year for Federal income tax purposes. Gross receipts from various aspects of a corporation’s business may be aggregated to determine what business the corporation is principally engaged in. For example, Corporation P derives 40 percent of its gross receipts from a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law, 40 percent of its gross receipts from a business which is so closely related to banking or managing or controlling banks as to be a proper incident thereto and 20 percent of its gross receipts from a business which may not be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law and is not so closely related to banking or managing or controlling banks as to be a proper incident thereto. Since corporation P derives more than 50 percent of its total gross receipts from a business which might be lawfully conducted by a corporation subject to Article 3 of the New York State Banking Law or is so closely related to banking or managing or controlling banks as to be a proper incident thereto, the “principally engaged in a business” requirement set forth in subparagraph (x)(A)(a) of this definition is met.

   Bona fide office.

      (i) A “bona fide office” is an office at which the taxpayer is carrying on its business in a regular and systematic manner and which is continuously maintained, occupied and used by one or more employees of the taxpayer. For a taxpayer to be carrying on its business in a regular and systematic manner, its business must be conducted through its own employees who are regularly in attendance at such office during normal business hours. The occasional consummation of a transaction does not constitute the carrying on of a business in a regular and systematic manner.

      (ii) In determining whether the taxpayer has a bona fide office, consideration is given to such things as:

         (A) the nature and location of the business;

         (B) the nature of the activity engaged in at each location; and

         (C) the regularity, continuity and permanency of the activity at each location.

Branch.

      (i) A “branch” is a bona fide office, as defined in 19 RCNY § 3-01(b) “Bona fide office,” which is used by the taxpayer on a regular and systematic basis to:

         (A) approve loans (regardless of whether the approval of certain classes of loans, such as loans over a set dollar amount, requires review for final approval or final approval by another office of the taxpayer);

         (B) accept loan repayments;

         (C) disburse funds; and

         (D) conduct one or more of the other functions of a banking business, such as: (a) paying withdrawals; (b) cashing checks, drafts and other similar items; (c) accepting deposits; (d) issuing cashier’s checks, treasurer’s checks, money orders or other similar items; (e) buying, selling, paying or collecting bills of exchange; (f) issuing letters of credit; (g) receiving money for transmission or transmitting the same by draft, check, cable or otherwise; or (h) exercising fiduciary powers.

      (ii) The following do not constitute a branch:

         (A) a loan production office;

         (B) a representative office;

         (C) a public accommodation office;

         (D) an automated teller machine or point-of-sale terminal;

         (E) a bona fide office, all of whose loans, pursuant to the taxpayer’s business policies or practices, require on a regular and systematic basis review for final approval or final approval by another office or all of whose loans in fact receive on a regular and systematic basis review for final approval or final approval by another office;

         (F) an office or any other facility of an agent or correspondent of the taxpayer; or

         (G) any combination of the foregoing.

      (iii) For purposes of this section, “approval” shall mean “final approval” and “final approval” shall have the same meaning as set forth in 19 RCNY § 3-04(f)(2)(iv)(D).

      (iv) Example: In 1982, a New York City office of a German bank was established. The New York City office does not have authority to give final approval to loans over $50 million. Prior to 1985 and 1986, the New York City office was involved with loans of less than $50 million as well as loans in excess of $50 million and gave final approval to those loans of less than $50 million. In 1985, the New York City office did not give final approval to any loans since it was only involved with loans in excess of $50 million. The New York City office has accepted loan repayments, disbursed funds and conducted one or more of the other functions of a banking business since it was established. The New York City office is a branch because it has been used on a regular and systematic basis to conduct all the functions required to qualify as a branch even though it did not approve any loans in 1985.

   Calendar year. The term “calendar year” means a period of 12 calendar months ending on December 31, or a period of less than 12 calendar months beginning on the date a taxpayer becomes subject to tax and ending on December 31. (See: 19 RCNY § 3-02(a)(2) – Calendar year taxpayers.)

   Corporation. The term “corporation” includes associations and joint stock companies.

   Doing business.

      (i) The term “doing business” is used in a comprehensive sense and includes all activities which occupy the time or labor of people for profit. Every corporation organized for profit and carrying out any of the purposes of its organization is deemed to be doing business for purposes of the tax. In determining whether a corporation is doing business, it is immaterial whether its activities actually result in a profit or a loss.

      (ii) Whether a corporation is doing business in New York City is determined by the facts in each case. Consideration is given to such factors as:

         (A) the nature, continuity, frequency and regularity of the activities of the corporation in New York City;

         (B) the purposes for which the corporation was organized;

         (C) the location of its offices and other places of business;

         (D) he employment in New York City of agents, officers and employees; and

         (E) the location of the actual seat of management or control of the corporation.

      (iii) Examples of activities of a corporation which would constitute doing business in New York City include the following:

         (A) operating a branch in New York City;

         (B) operating a loan production office in New York City;

         (C) operating a representative office in New York City;

         (D) operating a bona fide office in New York City.

      (iv) A corporation will not be deemed to be doing business in New York City because of:

         (A) the maintenance of cash balances with banks or trust companies in New York City;

         (B) The ownership of shares of stock or securities kept in New York City in a safe deposit box, safe, vault or other receptacle rented for this purpose, or if pledged as collateral security, of if deposited in safekeeping or custody accounts with one or more banks or trust companies, or brokers who are members of a recognized securities exchange;

         (C) the taking of any action by any such bank or trust company or broker, which is incidental to the rendering of safekeeping or custodian service to such corporation;

         (D) the maintenance of an office in New York City by one or more officers or directors of the corporation who are not employees of the corporation if the corporation is not otherwise doing business in New York City;

         (E) The keeping of books or records of a corporation in New York City, if such books or records are not kept by employees of such corporation and such corporation does not otherwise do business in New York City; or

         (F) any combination of the foregoing activities.

      (v) A corporation will not be deemed to be doing business in New York City if its activities in New York City are limited to such things as:

         (A) the mere acquisition of one or more security interests in real or personal property located in New York City without otherwise doing business;

         (B) the mere acquisition of title to property located in New York City through the foreclosure of a security interest without otherwise doing business; or

         (C) the mere holding of meetings of the board of directors in New York City.

   Fiscal year. The term “fiscal year” means any period not longer than 12 calendar months, or any shorter period beginning on the date the taxpayer becomes subject to tax and ending on the last day of any month other than December. (See: 19 RCNY § 3-02(a)(3) – Fiscal year taxpayers.) The term “fiscal year” also includes the 52-53 week accounting period if such period has been elected by the taxpayer. (See: 19 RCNY § 3-02(a)(4) – 52-53 week fiscal year taxpayers.)

   International banking facility. (Administrative Code, § 11-638(c)) The term “international banking facility” (hereinafter referred to in these regulations as “IBF”) means an international banking facility located in New York State. The term has the same meaning as is set forth in the New York State Banking Law or regulations promulgated thereunder or as is set forth in the laws of the United States or regulations of the Board of Governors of the Federal Reserve System.

   Loan production office.

      (i) A loan production office is an office whose activities are limited to:

         (A) soliciting loans on behalf of the bank, and in connection with such solicitation (a) assembling credit information; (b) making property inspections and appraisals; (c) securing title information; and (d) preparing applications for such loans (including making recommendations with respect to action thereon);

         (B) soliciting investors to purchase loans from the bank;

         (C) searching for investors to contract with the bank for the servicing of such loans; and

         (D) engaging in other similar agent-type activities.

      (ii) An office which accepts deposits, accepts loan repayments, approves loans or disburses funds is not a loan production office.

   Place of business. The term “place of business” means a bona fide office or branch of the taxpayer the income from which is required to be included in the computation of the taxpayer’s alternative entire net income. For example, a banking corporation organized under the laws of Great Britain has a branch in London and a branch in New York City. None of the income or expenses of the London branch are included in the computation of the taxpayer’s alternative entire net income. Therefore, the London branch is not a place of business of the taxpayer.

   Point-of-sale terminal. The term “point-of-sale terminal” means an electronic device, either on-line or off-line, that is not manned by bank employees, except for the training of non-bank employees or as provided in 19 RCNY § 3-01(b) “Automated Teller Machine” (ii). A point-of-sale terminal must be located in a store at a bona fide checkout counter, cashier station, customer convenience counter or other counter at which store functions are performed, or at a sales desk of other establishments. The function of a point-of-sale terminal is to transfer funds or record transfers of funds in connection with the sale of goods or services, but it may also be used to:

      (i) accept deposits;

      (ii) accept loan repayments;

      (iii) make cash withdrawals; and

      (iv) obtain funds pursuant to prearranged lines of credit.

   Public accommodation office. A public accommodation office is an office that is adjunct and within 1,000 feet from the principal office or a branch of the bank of which it is an adjunct and is established, maintained and operated for public convenience and advantage. A public accommodation office may transact business in connection with the following functions:

      (i) the acceptance of deposits of money, currency, checks and similar items;

      (ii) the payment of withdrawals;

      (iii) the cashing of checks, drafts and other similar items;

      (iv) the receipt of moneys due to the bank;

      (v) the issuance of cashier’s checks, treasurer’s checks, money orders and other similar items; and

      (vi) the disbursement of funds pursuant to an existing loan agreement or extension of credit.

   Representative office. A representative office is a service-type office of the bank. The activities of a representative office are limited to:

      (i) soliciting new business;

      (ii) researching;

      (iii) servicing head office needs; and

      (iv) acting as a liaison between the principal office and its customers.

   Return. (Administrative Code, § 11-671(2)(b))

      (i) The term “return” means a return of tax, but does not include a declaration of estimated tax. (See: 19 RCNY § 3-05 – Returns.)

      (ii) An application for extension of time to file a return is not a return.

   Subsidiary. (Administrative Code, § 11-638(d))

      (i) The term “subsidiary” means a corporation over 50 percent of the voting stock of which is owned by the taxpayer.

      (ii) The test of ownership is actual beneficial ownership, rather than mere record title as shown by the stock books of the issuing corporation. Actual beneficial ownership of stock does not mean indirect ownership or control of a corporation through a corporate structure consisting of several tiers and/or chains of corporations. A corporation will not be considered to be a subsidiary of a taxpayer merely because more than 50 percent of the shares of its voting stock is registered in the taxpayer’s name, unless the taxpayer is the actual beneficial owner of such stock. However, a corporation will not be considered a subsidiary of a taxpayer if more than 50 percent of the shares of its voting stock is not registered in the taxpayer’s name, unless the taxpayer submits proof that it is the actual beneficial owner of such stock.

         Example 1: Corporation A is engaged in a stock brokerage business. Corporation A holds record title in street name to 60 percent of the voting stock of corporation X, a publicly traded corporation. Corporation A holds record title to this stock on behalf of 100 corporate customers, none of which owns more than one percent of the stock of Corporation X. These 100 corporations are the actual beneficial owners of the stock of Corporation X held in street name by Corporation A. Even though Corporation A is the record title holder of more than 50 percent of the voting stock of Corporation X, Corporation X is not a subsidiary of Corporation A because Corporation A is not the actual beneficial owner of the stock.

         Example 2: Corporation C is the record title holder of 100 percent of the voting stock of Corporation D. Corporation C has the right to sell or pledge such stock. Corporation C receives all dividends paid by Corporation D. Corporation C enjoys the economic benefits, and bears the risk of economic loss, from the sale of such stock. Corporation C is the actual beneficial owner of Corporation D’s voting stock. Corporation D is a subsidiary of Corpor- ation C. Corporation B is the owner of 100 percent of the voting stock of Corporation C. Corporation B is not the actual beneficial owner of Corporation D’s voting stock merely by virtue of the fact that, through its ownership of the voting stock of Corporation C, Corporation B has practical control of the activities of Corporation D. Corporation D is not a subsidiary of Corporation B.

      (iii) A corporation is a subsidiary for purposes of the banking corporation tax law if the taxpayer is the actual beneficial owner of more than 50 percent of the shares of such corporation’s voting stock, even though the taxpayer has conferred the right to vote such stock on others, by means of a proxy, voting trust agreement or otherwise.

      (iv) In any case where the record holder of shares of voting stock of a corporation is not the actual beneficial owner of the stock, or where the right to vote such stock is not possessed by the record holder or by the actual beneficial owner of the stock, a full and complete statement of all relevant facts must be submitted with the return.

      (v) A corporation will be treated as a subsidiary of a taxpayer only for that part of the taxable year during which the taxpayer is the owner of more than 50 percent of the shares of stock of such corporation which, during that period, entitle the holders to vote for the election of directors or trustees.

   Subsidiary capital. (Administrative Code, 11-638(e))

      (i) The term “subsidiary capital” means the total of:

         (A) investment of the taxpayer in shares of stock of its subsidiaries; and

         (B) the amount of indebtedness owed to the taxpayer by its subsidiaries, whether or not evidenced by a written instrument, on which interest is not claimed and deducted by the subsidiary for purposes of any tax imposed by Subchapter 2 or Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code. Subsidiary capital does not include accounts receivable acquired in the ordinary course of trade or business for services rendered or for sales of property held primarily for sale to customers.

      (ii) Each item of subsidiary capital must be reduced by any liabilities of the taxpayer (parent), payable by their terms on demand or not more than one year from the date incurred, other than loans or advances outstanding for more than a year as of any date during the year covered by the return which are attributable to that item of subsidiary capital. The reduction will be made, for example, in cases where the liabilities have been incurred in connection with the acquisition or holding of stock or securities of a subsidiary, or in the making of a loan to the subsidiary.

      (iii) Subsidiary capital does not include stocks, bonds or other securities of a subsidiary held by the taxpayer for sale to customers in the regular course of the taxpayer’s business. Indebtedness on which any interest is deducted by the subsidiary in computing any tax imposed on the subsidiary under Subchapter 2 or Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code may not be included in the taxpayer’s subsidiary capital.

   Taxable year. (Administrative Code, § 11-638(b)) The term “taxable year” means the taxpayer’s taxable year for Federal income tax purposes, or the part thereof during which the taxpayer is subject to the banking corporation tax. In the case of a return made for a fractional part of a year, “taxable year” means the period for which such return is made. A taxable year must be a calendar year or fiscal year ending during the calendar year. A taxable year shall not include more than 12 months except in the case of a 52-53 week period. (See: 19 RCNY § 3-02(a) – Accounting periods.)

   Taxpayer. (Administrative Code, § 11-638(a))

      (i) The term “taxpayer” means a corporation which is subject to the tax imposed by the banking corporation tax law. This includes a bank holding company which is doing business in a corporate or organized capacity in New York City and is included in a combined return filed pursuant to 19 RCNY § 3-05(b).

      (ii) The term “taxpayer” also includes a corporation subject to the banking corporation tax law which continues to do business after it has been dissolved by the filing of a certificate of dissolution, by proclamation or otherwise. A dissolved corporation, the activities of which are limited to the liquidation of its business and affairs, the disposition of its assets (other than in the regular course of business), and the distribution of the proceeds, is not taxable under Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code. (However, a corporation in liquidation is subject to the unincorporated business tax imposed by Chapter 5 of Title 11 of the Administrative Code.)

   Voting stock. The term “voting stock” means shares of stock of a corporation, issued and outstanding, that entitle the holders thereof to vote for the election of the corporation’s directors or trustees. The determination of whether or not particular shares of a corporation’s stock entitle the holders of such shares to vote for the election of directors or trustees of the corporation depends on the actual legal situation with respect to voting rights, as it exists from time to time.

      Example: A taxpayer owns all the common stock of a corporation, which in ordinary circumstances is the only class of stock entitled to vote for the election of directors. The corporation also has outstanding an issue of preferred stock the holders of which, in certain circumstances, are entitled to vote for the election of directors either together with or exclusive of the holders of the common stock. The preferred stock will be treated as voting stock if, and so long as, its holders are entitled to vote. The common stock will not be treated as voting stock if, and so long as, its holders are not entitled to vote.

  1. Corporations subject to tax.

   (1) Corporations organized in New York State. (Administrative Code, § 11-639; § 11-640) The tax is imposed on every banking corporation organized under the laws of New York State for the privilege of doing business in a corporate or organized capacity in New York City.

   (2) Corporations organized in other states or countries. (Administrative Code, § 11-639; § 11-640) The tax is imposed on every banking corporation organized under the laws of any other state or country for the privilege of doing business in a corporate or organized capacity in New York City.

   (3) Corporations organized under the laws of the United States. (Administrative Code, § 11-639; § 11-640) The tax is imposed on every banking corporation organized under the laws of the United States for the privilege of doing business in a corporate or organized capacity in New York City.

   (4) Taxability of bank holding companies. (Administrative Code, § 11-639; § 11-646(f)) The tax is imposed on every bank holding company organized under the laws of New York State which is included in a combined return pursuant to 19 RCNY § 3-05(b) for the privilege of doing business in a corporate or organized capacity in New York City. The tax is imposed on every other bank holding company which is included in a combined return pursuant to 19 RCNY § 3-05(b) for the privilege of doing business in a corporate or organized capacity in New York City.

   (5) Change in classification. (Administrative Code, § 11-639; § 11-640(d))

      (i) A corporation subject to the banking corporation tax under Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code may, by reason of a change in the nature of its activities or a change in the ownership or control of its voting stock, cease to be subject to such tax and become taxable under another part of Chapter 6 of Title 11 or another chapter of Title 11. Conversely, a corporation subject to tax under another part of Chapter 6 or another chapter of Title 11 may, for the same reason, cease to be taxable thereunder and become subject to the banking corporation tax. The date on which any such change of classification becomes effective will be determined by the facts of each case.

      (ii) A corporation which becomes subject to the banking corporation tax during one of its fiscal or calendar years by reason of a change in classification is treated in the same manner as a corporation which became subject to tax in New York City during such year. (See: 19 RCNY § 3-01(a)(1) – Nature of tax; and 19 RCNY § 3-01(c) – Corporations subject to tax.)

      (iii) A corporation which ceases to be subject to the banking corporation tax during one of its fiscal or calendar years by reason of a change of classification is treated, insofar as that tax is concerned, in the same manner as a corporation which is dissolved or cease to be taxable in New York City during such year. (See: § 3-02(c) of these regulations – Cessation periods.)

      (iv) A bank holding company which does not make a combined return pursuant to 19 RCNY § 3-05(b) of these regulations is not subject to the banking corporation tax. That bank holding company may be subject to the general corporation tax pursuant to Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code if the requirements set forth in that subchapter for the imposition of tax are met.

      (v) A corporation which has made the election described in 19 RCNY § 3-01(b)(5)(x)(C) “Banking corporation” to be taxable under the general corporation tax law may become subject to the banking corporation tax upon the revocation of such election by the corporation. Such revocation must be for the entire taxable year.

   (6) Banking corporations exempt from tax. (Administrative Code, § 11-640(c)) Any trust company all of whose capital stock is owned by 20 or more savings banks organized under New York State law is exempt from the banking corporation tax.

§ 3-02 Accounting Periods and Methods.

(a) Accounting periods.

   (1) General. (Administrative Code, § 11-638(b); § 11-639(a))

      (i) Generally, for Federal income tax purposes, a taxpayer’s taxable year is the same as its accounting period. In most cases, the taxable year for which the banking corporation tax is to be computed and for which a tax return is to be filed shall be the same as the taxpayer’s taxable year for Federal income tax purposes or that portion of the Federal taxable year for which the taxpayer is subject to the banking corporation tax. (See: 19 RCNY § 3-01(b) “taxable year”). The taxable year under the banking corporation tax law will, generally, be the accounting period covered by the taxpayer’s Federal income tax return whether such period be a calendar year, a properly established fiscal year, an accounting period consisting of 52 or 53 weeks or an accounting period of less than 12 months as permitted or required under the Internal Revenue Code. If a taxpayer does not have a taxable year for Federal income tax purposes, the tax must be computed and a return must be filed for a calendar year, unless the Commissioner of Finance authorizes the use of some different accounting period.

      (ii) The banking corporation tax is imposed for each fiscal or calendar year of the taxpayer, or any part thereof, during which the taxpayer is doing business in a corporate or organized capacity in New York City. Therefore, for purposes of the banking corporation tax, the taxpayer’s first taxable year begins on the date it commences doing business in a corporate or organized capacity in New York City and ends on the last day of its fiscal or calendar year or the last day it is subject to the banking corporation tax, whichever comes first.

   (2) Calendar year taxpayers.

      (i) A taxpayer which reports on the basis of a calendar year for Federal income tax purposes must report on the same basis for purposes of the banking corporation tax. A calendar year is a period of 12 calendar months ending on December 31, or a period of less than 12 calendar months beginning on the date a taxpayer becomes subject to tax and ending on December 31. A calendar year also includes, in the case of a taxpayer which changes the period on the basis of which it keeps its books from a fiscal year to a calendar year, the period from the close of its last fiscal year to and including the following December 31.

      (ii) A taxpayer shall use a calendar year as its accounting period and report on a calendar year basis in the following situations:

         (A) the taxpayer keeps its books on the basis of a calendar year;

         (B) the taxpayer keeps its books on the basis of any period ending on any day other than the last day of a calendar month except in the case of a taxpayer which keeps its books on the basis of a 52-53 week accounting period;

         (C) the taxpayer does not keep books; or

         (D) the taxpayer is not required to file a Federal income tax return, unless the use of a fiscal year or a 52-53 week period basis of reporting has been authorized by the Commissioner of Finance.

   (3) Fiscal year taxpayers.

      (i) A taxpayer which reports on the basis of a fiscal year for Federal income tax purposes must report on the same basis for purposes of the banking corporation tax. A fiscal year is a period not longer than 12 calendar months, or any shorter period beginning on the date the taxpayer becomes subject to tax and ending on the last day of any month other than December. A fiscal year also includes, in the case of a taxpayer which changes the period on the basis of which it keep its books from a calendar year to a fiscal year or from one fiscal year to another fiscal year, the period from the close of its last calendar or fiscal year up to the date designated as the close of its new fiscal year. A fiscal year also includes a 52-53 week accounting period if such period has been elected by the taxpayer.

      (ii) A taxpayer reporting on a fiscal year basis must keep its books on such basis.

   (4) 52-53 week fiscal year taxpayers.

      (i) A taxpayer which reports on the basis of a 52-53 week accounting period for Federal income tax purposes must report on the same basis for purposes of the banking corporation tax. A 52-53 week period must end on the same day of the week each year and end always on whatever date that day of the week last occurs in a calendar month, or on whatever date that day of the week falls which is nearest the last day of a calendar month.

      (ii) If a 52-53 week accounting period is used and the period starts within seven days from the first day of any calendar month, the taxable year will be deemed to have begun on the first day of such calendar month. If a 52-53 week accounting period ends within seven days from the last day of any calendar month, the taxable year will be deemed to have ended on the last day of such month.

      (iii) If a taxpayer uses a 52-53 week accounting period for Federal income tax purposes and becomes subject to the banking corporation tax, the taxpayer may be required to file returns for two taxable years during an accounting period for which one Federal return is required. For example, a banking corporation commences doing business in New York City on Monday, October 29, 1984. The corporation uses a 52-53 week accounting period ending on the Saturday nearest the last day of October for Federal income tax purposes. The 52-53 week accounting period for which the corporation computes its tax for Federal income tax purposes begins October 28, 1984 and ends Saturday, November 2, 1985. For purposes of the banking corporation tax, the period from October 29, 1984 to October 31, 1984, inclusive, is deemed to be the first period for which a return is due and a tax payable. The next taxable period is deemed to be from November 1, 1984 to October 31, 1985 and is based on the accounting period ending November 2, 1985.

   (5) Change of accounting period.

      (i) If a taxpayer’s accounting period for Federal income tax purposes is changed, the taxable year and accounting period for which the taxpayer’s return is filed under the banking corporation tax must be changed at the same time to coincide with the new Federal income tax accounting period and taxable year. (See: 19 RCNY § 3-05(a)(2) – Short period returns.)

      (ii) Where a taxable year or accounting period of less than 12 months results from a change of accounting period, the taxpayer must file a return and pay the tax due for the period beginning from the close of the last taxable year or accounting period for which a return was required to be filed to the date designated as the close of its new accounting period or taxable year. Where a change in a taxable year from or to a 52-53 week accounting period, or from one 52-53 week period to a different 52-53 week period, results in a period of either 359 days or more or six days or less the 359 day or more period must be computed as if it were a full taxable year, and the period of six days or less must be added to and deemed part of the following taxable year. In the case of a period consisting of more than six days and less than 359 days, a return must be filed for such period.

      (iii) A taxpayer whose accounting period is changed for Federal income tax purposes is not required to apply for or obtain permission to make a similar change with respect to returns required under the banking corporation tax. In such a case, however, the taxpayer must submit with the first return filed for the new accounting period under the banking corporation tax a copy of the consent of the Commissioner of Internal Revenue to the change for Federal income tax purposes. A taxpayer which changes its accounting period for Federal income tax purposes without the prior approval of the Commissioner of Internal Revenue must submit with the first return filed for the new accounting period under the banking corporation tax law, a statement indicating the authority for the change of the Federal accounting period.

      (iv) In the case of a taxpayer which has an established accounting period for Federal incme tax purposes, no change of accouting period for purposes of the banking corporation tax (other than one required by reason of a change of the Federal accounting period as set forth in subparagraph (i) of this paragraph) will be permitted.

  1. Accounting methods.

   (1) General. (Administrative Code, § 11-641(m); § 11-641.1; § 11-643.5(b))

      (i) The accounting method or basis on which entire net income, alternative entire net income or taxable assets is to be computed must be the same as the taxpayer’s method of accounting for Federal income tax purposes. However, when the Commissioner of Finance deems it necessary in order to properly reflect the entire net income or alternative entire net income of the taxpayer, he may determine the taxable year or period in which any item of income or deduction must be included, without regard to the method of accounting used by the taxpayer. (See: 19 RCNY § 3-03(b)(6) – Taxable year in which income or deduction is included in entire net income and 19 RCNY § 3-03(d)(3) – Taxable year in which income or deduction is included in alternative entire net income.) When the Commissioner of Finance deems it necessary in order to properly reflect the taxable assets of the taxpayer, he may determine the taxable year or period in which any adjustment to the value of an asset may be claimed, without regard to the method of accounting used by the taxpayer.

      (ii) In the absence of an accounting method for Federal income tax purposes, entire net income, alternative entire net income or taxable assets must be computed in accordance with the method regularly employed in keeping the books of the taxpayer, provided such method properly reflects entire net income, alternative entire net income or taxable assets. If the books of a taxpayer do not properly reflect entire net income, alternative entire net income or taxable assets or if no books are kept, the computation of entire net income, alternative entire net income or taxable assets must be made in such manner as the Commissioner of Finance deems necessary to properly reflect entire net income, alternative entire net income or taxable assets.

   (2) Change of accounting method.

      (i) If a taxpayer’s method of accounting for Federal income tax purposes is changed, the accounting method employed in determining entire net income, alternative entire net income or taxable assets for purposes of the banking corporation tax must be changed at the same time to the method approved for Federal income tax purposes. When a change of accounting method is made, any adjustments which are determined to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted must be taken into account to the extent they are required to be taken into account in determining the taxpayer’s Federal taxable income.

      (ii) A taxpayer whose method of accounting is changed must submit with its first return in which the new accounting method is used a copy of the consent of the Commissioner of Internal Revenue, together with complete details of any adjustments with respect to items of income or deduction or adjustments to the value of assets.

  1. Cessation periods. (Administrative Code, § 11-639(a))

   (1) The banking corporation tax is imposed for each taxable year during which a taxpayer does business in a corporate or organized capacity in New York City. Accordingly, for purposes of the banking corporation tax, every taxpayer is subject to tax up to the date on which it ceases to do business in a corporate or organized capacity in New York City.

   (2) A taxpayer may cease to be subject to the banking corporation tax because of a change in classification. (See: 19 RCNY § 3-01(c)(5) – Change in classification.) In some cases, a corporation may then become subject to tax under some other subchapter of Chapter 6 of Title 11 or some other chapter of Title 11 of the Administrative Code.

   (3) For rules concerning the time for filing cessation returns, see 19 RCNY § 3-05(d)(3).

§ 3-03 Computation of Tax.

(a) Introduction.

   (1) General. (Administrative Code, § 11-643.5(a) and (b))

      (i) Every corporation subject to the banking corporation tax must compute its basic tax (See: 19 RCNY § 3-03(b) – Basic tax – measured by entire net income) and its alternative minimum tax. (See: subdivisions (d), (e), (f) and (g) of this 19 RCNY § 3-03.) Every taxpayer must pay the basic tax unless the alternative minimum tax is greater, in which case the taxpayer must pay the alternative minimum tax.

      (ii) The basic tax is measured by the taxpayer’s entire net income, or portion thereof allocated to New York City, and is imposed at the rate of nine percent.

      (iii) The alternative minimum tax is the largest of three bases.

         (A) The bases are: (a) (1) except for a corporation organized under the laws of a country other than the United States, and except as provided in subparagraph (iii)(B) of this paragraph, 0.1 of the mill upon each dollar of taxable assets, or portion thereof allocated to New York City (See: 19 RCNY § 3-03(e) – Alternative minimum tax measured by taxable assets); or (2) for a corporation organized under the laws of a country other than the United States, 2.6 mills upon each dollar of the taxpayer’s issued capital stock, or portion thereof allocated to New York City, on the last day of its taxable year (See: 19 RCNY § 3-03(f) – Alternative minimum tax measured by issued capital stock); (b) three percent of alternative entire net income, or portion thereof allocated to New York City (See: 19 RCNY § 3-03(d) – Alternative minimum tax measured by alternative entire net income); and (c) $125 (See: 19 RCNY § 3-03(g) – Alternative minimum tax measured by the fixed minimum amount.)

         (B) A taxpayer which has an outstanding net worth certificate issued to the Federal Deposit Insurance Corporation or to the Federal Savings and Loan Insurance Corporation and which meets certain other requirements is not subject to the alternative minimum tax measured by taxable assets for that portion of the taxable year in which such certificate is outstanding and such requirements are met. (See: 19 RCNY § 3-03(e)(1) – Computation of the alternative minimum tax measured by taxable assets.)

   (2) Computing tax on combined returns. (Administrative Code, § 11-646(f)) Where corporations report on a combined basis, the tax is measured by the combined entire net income (See: 19 RCNY § 3-03(b)(6)), or by the combined alternative entire net income (See: 19 RCNY § 3-03(d)(2)), or by the combined taxable assets (See: 19 RCNY § 3-03(e)(6) of all of the corporations included in the combined return. Each taxpayer included in the combined return (other than the taxpayer paying the combined tax) is required to pay an alternative minimum tax of $125. The corporation paying the combined tax will pay the alternative minimum tax of $125 (See: 19 RCNY § 3-03(g)(2)) when it is the greatest alternative minimum base and the alternative minimum tax is greater than the basic tax. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b) – Combined returns.

   (3) Correcting distortion of income or assets. (Administrative Code, § 11-646(g))

      (i) In case it shall appear to the Commissioner of Finance that any agreement, understanding or arrangement exists between the taxpayer and any other corporation or any person or firm, whereby the activity, business, income or assets of the taxpayer within New York City is improperly or inaccurately reflected, the Commissioner of Finance may, in his discretion, make such adjustments as he deems necessary in order to accurately reflect the tax liability of the taxpayer. In exercising his discretion, the Commissioner of Finance is empowered to adjust:

         (A) items of income or deduction in computing entire net income or alternative entire net income;

         (B) assets;

         (C) wages, salaries and other personal service compensation, receipts or deposits in computing any allocation percentage, provided only that entire net income or alternative entire net income be adjusted accordingly and that any asset directly traceable to the elimination of any receipt be eliminated from taxable assets so as to accurately determine the tax. If, however, in the determination of the Commissioner of Finance, such adjustments do not or cannot effectively provide for the accurate determination of the tax, the Commissioner of Finance shall be authorized to require the filing of a combined return by the taxpayer and any such other corporations. Thus, the Commissioner of Finance is not required to exercise his authority under this paragraph and in lieu thereof or in addition thereto a combined return may be required or permitted pursuant to the provisions of 19 RCNY § 3-05(b).

      (ii) The Commissioner of Finance may include in the entire net income or alternative entire net income of the taxpayer the fair profits which, but for an agreement, arrangement or understanding as described in subparagraph (i) of this paragraph, the taxpayer might have derived from any transaction:

         (A) where any taxpayer conducts its activity or business under any agreement, arrangement or understanding in such manner as either directly or indirectly to benefit its members or stockholders, or any of them, or any person or persons directly or indirectly interested in such activity or business, by entering into any transaction at more or less than a fair price which, but for such agreement, arrangement or understanding, might have been paid or received therefor; or

         (B) where any taxpayer enters into any transaction with another corporation on such terms as to create an improper loss or net income.

      (iii) In determining whether an agreement, understanding or arrangement between the taxpayer and any other corporation or any person or firm results in an improper or inaccurate reflection of the activity, business, income or assets of the taxpayer within New York City, consideration is given to such factors as:

         (A) whether the taxpayer controls or is controlled by such other corporation, person or firm, or whether the taxpayer and such other corporation, person or firm are controlled by the same interest;

         (B) whether the agreement, understanding or arrangement in question would have been entered into, or whether the terms and conditions would have been the same, had the element of control been absent and had the parties been dealing at arm’s length; and

         (C) whether the agreement, understanding or arrangement in question has a reasonable business purpose, or whether it appears to be arbitrary or to have been motivated principally by a tax avoidance purpose.

      (iv) In applying the provisions of subparagraph (i) of this paragraph, the Commissioner of Finance will consider, and may utilize in making adjustments or determining a fair price or fair profit, the principles and rules contained in §§ 1.482-1 and 1.482-2 of the Federal income tax regulations (26 C.F.R. § 1.482-1; 26 C.F.R. § 1.482-2) to the extent that they are relevant and can be made applicable to the provisions of this paragraph.

   (4) Use of dollar amounts in computing tax.

      (i) Any amount required to be included in a return may be entered at the nearest whole dollar amount. This does not apply to the items which must be taken into account in making the computations necessary to determine such amount. For example, each taxable dividend received must be taken into account at its exact amount, including cents, in computing the amount of dividend income to be included in the banking corporation tax return. However, the total amount of dividend income to be included in the return may be entered at the nearest whole dollar amount. A taxpayer may elect not to use whole dollar amounts by reporting all amounts in full, including cents, if a similar election is made for Federal income tax purposes. Such election must be made at the time of filing the return and is irrevocable with respect to the taxable year covered by the return. A new election may be made on any return for any subsequent taxable year.

      (ii) For the purpose of reporting amounts at the nearest whole dollar, a fractional part of the dollar shall be disregarded unless it amounts to one-half dollar or more, in which case the amount (determined without regard to the fractional part of a dollar) shall be increased by one dollar.

         Example:

Exact amount To be reported as
$500,000.49 $500,000.00
$500,000.50 $500,001.00
$500,000.51 $500,001.00

~

  1. Basic tax – measured by entire net income.

   (1) General. (Administrative Code, § 11-643.5(a))

      (i) The basic tax is measured by entire net income, or the portion thereof allocated to New York City, and is the measure of the tax unless the computation of the alternative minimum tax produces a greater amount of tax. The basic tax is computed by multiplying entire net income, or the portion thereof allocated to New York City, by the tax rate of nine percent.

      (ii) The portion of entire net income allocated to New York City is determined pursuant to 19 RCNY § 3-04(b) – Allocation of entire net income.

   (2) Definition of entire net income. (Administrative Code, § 11-641(a))

      (i) The term “entire net income” means total net income from all sources, which is the same as the taxable income which the taxpayer is required to report to the United States Treasury Department for purposes of the Federal income tax imposed by chapter one of the Internal Revenue Code with the adjustments required by paragraphs (3), (4) and (5) of this subdivision.

      (ii) “Federal taxable income” means taxable income as defined in § 63 of the Internal Revenue Code, and is the starting point in computing entire net income.

      (iii) Each corporation included in a Federal consolidated group must compute its Federal taxable income for purposes of the banking corporation tax law as if such corporation had computed its Federal taxable income on a separate basis for Federal income tax purposes. Provided, however, in the case of a target corporation, as defined in § 338(d)(2) of the Internal Revenue Code, that is a member of a selling consolidated group, as defined in § 338(h)(10)(B) of the Internal Revenue Code, with respect to which an election under § 338(h)(10) has been made, such election shall be recognized for purposes of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code. For purposes of determining entire net income, the Federal taxable income of such target corporation shall include any gain or loss on the deemed asset sale by such target corporation recognized by virtue of such election. For purposes of determining entire net income, the Federal taxable income of a member of the selling consolidated group, as so defined, that is subject to tax under such Subchapter shall not include any gain or loss on the sale or exchange of stock of such target corporation not recognized by virtue of such election.

      (iv) For purposes of determining entire net income of an affiliated target corporation, as defined in Treasury Regulation § 1.338(h)(10)-1(b)(3) that is a member of a selling affiliated group that does not file a Federal consolidated return, and for which an election under § 338(h)(10) of the Internal Revenue Code has been made, the Federal taxable income of such affiliated target corporation shall include any gain or loss on the deemed asset sale by such affiliated target corporation recognized by virtue of such election. For purposes of determining entire net income of the selling affiliate of such affiliated target corporation, Federal taxable income shall not include any gain or loss on the sale or exchange of stock of such affiliated target corporation not recognized by virtue of such election.

      (v) The income actually reported or the income actually determined for Federal income tax purposes is not necessarily the same as the taxable income which should have been reported for Federal income tax purposes under the provisions of the Internal Revenue Code. Generally the determination of the Commissioner of Internal Revenue as to Federal taxable income is followed, but it is not binding on the Commissioner of Finance.

      (vi) For purposes of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code, any election pursuant to § 338(h)(10) of the Internal Revenue Code made with respect to a target corporation that is an S corporation for Federal tax purposes will be deemed to be an invalid election and will not be recognized for purposes of such subchapter. If pursuant to this subparagraph, a § 338(h)(10) election of an S corporation is not recognized, the corresponding election pursuant to § 338(g) will be deemed invalid and will not be recognized for purposes of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code. See Treas. Reg. § 1.338(h)(10)-1(c)(4). The basis of the assets of the target corporation will be determined without regard to any adjustments made pursuant to § 338(b).

   (3) Adjustments – items to be added to federal taxable income. (Administrative Code, § 11-641)

      (i) In computing entire net income, Federal taxable income must be adjusted by adding to it:

         (A) in the case of a corporation organized under the laws of a country other than the United States,

            (a)any part of any income from dividends (including any part of any dividend for which a deduction has been allowed for Federal income tax purposes) or interest on any kind of stock, securities or indebtedness which has been excluded from Federal taxable income (such as interest income on certain obligations of the United States and its instrumentalities), but only if such income is treated as effectively connected with the conduct of a trade or business in the United States pursuant to § 864 of the Internal Revenue Code,

            (b)any income exempt from Federal taxable income under any treaty obligation of the United States, but only if such income would be treated as effectively connected in the absence of such exemption, provided that such treaty obligation does not preclude the taxation of such income by a state, or

            (c)any income which would be treated as effectively connected if such income were not excluded from gross income pursuant to § 103(a) of the Internal Revenue Code, or

         (B) (a) in the case of any other corporation, any part of any income from dividends (including any part of any dividend for which a deduction has been allowed for Federal income tax purposes) or interest on any kind of stock, securities or indebtedness which has been excluded from Federal taxable income (such as interest income on state and municipal bonds and certain obligations of the United States and its instrumentalities);

            (b)taxes on or measured by income or profits paid or accrued within the taxable year to the United States, or any of its possessions or to any foreign country for which a deduction has been allowed for Federal income tax purposes; any net operating loss deduction for the taxable year allowable for Federal income tax purposes;

            (c)any net operating loss deduction for the taxable year allowable for Federal income tax purposes;

            (d)any tax imposed under article 32 of the Tax Law and any tax imposed under the banking corporation tax law which were deducted in computing Federal taxable income;

            (e)any amount which the taxpayer claimed as a deduction in computing its Federal taxable income solely as a result of an election made pursuant to § 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in such section;

            (f)any amount which the taxpayer would have been required to include in the computation of its Federal taxable income had it not made the election permitted pursuant to § 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in such section;

            (g)the amount allowable as the accelerated cost recovery system deduction pursuant to § 168 of the Internal Revenue Code, except with respect to

               (1)recovery property subject to the provisions of § 280F of the Internal Revenue Code (regarding luxury automobiles and certain property used for personal purposes) and

               (2)recovery property placed in service in New York State in taxable years beginning after December 31, 1984;

            (h)upon the disposition of recovery property to which 19 RCNY § 3-03(b)(4)(ii)(G) applies, the amount, if any, by which the aggregate of the deductions for depreciation attributable to such property deducted in computing entire net income pursuant to such subparagraph (ii)(G) exceeds the aggregate accelerated cost recovery system deduction attributable to such property, described in subparagraph (g) of this paragraph

            (i)any capital loss carry forward allowed as a deduction in computing Federal taxable income under § 1212 of the Internal Revenue Code which was deductible as a loss under Part 1 or Part 2 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code; and

            (j)any other amount allowed as a deduction for Federal income tax purposes which was allowable as a deduction in computing net income under Part 1 or Part 2 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code.

   (4) Adjustments – items to be deducted from federal taxable income. (Administrative Code, § 11-641)

      (i) In computing entire net income, Federal taxable income must be adjusted by subtracting from it:

         (A) any refund or credit of a tax imposed under Article 32 of the Tax Law or any refund or credit of the tax imposed under the banking corporation tax law for which tax no exclusion or deduction was allowed in determining the taxpayer’s entire net income under the banking corporation tax law for any prior year;

         (B) any amount treated as a dividend pursuant to § 78 of the Internal Revenue Code;

         (C) any amount of income or gain includible in determining Federal taxable income for the taxable year, determined pursuant to the installment method under § 453 of the Internal Revenue Code, resulting from the sale of real or personal property to the extent that the income or gain was included in the computation of net income under Part 1 or Part 2 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code; and

         (D) any other amount of income or gain which was properly included in the computation of net income under Part 1 or Part 2 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code.

      (ii) In computing entire net income, a deduction shall be allowed, to the extent not deductible in determining Federal taxable income, for the following:

         (A) interest on indebtedness incurred or continued to purchase or carry obligations or securities the income of which is subject to tax under the banking corporation tax law but exempt for Federal income tax purposes;

         (B) ordinary and necessary expenses paid or incurred during the taxable year attributable to income which is subject to tax under the banking corporation tax law but exempt for Federal income tax purposes;

         (C) the amortized portion of a bond premium for the taxable year on any bond the interest on which is subject to tax under the banking corporation tax law but exempt for Federal income tax purposes;

         (D) that portion of wages and salaries paid or incurred for the taxable year for which a deduction is not allowed pursuant to the provisions of § 280C of the Internal Revenue Code;

         (E) any amount which is included in the taxpayer’s Federal taxable income solely as a result of an election made pursuant to § 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in such section;

         (F) any amount which the taxpayer could have excluded from Federal taxable income had it not made the election provided for in § 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in such section;

         (G) with respect to recovery property for which the accelerated cost recovery system deduction is allowed pursuant to § 168 of the Internal Revenue Code, the amount allowable as the depreciation deduction pursuant to § 167 of the Internal Revenue Code as such section would have applied to property placed in service on December 31, 1980, except recovery property

            (a) subject to § 280F of the Internal Revenue Code (regarding luxury automobiles and certain property used for personal purposes),

            (b) placed in service in New York State in taxable years beginning after December 31, 1984, or

            (c) to which the adjustment required by 19 RCNY § 3-03(b)(3)(v) applies;

         (H) upon the disposition of recovery property to which subparagraph (ii)(G) of this paragraph applies, the amount, if any, by which the aggregate accelerated cost recovery system deduction attributable to such property, described in 19 RCNY § 3-03(b)(3)(vii) exceeds the aggregate of the deductions for depreciation attributable to such property deducted in computing entire net income pursuant to subparagraph (ii)(G) of this paragraph;

         (I) any amount of money or other property received from the Federal Deposit Insurance Corporation pursuant to § 13(c) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(c)) regardless of whether any note or other instrument is issued in exchange therefore;

         (J) any amount of money or other property received from the Federal Savings and Loan Insurance Corporation pursuant to § 406(f)(1), (2), (3) or (4) of the Federal National Housing Act, as amended, (12 U.S.C. § 1729(f)(1), (2), (3) or (4)) regardless of whether any note or other instrument is issued in exchange therefor;

         (K) (a) 17 percent of interest income from subsidiary capital, and

            (b) 60 percent of dividend income, gains and losses from subsidiary capital to the extent not already deducted pursuant to subparagraph (i)(B) of this paragraph;

         (L) 22 1/2 percent of interest income on obligations of New York State, or of any political subdivision thereof, or of the United States, other than obligations held for resale in connection with regular trading activities. The term “obligation” refers to obligations incurred in the exercise of the borrowing power of New York State or any of its political subdivisions or of the United States. This term does not refer to a guarantee of the debt of a third party. The following are examples of instruments that are not obligations incurred in the exercise of the borrowing power of New York State or any of its political subdivisions or of the United States:

            (a) guaranteed student loans,

            (b) industrial development bonds issued pursuant to article 18-A of the New York State General Municipal Law,

            (c) Federal National Mortgage Association mortgage-backed securities, and

            (d) Government National Mortgage Association mortgage-backed securities,

The Commissioner of Finance will publish on a regular basis a list of obligations which meet the requirements of this paragraph.

      (iii) In the case of the sale or exchange of depreciable property which was subject to Part 1 or Part 2 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code and has a higher adjusted basis for New York City tax purposes than for Federal income tax purposes, a deduction is allowed in computing entire net income for the portion of the gain or loss which equals the difference in the basis, except as provided in subparagraphs (ii)(A), (ii)(B) or (ii)(C) of this paragraph:

         (A) for property of a taxpayer, other than a savings bank or a savings and loan association, acquired prior to January 1, 1966 and disposed of thereafter, no gain will be deemed to have been derived if either the cost or fair market price or value on January 1, 1966, exceeds the value realized, nor a loss sustained if either the cost or fair market price or value on January 1, 1966 is less than the value realized;

         (B) for the purpose of ascertaining a gain or loss from the sale, exchange or other disposition of:

            (a) property of a taxpayer, other than a savings bank or a savings and loan association, acquired prior to January 1, 1966 and disposed of thereafter, the basis for computing a gain when both the cost and the fair market price or value on January 1, 1966 are less than the value realized, is the cost or fair market price or value on that date, whichever is higher, and the basis for computing a loss when both the cost and the fair market price or value on January 1, 1966 exceeds the value realized, is the cost or fair market price or value on that date, whichever is lower;

            (b) property of a savings and loan association acquired prior to January 1, 1966 and disposed of thereafter, the basis of such property shall be the fair market price or value on January 1, 1966.

      (iv) The term “cost,” for purposes of subparagraph (iii) of this paragraph, means the purchase price less the depreciation properly chargeable against the property since the date of acquisition, plus the cost of any permanent improvements made to the property subsequent to acquisition, less the depreciation thereon from the date such permanent improvements were completed. In the case of bonds, the purchase price shall be reduced by the total amount of amortizable bond premium allowable under § 11-621(a)(9) or § 11-629(i) of the Administrative Code. In the case of property acquired by exchange, the fair market value of the property at the date acquired shall be considered as being the purchase price of such property, except in those cases where these regulations provide that the property received in exchange shall be considered as substituted for and have the same value as the property exchanged. In the case of property which is included in an inventory, the “cost” of such property shall be the last inventory value thereof made in accordance with the method of accounting on which the taxpayer’s books are kept.

      (v) The term “fair market price or value on January 1, 1966” means the exchange value of the property on that date. Where there has been a change in the market value of the property since acquisition, but the actual market value of the property on January 1, 1966 is not proved conclusively, the difference between its selling price and its cost, as herein defined, disregarding the cost of permanent improvements made since December 31, 1966, and the depreciation thereon, will be deemed to have arisen ratably over the period during which the property was held and the January 1, 1966 value will be determined accordingly. In the case of securities dealt in on a recognized exchange, the fair market value on January 1, 1966 will ordinarily be determined by the average of the bid and asked prices after closing on December 31, 1965. In all other cases, other evidence of value is necessary, and bona fide sales nearest January 1, 1966, of securities publicly or privately dealt in, will be considered.

   (5) Other items affecting entire net income. (Administrative Code, § 11-641)

      (i) Entire net income may be affected by the following:

         (A) In the case of property placed in service prior to January 1, 1973 for which the taxpayer properly adopted a method of computing depreciation under §§ 11-621 or 11-629 of the Administrative Code which was different than the method adopted for Federal income tax purposes, entire net income shall be computed by adding to Federal taxable income the deduction for depreciation on such property used in the computation of Federal taxable income and by subtracting from Federal taxable income a deduction for depreciation on such property computed as if such deduction were determined by the method of depreciation adopted under §§ 11-621 or 11-629 of the Administrative Code.

         (B) A deduction is allowed for depreciation, at the election of the taxpayer, for certain tangible property located in New York City. (See: 19 RCNY § 3-04(h)(5) – Optional depreciation.)

         (C) Provided an election has not been made pursuant to 19 RCNY § 3-04(b)(3), a deduction is allowed for the adjusted eligible net income, as described in 19 RCNY § 3-03(c), of the IBF of the taxpayer. In the event adjusted eligible net income is a loss, the amount of such loss is added to entire net income.

         (D) Entire net income is to be computed without regard to the reduction in the basis of property that is required by § 362 of the Internal Revenue Code because of any amount of money or other property received from the Federal Deposit Insurance Corporation pursuant to § 13(c) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(c)) or from the Federal Savings and Loan Insurance Corporation pursuant to § 406(f)(1), (2), (3) or (4) of the Federal National Housing Act, as amended, (12 U.S.C. § 1729(f)(1), (2), (3) or (4)).

      (ii) A taxpayer sustaining a net capital loss for Federal income tax purposes is permitted to carry back or carry forward such loss to the same extent and to the same years as is allowed under § 1212 of the Internal Revenue Code. A corporation which files as part of a consolidated group for Federal income tax purposes but files on a separate basis for purposes of the banking corporation tax law must compute its net capital loss as if it were filing on a separate basis for Federal income tax purposes.

   (6) Computation of entire net income on a combined return (Administrative Code, § 11-646(f))

      (i) Each corporation included in the combined return is to compute its entire net income as if it had filed its Federal income tax return on a separate basis. Then, to compute combined entire net income, all intercorporate dividends and intercorporate transactions between the corporations included in the combined return must be eliminated. In applying the foregoing, intercorporate profits are deferred, capital losses are to be offset against capital gains and contributions are to be deducted as if the corporations in the group had filed a consolidated Federal income tax return.

      (ii) If any corporation included in the combined return makes the IBF election pursuant to 19 RCNY § 3-04(b)(3), all corporations included in the combined return will be deemed to have made the election.

      (iii) In no event will an item of income or expense of a corporation organized under the laws of a country other than the United States be included in a combined return unless it is includible in entire net income or alternative entire net income.

      (iv) As to when combined returns will be permitted or required, see 19 RCNY § 3-05(b) – Combined returns.

   (7) Taxable year in which income or deduction is included in entire net income. (Administrative Code, § 11-641(m)) In general, the method of accounting used in computing taxable income for Federal income tax purposes is the method used in computing entire net income. However, when the Commissioner of Finance deems it necessary in order to properly reflect the entire net income of the taxpayer, it may determine the taxable year or period in which any item of income or deduction shall be included without regard to the method of accounting used by the taxpayer for Federal income tax purposes.

   (8) Adjusting entire net income to period covered by return. (Tax Law, § 11-641(i))

      (i) If the entire net income required to be reported under the banking corporation tax law is for a period different than the period covered by the taxpayer’s Federal income tax return, the taxpayer’s entire net income must be prorated to correspond with the period covered by the return under the banking corporation tax law. The prorated entire net income is computed as follows:

         (A) adjust Federal taxable income in the manner set forth in paragraphs (3), (4) and (5) of this subdivision;

         (B) divide entire net income by the number of calendar months, or major parts thereof, covered by the return for Federal income tax purposes; and

         (C) multiply the result by the number of calendar months, or major parts thereof, covered by the return under the banking corporation tax law.

Example: A banking corporation organized in France has been doing business since 1973 in the United States and began to do business in New York City on May 10, 1985, and reports on a calendar year basis. Its entire net income for calendar year 1985 is $12,000. For purposes of computing the tax measured by entire net income for taxable year 1985, entire net income must be divided by 12 and the result multiplied by 8 (the number of months from May to December), resulting in a prorated entire net income of $8,000.

      (ii) The method of computing entire net income for a short period, as set forth in this paragraph, applies to taxpayers reporting on either a calendar year or fiscal year basis for Federal income tax purposes.

      (iii) If, in the opinion of the Commissioner of Finance the method described in this paragraph does not properly reflect the taxpayer’s entire net income for purposes of the banking corporation tax law during the period covered by its return, the Commissioner of Finance may determine entire net income solely on the basis of the taxpayer’s income during such period.

   (9) Correcting distortion of entire net income. (Administrative Code, § 11-646(g)) For rules relating to the power of the Commissioner of Finance to correct distortion of entire net income, see 19 RCNY § 3-03(a)(3).

  1. International banking facility (IBF). (1) General. (Administrative Code, § 11-641(f))

      (i) Provided an election has not been made pursuant to 19 RCNY § 3-04(b)(3), a taxpayer which establishes an IBF, as defined in 19 RCNY § 3-01(b) “International banking facility”, is allowed as a deduction in computing its entire net income the adjusted eligible net income, as determined in this subdivision, of such IBF. However, in the event the adjusted eligible net income of the IBF is a loss, the amount of such loss must be added to Federal taxable income in computing the taxpayer’s entire net income.

      (ii) The adjusted eligible net income of an IBF is computed by subtracting from eligible gross income the following:

         (A) expenses or other deductions directly or indirectly attributable to eligible gross income;

         (B) the ineligible funding amount; and

         (C) the floor amount.

      (iii) An IBF is required to:

         (A) make loans to and receive deposits from foreign persons as defined in 19 RCNY § 3-03(c)(2); and

         (B) maintain books and records that accurately reflect gross income, gains, losses, deductions, assets, liabilities and other activities of the IBF for the taxable year and make available to the Commissioner of Finance upon his request any information necessary to substantiate the deduction determined in this subdivision (c). Such information may include, but shall not be limited to: (a) a list of all loans made, arranged for, placed or serviced during the taxable year indicating the borrower, loan number, date proceeds disbursed, maturity date, amount borrowed and terms; (b) a list of all deposits made or placed during the taxable year indicating where such deposits were made or placed, date of deposit, amount and terms; and (c) a list of all depositors for the taxable year.

   (2) Meaning of certain terms. (Administrative Code, § 11-641(f)) As used in this subdivision, the following terms have these meanings:

      Agency. The term “agency” means a branch.

      Deposit. The term “deposit” means an IBF time deposit as defined in § 204.8(a)(2) of the Federal Reserve System regulations (12 C.F.R. § 204.8(a)(2)).

      Domestic. The term “domestic” when applied to a corporation or partnership means a corporation or partnership created or organized in the United States or under the laws of the United States or of any state.

      Domestic branch. The term “domestic branch” means any branch located in the United States.

      Foreign. The term “foreign” when applied to a corporation or partnership means a corporation or partnership which is not domestic.

      Foreign branch. The term “foreign branch” means any branch located outside the United States.

      Foreign person. The term “foreign person” means:

         (A) a nonresident individual;

         (B) a foreign corporation, a foreign partnership or a foreign trust, other than a domestic branch thereof;

         (C) a foreign branch of a domestic corporation;

         (D) a foreign branch of the taxpayer;

         (E) a foreign government or an international organization or an agency of either; or

         (F) another international banking facility located within or without New York State.

      Foreign trust. The term “foreign trust” means a trust, the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income for Federal income tax purposes.

      Ineligible gross income. The term “ineligible gross income” means gross income (including gross income from interoffice transactions) of the IBF that is other than eligible gross income.

      International organization. The term “international organization” means an organization as defined in § 7701(a)(18) of the Internal Revenue Code, an organization as described in § 204.125 of the Federal Reserve System regulations (12 C.F.R. § 204.125) and the World Bank.

      Loan. The term “loan” means any loan, whether the transaction is represented by a promissory note, security, acknowledgement of advance, due bill, repurchase agreement or any other form of credit transaction, if the related asset is recorded in the financial accounts of the IBF.

      Nonresident individual. The term “nonresident individual” means an individual who resides principally outside the United States at the time of the transaction.

      Resident individual. The term “resident individual” means an individual who resides principally within the United States at the time of the transaction.

      United States. The term “United States” means the 50 states and the District of Columbia.

   (3) Adjusted eligible net income. (Administrative Code, § 11-641(f) and (m))

      (i) The adjusted eligible net income of the IBF is allowed as a deduction in computing the taxpayer’s entire net income, to the extent not deductible in determining Federal taxable income. This deduction is taken before the taxpayer allocates its entire net income within and without New York City. The adjusted eligible net income of the IBF is determined by subtracting from the eligible net income of the IBF the ineligible funding amount (See: 19 RCNY § 3-03(c)(10) – Ineligible funding amount) and the floor amount (See: 19 RCNY § 3-03(c)(11) – Floor amount). The eligible net income of the IBF is the amount remaining after subtracting from the eligible gross income of the IBF (See: 19 RCNY § 3-03(c)(4) – Eligible gross income) the expenses applicable to such gross income (See: 19 RCNY § 3-03(c)(5) – Direct expenses of the IBF, 19 RCNY § 3-03(c)(6) – Interest expense of the IBF, 19 RCNY § 3-03(c)(7) – Bad debt deduction of the IBF, and 19 RCNY § 3-03(c)(8) – Indirect expenses of the IBF, including head office expenses). When the IBF has eligible gross income and ineligible gross income for the taxable year, eligible net income of the IBF is computed by reducing eligible gross income by those expenses which are apportioned to eligible gross income pursuant to 19 RCNY § 3-03(c)(9).

      (ii) The eligible gross income of the IBF is the amount of gross income (including gross income from interoffice transactions) derived from the activities described in 19 RCNY § 3-03(c)(4) that would be includible in the computation of the IBF’s entire net income for the taxable year, as if the IBF were a separate corporation.

      (iii) Expenses applicable to the eligible gross income of the IBF are those expenses or other deductions (including expenses or other deductions from interoffice transactions) described in paragraphs (5), (6), (7) and (8) of this subdivision that are directly or indirectly attributable to the eligible gross income of the IBF.

      (iv) The Commissioner of Finance may, whenever necessary in order to properly reflect the adjusted eligible net income or the entire net income of the taxpayer, determine the taxable year in which any item of income or deduction shall be included without regard to the method of accounting used by the taxpayer.

   (4) Eligible gross income. (Administrative Code, § 11-641(F)(2))

      (i) Eligible gross income includes gross income derived from making, arranging for, placing or servicing loans to foreign persons, except that such gross income derived from those foreign persons described in subparagraph (ii) of this paragraph is eligible gross income only when substantially all the proceeds of the loan are for use outside the United States. Eligible gross income includes fees, such as arrangement, commitment and letter of credit fees received from foreign persons regardless of when or whether the loans are made, and management fees from servicing loans to foreign persons. Eligible gross income includes interest income received from a loan made to or a deposit placed with a foreign person which was purchased without recourse as against any prior owner and meets the restrictions set forth in 12 C.F.R. § 204-122. Eligible gross income does not include income received from the purchasing or selling of assets from or to third parties, such as loans (including loan participations), securities, certificates of deposit and bankers’ acceptances. For an asset to be treated as recorded in the financial accounts of the IBF, such asset must be recorded in the financial accounts of the IBF:

         (A) in accordance with the usual recording practices of the taxpayer; or

         (B) in the case of assets transferred to the IBF when the IBF is created, within the transfer time allowed for Federal Reserve purposes.

      (ii) Gross income derived from making, arranging for, placing or servicing a loan to a foreign person which is:

         (A) a nonresident individual;

         (B) a foreign branch of a domestic corporation (other than a foreign branch of a domestic bank);

         (C) a foreign corporation which is 80 percent or more owned or controlled, either directly or indirectly, by one or more domestic corporations (except corporations which are banks), domestic partnerships or resident individuals; or

         (D) a foreign partnership which is 80 percent or more owned or controlled, either directly or indirectly, by one or more domestic corporations (except corporations which are banks), domestic partnerships or resident individuals; is eligible gross income only when substantially all the proceeds of the loan are for use outside the United States. For purposes of this subdivision (c), the phrase “substantially all the proceeds of the loan are for use outside of the United States” means that at least 95 percent of the proceeds of the loan must be used outside the United States to finance the operations of the borrower or its affiliates located outside the United States. An affiliate is a corporation or partnership which is 80 percent or more owned or controlled, either directly or indirectly, by the borrower. The use-of-proceeds requirement for New York City tax purposes is deemed to be satisfied based on the stated purpose of the loan and a written statement of the foreign person to whom a loan is made stating that such foreign person, or another foreign person that is affiliated with such foreign person, will use the proceeds of the loan outside the United States. The written statement may be in the form of a representation or covenant in any agreement relating to the loan or a separate certificate or other written statement of the foreign person, such as the model statement set forth by the Federal Reserve Board. If the taxpayer is unable to obtain such a written statement, the Commissioner of Finance will consider other evidence that the proceeds of the loan are for use outside the United States. For purposes of this subparagraph (ii), the term “owned or controlled, either directly or indirectly” means, in the case of a corporation, the power to direct or cause the direction of the management and policies of a corporation, whether through the ownership of at least 80 percent of the voting stock of such corporation or through the ownership of at least 80 percent of the voting stock of any other corporation which possesses such power, or, in the case of a partnership, the power to direct or cause the direction of the management and policies of the partnership, or ownership of at least 80 percent of the profits interest or at least 80 percent of the capital interest of such partnership.

      (iii) Eligible gross income includes gross income derived from making or placing deposits, if the related asset is recorded in the financial accounts of the IBF, with foreign persons which are:

         (A) banks;

         (B) foreign branches of a bank, including foreign branches of the taxpayer;

         (C) foreign banks which are subsidiaries of a bank, including foreign banks which are subsidiaries of the taxpayer; or

         (D) other IBFs. The term “deposit” as used in this subparagraph (iii) means the amount of money received or held by such foreign person for which it has given or is obligated to give credit, either conditionally or unconditionally, to a deposit liability account, including interest credited to such account, or which is evidenced by such foreign person’s certificate of deposit.

      (iv) Eligible gross income includes gross income derived from foreign exchange trading or hedging transactions that are solely entered into for or directly traceable to any of the transactions described in subparagraphs (i), (ii) or (iii) of this paragraph. Gross income from foreign exchange trading or hedging transactions related to a deposit (as defined in 19 RCNY § 3-03(c)(2)) from a foreign person, is eligible gross income when such deposit can be traced directly to a transaction described in subparagraphs (i), (ii) or (iii) of this paragraph. A foreign exchange trading or hedging transaction is not solely entered into for or directly traceable to any of the transactions described in subparagraphs (i), (ii) or (iii) of this paragraph unless the foreign exchange trading or hedging transaction is recorded in the financial accounts of the IBF. The term “foreign exchange trading or hedging transaction” as used in this subparagraph means:

         (A) the purchase, sale or exchange of foreign currency; or

         (B) the acquisition, disposition or performance of any contract to purchase, sell or exchange foreign currency at a future date under terms fixed in the contract if the contract hedges a foreign currency denominated loan or deposit. A forward contract hedges such foreign currency denominated loan or deposit if the effect of a change in the value of the foreign currency on the United States dollar value of the forward contract, either alone or in combination with other such contracts, offsets the effect of the change on the United States dollar value of such foreign currency denominated loan or deposit. A hedging relationship may be established by reference to particular facts and circumstances (for example, the amount of the forward contract, particular currency, initial date and maturity) indicating a hedging purpose, or by designating a contract as being intended for the purpose of hedging a loan or deposit.

   (5) Direct expenses of the IBF. (Administrative Code, § 11-641(f)(3))

      (i) Expenses or other deductions which can be specifically identified with the gross income, gains, losses, deductions, assets, liabilities or other activities of the IBF are direct expenses, regardless of where such expenses or other deductions are recorded. Direct expenses may include such items as interest, bad debts, rents, depreciation, taxes, insurance, supplies, compensation of officers, salaries, wages, travel expenses, pension plans, charitable contributions, training, servicing, etc.

      (ii) Employee expenses incurred at places other than the IBF are allocated to the IBF when the employee is regularly connected with the IBF regardless of where the services of such employee were actually performed.

      (iii) If the IBF incurs an expense which can be specifically identified with one or more places of business of the taxpayer, such expense must be directly allocated to such place or places of business.

      (iv) Head office expenses that can be specifically identified with the gross income, gains, losses, deductions, assets, liabilities or other activities of the IBF are directly allocated to the IBF.

      (v) If a portion of an expense can be specifically identified with the IBF, that portion of the expense must be directly allocated to the IBF. The portion of such expense that cannot be directly allocated to one or more places of business of the taxpayer must be indirectly allocated to the IBF pursuant to 19 RCNY § 3-03(c)(8).

   (6) Interest expense of the IBF. (Administrative Code, § 11-641(f)(3))

      (i) Interest expense of the IBF includes interest paid or accrued on funds borrowed by the IBF and/or interest paid or accrued on deposits recorded on the books as IBF liabilities. A taxpayer that determines its interest expense deduction for Federal income tax purposes pursuant to § 1.882-5 of the Federal income tax regulations (26 C.F.R. § 1.882-5) must compute the interest expense of the IBF for New York City tax purposes as described in subparagraph (iii) of this paragraph. Every other taxpayer must compute the interest expense of the IBF for New York City tax purposes as described in subparagraph (ii) of this paragraph.

      (ii) The interest expense of the IBF is the sum of the amount of interest expense determined in subparagraph (ii)(A) of this paragraph and the total deemed interest expense determined in subparagraph (ii)(B) of this paragraph.

         (A) Interest expense on the borrowings and deposits from other than a branch, agency or other office of the bank which established the IBF is the interest expense deduction on such borrowings and deposits that was allowed for Federal income tax purposes.

         (B) Each deposit placed with the IBF by a branch, agency or other office of the bank which established the IBF (for purposes of this subparagraph called the “lending office”) and each borrowing from such lending office shall be deemed to bear interest computed by using the following applicable rates: (a) a rate of interest representing the interest cost of the lending office on arm’s length borrowings made to obtain funds which were loaned to, deposited in or placed with the IBF; or (b) the average rate of interest incurred by the lending office which is equal to the ratio of the total amount of interest expense from arm’s length transactions recorded in the financial accounts of the lending office for the taxable year to the average amount of liabilities from borrowings and deposits owed from such arm’s length transactions recorded in the financial accounts of the lending office for the taxable year averaged on a quarterly or more frequent basis; or (c) any other rate which the taxpayer establishes to the Commissioner of Finance as a more appropriate rate.

      (iii) (A) A taxpayer that determines its interest expense deduction for Federal income tax purposes pursuant to § 1.882-5 of the Federal income tax regulations (26 C.F.R. § 1.882-5) must compute its interest expense of the IBF for New York City tax purposes in the same manner, using the same liabilities-to-assets ratio, the same method (branch book/dollar pool or separate currency pools), the same interest rate or rates and the same method of valuation it actually used in the computation of its Federal interest expense deduction for the taxable year. In determining the IBF’s interest expense for New York City tax purposes, the three-step process described in § 1.882-5 of the Federal income tax regulations (26 C.F.R. § 1.882-5) is applied using the following rules:

            (a)The term “interoffice” means the activities between the IBF and the separate branches, agencies, or offices of the taxpayer.

            (b)The classification of items as assets or liabilities must be on a consistent basis from year to year and determined according to U.S. tax principles.

            (c)The average total value of IBF assets must be stated in U.S. dollars and valued by the same method (book or fair market) used for Federal income tax purposes. The actual value used in the Federal computation must be used in the asset determination for New York City tax purposes.

            (d)The average total value of assets and the average total amount of liabilities is determined by using the same interval (daily, weekly, etc.) actually used for Federal income tax purposes.

            (e)A particular asset value or liability amount that is denominated in one currency is translated into another currency at the exchange rate for the date the value or amount is determined for purposes of this subparagraph. An interest expense amount shown on the books is translated at the exchange rate from a qualified source for the date the amount is paid or accrued. Qualified sources of exchange rates must be determined under the rules of § 1.964-1(d)(5) of the Federal income tax regulations (26 C.F.R. § 1.964-1(d)(5)).

         (B) The asset determination in Step 1 of the Federal three-step process is the average total value of all of the IBF assets (including interoffice) shown on the books that generate, have generated, or could reasonably have been or be expected to generate income, gain or loss which is or would be included in the computation of entire net income for the taxable year, or portion thereof.

         (C) The liability determination in Step 2 of the Federal three-step process is the amount of IBF-connected liabilities for the taxable year, or portion thereof, determined by multiplying the average total value of assets determined in subparagraph (iii)(B) of this paragraph, by the same percentage actually used for Federal income tax purposes for the taxable year.

         (D) If the taxpayer used, for Federal income tax purposes, the separate currency pools method in Step 3 of the Federal three-step process, the IBF interest expense for New York City tax purposes is the sum of the separate interest expenses for each currency in which the IBF has borrowed. If the IBF borrowed in a currency for which it did not compute an interest expense for Federal income tax purposes, it must compute its IBF interest expense for that currency as if it actually had an interest expense for such currency for Federal income tax purposes. The interest expense for each currency is determined as follows: (a) the amount of IBF-connected liabilities determined in subparagraph (iii)(C) of this paragraph multiplied by; (b) the ratio, stated in the same currency used for Federal income tax purposes, of (1) the average total amount of IBF liabilities denominated in the particular currency shown on the books (including interoffice) for the taxable year, or portion thereof, to (2) the average total amount of all IBF liabilities shown on the books (including interoffice) for the taxable year, or portion thereof, multiplied by; (c) the average worldwide interest rate actually used for Federal income tax purposes in computing that particular currency.

         (E) If the taxpayer used, for Federal income tax purposes, the branch book/dollar pool method in Step 3 of the Federal three-step process and Section 1.882-5(b)(3)(i)(A) of the Federal income tax regulations (26 C.F.R. § 1.882-5(b)(3)(i)(A)) applied, the IBF interest expense for New York City tax purposes is determined by multiplying the IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, by the same average U.S.-connected interest rate actually used for Federal income tax purposes.

         (F) If the taxpayer used, for Federal income tax purposes, the branch book/dollar pool method in Step 3 of the Federal three-step process and § 1.882-5(b)(3)(i)(B) of the Federal income tax regulations (26 C.F.R. § 1.882-5(b)(3)(i)(B)) applied and the IBF-connected liabilities exceed the average total amount of IBF liabilities shown on the books (excluding interoffice), the IBF interest expense for New York City tax purposes is determined by adding: (a) the amount of IBF interest expense (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof; and (b) the amount determined by multiplying the excess of IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, over the average total amount of IBF liabilities (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof, by the average interest rate on U.S. dollar liabilities actually used for Federal income tax purposes.

         (G) If the taxpayer used, for Federal income tax purposes, the branch book/dollar pool method in Step 3 of the Federal three-step process and § 1.882-5(b)(3)(i)(B) of the Federal income tax regulations (26 C.F.R. § 1.882-5(b)(3)(i)(B)) applied and the IBF-connected liabilities do not exceed the average total amount of IBF liabilities shown on the books (excluding interoffice), the IBF interest expense for New York City tax purposes is determined by subtracting: (a) the amount determined by multiplying the difference between the average total amount of IBF liabilities (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof, and the IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, by the average interest rate on U.S. dollar liabilities actually used for Federal income tax purposes, from; (b) the amount of IBF interest expense (stated in U.S. dollars) shown on the books (excluding interoffice) for the taxable year, or portion thereof. If the amount determined in this paragraph results in a negative amount, the taxpayer must determine the interest expense of the IBF for New York City tax purposes by multiplying the IBF-connected liabilities, determined in subparagraph (iii)(C) of this paragraph, by the average IBF-connected interest rate. The average IBF-connected interest rate is the ratio, stated in U.S. dollars, of the total amount of IBF interest expense shown on the books (excluding interoffice) for the taxable year, or portion thereof, to the average total amount of IBF liabilities shown on the books (excluding interoffice) for the taxable year, or portion thereof.

   (7) Bad debt deduction of the IBF. (Administrative Code, § 11-641(f)(3))

      (i) In computing applicable direct expenses pursuant to paragraph(c)(5) of this section, the IBF of a taxpayer must compute its bad debt deduction by using the same method (direct charge-off or reserve) the bank used for Federal income tax purposes. A taxpayer which uses the direct charge-off method to compute its bad debt deduction for Federal income tax purposes, in accordance with subsection (a) of § 166 of the Internal Revenue Code, has as its IBF bad debt deduction the aggregate of those specific bad debts of the IBF from loans which produce or would have produced eligible gross income (hereinafter “IBF loans”) which were included in the bad debt deduction for Federal income tax purposes. A taxpayer which maintains a reserve balance for losses on loans, in accordance with §§ 585 or 593 of the Internal Revenue Code, for Federal income tax purposes must maintain in IBF reserve balance for losses on loans and has as its IBF bad debt deduction the addition to its IBF reserve balance for losses on loans.

      (ii) The addition to the IBF reserve balance for losses on loans is computed as follows:

         (A) (a) A taxpayer which computes its addition to its reserve balance for losses on loans for Federal income tax purposes pursuant to § 585(b)(2) (the percentage method) determines a fraction the numerator of which is the amount of IBF eligible loans and the denominator of which is the amount of eligible loans both within and without the IBF.

            (b) A taxpayer which computes its addition to its reserve balance for losses on loans for Federal income tax purposes pursuant to § 585(b)(3) (the experience method) determines a fraction the numerator of which is the amount of IBF outstanding loans and the denominator of which is the amount of outstanding loans both within and without the IBF.

            (c) A taxpayer which does not compute its addition to its reserve balance for losses on loans for Federal income tax purposes pursuant to § 585(b)(2) or (3) determines a fraction the numerator of which is the IBF amount which was included in the computation for Federal income tax purposes and the denominator of which is the amount used for Federal income tax purposes. The components of the fraction must reflect the method the taxpayer used for computing its addition to its reserve balance for losses on loans for Federal income tax purposes.

         (B) Multiply the fraction determined in subparagraph (ii)(A) of this paragraph by the Federal reserve balance for losses on loans after the taxable year’s reserve addition. The result is the IBF reserve balance for losses on loans.

         (C) Subtract the IBF reserve balance for losses on loans before the taxable year’s reserve addition from the IBF reserve balance for losses on loans computed in subparagraph (ii)(B) of this paragraph. The result is the addition to the IBF reserve balance for losses on loans. If the addition to the IBF reserve balance for losses on loans is a negative amount, the IBF bad debt deduction is a negative amount.

      (iii) For purposes of this paragraph the following rules apply:

         (A) The terms “loan,” “eligible loan,” “qualifying real property loan” and “nonqualifying loan” have the same meanings as defined in §§ 585 and 593, as the case may be, of the Internal Revenue Code and regulations promulgated thereunder. Therefore, interoffice loans do not qualify as eligible loans in computing the IBF bad debt deduction. Accordingly, the amount of the IBF bad debt deduction plus the amount of such deduction allocated without the IBF must equal the actual bad debt deduction taken for Federal income tax purposes.

         (B) When outstanding loans or eligible loans that are outstanding are transferred to the IBF the taxpayer must on the same date transfer to the IBF the portion of its reserve balance for losses on loans maintained for Federal income tax purposes which is attributable to such transferred loans. Such portion is computed by multiplying the Federal reserve balance for losses on loans on the date of transfer by a fraction: (a) the numerator of which is such loans that were transferred as of the date of transfer which were included in the computation of the Federal reserve balance for losses on loans for the previous taxable year; and (b) the denominator of which is the total of such loans as of the date of transfer which were included in the computation of the Federal reserve balance for losses on loans for the previous taxable year. When the outstanding loans or eligible loans that are outstanding are transferred from existing places of business, the reserve balance for such existing places of business must be reduced accordingly.

   (8) Indirect expenses of the IBF, including head office expenses. (Administrative Code, § 11-641(f)(3))

      (i) Expenses of the taxpayer, including head office expenses, which cannot be specifically identified with the gross income, gains, losses, deductions, assets, liabilities or other activities of the IBF or a place of business of the taxpayer, are indirect expenses and must be allocated on an indirect basis. Indirect expenses, including head office expenses, may include such items as interest, bad debts, compensation of officers, salaries, wages, travel expenses, pension plans, rents, taxes, depreciation, insurance, advertising, accounting, legal, charitable contributions, financing, operation supervision, technical, research, training, physical facilities, servicing, etc. For computation of the interest expense of the IBF and bad debt deduction of the IBF, see paragraphs (6) and (7) of this subdivision, respectively.

      (ii) Expenses that cannot be specifically identified with the IBF or any particular place of business of the taxpayer but are indirectly related to the gross income, gains, losses, deductions, assets, liabilities or other activities of the IBF, must be allocated by the method that properly reflects the allocation of such expenses to the IBF. Generally, the amount of indirect expenses allocable to the IBF is determined by multiplying such expenses by a fraction computed by either the gross asset method as described in subparagraph (ii)(A) of this paragraph, or the gross income method as described in subparagraph (ii)(B) of this paragraph.

         (A) Gross asset method. In the gross asset method, the numerator of the fraction is the average of all gross assets (except interoffice gross assets and goodwill) of the IBF of the taxpayer and the denominator is the average of all gross assets (except interoffice gross assets and goodwill) of the taxpayer. Where the numerator determined in the preceding sentence is zero, the numerator and denominator must be computed by including gross assets from interoffice transactions. In the case of a taxpayer which is a foreign corporation, “all gross assets” means such taxpayer’s assets located in the United States and its other assets used in connection with its trade or business in the United States. The average of all gross assets must be computed on a quarterly basis or, at the option of the taxpayer, on a more frequent basis such as monthly, weekly or daily. Loans and deposits are to be included on an average daily balance basis. When the taxpayer’s usual accounting practice does not permit a quarterly or more frequent computation of the average of all gross assets, a semi-annual or annual computation will be allowed when it appears to the Commissioner of Finance that no distortion of the average of all gross assets will result. Different periods of averaging may be used for different classes of assets. If, because of variations in the amount or value of any class of assets, it appears to the Commissioner of Finance that averaging on an annual, semi-annual or quarterly basis does not properly reflect the average of all gross assets, the Commissioner of Finance may require averaging on a more frequent basis. The method used to determine the average of all gross assets must be consistent and may not be changed on any subsequent return without the prior written consent of the Commissioner of Finance. Gross assets are valued as described in 19 RCNY § 3-03(e)(2)(iii).

         (B) Gross income method. In the gross income method, the numerator of the fraction is the gross income (excluding gross income from interoffice transactions) of the IBF of the taxpayer includible in the computation of entire net income for the taxable year and the denominator is the gross income (excluding gross income from interoffice transactions) of the taxpayer includible in the computation of entire net income for the taxable year. Where the numerator determined in the preceding sentence is zero, the numerator and denominator must be computed by including gross income from interoffice trans- actions.

         (C) Other method. Any other method that the taxpayer establishes to the Commissioner of Finance as a more appropriate method.

      (iii) Expenses that can be identified with the IBF and one or more places of business of the taxpayer, but not all places of business of the taxpayer, must be allocated by the method that properly reflects the allocation of such expenses to the IBF. The amount of such expenses allocable to the IBF is determined by multiplying such expenses by a fraction computed as described in subparagraph (ii) of this paragraph. However, in computing such fraction, the denominator is limited to the IBF and those places of business identified with such expenses.

      (iv) A taxpayer must use the same method in allocating all indirect expenses. The method a taxpayer uses in computing the allocation of indirect expenses as described in subparagraph (ii) of this paragraph may not be changed in subsequent years without the written consent of the Commissioner of Finance. If the Commissioner of Finance determines that the method used in allocating expenses, including head office expenses, does not properly reflect the expenses of the IBF, the Commissioner of Finance may require the taxpayer to allocate expenses by a different method.

   (9) Apportionment of expenses of the IBF. (Administrative Code, § 11-641(f)) When the IBF has eligible gross income and ineligible gross income, the expenses that are applicable to eligible gross income shall be the sum of the following amounts:

      (i) the amount of direct expenses of the IBF (as determined in 19 RCNY § 3-03(c)(5), (c)(6)(ii)(A), and (c)(7)) for the taxable year that are specifically identified with eligible gross income, and

      (ii) an amount computed by multiplying the sum of direct expenses of the IBF (as determined in 19 RCNY § 3-03(c)(5) and c)(6)(ii)(A)) for the taxable year that are not specifically identified with either the eligible gross income or the ineligible gross income of the IBF and all indirect expenses of the IBF (as determined in 19 RCNY § 3-03(c)(6) and (c)(8)) for the taxable year by a fraction, the numerator of which is the eligible gross income of the IBF for the taxable year and the denominator of which is the gross income of the IBF for the taxable year.

   (10) Ineligible funding amount. (Administrative Code, § 11-641(f)(5))

      (i) The ineligible funding amount of the IBF is determined by multiplying eligible net income (See: 19 RCNY § 3-03(c)(3)(i)), by the following fraction:

         (A) The numerator of the fraction is the average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year which were not owed to or received from foreign persons (the term “foreign person” is defined in 19 RCNY § 3-03(c)(2)(viii)).

         (B) The denominator of the fraction is the average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year.

      (ii) “All liabilities and other sources of funds of the IBF” include deposits, advances from the head office or other places of business of the taxpayer, accounts payable, notes and bonds payable, accrued expenses, deferred income, contingent liabilities, taxes payable, appropriated retained earnings (such as reserve for deferred taxes, dividends payable, etc.), unappropriated retained earnings, etc. Certain liabilities that are determined not be sources of funds may be excluded with the permission of the Commissioner of Finance. The average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year must be computed on a quarterly basis or, at the option of the taxpayer, on a more frequent basis such as monthly, weekly or daily. When the taxpayer’s usual accounting practice does not permit a quarterly or more frequent computation of the average aggregate amount of all liabilities and other sources of funds, a semi-annual or annual computation may be allowed when it appears that no distortion of the average aggregate amount of all liabilities and other sources of funds will result. Different periods of averaging may be used for different classes of liabilities. If, because of variations in the amount or value of any class of liabilities or other sources of funds, it appears to the Commissioner of Finance that averaging on an annual, semi-annual or quarterly basis does not properly reflect the average aggregate amount of all liabilities and other sources of funds, the Commissioner of Finance may require averaging on a more frequent basis. The method of determining the average aggregate amount of all liabilities and other sources of funds must be consistent and may not be changed on any subsequent return without the written consent of the Commissioner of Finance.

      (iii) The principles of separate accounting must be applied in determining the amount of liabilities and other sources of funds, including retained earnings, which were not owed to or received from foreign persons. Unless the taxpayer can substantiate that liabilities and other sources of funds, including retained earnings, were owed to or received from foreign persons, they are deemed to be owed to or received from other than foreign persons and included in the numerator described in subparagraph (i)(A) of this paragraph.

   (11) Floor amount. (Administrative Code, § 11-641(f)(b))

      (i) The floor amount is computed by multiplying the amount remaining, after reducing eligible net income (See: 19 RCNY § 3-03(c)(3)(i)) by the ineligible funding amount (See: 19 RCNY § 3-03(c)(10)(i)) by a fraction not greater than one. The fraction is determined as follows:

         (A) The numerator is the amount determined in subparagraph (i)(A)(a) of this paragraph multiplied by the applicable percentage stated in subparagraph (i)(A)(b) of this paragraph minus the amount determined in subparagraph (i)(A)(c) of this paragraph.

            (a)Determine the average aggregate amount of loans and deposits as described in subparagraph (ii) of this paragraph which were properly recorded in the financial accounts of the taxpayer’s branches, agencies and offices within New York State for taxable years beginning in 1975, 1976 and 1977. Loans and deposits related to net income reassigned to New York State by the New York State Tax Commission are not includible for purposes of this subparagraph (i)(A)(a). The average aggregate amount of such loans and deposits may be determined by reference to the monthly or quarterly reports of the taxpayer to the Federal Reserve Bank of New York, as appropriately modified.

            (b)The average aggregate amount determined in subparagraph (i)(A)(a) of this paragraph is multiplied by the following percentages:

               (1)100 percent for the first taxable year the taxpayer established the IBF and for the next succeeding four taxable years;

               (2)80 percent for the sixth taxable year;

               (3)60 percent for the seventh taxable year;

               (4)40 percent for the eighth taxable year;

               (5)20 percent for the ninth taxable year; and

               (6)zero percent for the tenth taxable year and thereafter.

            (c)The product obtained in subparagraph (i)(A)(b) of this paragraph is reduced by the average aggregate amount of loans and deposits as described in subparagraph (ii) of this paragraph which were properly recorded in the financial accounts of the taxpayer’s branches, agencies and offices within New York State (other than the IBF) for the current taxable year. If the amount determined in this subparagraph (i)(A)(c) is greater than the amount determined in subparagraph (i)(A)(b) of this paragraph, the numerator is zero.

         (B) The denominator is the average aggregate amount of loans and deposits as described in subparagraph (ii) of this paragraph which were properly recorded in the financial accounts of the IBF for the taxable year.

      (ii) For purposes of this paragraph, the average aggregate amount of the loans described in subparagraph (i)(A) of this paragraph and the average aggregate amount of deposits described in subparagraph (i)(B) of this paragraph must be computed on a quarterly basis, or at the option of the taxpayer, on a more frequent basis such as monthly, weekly or daily. When the taxpayer’s usual accounting practice does not permit a quarterly or more frequent computation of the average aggregate of such loans and such deposits, a semi-annual or annual computation may be allowed when it appears that no distortion of the average aggregate of such loans and such deposits will result. If, because of variations in the amount or value of such loans and such deposits, it appears to the Commissioner of Finance that averaging on an annual, semi-annual or quarterly basis does not properly reflect the average aggregate of such loans and such deposits, the Commissioner of Finance may require averaging on a more frequent basis. Any method of determining the average aggregate of such loans and such deposits may not be changed on any subsequent return without the written consent of the Commissioner of Finance.

         (A) Loans mean loans to foreign persons. The term “foreign person” is defined in 19 RCNY § 3-03(c)(2)(vii).

         (B) Deposits mean deposits with foreign persons which are: (a) banks; (b) foreign branches of a bank, including foreign branches of the taxpayer; or (c) foreign banks which are subsidiaries of a bank, including foreign banks which are subsidiaries of the taxpayer.

      (iii) For purposes of this paragraph, loans and deposits that were recorded in the financial accounts for a taxable year include those loans which were issued during such taxable year and those deposits which were made or placed during such taxable year and any other loan or deposit in the financial accounts for such taxable year. If the IBF purchases or acquires loans or deposits which were recorded in the financial accounts within New York State of a related corporation for taxable years 1975, 1976 and 1977, such loans and deposits are deemed to be recorded in the financial accounts of the taxpayer’s branches, agencies and offices within New York State for taxable years beginning in 1975, 1976 and 1977 and must be included in the numerator when computing the floor amount. A corporation is related to another corporation when such corporation owns or controls, either directly or indirectly, more than 50 percent of the capital stock of the other corporation, or more than 50 percent of the capital stock of such corporation is owned or controlled, either directly or indirectly, by the other corporation, or more than 50 percent of the capital stock of both corporations is owned or controlled, either directly or indirectly, by the same interests. A taxpayer, which, pursuant to § 11-646(f) of the Administrative Code, made a consolidated return with corporations affiliated with it for any of the taxable years 1975, 1976 and 1977, or makes a combined return for the taxable year, shall compute the floor amount as if it had filed separate returns for the taxable years 1975, 1976 and 1977 and as if it were filing a separate return for the taxable year.

  1. Alternative minimum tax measured by alternative entire net income.

   (1) Computation of the alternative minimum tax measured by alternative entire net income. (Administrative Code, §§ 11-641.1, 11-643.5(b)(3))

      (i) The alternative minimum tax measured by alternative entire net income is the measure of the tax if it is the largest of the alternative minimum bases and the alternative minimum tax is greater than the basic tax. The alternative minimum tax measured by alternative entire net income is computed by multiplying alternative entire net income, or portion thereof allocated to New York City, by the tax rate of three percent.

      (ii) The term “alternative entire net income” means entire net income as determined pursuant to 19 RCNY § 3-03(b)(2), except that the deductions described in subparagraphs (K) and (L) of 19 RCNY § 3-03(b)(4) are not allowed.

      (iii) Any election made pursuant to 19 RCNY § 3-04(b)(3) with respect to the IBF modification provided for in 19 RCNY § 3-03(c) is deemed to have been made for purposes of computing alternative entire net income.

   (2) Computation of the alternative minimum tax measured by alternative entire net income on a combined return. (Administrative Code, § 11-646(f))

      (i) Each corporation included in the combined return is to compute its alternative entire net income as if it had filed its Federal income tax return on a separate basis. Then, to compute combined alternative entire net income, all intercorporate dividends and intercorporate transactions between the corporations included in the combined return must be eliminated. Intercorporate profits are deferred, capital losses are to be offset against capital gains and contributions are to be deducted as if the corporations in the group had filed a consolidated Federal income tax return.

      (ii) If any corporation included in the combined return is deemed to have made the IBF election pursuant to 19 RCNY § 3-03(d)(1)(iii), all corporations included in the combined return will be deemed to have made the election.

      (iii) In no event will an item of income or expense of a corporation organized under the laws of a country other than the United States be included in a combined return unless it is includible in alternative entire net income.

      (iv) As to when combined returns will be permitted or required, see 19 RCNY § 3-05(b) – Combined Returns.

   (3) Taxable year in which income or deduction is included in alternative entire net income. (Administrative Code, § 11-641(m)) In general, the method of accounting used in computing taxable income for Federal income tax purposes is the method used in computing alternative entire net income. However, when the Commissioner of Finance deems it necessary in order to properly reflect the alternative entire net income of the taxpayer, it may determine the taxable year or period in which any item of income or deduction shall be included without regard to the method of accounting used by the taxpayer for Federal income tax purposes.

   (4) Adjusting alternative entire net income to period covered by return. (Administrative Code, §§ 11-641(1), 11-641.1)

      (i) If the alternative entire net income required to be reported under the banking corporation tax law is for a period different than the period covered by the taxpayer’s Federal income tax return, the taxpayer’s alternative entire net income must be prorated to correspond with the period covered by the return under the banking corporation tax law. The prorated alternative entire net income is computed as follows:

         (A) divide alternative entire net income, as determined in 19 RCNY § 3-03(d)(1)(ii), by the number of calendar months, or major parts thereof, covered by the return for Federal income tax purposes; and

         (B) multiply the result by the number of calendar months, or major parts thereof, covered by the return under the banking corporation tax law.

      (ii) The method of computing alternative entire net income for a short period, as set forth in this paragraph, applies to taxpayer’s reporting on either a calendar year or fiscal year basis for Federal income tax purposes.

      (iii) If, in the opinion of the Commissioner of Finance, the method described in this paragraph does not properly reflect the taxpayer’s alternative entire net income for purposes of the banking corporation tax during the period covered by its return, the Commissioner of Finance may determine entire net income solely on the basis of the taxpayer’s income during such period.

   (5) Correcting distortion of alternative entire net income. (Administrative Code, § 11-646(g)) For rules relating to the power of the Commissioner of Finance to correct distortion of alternative entire net income, see 19 RCNY § 3-03(a)(3).

  1. Alternative minimum tax measured by taxable assets.

   (1) Computation of the alternative minimum tax measured by taxable assets. (Administrative Code, § 11-643.5(b)(1))

      (i) Except for a corporation organized under the laws of a country other than the United States, the alternative minimum tax measured by taxable assets is the measure of the tax if it is larger than the alternative minimum tax measured by alternative entire net income or the alternative minimum tax measured by the fixed minimum amount and the alternative minimum tax is greater than the basic tax. The alternative minimum tax measured by taxable assets is computed at the rate of 0.1 of a mill upon each dollar of taxable assets, or portion thereof allocated to New York City, except in the case of a taxpayer described in subparagraph (ii) of this paragraph.

      (ii) A taxpayer is not subject to the alternative minimum tax measured by taxable assets for that portion of the taxable year

         (A) in which it was a qualified institution as defined in § 406(f)(5)(B) of the Federal National Housing Act, as amended, (12 U.S.C. § 1729(f)(5)(B)), or as defined in § 13(i)(2) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(i)(2)), and

         (B) in which it had an outstanding net worth certificate issued to the Federal Savings and Loan Insurance Corporation in accordance with § 406(f)(5) of the Federal National Housing Act, as amended (12 U.S.C. § 1729(f)(5)), or issued to the Federal Deposit Insurance Corporation in accordance with § 13(i) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(i)), provided it would have been exempt from any tax determined on the basis of the deposits held by it or the interest paid on such deposits pursuant to § 406(f)(5)(I) of the Federal National Housing Act, as amended, (12 U.S.C. § 1729(f)(5)(I)) or § 13(i)(9) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(i)(9)).

   (2) Definition of taxable assets. (Administrative Code, § 11-643.5(b)(1))

      (i) The term “taxable assets” means the average total value of those assets which are properly reflected on a balance sheet the income or expenses of which are properly reflected (or would have been properly reflected if not fully depreciated or expensed or depreciated or expensed to a nominal amount) in the computation of the taxpayer’s alternative entire net income for the taxable year and in the computation of the eligible net income of the taxpayer’s IBF for the taxable year.

      (ii) Taxable assets do not include any amount of money or other property received from or attributable to amounts received from the Federal Deposit Insurance Corporation pursuant to § 13(c) of the Federal Deposit Insurance Act, as amended, (12 U.S.C. § 1823(c)) or the Federal Savings and Loan Insurance Corporation pursuant to §§ 406(f)(1), (2), (3) or (4) of the Federal National Housing Act, as amended, (12 U.S.C. § 1729(f)(1), (2), (3) or (4)).

      (iii) Tangible real and personal property, such as buildings, land, machinery and equipment, is to be valued at cost. Intangible property, such as loans, investments, coin and currency, is to be valued at book value. In determining the average total value of assets, the taxpayer must use the values described in this subparagraph. The average value of assets is computed on a quarterly basis, or at the option of the taxpayer on a more frequent basis, such as monthly, weekly or daily. Different periods of averaging may be used for different classes of assets. If, because of variations in the amount or value of any class of assets, it appears to the Commissioner of Finance that averaging on a quarterly basis does not properly reflect average total value of assets, the Commissioner of Finance may require averaging on a more frequent basis. Any method of determining average total value of assets which is adopted by the taxpayer on any return and accepted by the Commissioner of Finance may not be changed on any subsequent return without the prior written consent of the Commissioner of Finance.

      (iv) The term “balance sheet” for purposes of subparagraph (i) shall mean the balance sheet of the taxpayer prepared from the books and records of the taxpayer in accordance with generally accepted accounting principles and used for purposes of preparing the taxpayer’s financial statement. The “book value” of intangible property for purposes of subparagraph (iii) shall mean the amount of the intangible property shown on the books and records of the taxpayer in accordance with generally accepted accounting principles and included in the balance sheet described in the preceding sentence. In the case of loans, the book value shall be loans net of the reserve for losses on loans.

   (3) [Reserved.]

   (4) [Reserved.]

   (5) [Reserved.]

   (6) Computation of the alternative minimum tax measured by taxable assets on a combined return. (Administrative Code, § 11-646(f))

      (i) The alternative minimum tax measured by taxable assets is computed at the rate of 0.1 of a mill upon each dollar of taxable assets, or portion thereof allocated to New York City, of all the corporations included in the combined return. In computing combined taxable assets, intercorporate stockholdings and intercorporate bills, notes and accounts receivable and payable and other intercorporate indebtedness between the corporations included in the combined return must be eliminated.

      (ii) Combined taxable assets do not include the taxable assets of a taxpayer described in 19 RCNY § 3-03(e)(1)(ii).

      (iii) As to when combined returns will be permitted or required, see 19 RCNY § 3-05(b) – Combined Returns.

   (7) Adjusting taxable assets to period covered by return.

      (i) If the period covered by the taxpayer’s return under the banking corporation tax law is other than 12 calendar months, the taxpayer’s taxable assets must be prorated to correspond with the period covered by the return. The prorated taxable assets are determined as follows:

         (A) compute taxable assets in the manner set forth in 19 RCNY § 3-03(e)(2);

         (B) divide taxable assets by 12; and

         (C) multiply the result by the number of calendar months, or major parts thereof, covered by the return.

      (ii) The method of computing taxable assets for a short period, as set forth in this paragraph, applies to taxpayer’s reporting on either a calendar year or fiscal year basis for Federal income tax purposes.

      (iii) If, in the opinion of the Commissioner of Finance, the method described in this paragraph does not properly reflect the taxpayer’s taxable assets for purposes of the banking corporation tax during the period covered by its return, the Commissioner of Finance may determine taxable assets solely on the basis of the taxpayer’s assets during such period.

   (8) Correcting distortion of taxable assets. (Administrative Code, § 11646(g)) For rules relating to the power of the Commissioner of Finance to correct distortion of taxable assets, see 19 RCNY § 3-03(a)(3).

  1. Alternative minimum tax measured by issued capital stock.

   (1) Computation of the alternative minimum tax measured by issued capital stock. (Administrative Code, § 11-643.5(b)(2))

      (i) For corporations organized under the laws of a country other than the United States, the alternative minimum tax measured by issued capital stock is the measure of the tax if it is larger than the alternative minimum tax measured by alternative entire net income or the alternative minimum tax measured by the fixed minimum amount and the alternative minimum tax is greater than the basic tax. The alternative minimum tax measured by issued capital stock is computed at the rate of 2.6 mills upon each dollar of the taxpayer’s issued capital stock, or the portion thereof allocated to New York City, at its face value on the last day of its taxable year or, in the case of shares without par value, at its actual or market value on the last day of its taxable year. If its actual or market value is less than five dollars per share, a five dollar per share value must be used.

      (ii) The term “face value” means par value, which is the value written or printed on the face of the instrument.

      (iii) The market value of stocks regularly traded on an exchange or in an over-the-counter market is the mean between the highest and lowest selling prices on the last day of the taxpayer’s taxable year, or if such prices are not available, the highest and lowest selling prices on the nearest date within its taxable year. If the actual sales prices within the taxable year are not available, the market value is the mean between the bona fide bid and asked prices on the last day of its taxable year, or if such prices are not available, the bona fide bid and asked prices on the nearest date within the taxable year. If the actual sales prices or bona fide bid and asked prices within the taxable year are not available or for any other reason such prices are not truly indicative of value, the market value is ascertained on the basis of the taxpayer’s net worth, earning power, book value, dividends paid and all other relevant factors. If a taxpayer consistently computes the actual or market value of its stocks on some other basis, such as the last selling price on the last day of its taxable year, such method of valuation may be accepted by the Commissioner of Finance. In all cases, a complete explanation of the method of valuation used must be included with the taxpayer’s return.

      (iv) A taxpayer which derives income from business carried on both within and without New York City must allocate its issued capital stock in the proportion that gross income derived from business carried on within New York City, during the period covered by the return, bears to its total gross income derived from all business both within and without the city during the period covered by the return. The term “gross income” means gross income from whatever source derived, including, but not limited to, the items enumerated in paragraphs (1) through (15) of subdivision (a) of § 61 of the Internal Revenue Code. In determining the gross income derived from business carried on within New York City (which shall include the eligible gross income of an IBF), the rules described in 19 RCNY § 3-04(f) for determining when receipts are within the City must be used.

   (2) Computation of the alternative minimum tax measured by issued capital stock on a combined return. The alternative minimum tax measured by issued capital stock is computed at the rate of 2.6 mills upon each dollar of issued capital stock, or portion thereof allocated to New York City, of all the corporations included in the combined return. In computing combined issued capital stock, intercorporate eliminations are not allowed.

  1. Alternative minimum tax measured by the fixed minimum amount.

   (1) The alternative minimum tax measured by the fixed minimum amount. (Administrative Code, § 11-643.5(b)(4)) The alternative minimum tax measured by the fixed dollar amount of $125 is the measure of the tax if it is the largest of the alternative minimum bases and the alternative minimum tax is greater than the basic tax. In no event may the fixed minimum tax be less than $125 for any taxable year.

   (2) The alternative minimum tax measured by the fixed minimum amount on a combined return. (Administrative Code, § 11-646(f))

      (i) Where the tax as computed on a combined return is measured by combined entire net income (See: 19 RCNY § 3-03(b)(6)), or is measured by combined alternative entire net income (See: 19 RCNY § 3-03(d)(2)), or is measured by combined taxable assets (See: 19 RCNY § 3-03(e)(6)), or is measured by combined issued capital stock (See: 19 RCNY § 3-03(f)(2)), each corporation included in the combined return except:

         (A) the taxpayer paying the combined tax; and

         (B) any corporation described in subparagraph (ii) of this paragraph; is required to pay the fixed minimum tax of $125. The taxpayer paying the combined tax will pay the alternative minimum tax measured by $125 when $125 is the largest of the alternative minimum bases and the alternative minimum tax is greater than the basic tax.

      (ii) A corporation which is not a taxpayer (See: 19 RCNY § 3-01(c)) is not required to pay the fixed minimum tax of $125 when included in a combined return.

      (iii) As to when combined returns will be permitted or required, see 19 RCNY § 3-05(b) – Combined Returns.

§ 3-04 Allocation.

(a) General. (1) General rules for allocation. (Administrative Code, § 11-642)

      (i) (A) The banking corporation tax law provides for distinct allocations of entire net income, alternative entire net income and taxable assets. Entire net income is defined in 19 RCNY § 3-03(b)(2). Alternative entire net income is defined in 19 RCNY § 3-03(d)(1)(ii). Taxable assets are defined in 19 RCNY § 3-03(e)(2). A corporation subject to the banking corporation tax which has entire net income derived from business carried on both within and without New York City shall determine the portion of its entire net income which is derived from business carried on within New York City pursuant to 19 RCNY § 3-04(b). A corporation subject to the banking corporation tax which has alternative entire net income derived from business carried on both within and without New York City shall determine the portion of its alternative entire net income which is derived from business carried on within New York City pursuant to 19 RCNY § 3-04(c). A corporation subject to the banking corporation tax which has taxable assets derived from business carried on both within and without New York City shall determine the portion of its taxable assets derived from business carried on within New York City pursuant to 19 RCNY § 3-04(d). Except as provided in subparagraph (B) of this paragraph, a corporation subject to the banking corporation tax which does not have entire net income, alternative entire net income or taxable assets derived from business carried on without New York City must allocate such entire net income, alternative entire net income or taxable assets 100 percent to New York City.

         (B) A taxpayer which has established an IBF as defined in 19 RCNY § 3-01(b)(16) may, in lieu of modifying its entire net income by deducting therefrom the adjusted eligible net income of the IBF (in the case of a loss, such loss must be added to entire net income) elect on an annual basis, pursuant to 19 RCNY § 3-04(b)(3)(iii), to reflect the results of its IBF operations in its entire net income allocation percentage and its alternative entire net income allocation percentage. When the taxpayer makes such election, such taxpayer is entitled to allocate its entire net income and alternative entire net income within and without New York City pursuant to 19 RCNY § 3-04(b) and (c), respectively.

      (ii) When a corporation subject to the banking corporation tax carries on business within and without New York City for only part of the taxable year, it allocates entire net income, alternative entire net income or taxable assets within and without New York City for only that part of the taxable year during which it carries on such business within and without New York City. For allocation of entire net income for a short period, see 19 RCNY § 3-04(h)(1). For allocation of alternative entire net income for a short period, see 19 RCNY § 3-04(h)(2). For allocation of taxable assets for a short period, see 19 RCNY § 3-04(h)(3).

      (iii) For purposes of this Part, the phrase “business carried on” means “doing business” as defined in 19 RCNY § 3-01(b)(7), provided the income or expenses from such business are required to be included in the computation of the taxpayer’s alternative entire net income.

   (2) Allocation on combined returns. (Administrative Code, § 11-646(f)) In the case of combined returns, allocation of entire net income, alternative entire net income and taxable assets is made on the basis of combined accounts from which all intercorporate transactions between corporations included in the combined return are eliminated. All corporations included in a combined return must make the same IBF election pursuant to 19 RCNY § 3-04(b)(3).

  1. Allocation of entire net income.

   (1) General rules for allocation of entire net income. (Administrative Code, § 11-642)

      (i) When a taxpayer’s entire net income, as defined in 19 RCNY § 3-03(b)(2), is derived from business carried on both within and without New York City, the portion thereof which is derived from business carried on within New York City is determined by multiplying entire net income by the entire net income allocation percentage. When a taxpayer is entitled to allocate entire net income pursuant to 19 RCNY § 3-04(a)(1)(i)(B), the portion of its entire net income which is attributable to New York City is determined by multiplying entire net income by the entire net income allocation percentage. The entire net income allocation percentage is determined by a formula consisting of a payroll factor, a receipts factor, a deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor.

      (ii) If allocation by the entire net income allocation percentage does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may permit or require the allocation of entire net income by a different method. A taxpayer may not use a method other than the entire net income allocation percentage for allocating its entire net income within and without New York City without the written consent of the Commissioner of Finance. (See: 19 RCNY § 3-04(h)(4) – Power of the Commissioner of Finance to adjust or change the method of allocation.)

   (2) Computation of entire net income allocation percentage. (Administrative Code, § 11-642)

      (i) The taxpayer’s entire net income allocation percentage is computed by

         (A) adding the taxpayer’s payroll factor, receipts factor, deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor, and

         (B) dividing the total by five. If the payroll factor is missing, the receipts factor, deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor are added together and the sum is divided by four. If the receipts factor is missing, the remaining three factors are added together and the sum is divided by three. If the deposits factor is missing, the remaining three factors are added together and the sum is divided by three. If all but one factor are missing, that factor is the entire net income allocation percentage. A factor is missing if both its numerator and denominator are zero but it is not missing merely because its numerator is zero.

      (ii) The taxpayer’s payroll factor, receipts factor and deposits factor are expressed as percentages and are determined as follows.

         (A) The payroll factor is computed by dividing 80 percent of the wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within New York City by the total wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within and without New York City. (See: 19 RCNY § 3-04(e).)

         (B) The receipts factor is computed by dividing the amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within New York City by the total amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within and without New York City. (See: 19 RCNY § 3-04(f).)

         (C) The deposits factor is computed by dividing the average value of deposits maintained at branches of the taxpayer within New York City by the average value of deposits maintained at branches of the taxpayer within and without New York City. (See: 19 RCNY § 3-04(g).)

      (iii) The receipts factor includes only receipts which are included in the computation of alternative entire net income (as defined in 19 RCNY § 3-03(d)(1)(ii)) for the taxable year. The payroll factor includes only the wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, the expenses of which are included in the computation of alternative entire net income for the taxable year. The deposits factor includes only deposits the expenses of which are included in the computation of alternative entire net income for the taxable year. Where the taxpayer includes in its Federal income tax return interbranch transactions between the taxpayer’s places of business, such interbranch receipts, payroll and deposits are not included in either the numerators or denominators of the factors in computing the entire net income allocation percentage. For taxpayers that have an IBF, see 19 RCNY § 3-04(b)(3) for special allocation rules.

      (iv) If it appears that the entire net income allocation percentage computed on the basis of all or any of the payroll, receipts or deposits factors does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance may adjust the entire net income allocation percentage as set forth in 19 RCNY § 3-04(h)(4).

      (v) For computation of the entire net income allocation percentage when a taxpayer is subject to tax for a period less than its taxable period for Federal income tax purposes, see 19 RCNY § 3-04(h)(1) – Allocation of entire net income for a short period.

   (2-a) Income allocation percentage where an allocation factor is missing for taxable years beginning in 2009 and thereafter but before 2018.

      (i) In the event that any of the percentages to be determined under paragraphs (1), (2) or (3) of subdivision (a) of § 11-642 of the Administrative Code cannot be determined because the taxpayer has either no payroll, or no receipts, or no deposits within or without the City, then the computation to be made under paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code shall be made by taking the sum of the products that are determined under such paragraph (1-a) for the factors that are present, and dividing that sum by the sum of the weight factors that apply to each of the present factors in the calculation made under such paragraph (1-a). This amount is then rounded to four decimal places. (An allocation factor is not missing merely because its numerator is zero, but it is missing if both its numerator and its denominator are zero.)

      (ii) Weight factor defined. For purposes of this paragraph, “weight factor” is the percentage used in the allocation computation in paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code, by which the percentage derived from subdivision (a) of § 11-642 of the Administrative Code is multiplied in such allocation computation. For example, in clause (i) of subparagraph (A) of paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code, the weight factor is 18%; in clause (i) of subparagraph (I) of paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code, the weight factor is 2%.

      (iii) Example: For the tax year 2009, a taxpayer has no employees either within or without the City. The receipts factor percentage determined under paragraph (2) of subdivision (a) of § 11-642 of the Administrative Code is 10%, and the deposit factor percentage determined under paragraph (3) of subdivision (a) of § 11-642 of the Administrative Code is 25%. As the payroll factor is missing, the allocation percentage may be computed by taking the sum of

  1. the product of 46% and 10%, and
  2. the product of 36% and 25%,    which is .046 + .09 = .136,    then dividing that sum by the sum of the weight factors for receipts and deposits, which are .46 and .36, respectively:      .136    = .136 = .16585, rounded to four decimal places = .1659    .46 + .36   .82

   (3) IBF entire net income allocation rules. (Administrative Code, § 11-642)

      (i) A taxpayer which has established an IBF, as defined in 19 RCNY § 3-01(b)(16), is entitled, pursuant to 19 RCNY § 3-03(c), to modify its entire net income by deducting therefrom the adjusted eligible net income of the IBF. (In the case of a loss, such loss must be added to entire net income.) Where the taxpayer makes that modification and the taxpayer is entitled to allocate its entire net income by the entire net income allocation percentage pursuant to 19 RCNY § 3-04(a)(1)(i)(A), such taxpayer must

         (A) exclude from both the numerator and denominator of the payroll and deposits factors the wages, salaries and other personal service compensation and deposits the expenses of which are attributable as provided in 19 RCNY § 3-03(c) to the production of eligible gross income and

         (B) exclude from both the numerator and denominator of the receipts factor those receipts which are attributable as provided in 19 RCNY § 3-03(c) to the production of eligible gross income. Such method of treating the results of the IBF operations is referred to in this paragraph as the “IBF modification.”

      (ii) When the taxpayer elects, pursuant to subparagraph (iii) of this paragraph, to reflect the results of its IBF operations in its entire net income allocation percentage in lieu of the IBF modification, such allocation percentage is adjusted by

         (A) including in the denominator of the payroll factor, wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, but excluding from the numerator of the payroll factor, wages, salaries and other personal service compensation of the taxpayer’s employees, the expenses of which are attributable, as provided in 19 RCNY § 3-03(c), to the production of eligible gross income,

         (B) including in the denominator but excluding from the numerator of the receipts factors those receipts which are attributable, as provided in 19 RCNY § 3-03(c), to the production of eligible gross income and

         (C) including in the denominator but excluding from the numerator of the deposits factor, deposits the expenses of which are attributable, as provided in 19 RCNY § 3-03(c), to the production of eligible gross income. Such election is referred to in this section as the “IBF formula allocation method.”

      (iii) The election to use the IBF formula allocation method for a taxable year is made with the filing of the return for such taxable year. Such election may be made or changed with the filing of an amended return for such taxable year. When a combined return is filed, the IBF election is made by the parent corporation included in such combined return and is binding on all corporations included in such combined return. Where the parent corporation is not included in the combined return, the IBF election shall be made for the corporations included in the combined return by their common parent and such election is binding on all corporations included in such return.

      (iv) As used in this paragraph, the term “eligible gross income” has the same meaning as is given to that term in 19 RCNY § 3-03(c)(4), except that for purposes of subparagraph (ii) of this paragraph, the term “foreign person,” as defined in 19 RCNY § 3-03(c)(2)(vii), shall not include a foreign branch of the taxpayer, and no consideration shall be given to any transaction between the taxpayer’s foreign branches and its IBF.

   (4) Allocation of entire net income on combined returns. (Administrative Code, § 11-646(f)) In the case of combined returns, the factors comprising the entire net income allocation percentage are computed as though the corporations included in the return were one corporation. Intercorporate dividends and all other intercorporate transactions, including intercorporate receipts between the corporations included in the combined return, are eliminated. If one corporation included in the combined return makes the IBF election pursuant to 19 RCNY § 3-04(b)(3), all corporations included in the combined return must make the same election. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b).

  1. Allocation of alternative entire net income.

   (1) General rules for allocation of alternative entire net income. (Administrative Code, § 11-642)

      (i) When a taxpayer’s alternative entire net income, as defined in 19 RCNY § 3-03(d)(1)(ii), is derived from business carried on both within and without New York City, the portion thereof which is derived from business carried on within New York City is determined by multiplying alternative entire net income by the alternative entire net income allocation percentage. When a taxpayer is entitled to allocate alternative entire net income pursuant to 19 RCNY § 3-04(a)(1)(i)(B), the portion of its alternative entire net income which is attributable to New York City is determined by multiplying alternative entire net income by the alternative entire net income allocation percentage. The alternative entire net income allocation percentage is determined by a formula consisting of a payroll factor, a receipts factor and a deposits factor.

      (ii) If allocation by the alternative entire net income allocation percentage does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may permit or require the allocation of alternative entire net income by a different method. A taxpayer may not use a method other than the alternative entire net income allocation percentage for allocating its alternative entire net income within and without New York City without the written consent of the Commissioner of Finance. (See: 19 RCNY § 3-04(h)(4) – Power of the Commissioner of Finance to adjust or change the method of allocation.)

   (2) Computation of alternative entire net income allocation percentage. (Administrative Code, § 11-642)

      (i) The alternative entire net income allocation percentage is computed by

         (A) adding the taxpayer’s payroll factor, receipts factor and deposits factor, and

         (B) dividing the total by three. If one of the factors is missing, the two remaining factors are added together and the sum is divided by two. If two of the factors are missing, the remaining factor is the alternative entire net income allocation percentage. A factor is missing if both its numerator and denominator are zero, but is not missing merely because its numerator is zero.

      (ii) The taxpayer’s payroll factor, receipts factor and deposits factor are expressed as percentages and are determined as follows.

         (A) The payroll factor is computed by dividing 100 percent of the wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within New York City by the total wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within and without New York City. (See: 19 RCNY § 3-04(e).)

         (B) The receipts factor is computed by dividing the amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within New York City by the total amount of receipts of the taxpayers from loans, financing leases and all other business receipts earned within and without New York City. (See: 19 RCNY § 3-04(f).)

         (C) The deposits factor is computed by dividing the average value of deposits maintained at branches of the taxpayer within New York City by the average value of deposits maintained at branches of the taxpayer within and without New York City. (See: 19 RCNY § 3-04(g).)

      (iii) The receipts factor includes only receipts which are included in the computation of alternative entire net income for the taxable year. The payroll factor includes only the wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, the expenses of which are included in the computation of alternative entire net income for the taxable year. The deposits factor includes only deposits the expenses of which are included in the computation of alternative entire net income for the taxable year. Where the taxpayer includes in its Federal income tax return interbranch transactions between the taxpayer’s places of business, such interbranch receipts, payroll and deposits are not included in either the numerators or denominators of the factors in computing the alternative entire net income allocation percentage. For taxpayers that have an IBF, see 19 RCNY § 3-04(c)(3) for special allocation rules.

      (iv) If it appears that the alternative entire net income allocation percentage computed on the basis of all or any of the payroll, receipts or deposits factor does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance may adjust the alternative entire net income allocation percentage as set forth in 19 RCNY § 3-04(h)(4).

      (v) For computation of the alternative entire net income allocation percentage when a taxpayer is subject to tax for a period less than its taxable period for Federal income tax purposes, see 19 RCNY § 3-04(h)(2) – Allocation of alternative entire net income for a short period.

   (3) IBF alternative entire net income allocation rules. (Administrative Code, § 11-642) A taxpayer which has established an IBF, as described in 19 RCNY § 3-03(c), and which has elected to use the IBF formula allocation method pursuant to 19 RCNY § 3-04(b)(3) must make the same election for purposes of allocating alternative entire net income by the alternative entire net income allocation percentage. If, pursuant to 19 RCNY § 3-04(b)(3), a taxpayer utilizes the IBF modification, the taxpayer must utilize the IBF modification for purposes of computing alternative entire net income and the alternative entire net income allocation percentage.

   (4) Allocation of Alternative Entire Net Income on Combined Returns. (Administrative Code, § 11-646(f)) In the case of combined returns, the factors comprising the alternative entire net income allocation percentage are computed as though the corporations included in the return were one corporation. Intercorporate dividends and all other intercorporate transactions including intercorporate receipts between the corporations included in the combined return are eliminated. If one corporation included in the combined return makes the IBF election pursuant to 19 RCNY § 3-04(b)(3), all corporations included in the combined return must make the same election. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b).

  1. Allocation of taxable assets.

   (1) General rules for allocation of taxable assets. (Administrative Code, § 11-642)

      (i) When a taxpayer’s taxable assets, as defined in 19 RCNY § 3-03(e)(2), are derived from business carried on both within and without New York City, the portion thereof which is derived from business carried on within New York City is determined by multiplying taxable assets by the asset allocation percentage. The asset allocation percentage is determined by a formula consisting of a payroll factor, a receipts factor, a deposits factor, an additional factor equal to the receipts factor, and an additional factor equal to the deposits factor.

      (ii) If allocation by the asset allocation percentage does not properly reflect the activity, business or assets of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may permit or require the allocation of taxable assets within and without New York City by a different method. A taxpayer may not use a method other than the asset allocation percentage for allocating its taxable assets within and without New York City without the written consent of the Commissioner of Finance. (See: 19 RCNY § 3-04(h)(4) – Power of the Commissioner of Finance to Adjust or Change the Method of Allocation.)

   (2) Computation of asset allocation percentage. (Administrative Code, § 11-642)

      (i) The taxpayer’s asset allocation percentage is computed by

         (A) adding the taxpayer’s payroll factor, receipts factor, deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor, and

         (B) dividing the total by five. If the payroll factor is missing, the receipts factor and deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor are added together and the sum is divided by four. If the receipts factor is missing, the remaining three factors are added together and the sum is divided by three. If the deposits factor is missing, the remaining three factors are added together and the sum is divided by three. If all but one factor are missing, the remaining factor is the asset allocation percentage. A percentage is missing if both its numerator and denominator are zero but it is not missing merely because its numerator is zero.

      (ii) The taxpayer’s payroll factor, receipts factor and deposits factor are expressed as percentages and are determined as follows.

         (A) The payroll factor is computed by dividing 80 percent of the wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within New York City by the total wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within and without New York City. (See: 19 RCNY § 3-04(e).)

         (B) The receipts factor is computed by dividing the amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within New York City by the total amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within and without New York City. (See: 19 RCNY § 3-04(f).)

         (C) The deposits factor is computed by dividing the average value of deposits maintained at branches of the taxpayer within New York City by the average value of deposits maintained at branches of the taxpayer within and without New York City. (See: 19 RCNY § 3-04(g).)

      (iii) (A) Both the numerator and denominator of the receipts factor consist of (a) receipts that are included in the computation of alternative entire net income (as defined in 19 RCNY § 3-03(d)(1)(ii)) for the taxable year and (b) receipts that are attributable to the production of eligible gross income of the IBF for the taxable year, regardless of whether the IBF election is made pursuant to 19 RCNY § 3-04(b)(3).

         (B) Both the numerator and denominator of the payroll factor consist of (a) wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, the expenses of which are included in the computation of alternative entire net income for the taxable year, and (b) wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, the expenses of which are attributable to the production of eligible gross income of the IBF for the taxable year, regardless of whether the IBF election is made pursuant to 19 RCNY § 3-04(b)(3).

         (C) Both the numerator and the denominator of the deposits factor consist of (a) deposits the expenses of which are included in the computation of alternative entire net income for the taxable year, and (b) deposits the expenses of which are attributable to the production of eligible gross income of the IBF for the taxable year, regardless of whether the IBF election is made pursuant to 19 RCNY § 3-04(b)(3).

         (D) As used in this subdivision, the term “eligible gross income” has the same meaning as is given to that term in 19 RCNY § 3-03(c)(4), except that for the purposes of this subdivision, the term “foreign person,” as defined in 19 RCNY § 3-03(c)(2)(vii), shall not include a foreign branch of the taxpayer, and no consideration shall be given to any transactions between the taxpayer’s foreign branches and its IBF.

         (E) Where the taxpayer includes in its Federal income tax return interbranch transactions between the taxpayer’s places of business, such interbranch receipts, payroll and deposits are not included in either the numerators or denominators of the factors in computing the asset allocation percentage.

      (iv) If it appears that the asset allocation percentage computed on the basis of all or any of the payroll, receipts or deposits factors does not properly reflect the activity, business or assets of the taxpayer in New York City, the Commissioner of Finance may adjust the asset allocation percentage as set forth in 19 RCNY § 3-04(h)(4).

      (v) For computation of the asset allocation percentage when a taxpayer is subject to tax for a period less than its taxable period for Federal income tax purposes, see 19 RCNY § 3-04(h)(3) – Allocation of taxable assets for a short period.

   (3) Allocation of taxable assets on combined returns. (Administrative Code, § 11-646(f)) In the case of combined returns, the factors of the asset allocation percentage are computed as though the corporations included in the return were one corporation. Intercorporate dividends and all other intercorporate transactions including intercorporate receipts between the corporations included in the combined return are eliminated. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b).

  1. Payroll factor.

   (1) General. (Administrative Code, § 11-642)

      (i) The percentage of the taxpayer’s payroll allocated to New York City is determined by dividing 80 percent (100 percent when computing the alternative entire net income allocation percentage) of the wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, within New York City during the period the taxpayer is entitled to allocate by the total amount of wages, salaries and other personal service compensation of the taxpayer’s employees, except general executive officers, both within and without New York City during the period the taxpayer is entitled to allocate.

      (ii) The term “employees within New York City” includes all employees regularly connected with or working out of an office of the taxpayer within New York City, irrespective of where the services of such employees were performed. However, if the taxpayer establishes to the satisfaction of the Commissioner of Finance or the Commissioner of Finance establishes on his own motion that

         (A) a substantial part of the taxpayer’s payroll was paid to employees attached to an office in New York City who performed a substantial part of their services outside New York City or a substantial part of the taxpayer’s payroll was paid to employees attached to an office outside New York City who performed a substantial part of their services within New York City, and

         (B) establishes that the computation of the payroll factor according to the general rule stated in this subparagraph would not properly reflect the amount of the taxpayer’s business carried on within New York City by its employees, then the Commissioner of Finance may permit or require the payroll factor to be computed on the basis of the amount of compensation paid for services performed within New York City. The compensation paid for services performed within New York City will be deemed to be:

            (a) in the case of an employee whose compensation depended directly on the volume of business secured by him, the amount received by him for the business attributable to his efforts within New York City;

            (b) in the case of an employee whose compensation depended on other results achieved, the proportion of the total compensation which the value of his services within New York City bears to the value of all his services; and

            (c) in the case of an employee compensated on a time basis, the proportion of the total amount received by him which the working time within New York City bears to the total working time.

      (iii) Wages, salaries and other personal service compensation include all amounts paid for services to the taxpayer and deducted by the taxpayer in computing its alternative entire net income, but do not include amounts paid by the taxpayer which do not have the element of compensation for personal services actually rendered or to be rendered.

      (iv) Wages, salaries and other personal service compensation are computed on a cash or accrual basis, in accordance with the method of accounting used by the taxpayer for the taxable year in computing alternative entire net income.

   (2) Definition of employee.

      (i) Employees whose wages, salaries and other personal service compensation are included in the computation of the payroll factor include every individual, except general executive officers, where the relationship existing between the taxpayer and the individual is that of employer and employee.

      (ii) Generally, the relationship of employer and employee exists when the taxpayer has the right to control and direct the individual not only as to the result to be accomplished by him but also as to the means by which such result is to be accomplished. If the relationship of employer and employee exists, the designation or description of the relationship, and the measure, method or designation of the compensation is immaterial.

      (iii) Compensation paid to directors for acting as such is not included in computing the payroll factor.

   (3) General executive officers.

      (i) A general executive officer must be an officer of the corporation charged with and performing general executive duties of the corporation and elected by the shareholders, elected or appointed by the board of directors, or if initially appointed by another officer such appointment must be ratified by the board of directors. If the place of incorporation is other than New York State, the officer of the corporation must be elected or appointed in accordance with the laws of the place of incorporation.

      (ii) A general executive officer is an appointed or elected officer of the corporation having company-wide authority with respect to his assigned functions or duties or is responsible for an entire division of the company. Any person who has merely been designated as an officer but who is not an appointed or elected officer, as described in subparagraph (i) of this paragraph, is not a general executive officer.

      (iii) Personal service compensation paid to a general executive officer of the taxpayer for acting as such is not included in the computation of the payroll factor.

  1. Receipts factor.

   (1) General. (Administrative Code, § 11-642)

      (i) The percentage of the taxpayer’s receipts allocated to New York City is determined by dividing 100 percent of the taxpayer’s receipts from loans (including the taxpayer’s portion of a participation in a loan) and financing leases and all other business receipts earned within New York City during the period the taxpayer is entitled to allocate by the total amount of the taxpayer’s receipts from loans (including the taxpayer’s portion of a participation in a loan) and financing leases and all other business receipts within and without New York City during the period the taxpayer is entitled to allocate.

      (ii) Receipts are computed on a cash or accrual basis in accordance with the method of accounting used by the taxpayer for the taxable year in computing its alternative entire net income.

   (2) Income from loans and financing leases. (Administrative Code, § 11-642)

      (i) Gross income from a loan or financing lease is allocated to New York City if such income is attributable to a loan or financing lease which is located in New York City. A loan or financing lease is located where the greater portion of income producing activity relating to the loan or financing lease occurred, provided however:

         (A) In the case of a taxpayer described in subparagraphs (i), (ii), (iii), (iv), (v), (vi), or (ix) of 19 RCNY § 3-01(b)(5), a loan or financing lease that is attributed by such taxpayer to a branch without New York City is presumed to be properly attributed provided that such presumption may be rebutted if the Commissioner of Finance demonstrates that the greater portion of income producing activity relating to the loan or financing lease did not occur at such branch. Where such presumption has been rebutted by the Commissioner of Finance, the loan or financing lease shall be presumed to be within New York City if the taxpayer had a branch within New York City at the time the loan or financing lease was made. However, the taxpayer may rebut such presumption by demonstrating that the greater portion of income producing activity relating to the loan or financing lease did not occur within New York City. For purposes of this section, a loan or financing lease is made when such loan or financing lease is approved.

         (B) In the case of a taxpayer described in subparagraphs (i), (ii), (iii), (iv), (v), (vi), or (ix) of 19 RCNY § 3-01(b)(5) which records a loan or financing lease on the books of a place without New York City which is not a branch, it shall be presumed that the greater portion of income producing activity related to such loan or financing lease occurred within New York City if the taxpayer had a branch within New York City at the time the loan or financing lease was made. The taxpayer may rebut such presumption by demonstrating that the greater portion of income producing activity related to the loan or financing lease did not occur within New York City. A loan or financing lease is made when such loan or financing lease is approved.

         (C) In the case of a taxpayer which is a bank holding company or a taxpayer described in subparagraphs (vii) or (x) of 19 RCNY § 3-01(b)(5), a loan or financing lease attributed by such taxpayer to a bona fide office without New York City is presumed to be properly attributed provided that such presumption may be rebutted if the Commissioner of Finance demonstrates that the greater portion of income producing activity relating to the loan or financing lease did not occur without New York City.

      (ii) A) The term “loan” means any loan, whether the transaction is represented by a promissory note, security, acknowledgement of advance, due bill or any other form of credit transaction, if the related asset is properly recorded in the financial accounts of the taxpayer. Loans include the taxpayer’s portion of a participation in a loan.

         (B) The term “financing lease” means a lease where the taxpayer is not treated as the owner of the property for purposes of computing alternative entire net income.

         (C) The phrase “gross income from a loan or financing lease” includes interest and fees, such as arrangement, commitment and management fees but does not include the repayments of principal.

      (iii) To determine where the greater portion of income producing activity relating to a loan or financing lease occurred, consideration is given to such activities as the solicitation, investigation, negotiation, final approval and administration of the loan or financing lease. Each loan or financing lease has its own characteristics. In some cases, one or more of the activities to be considered may not be present. The significance to be accorded to each activity depends upon the facts in each case.

      (iv) The terms “solicitation,”“investigation,” “negotiation,”“final approval” and “administration” are defined as follows:

         Administration. Administration is the process of managing the account. This process includes bookkeeping, collecting the payments, corresponding with the customer, reporting to management regarding the status of the agreement and proceeding against the borrower if the borrower is in default. Such activity is located at the office which oversees this activity.

         Final approval. Final approval is the act of employees or the board of directors of the taxpayer which legally binds the taxpayer to perform under an agreement. Such activity is located at the office which the taxpayer’s employees are regularly connected with, regardless of where the services of such employees were actually performed. If the board of directors makes such final approval, such activity occurred where the actual seat of management and control of the taxpayer is located.

         Investigation. Investigation is the procedure whereby employees of the taxpayer determine the credit-worthiness of the customer as well as the degree of risk involved in making a particular agreement. Such activity is located at the office which the taxpayer’s employees are regularly connected with, regardless of where the services of such employees were actually performed.

         Negotiation. Negotiation is the procedure whereby employees of the taxpayer and its customer determine the terms of the agreement (e.g., the amount, duration, interest rate, frequency of repayment, currency denomination and security required). Such activity is located at the office which the taxpayer’s employees are regularly connected with, regardless of where the services of such employees were actually performed.

         Solicitation. Solicitation is either active or passive. (a) Active solicitation occurs when an employee of the taxpayer initiates the contact with the customer. Such activity is located at the office which the taxpayer’s employee is regularly connected with, regardless of where the services of such employee were actually performed. (b) Passive solicitation occurs when the customer initiates the contact with the taxpayer. If the customer’s initial contact was not at an office of the taxpayer, the office, if any, where the passive solicitation occurred is determined by the facts in each case.

   (3) Receipts from leases and rents. (Administrative Code, § 11-642)

      (i) Receipts from real property and tangible personal property leased or rented from the taxpayer are allocated to New York City if such property is located in New York City. Receipts from rentals include all amounts received by the taxpayer for the use of or occupation of property, whether or not such property is owned by the taxpayer. Gross receipts received from real property and tangible personal property which is subleased must be included in the receipts factor.

      (ii) For the treatment of income from financing lease, see 19 RCNY § 3-04(f)(2).

   (4) Income from bank, credit, travel, entertainment and other card operations. (Administrative Code, § 11-642)

      (i) Interest, fees in the nature of interest and penalties in the nature of interest from a bank, credit, travel, entertainment and other card receivables are allocated to New York City if the card holder’s domicile is in New York City. In the case of an individual, domicile, in general, is the place where such individual intends his permanent home to be. Such permanent home is the place to which a person intends to return whenever he may be absent. In all other cases, domicile is the place where the actual seat of management or control is located. It shall be presumed that the domicile of the cardholder is its billing address.

      (ii) Service charges and fees from bank, credit, travel, entertainment and other cards are allocated to New York City if the card is serviced within New York City. A card is serviced at the place where the records pertaining to such account are kept and managed.

      (iii) Receipts from merchant discounts are allocated to New York City if the merchant is located within New York City. In the case of a merchant with locations both within and without New York City, only receipts from merchant discounts attributable to sales made from locations within New York City are allocated to New York City. It shall be presumed that the location of the merchant is the address of the merchant shown on the invoice submitted by the merchant to the taxpayer.

   (5) Income from trading activities and investment activities. (Administrative Code, § 11-642)

      (i) Income from trading activities and investment activities shall be allocated to New York City, if the greater portion of income producing activity relating to such trading and investment activities occurred within New York City. When determining the income from trading and investment activities, the taxpayer must net the gains with the losses from such activities that are included in the computation of Federal taxable income. A net loss is deemed to be zero.

      (ii) Trading activities include, but are not limited to, foreign exchange transactions, the purchase and sale of options and financial futures, and in appropriate cases, interbank fund transfers.

      (iii) Except as provided in subparagraph (iv) of this paragraph, to determine where the greater portion of income producing activity relating to trading activities or investment activities occurred, consideration is given to such factors as:

         (A) where the particular policies of the taxpayer regarding the trading or investment activities are established and guidelines set up;

         (B) where the day to day decisions regarding each transaction relating to the trading or investment activities are made; and

         (C) where the equipment and other support activities relating to such trading or investment activities are located. The significance to be accorded to each factor depends upon the facts in each case. Consideration shall also be given to where the general policies of the taxpayer regarding the trading or investment activities are established and the guidelines set up. However, this shall not be accorded as much significance as any of the factors enumerated in subparagraphs (iii)(A), (iii)(B), or (iii)(C) of this paragraph.

      (iv) Securities owned by a bank but held by a public official or pledged to secure public funds or trust funds deposited in such bank shall be allocated to New York City if such secured deposit is maintained in New York City. (See: 19 RCNY § 3-04(g)(3) for definition of maintained.)

   (6) Fees or charges from letters of credit, traveler’s checks and money orders. (Administrative Code, § 11-642) Fees or charges from the issuance of letters of credit, traveler’s checks and money orders are allocated to New York City if such letters of credit, traveler’s checks or money orders are issued within New York City.

   (7) Receipts for services performed. (Administrative Code, § 11-642)

      (i) Receipts for services performed by the taxpayer’s employees regularly connected with or working out of a New York City office of the taxpayer are allocated to New York City if such services are performed within New York City.

      (ii) When allocating receipts for services performed, it is immaterial where such receipts are payable or where they are actually received.

      (iii) Where services are performed both within and without New York City, the portion of the receipt attributable to services performed within New York City is determined on the basis of the relative value of, or amount of time spent in performance of, such services within New York City, or by some other reasonable method. Full details must be submitted with the taxpayer’s return.

   (8) Receipts of royalties. (Administrative Code, § 11-642) Receipts of royalties from the use of patents, copyrights and trademarks are allocated to New York City if the taxpayer’s actual seat of management or control is located in New York City. Royalties include all amounts received by the taxpayer for the use of patents, copyrights or trademarks, whether or not such patents, copyrights or trademarks were issued to the tax- payer.

   (9) Other business receipts. (Administrative Code, § 11-642)

      (i) Income from securities used to maintain reserves against deposits to meet Federal and state reserve requirements shall be allocated to New York City based upon the ratio that total deposits in New York City bears to total deposits everywhere. (See: 19 RCNY § 3-04(g)(2) for definition of deposit.)

      (ii) All other business receipts earned by the taxpayer in New York City are allocated to New York City.

      (iii) A receipt from the sale of a capital asset is not a business receipt and is not included in the receipts factor. For example, the receipt from the sale of a capital asset as scrap or at a gain is not included in the receipts factor.

   (10) Receipts factor on combined returns. The receipts factor on a combined return is computed as though the corporations included in the return were one corporation. All intercorporate receipts between the corporations included in the combined return are eliminated in computing the combined receipts factor. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b).

  1. Deposits factor.

   (1) General. (Administrative Code, § 11-642) The percentage of the taxpayer’s deposits allocated to New York City is determined by dividing the average value of deposits maintained at branches of the taxpayer within New York City during the period the taxpayer is entitled to allocate by the average value of all deposits maintained at branches of the taxpayer both within and without New York City during the period the taxpayer is entitled to allocate.

   (2) Definition of deposit. (Administrative Code, § 11-642) For purposes of this subdivision the term “deposit” means:

      (i) the unpaid balance of money or its equivalent received or held by a bank in the usual course of business and for which it has given or is obligated to give credit, either conditionally or unconditionally, to a commercial, checking, savings, time, or thrift account, or which is evidenced by its certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar name, or a check or draft drawn against a deposit account and certified by the bank, or a letter of credit or a traveler’s check on which the bank is primarily liable; provided, that, without limiting the generality of the term “money or its equivalent,” any such account or instrument must be regarded as evidencing the receipt of the equivalent of money when credited or issued in exchange for checks or drafts or for a promissory note upon which the person obtaining any such credit or instrument is primarily or secondarily liable, or for a charge against a deposit account, or in settlement of checks, drafts, or other instruments forwarded to such bank for collection;

      (ii) trust funds received or held by such bank, whether held in the trust department or held or deposited in any other department of such bank;

      (iii) money received or held by a bank, or the credit given for money or its equivalent received or held by a bank, in the usual course of business for a special or specific purpose, regardless of the legal relationship thereby established, including without being limited to, escrow funds, funds held as security for an obligation due to the bank or others (including funds held as dealers’ reserves) or for securities loaned by the bank, funds deposited by a debtor to meet maturing obligations, funds deposited as advance payment on subscriptions to United States Government securities, funds held for distribution or purchase of securities, funds held to meet its acceptances or letters of credit, and withheld taxes; provided, that there shall not be included funds which are received by the bank for immediate application to the reduction of an indebtedness to the receiving bank, or under condition that the receipt thereof immediately reduces or extinguishes such an indebtedness;

      (iv) outstanding drafts (including advice or authorization to charge bank’s balance in another bank), cashier’s checks, money orders, or other officer’s checks issued in the usual course of business for any purpose, but not including those issued in payment for services, dividends, or purchase or other costs or expenses of the bank itself.

   (3) Definition of maintained. (Administrative Code, § 11-642)

      (i) For purposes of this subdivision, a deposit is “maintained” at the branch of the taxpayer at which the deposit is properly booked.

         (A) A deposit, the value of which at all times during the taxable year was less than $100,000, that is booked by a taxpayer at a branch without New York City is presumed to be properly booked, provided that such presumption may be rebutted if the Commissioner of Finance demonstrates that the greater portion of contact relating to the deposit did not occur at such branch. Where such presumption has been rebutted by the Commissioner of Finance, the deposit shall be presumed to be maintained within New York City if the taxpayer had a branch within New York City at the time the deposit was booked. However, the taxpayer may rebut such presumption by demonstrating that the greater portion of contact relating to the deposit did occur at a branch outside New York City.

         (B) A deposit, the value of which at any time during the taxable year was $100,000 or more, is considered to be properly booked at the branch with which it has a greater portion of contact.

      (ii) In determining whether a deposit has a greater portion of contact with a particular branch, consideration is given to such activities as:

         (A) Whether the deposit account was opened at or transferred to that branch by or at the direction of the depositor or by a broker of deposits, regardless of where subsequent deposits or withdrawals may be made;

         (B) whether employees regularly connected with that branch are primarily responsible for servicing the depositor’s general banking and other financial needs;

         (C) whether the deposit was solicited by an employee regularly connected with that branch, regardless of where such deposit was actually solicited;

         (D) whether the terms governing the deposit were negotiated by employees regularly connected with that branch regardless of where the negotiations were actually conducted; and

         (E) whether essential records relating to the deposit are kept at that branch and whether the deposit is serviced at that branch.

      (iii) In some cases, one or more of the activities considered in subparagraph (ii) of this paragraph may not be present. The significance to be accorded to each activity depends upon the facts in each case.

      (iv) A deposit that is maintained at a bona fide office of the taxpayer which is not a branch is excluded from both the numerator and denominator of the deposits factor.

   (4) Average value of deposits. (Administrative Code, § 11-642) The value of deposits maintained at branches of the taxpayer is the total of the amounts credited to depositors, including the amount of any interest so credited. The average value of deposits is to be computed on a daily basis. However, if the taxpayer’s usual accounting practices do not permit the computation of average value on a daily basis, a computation on a weekly basis will be permitted. The Commissioner of Finance will not permit the computation of average value of deposits on a basis less frequent than weekly, unless the taxpayer demonstrates that requiring it to use a weekly computation would produce an undue hardship. Any method of determining average value of deposits which is adopted by the taxpayer on any return may not be changed on any subsequent return without the prior written consent of the Commissioner of Finance.

  1. Other rules.

   (1) Allocation of entire net income for a short period. (Administrative Code, §§ 11-641(k) and 11-642)

      (i) A taxpayer which is entitled to allocate entire net income within and without New York City for only part of a taxable year allocates its entire net income for only that part of the taxable year during which it is entitled to allocate. (See: 19 RCNY § 3-04(b)(1) – General Rules for Allocation of Entire Net Income.) A taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes computes its prorated entire net income pursuant to 19 RCNY § 3-03(b)(8) and computes its entire net income allocation percentage only for that part of the taxable year during which it is entitled to allocate.

      (ii) (A) The entire net income allocation percentage is applied to entire net income which has been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes, the entire net income allocation percentage is applied to entire net income which (a) has been prorated pursuant to 19 RCNY § 3-03(b)(8), for the period during which the taxpayer is subject to tax; and (b) has been prorated for the period during which the taxpayer is entitled to allocate.

         (B) Entire net income (or prorated entire net income) is prorated for the period the taxpayer is entitled to allocate and is computed as follows: (a) divide entire net income (or prorated entire net income) by the number of calendar months or major parts thereof covered by the taxpayer’s New York City return; and (b) multiply the amount determined in subparagraph (ii)(A) of this paragraph by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate.

         (C) After entire net income (or prorated entire net income) has been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of entire net income (or prorated entire net income) will be allocated at either 100 percent or zero percent depending on whether the taxpayer’s business was conducted solely within or solely without New York City.

      (iii) If, in the opinion of the Commissioner of Finance, the method described in this section for prorating entire net income (or prorated entire net income) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxpayer’s entire net income (or prorated entire net income) for the period during which it is entitled to allocate and for the remaining period, the Commissioner of Finance may determine entire net income solely on the basis of the entire net income properly recorded on the taxpayer’s books and records during such periods.

      (iv) The short period entire net income allocation percentage is determined in the same manner as the entire net income allocation percentage described in 19 RCNY § 3-04(b)(2), except that

         (A) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate;

         (B) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and

         (C) the deposits factor is computed only for the period for which the taxpayer is entitled to allocate. A taxpayer must submit complete details with its return showing how it computed each factor of the short period entire net income allocation percentage.

      (v) The following are examples illustrating the computation of the entire net income allocation percentage for a short period and the application of this percentage to entire net income:

Example 1: A taxpayer which was subject to tax for all of 1985 reports on a calendar year basis and had entire net income of $72,000 for such taxable year 1985. On June 13, 1985 the taxpayer began doing business both within and without New York City which entitled it to allocate for the period June 13, 1985 through December 31, 1985. For the short period June 13, 1985 through December 31, 1985 (7 months), the taxpayer had the following:

  New York City Total
Payroll $60,800* $80,000
Receipts $777,600* $960,000
Deposits $1,080,000* $1,350,000

~

* 80% of the New York City amount

The taxpayer’s short period entire net income allocation percentage is computed as follows:

Payroll factor [($60,800/$80,000) × 100] 76%
Receipts factor [($777,600/$960,000) × 100] 81%
Deposits factor [($1,080,000/$1,350,000) × 100] 80%
Receipts factor [($777,600/$960,000) × 100] 81%
Deposits factor [($1,080,000/$1,350,000) × 100] 80%
Total 398%

~

The short period entire net income allocation percentage is 79.6% (398%/5).

The taxpayers entire net income allocated to New York City is $63,432 computed as follows:

$72,000/12 (months) = $6,000$  6,000 × 7 (months) = $42,000$42,000 × 79.6% = $33,432 $72,000 - $42,000 = $30,000

Entire net income allocated at 100% $30,000
Entire net income allocated at 79.6% $33,432
Total allocated entire net income $63,432

~

Example 2: A banking corporation incorporated outside the United States has been doing business in the State of California since 1979. It began doing business and became subject to tax in New York State on April 2, 1985. The taxpayer reports on a calendar year basis and had entire net income of $60,000 for the 12 month calendar year 1985.For the short taxable period April 2, 1985 through December 31, 1985 (9 months), the taxpayer had the following:

  New York City Total
Payroll $70,000* $100,000
Receipts $560,000* $800,000
Deposits $672,000* $1,120,000

~

* 80% of the New York City amount

The taxpayer’s short period entire net income allocation percentage is computed as follows:

Payroll factor [($70,000/$100,000) x 100] 70%
Receipts factor [($560,000/$800,000) x 100] 70%
Deposits factor [($672,000/$1,120,00) x 100] 60%
Receipts factor [($560,000/$800,000) x 100] 70%
Deposits factor [($672,000/$1,120,000) x 100] 60%
Total 330%

~

The short period entire net income allocation percentage 66% (330%/5)

The taxpayer’s prorated entire net income computed pursuant to 19 RCNY § 3-03(b)(7) is $45,000 computed as follows:

$60,000/12 (months) = $5,000$5,000 × 9 (months) = $45,000

Such prorated entire net income allocated to New York City is $29,700 ($45,000 × 66%).

   (2) Allocation of alternative entire net income for a short period. (Administrative Code, §§ 11-641(k) and 11-642)

      (i) A taxpayer which is entitled to allocate alternative entire net income within and without New York City for only part of a taxable year allocates its alternative entire net income for only that part of the taxable year during which it is entitled to allocate. (See: 19 RCNY § 3-04(c)(1) – General rules for allocation of alternative entire net income.) A taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes computes its prorated alternative entire net income pursuant to 19 RCNY § 3-03(d)(4) and computes its alternative entire net income allocation percentage only for that part of the taxable year during which it is entitled to allocate.

      (ii) The alternative entire net income allocation percentage is applied to alternative entire net income which has been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes, the alternative entire net income allocation percentage is applied to alternative entire net income which

         (A) has been prorated pursuant to 19 RCNY § 3-03(d)(4), for the period during which the taxpayer is subject to tax; and

         (B) has been prorated for the period during which the taxpayer is entitled to allocate. Alternative entire net income (or prorated alternative entire net income) is prorated for the period the taxpayer is entitled to allocate and is computed as follows:

         (C) divide alternative entire net income (or prorated alternative entire net income) by the number of calendar months or major parts thereof covered by the taxpayer’s New York City return; and

         (D) multiply the amount determined in subparagraph (ii)(c) of this paragraph by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate. After alternative entire net income (or prorated alternative entire net income) has been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of alternative entire net income (or prorated alternative entire net income) will be allocated at either 100 percent or zero percent depending on whether the taxpayer’s business was conducted solely within or solely without New York City.

      (iii) If, in the opinion of the Commissioner of Finance, the method described in this paragraph for prorating alternative entire net income (or prorated alternative entire net income) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxpayer’s alternative entire net income (or prorated alternative entire net income) for the period during which it is entitled to allocate and the remaining period, the Commissioner of Finance may determine alternative entire net income solely on the basis of the alternative entire net income properly recorded on the taxpayer’s books and records during such periods.

      (iv) The short period alternative entire net income allocation percentage is determined in the same manner as the alternative entire net income allocation percentage described in 19 RCNY § 3-04(c)(2) except that:

         (A) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate;

         (B) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and

         (C) the deposits factors is computed only for the period for which the taxpayer is entitled to allocate. A taxpayer must submit complete details with its return showing how it computed each factor of the short period alternative entire net income allocation percentage.

      (v) The following is an example illustrating the computation of the alternative entire net income allocation percentage for a short period and the application of this percentage to alternative entire net income:

Example: A banking corporation incorporated outside the United States had been doing business in the State of Florida since 1978. It began doing business and became subject to tax in New York City on May 3, 1985. On November 30, 1985 the taxpayer ceased doing business in Florida but continued its operations in New York City. For Federal income tax purposes, the taxpayer reports on a calendar year basis and had alternative entire net income of $120,000 for the 12 month calendar year 1985. For the period the taxpayer is entitled to allocate, that is, May 3, 1985 through November 30, 1985 (7 months), the taxpayer had the following:

  New York City Total
Payroll $80,000* $100,000
Receipts $875,000* $1,250,000
Deposits $990,000* $1,650,000

~

* 100% of the New York City amount

The taxpayer’s short period alternative entire net income allocation percentage is computed as follows:

Payroll factor [($80,000/$100,000) × 100] 80%
Receipts factor [($875,000/$1,250,000) × 100] 70%
Deposits factor [($990,000/$1,650,000) × 100] 60%
Total 210%

~

The short period alternative entire net income allocation percentage is 70% (210%/3).

The taxpayers alternative entire net income allocated to New York City is $59,000 computed as follows:

$120,000/12 (months) = $10,000$  10,000 × 7 (months) = $70,000 $  70,000 × 70% = $49,000 $  10,000 × 1 (month) = $10,000 $120,000 - $70,000 - $10,000 = $40,000

Alternative entire net income for period 1/1/85-4/30/85 is $40,000 allocated at 0% 0
Alternative entire net income for period 5/1/85-11/30/85 is $70,000 allocated at 70% $49,000
Alternative entire net income for period 12/1/85-12/31/85 is $10,000allocated at 100% $10,000
Total allocated alternative entire net income $59,000

~

   (3) Allocation of taxable assets for a short period. (Administrative Code, § 11-642)

      (i) A taxpayer which is entitled to allocate taxable assets within and without New York City for only part of a taxable year allocates its taxable assets for only that part of the taxable year during which it is entitled to allocate. (See: 19 RCNY § 3-04(d)(1) – General rules for allocation of taxable assets.) A taxpayer subject to tax for a period other than 12 calendar months computes its prorated taxable assets pursuant to 19 RCNY § 3-03(e)(7) and computes its asset allocation percentage only for that part of the taxable year during which it is entitled to allocate.

      (ii) The asset allocation percentage is applied to taxable assets which have been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period other than 12 calendar months, the asset allocation percentage is applied to taxable assets which:

         (A) have been prorated, pursuant to 19 RCNY § 3-03(e)(7), for the period during which the taxpayer is subject to tax; and

         (B) have been prorated for the period during which the taxpayer is entitled to allocate. Taxable assets (or prorated taxable assets) are prorated for the period the taxpayer is entitled to allocate and are computed as follows:

         (C) divide taxable assets (or prorated taxable assets) by the number of calendar months or major parts thereof covered by the taxpayer’s New York City return; and

         (D) multiply the amount determined in subparagraph (ii)(c) of this paragraph by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate. After taxable assets (or prorated taxable assets) have been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of taxable assets (or prorated taxable assets) will be allocated at either 100 percent or zero percent depending on whether the taxpayer’s business was conducted solely within or solely without New York City.

      (iii) If, in the opinion of the Commissioner of Finance, the method described in this paragraph for prorating taxable assets (or prorated taxable assets) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxable assets (or prorated taxable assets) for the period during which it is entitled to allocate and for the remaining period, the Commissioner of Finance may determine taxable assets solely on the basis of the taxable assets properly recorded on the taxpayer’s books and records during such periods.

      (iv) The short period assets allocation percentage is determined in the same manner as the asset allocation percentage described in 19 RCNY § 3-04(d)(2), except that:

         (A) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate;

         (B) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and

         (C) the deposits factor is computed only for the period for which the taxpayer is entitled to allocate. A taxpayer must submit complete details with its return showing how it computed each factor of the short period asset allocation percentage.

      (v) The following is an example illustrating the computation of the asset allocation percentage for a short period and the application of this percentage to taxable assets:

Example: A taxpayer, which was subject to tax for all of 1985, reports on a calendar year basis and had taxable assets of $1,800,000 for such taxable year 1985. On February 11, 1985 the taxpayer began doing business both within and without New York City which entitled it to allocate for the period February 11, 1985 through December 31, 1985. For the short period February 11, 1985 through December 31, 1985 (11 months), the taxpayer had the following:

  New York City Total
Payroll $73,000* $100,000
Receipts $720,000* $900,000
Deposits $855,000* $1,125,000

~

* 80% of the New York City amount

The taxpayer’s short period asset allocation percentage is computed as follows:

Payroll factor [($73,000/$100,000) × 100] 73%
Receipts factor [($720,000/$900,000) × 100] 80%
Deposits factor [($855,000/$1,125,000) × 100] 76%
Receipts factor [($720,000/$900,000) × 100] 80%
Deposits factor [$855,000/$1,125,000) × 100] 76%
Total 385%

~

The short period asset allocation percentage is 77% (385%/5).

The amount of the taxpayer’s taxable assets allocated to New York City is $1,420,500 computed as follows:

$1,800,000/12 (months) = $150,000$   150,000 × 11 (months) = $1,650,000 $1,650,000 × 77% = $1,270,500 $1,800,000 - $1,650,000 = $150,000

Taxable assets allocated at 100% $150,000
Taxable assets allocated at 77% $1,270,500
Total allocated taxable assets $1,420,500

~

   (4) Power of the Commissioner of Finance to adjust or change the method of allocation. (Administrative Code, § 11-642)

      (i) When it appears that the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage described in this section does not properly reflect the activity, business, income or assets of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage by:

         (A) excluding one or more factors; or

         (B) including one or more factors.

      (ii) The Commissioner of Finance is authorized, in his discretion, to permit or require the allocation of entire net income, alternative entire net income or taxable assets by a different method of allocation when it appears to the Commissioner of Finance that such method of allocation will effect a fair and proper allocation of the taxpayer’s income or assets reasonably attributable to New York City.

      (iii) A taxpayer may not adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage described in this section or use a different method of allocating its entire net income, alternative entire net income or taxable assets within and without New York City without the written consent of the Commissioner of Finance. A request to adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage or to use a different method of allocation must be sent to:

         Department of Finance          Audit Division          Banking Corporation Tax Unit          345 Adams Street          7th Floor          Brooklyn, NY 11201

The request must set forth complete information on which the request is made, together with a computation of the amount of tax which would be due under the proposed method. A taxpayer making a request for an adjustment of any of its allocation percentages, or to use a different method of allocation must compute and pay its tax in accordance with the entire net income allocation percentage, the alternative entire net income allocation percentage and the asset allocation percentage described in this section and it must file its return in accordance with the instructions shown on the return.

      (iv) If a taxpayer has been permitted or required to adjust the entire net income allocation percentage, alternative entire net income allocation percentage or asset allocation percentage described in this section or to use a different method of allocating its entire net income, alternative entire net income or taxable assets within and without New York City, the taxpayer must continue to use such permitted or required method in subsequent taxable years. If the facts materially change, the taxpayer must notify the Commissioner of Finance of such change. If such permitted or required method no longer properly reflects the activity, business, income or assets of the taxpayer, the taxpayer must request permission or the Commissioner of Finance may require the taxpayer to change such permitted or required method.

      (v) See 19 RCNY § 3-03(a)(3) concerning other powers of the Commissioner of Finance to adjust entire net income, alternative entire net income and taxable assets.

   (5) Optional depreciation. (Administrative Code, §§ 11-641(j) and 11-641.1)

      (i) For taxable years beginning on or after January 1, 1966, a taxpayer is provided an option to elect to deduct from allocated entire net income an amount not to exceed twice the amount of Federal depreciation on certain newly acquired depreciable property. Such deduction is allowed only upon the condition that entire net income be computed without any deduction for depreciation or amortization of qualified property. The total depreciation deduction allowed under Parts 1, 2 and 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code in any taxable year or years on each item of qualified property may not exceed the cost or other basis of the property described in subparagraph (ii)(E) of this paragraph.

      (ii) For purposes of this paragraph the term, “qualified property” means tangible property which:

         (A) is depreciable pursuant to § 167 of the Internal Revenue Code;

         (B) has a situs in New York City;

         (C) is used in the taxpayer’s trade or business;

         (D) the original use of which commenced with the taxpayer, commenced in New York City and commenced after December 31, 1965; and

         (E) is acquired by purchase as defined in § 179(d) of the Internal Revenue Code, or constructed, reconstructed or erected after December 31, 1965, pursuant to a contract which was, on or before December 31, 1967, and at all times thereafter, binding on the taxpayer, or property, the physical construction, reconstruction or erection of which began on or before December 31, 1967, which was completed on or before December 31, 1969. For any taxable year beginning on or after January 1, 1968, a taxpayer is not allowed a deduction under subparagraph (i) of this paragraph with respect to tangible personal property leased by it to any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property is considered a lease.

      (iii) If the deduction allowable for any taxable year exceeds the taxpayer’s entire net income allocated to New York City, the excess may be carried over to the following taxable year or years. The taxpayer’s entire net income allocated to New York City must be reduced to zero before any allowance of a carry-over of any unused deduction under this section. If a carry-over under this provision is claimed, complete details of the computation must be submitted with the return.

      (iv) In any taxable year when property on which depreciation under this paragraph has been allowed, is sold or otherwise disposed of, entire net income before allocation must be adjusted by adding the Federal loss or subtracting the Federal gain resulting from such sale or disposition. The New York City gain resulting from such sale or disposition must be added to entire net income allocated to New York City. If a New York City loss results from such sale or disposition, it is subtracted from entire net income allocated to New York City. To determine the basis of the property, in computing the gain or loss for purposes of the banking corporation tax, the sum of the amounts allowed as depreciation under this paragraph for all taxable years from the year of acquisition to and including the year of the sale or other disposition is subtracted from the original Federal cost or other basis. No loss shall be recognized with respect to a sale or other disposition to a person whose acquisition thereof is not a purchase as defined in § 179(d) of the Internal Revenue Code. A sale or other disposition of qualified property includes any transfer or exchange without regard to whether a gain or loss from the transaction is recognized for Federal income tax purposes. A disposition of qualified property includes:

         (A) a sale of the property;

         (B) a liquidation other than as part of a statutory merger or consolidation;

         (C) a legal dissolution of the taxpayer;

         (D) a trade-in of the property;

         (E) a gift of the property;

         (F) transfer upon foreclosure of a security interest in the property;

         (G) retirement of the property before expiration of its useful life;

         (H) condemnation of the property;

         (I) loss of the property due to fire, theft, storm or other casualty; and

         (J) transfer of the property to a corporation not taxable under the banking corporation tax law.

      (v) If the election provided in subparagraph (i) of this paragraph is made when computing entire net income, alternative entire net income must also be computed without any deduction for depreciation or amortization of qualified property. The deduction from allocated alternative entire net income for the taxable year is the same as the deduction from allocated entire net income for the taxable year.

§ 3-05 Returns.

(a) General.

   (1) Corporations required to file returns. (Administrative Code, § 11-646(a))

      (i) Returns are required to be filed annually by:

         (A) every banking corporation subject to tax (See: 19 RCNY § 3-01(c) – Corporations subject to tax);

         (B) every bank holding company required or permitted to make a combined return under 19 RCNY § 3-05(b); and

         (C) every taxpayer which continues in business in New York City after it is dissolved.

      (ii) Every banking corporation claiming not to be subject to tax but having one or more officers, agents or representatives within New York City must submit a complete description of its activities in New York City in an information report (form NYC-245) which it must file annually. If the Commissioner of Finance determines the banking corporation is subject to tax, he will notify such corporation to file a tax return. The filing of the information report does not start the period of limitation within which the Commissioner of Finance may assess the tax.

   (2) Short period returns. (Administrative Code, § 11-646(a)) A short period return is required in the case of:

      (i) a newly organized taxpayer whose first accounting period is less than 12 months;

      (ii) a foreign corporation that becomes subject to the banking corporation tax in New York City subsequent to the commencement of its Federal accounting period;

      (iii) a taxpayer that dissolves, merges, consolidates or ceases to be subject to tax pursuant to the banking corporation tax prior to the close of its accounting period for Federal income tax purposes;

      (iv) a taxpayer that changes its accounting period for Federal income tax purposes;

      (v) a taxpayer that becomes part of or ceases to be part of a Federal consolidated group during the year;

      (vi) a taxpayer which changes from one Federal consolidated group to another Federal consolidated group during the year; and

      (vii) a taxpayer that is an old target (within the meaning of Treas. Reg. § 1.338-2(c)(17)) for which an election is made pursuant to § 338 of the Internal Revenue Code and not deemed invalid pursuant to 19 RCNY § 3-03(b)(2)(vi), if the acquisition date, as defined in § 338(h)(2) of the Internal Revenue Code, is other than the last day of the taxpayer’s taxable year determined without regard to such election. A short period report required by this subdivision shall cover the period provided in subdivision (a) of 19 RCNY § 3-02 and shall be filed as provided in subdivision (d) of this section.

   (3) Returns where Federal or New York State income is changed. (Administrative Code, § 11-646(e))

      (i) If the amount of the taxable income for any year of any taxpayer as reported for Federal income tax or New York State franchise tax purposes is changed or corrected by a final determination of the Commissioner of Internal Revenue or other officer of the United States or the New York State Tax Commission or other competent authority, or if a taxpayer, pursuant to subsection (d) of § 6213 or the Internal Revenue Code, executes a notice of waiver of the restrictions, provided in subsection (a) of such section, or, pursuant to subsection (f) of § 1081 of the New York State Tax Law, executes a notice of waiver of the restrictions provided in subsection (c) of such section, the taxpayer is required to report to the Commissioner of Finance such changed or corrected taxable income or such execution of such notice of waiver and the changes or corrections of its Federal or New York State taxable income on which it is based within 90 days after the final determination or the execution of the notice of waiver. The taxpayer must concede the accuracy of such determination or state wherein it is erroneous.

      (ii) Any deficiency notice issued (including a notice issued pursuant to a waiver filed by a taxpayer) pursuant to the provisions of the Internal Revenue Code or the New York State Tax Law is a final determination unless a timely petition to redetermine the deficiency is filed in the Tax Court of the United States or with the New York State Tax Commission. If a petition is filed, the judgment of the court of last resort is the final determination. The allowance by the Commissioner of Internal Revenue or the New York State Tax Commission of a refund of any part of the tax shown on the taxpayer’s return or of any deficiency thereafter assessed, whether the refund is made on the Commissioner’s or State Tax Commission’s own motion or pursuant to the judgment of a court, is also final determination.

   (4) Amended Federal or New York State return. (Administrative Code, § 11-646(e))

      (i) Any taxpayer which files an amended return with the Internal Revenue Service or the New York State Tax Commission must file an amended return within 90 days thereafter with the Commissioner of Finance.

  1. Combined returns.*

   (1) General. (Administrative Code, § 11-646(f))

      (i) Each banking corporation (as defined in 19 RCNY § 3-01(b)(5)) or bank holding company (as defined in 19 RCNY § 3-01(b)(4)) is a separate taxable entity and must file its own return. However, where the requirements described in 19 RCNY § 3-05(b)(2) and (b)(3) are met, a group of banking corporations and bank holding companies may be required or permitted to file a combined return.

      (ii) Each of the corporations to be included in the combined return must be a banking corporation or a bank holding company.

      (iii) A corporation organized under the laws of the United States, New York State, or any other state may not be included in a combined return with an alien corporation (a corporation organized under the laws of a country other than the United States.) That is, an alien corporation can only be included in a combined return with other alien corporations.

      (iv) Each corporation included in a combined return must use the same accounting period.

      (v) For purposes of this subdivision, the provisions of 19 RCNY § 3-01(b)(5)(x)(A)((c)) and (b)(5)(x)(A)((d)) relating to “ownership” and “control” apply.

   (2) Corporations required to file a combined return. (Administrative Code, § 11-646(f))

      (i) (A) A banking corporation or bank holding company which is doing business in New York City in a corporate or organized capacity is required to file a return on a combined basis covering itself and the following corporations:

            (a) any banking corporation or bank holding company which owns or controls, directly or indirectly, 80 percent or more of its voting stock, and

            (b) any banking corporation or bank holding company in which it owns or controls, directly or indirectly, 80 percent or more of the voting stock.

         (B) For provisions regarding a banking corporation or a bank holding company which is not a taxpayer, see 19 RCNY § 3-05(b)(6)(i).

      (ii) It will be presumed that the tax liability of any banking corporation or bank holding company described in subparagraph (i)(A) of this paragraph will be properly reflected when such corporation reports on a combined basis. Such a corporation may nevertheless be excluded from the combined return if the taxpayer or the Commissioner of Finance shows that the inclusion of such a corporation in the combined return fails to properly reflect the tax liability of such corporation under the banking corporation tax law. Tax liability may be deemed to be improperly reflected because of intercorporate transactions or some agreement, understanding, arrangement or transaction referred to in 19 RCNY § 3-03(a)(3).

      (iii) (A) A banking corporation or bank holding company described in subparagraph (i)(A) of this paragraph of this section that meet the applicable requirements may be excluded from a combined return in accordance with paragraph (b)(5) of this section.

         (B) A group of corporations meeting the requirements of subparagraph (i)(A) of this section may make a written request, in accordance with 19 RCNY § 3-05(b)(5), for preliminary review as to which corporations are to be included in a combined return.

      (iv) A group of corporations filing a combined return pursuant to subparagraph (i)(A) of this paragraph must submit all of the information described in 19 RCNY § 3-05(b)(5)(iii) with its combined return unless such information has already been submitted pursuant to subparagraph (iii) of this paragraph.

   (3) Corporations permitted or required to file a combined return. (Administrative Code, § 11-646(f))

      (i) A) In the discretion of the Commissioner of Finance, any banking corporation or bank holding company which is doing business in New York City in a corporate or organized capacity and

            (a) any banking corporation or bank holding company which owns or controls, directly or indirectly, 65 percent or more of its voting stock, and

            (b) any banking corporation or bank holding company in which it owns or controls, directly or indirectly, 65 percent or more of the voting stock, may be permitted or required to make a return on a combined basis. The Commissioner of Finance will permit or require such corporations to file on a combined basis if he determines that a combined return is necessary in order to properly reflect the tax liability of such a banking corporation or bank holding company. The corporations described in subparagraphs (i)(A)((a)) and (i)(A)((b)) of this paragraph include corporations which are not doing business in New York City in a corporate or organized capacity.

         (B) The Commissioner of Finance may, in his discretion, permit or require the filing of a combined return by banking corporations or bank holding companies 65 percent or more of the voting stock of each of which is owned or controlled, directly or indirectly, by the same interest, if at least one of such corporations is a taxpayer and if the Commissioner of Finance determines that such filing is necessary in order to properly reflect the tax liability of any one or more of such corporations.

      (ii) (A) For those corporations described in subparagraph (i) of this paragraph, in making his determination whether a combined return is necessary in order to properly reflect the tax liability of any one or more of such corporations, the Commissioner of Finance will first determine whether the group of corporations under consideration is engaged in a unitary business. In deciding whether a corporation is part of a unitary business, the Commissioner of Finance will consider whether the activities in which the corporation engages are related to the activities of the other corporations in the group, or whether the corporation is engaged in the same or related lines of business as the other corporations in the group. It will be presumed that a group of corporations meeting the stock ownership requirements of subparagraph (i) of this paragraph (including those also meeting the requirements of 19 RCNY § 3-05(b)(2)(i)(A) and (b)(6)(i)) is engaged in a unitary business. The burden of establishing that a corporation in such group is not part of a unitary business shall be upon the person so asserting, whether such person be the Commissioner of Finance or any member of such group.

         (B) When a taxpayer engaged in a unitary business reports on a separate basis, the tax liability of such taxpayer and any other banking corporation or bank holding company in such unitary business may be deemed to be improperly reflected because of:

            (a) intercorporate transactions (See: subparagraph (ii)(c) of this paragraph), or

            (b) some agreement, understanding, arrangement or transaction existing between the taxpayer and any other combinable corporation, whereby the activity, business, income or assets of the taxpayer within New York City is improperly or inaccurately reflected.

         (C) (a) If there are substantial intercorporate transactions among the banking corporations or bank holding companies engaged in a unitary business, it will be presumed that the tax liability of the taxpayer will be improperly reflected when the taxpayer reports on a separate basis. In determining whether there are substantial intercorporate transactions, the Commissioner of Finance will consider transactions directly connected with the business conducted by such corporations, such as:

               (1) performing services for other corporations in the group;

               (2) providing funds to other corporations in the group; or

               (3) performing related customer services using common facilities and employees. Service functions will not be considered when they are incidental to the business of the corporation providing such services. Service functions include, but are not limited to, accounting, legal and personnel services. The substantial intercorporate transaction test may be met where as little as 50 percent of a corporation’s receipts or expenses are from one or more qualified activities described in subparagraph (ii)(c). It is not necessary that there be substantial intercorporate transactions between any one member with every other member of the group. It is, however, essential that each corporation have substantial intercorporate transactions with one other combinable corporation or with a combined or combinable group of corporations. For example, corporations X, Y and Z are banking corporations and Z derives 30 percent of its receipts from the performance of services for corporation X and 40 percent from the performance of services for corporation Y. If corporations X and Y constitute a combined or combinable group, there are substantial intercorporate transactions between corporation Z and such a combined group because 70 percent of corporation Z’s receipts are from such combined group. If corporations X and Y do not constitute a combined or combinable group, there are not substantial intercorporate transactions between corporation Z and corporations X and Y.

            (b) If a corporation described in subdivision (a) of this section fails to meet the presumption of improper reflection of tax liability because it does not have substantial intercorporate transactions with any other combinable corporation or with a combined or combinable group of such corporations and if the filing of a return on a separate basis nevertheless results in an improper reflection of the taxpayer’s tax liability in New York City, the Commissioner of Finance will permit or require the filing of a combined return. If a corporation described in subdivision (a) of this section meets the presumption of improper reflection of tax liability because it has substantial intercorporate transactions with any other combinable corporation or with a combined or combinable group of such corporations and if the filing of a return on a separate basis does not result in an improper reflection of the taxpayer’s tax liability in New York City, the Commissioner of Finance will not permit or require the filing of a combined return.

         (D) When a taxpayer reports on a separate basis, the tax liability of such taxpayer and any other banking corporation or bank holding company may be deemed to be improperly reflected because of some agreement, understanding, arrangement or transaction existing between the taxpayer and any other combinable corporation, whereby the activity, business, income or assets of the taxpayer within New York City is improperly or inaccurately reflected.

      (iii) Except for corporations described in 19 RCNY § 3-05(b)(2)(i)(A) any banking corporation or bank holding company described in subparagraph (i) of this paragraph and those described in 19 RCNY § 3-05(b)(6)(i) that meets the applicable requirements may file a combined return with one or more corporations or bank holding companies or be added to or excluded from a combined return in accordance with 19 RCNY § 3-05(b)(5).

   (4) Examples. Example 1: Assume the same facts as in Example 1 of 19 RCNY § 3-01(b)(5)(x)(A)(d) and that all of the corporations except corporation E are organized under the laws of New York State. Assume that corporation E is organized under the laws of Canada. Bank A, bank B, corporation D, E, F and G are banking corporations. The Federal bank holding company and bank A are required (unless the requirements of 19 RCNY § 3-05(b)(2)(ii) are met) to file a combined return pursuant to the provisions of 19 RCNY § 3-05(b)(2). Bank B and corporation F are required (unless the requirements of 19 RCNY § 3-05(b)(2)(ii) are met) to file a combined return pursuant to the provisions of 19 RCNY § 3-05(b). Corporations D and G may be permitted or required to be included in a combined return with the Federal bank holding company and bank A pursuant to the provisions of 19 RCNY § 3-05(b)(3).

      Example 2: A, a Federal bank holding company, owns 100 percent of the voting stock of bank B and corporation C. Corporation C owns 100 percent of the voting stock of corporations D and E. All of the corporations are taxpayers. A performs services for and provides funds to bank B and corporations C, D and E. Corporations C and D are in the finance leasing business and corporation E conducts a consumer finance business. A, bank B and corporations C, D and E are required to file a combined return pursuant to 19 RCNY § 3-05(b).

   (5) Procedure for adding to, excluding from or filing a combined return.

      (i) (A) A banking corporation or bank holding company described in 19 RCNY § 3-05(b)(2)(i) that meets the requirements for exclusion set forth in 19 RCNY § 3-05(b)(2)(ii) does not need to request prior permission to be excluded from a combined return. To be excluded from a combined return, such entity must file a completed separate return. The first year such entity is excluded from the combined return, such entity must include the information required by subparagraph (iii) of this paragraph (5) either on the return or attached thereto.

         (B) A banking corporation or bank holding company described in 19 RCNY § 3-05(b)(3)(i) or 19 RCNY § 3-05(b)(6)(i), that meets the applicable requirements set forth in 19 RCNY § 3-05(b)(3) does not need to request prior permission to file on a combined basis with one or more banking corporations or bank holding companies or to be added to or excluded from a combined return. To file on a combined basis, such entity must be included in a completed combined return. The first year such entity files on a combined basis, and each year thereafter in which the composition of the group changes, the information required by subparagraph (iii) of this paragraph (5) must be submitted, either on the return or attached thereto.

      (ii) [Reserved.]

      (iii) The first year the group files on a combined basis and each year thereafter in which the composition of the group changes, the Commissioner requires the following information either on the combined return or attached thereto:

         (A) the corporate organization chart setting forth the name of each banking corporation and bank holding company meeting the stock ownership requirements of 19 RCNY § 3-05(b)(3)(i) and the percentage of voting stock of each such corporation owned or controlled, directly or indirectly, by any other such corporation and the name of each corporation or, other person in the case of a corporation described in 19 RCNY § 3-05(b)(3)(i)(B), which owns or controls, directly or indirectly, the voting stock of each such corporation and the percentage of such stock so owned;

         (B) for all of the bank holding companies, banking corporations and other corporations meeting the stock ownership requirements of 19 RCNY § 3-05(b)(3)(i):

            (a) the exact name,

            (b) address (including zip code),

            (c) employer identification number,

            (d) date of incorporation,

            (e) state or country of incorporation,

            (f) the date began business in New York City, if applicable, and

            (g) in the case of a corporation described in 19 RCNY § 3-01(b)(5)(x), a description of the activities in which the corporation is principally engaged (as defined in such 19 RCNY § 3-01(b)(5)(x)) and the section of the law or regulations which establish that such activities are permissible activities within the contemplation of 19 RCNY § 3-01(b)(5)(x)(A)(a);

         (C) a statement providing details as to why the inclusion of those corporations included in a combined return and the exclusion of those corporations excluded from a combined return properly reflect the tax liability of the group of corporations and of each corporation to be included in the group and of each corporation to be excluded from the group; and

         (D) for the taxable year covered by the combined return, using spread sheets if necessary, information that will clearly identify on a corporation-by-corporation basis, the nature and amount of each category of intercorporate transaction between each one of the corporations described in subparagraph (iii)(B) of this paragraph with each of the other corporations which reflects:

            (a) the source and amount of gross receipts of each corporation described in subparagraph (iii)(B) of this paragraph and the portion derived from transactions with each of the other corporations,

            (b) the source and amount of total services and other transactions of each corporation described in subparagraph (iii)(B) of this paragraph, and the portion related to transactions with each of the other corporations, and

            (c) any other data that shows the degree of involvement of the corporations with each other.

         (E) If the New York State Department of Taxation and Finance disallows the filing of a combined report or the inclusion of a corporation in, or the exclusion of a corporation from, a combined report for purposes of Article 9-A of the New York State Tax Law, the taxpayer must report such fact to the Commissioner of Finance within 30 days following such disallowance.

      (iv) The filing of a combined return, the inclusion of a corporation in or the exclusion of a corporation from a combined return is subject to revision or disallowance on audit. In such event, the Commissioner of Finance may compute and assess the tax of each corporation not permitted to be included in a combined report on a separate basis and the Commissioner of Finance may recompute and assess the tax on the combined return by including therein any improperly excluded corporation.

      (v) A corporation that properly reports on a combined basis must continue to file its returns on a combined basis until the facts affecting its combined reporting status materially change. A corporation properly excluded from a combined return must continue to file its return on a separate basis until the facts materially change. For example, if a corporation which was 65 percent or more but less than 80 percent owned or controlled becomes 80 percent or more owned or controlled, or if a corporation which was 80 percent or more owned or controlled, becomes less than 80 percent owned or controlled, a material change has taken place.

      (vi) Once a group of corporations properly files a combined return, it must notify the Commissioner of Finance of the subsequent acquisition of any corporation for which information is requested pursuant to subparagraph (iii)(B) of this paragraph. Such notification must be given on the combined return for the taxable year in which such acquisition was made. The notification must contain all the information described in subparagraph (iii) of this paragraph.

   (6) Corporations not included in a combined return. (Administrative Code, § 11-646(f))

      (i) A banking corporation or bank holding company which is not a taxpayer cannot be included in a combined return under 19 RCNY § 3-05(b)(2) unless it is part of a unitary business with the other corporations in the group (See: 19 RCNY § 3-05(b)(3)(ii)(A)) and the Commissioner of Finance determines that the inclusion of such corporation is necessary in order to properly reflect the tax liability of one or more banking corporations or bank holding companies included in the group because of:

         (A) intercorporate transactions (See: 19 RCNY § 3-05(b)(3)(ii)(C)); or

         (B) some agreement, understanding, arrangement or transaction existing between the taxpayer and any other combinable corporation, whereby the activity, business, income or assets of the taxpayer within New York City is improperly or inaccurately reflected (See: 19 RCNY § 3-05(b)(3)(ii)(D))

      (ii) A corporation which has properly elected to be taxable under subchapter 2 of chapter 6 of Title 11 of the Administrative Code for a taxable year in accordance with the provisions of 19 RCNY § 3-01(b)(5)(x)(B) cannot be included in a combined return for that taxable year.

   (7) Combined returns: cross-references. The following is a list of cross-references to other sections of these regulations which pertain to combined returns:

      (i) Computing tax on combined returns, see 19 RCNY § 3-03(a)(2).

      (ii) Definition of entire net income, see 19 RCNY § 3-03(b)(2)(iii).

      (iii) Computing entire net income on a combined return, see 19 RCNY § 3-03(b)(6).

      (iv) Computing the alternative minimum tax measured by alternative entire net income on a combined return, see 19 RCNY § 3-03(d)(2) of these regulations.

      (v) Computing the alternative minimum tax measured by taxable assets on a combined return, see 19 RCNY § 3-03(e)(6).

      (vi) The alternative minimum tax measured by the fixed minimum amount on a combined return, see 19 RCNY § 3-03(g)(2).

      (vii) Allocation of entire net income on combined returns, see 19 RCNY § 3-04(b)(4).

      (viii) Allocation of alternative entire net income on combined returns, see 19 RCNY § 3-04(c)(4).

      (ix) Allocation of taxable assets on combined returns, see 19 RCNY § 3-04(d)(3).

      (x) Receipts factor on combined returns, see 19 RCNY § 3-04(f)(10).

      (xi) Form of combined returns, see 19 RCNY § 3-05(c)(2).

      (xii) Combined corporations ceasing to be subject to the banking corporation tax, see 19 RCNY § 3-05(d)(3).

      (xiii) Extension of time for filing combined returns, see 19 RCNY § 3-05(d)(4).

      (xiv) Payment of tax on combined return, see 19 RCNY § 3-06(a).

  1. Form of returns.

   (1) Form of returns. (General) (Administrative Code, § 11-646(a), (b), (d) and (e))

      (i) Returns are required to be filed on forms prescribed by the Commissioner of Finance. All taxpayers are required to file form NYC-1. A taxpayer must submit with such return a copy of its actual Federal form 1120 or 1120F and all attachments. In addition, it must submit the following information:

         (A) payor and amount of each dividend;

         (B) payor and amount of each item of gross interest income described in 19 RCNY § 3-03(b)(4)(ii)(L);

         (C) description and amount of each item of other income;

         (D) the amount and type of taxes paid to each jurisdiction;

         (E) a schedule showing all computations pertaining to an IBF.

      (ii) When a consolidated return is filed for Federal income tax purposes, the taxpayer must also submit with its form NYC-1 a copy of the consolidating spread sheets and supporting schedules required for Federal income tax purposes.

      (iii) A change in Federal or New York State taxable income must be reported and must be accompanied by a copy of the amended Federal or New York State return or the Federal revenue agent’s report or New York State audit report and copies of all other related information.

      (iv) Any banking corporation which is not a taxpayer but which has one or more officers, agents or representatives within New York City is required to file an information report on form NYC-245.

      (v) Every taxpayer must submit such other returns and other information which the Commissioner of Finance may require in the administration of the banking corporation tax law.

      (vi) Every return must have annexed to it a certification that the statements in the return are true. The certification must be made by the president, vice-president, treasurer, assistant treasurer, chief accounting officer or any other officer of the taxpayer authorized to act in that capacity. The fact that an individual’s name is signed on the certification of the return shall be prima facie evidence that such individual is authorized to sign and to certify the return on behalf of the corporation.

      (vii) Annual return forms are supplied by the Commissioner of Finance. Copies of the prescribed forms will, upon request, be furnished by the Commissioner of Finance. Failure to receive a blank form does not excuse failure to file the return.

   (2) Form of combined return. (Administrative Code, § 11-646(a))

      (i) In all cases where a combined return is permitted or required (See: 19 RCNY § 3-05(b) – Combined returns), a combined banking corporation tax return must be submitted on form NYC-3A-F. In addition, a separate banking corporation tax return must be filed for each corporation in the combined group on form NYC-1.

      (ii) All corporations in the combined group must use the same accounting period.

   (3) Forms to be used.

      (i) Return forms may be obtained from the Department of Finance, Taxpayer Services Division, 151 West Broadway, New York, New York 10013.

      (ii) The following is a list of forms to be used:

Form No. Description
NYC-6B Application for 6 Month Extension for Filing Tax Return
NYC-6.1B Application for Additional Extension
NYC-8 Claim for Credit or Refund of Corporation Tax Paid
NYC-1 Tax Return for Banking Corporations
NYC-1A-F Combined Tax Return for Banking Corporations
NYC-245 Activities Report of Corporations
NYC-324 Schedule of Optional Depreciation on Qualified New York Property
NYC-399 Schedule for New York City Depreciation Deduction
NYC-400B Declaration of Estimated Tax
NYC-3360B Banking Corporation Tax Report of Change in Tax made by U.S. Internal RevenueService and/or NY State Department of Taxation and Finance

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  1. Time and place for filing returns.

   (1) Time for filing returns. (Adminstrative Code, § 11-646(a)) Returns must be filed at the times set forth in this subparagraph.

      (i) Except as provided in paragraph (8) of this subdivision, every calendar year taxpayer must file its return on or before the 15th day of March following the close of its calendar year.

      (ii) Except as provided in paragraph (8) of this subdivision, every fiscal year taxpayer must file its return on or before the 15th day of the third month following the close of its fiscal year.

Example 1: A corporation selects the fiscal year basis of reporting and uses September 30 as the last day of its fiscal year. Its return must be filed on or before December 15.

      (iii) Except as provided in paragraph (8) of this subdivision, every taxpayer using a 52-53 week accounting period must file its annual return on or before the 15th day of the third month following the date on which its fiscal year is deemed to have ended. A 52-53 week accounting period which ends within seven days from the last day of any calendar month will be deemed to have ended on the last day of such month (See: 19 RCNY § 3-02(a)(4) – 52-53 week fiscal year taxpayers).

Example 2: A corporation selects a 52-53 week accounting period ending on the Monday nearest the last day of November. In 1985, the Monday nearest the last day of November is Monday, December 2. The accounting period is deemed to have ended on the last day of November and its return must be filed on or before February 15, 1986.

   (2) Time for filing changes in Federal or New York State taxable income. (Administrative Code, § 11-646(e)) Any change in Federal or New York State taxable income must be reported within 90 days after the date of final determination by the Commissioner of Internal Revenue or other officer of the United States or the New York State Tax Commission or other competent authority. For a description of change in Federal or New York State taxable income and final determination, see 19 RCNY § 3-05(a)(3).

   (3) Time for filing returns of corporations ceasing to be subject to tax. (Administrative Code, § 11-646(a))

      (i) (A) A taxpayer that ceases to do business in New York City in a corporate or organized capacity and thereby ceases to be subject to the banking corporation tax (See: 19 RCNY § 3-02(c) – Cessation Periods), is required to file a return on or before the 15th day following the date of such cessation or at such other time as the Commissioner of Finance may require, covering the period from the close of its last calendar or fiscal year up to and including the date of such cessation.

         (B) A taxpayer that ceases to be subject to the banking corporation tax because of a change in the nature of its activities or because of a change in the ownership or control of its voting stock (See: 19 RCNY § 3-02(c) – Cessation Periods), is required to file a return on or before the 15th day following the date of such change or at such other time as the commissioner of Finance may require, covering the period from the close of its last calendar or fiscal year up to and including the date of such change. This subparagraph shall not apply to a taxpayer for which an election is made pursuant to § 338 of the Internal Revenue Code, regardless of whether such election is deemed invalid pursuant to 19 RCNY § 3-03(b)(2)(vi), notwithstanding any deemed cessation of existence of such taxpayer pursuant to Treas. Reg. § 1.338(h)(10)-1(d)(4).

      (ii) Notwithstanding subparagraph (i) of this paragraph (3), a corporation need not file a separate report within 15 days of the date it ceases to be subject to the banking corporation tax (See: 19 RCNY § 3-02(c) – Cessation Periods) if:

         (a) it is a member of a group taxed on the basis of a combined report for the period including the date of such cessation; and

         (b) it is properly included in such combined report.

   (4) Extension of time for filing returns. (Administrative Code, § 11-646(c).)

      (i) An automatic six month extension for filing an annual return will be granted if the application for automatic extension (form NYC-6B) is filed and a properly estimated tax is paid on or before the due date of the return for the taxable period for which the extension is requested. (See: 19 RCNY § 3-06(a)(3) – Properly estimated tax.) Failure to meet the requirements of this subparagraph (i) will make the application invalid and any return filed after the due date will be treated as a late filed return.

      (ii) An automatic six month extension for filing a combined return will be granted to a group of corporations authorized to file a combined return if the application for automatic extension (form NYC-6B) is filed and a properly estimated tax is paid on or before the due date of the return for the taxable period for which the extension is requested. (See: 19 RCNY § 3-06(a)(3) – Properly estimated tax.) Failure to meet the requirements of this subparagraph (ii) will make the application invalid and any return filed after the due date will be treated as a late filed return. To obtain an automatic extension, an application must be filed by the corporation paying the tax for the combined group. The applicant must submit the following information:

         (A) its complete name;

         (B) its employer identification number;

         (C) a list showing the name, employer identification number and taxable period of each of the other corporations properly included as part of the combined group; and

         (D) a list showing the estimated tax for each corporation included in the combined group. The corporation paying the tax for the combined group must pay with the application the properly estimated combined tax plus $125, as provided in 19 RCNY § 3-03(g)(2), for each of the taxpayers included in the combined group.

      (iii) On or before the expiration of the automatic six month extension, the Commissioner of Finance may grant additional three month extensions of time for filing returns when good cause exists. Up to two additional three month extensions of time for filing returns for any taxable year may be granted when good cause exists. An application for each additional three month extension must be made in writing before the expiration of the previous extension. Additional extensions of time for filing by a combined group must be requested in one application by the corporation paying the tax for the combined group. The applicant must submit the following information:

         (A) its complete name;

         (B) its employer identification number;

         (C) the reason for requesting the additional extension; and

         (D) in the case of an application by a combined group, a list showing the name, employer identification number and taxable period of the other corporations properly included as part of the combined group.

      (iv) Any extension of time for filing a return granted under this Subpart will not extend the time for payment of any tax due. (However, see 19 RCNY § 3-06(a)(2) for extension of time for payment of tax.)

      (v) Notwithstanding paragraph (3) of this subdivision, a corporation that ceases to be subject to the banking corporation tax shall receive an automatic six-month extension of time for filing an annual tax report (form NYC-1) only on the condition that form NYC-6FB (Application for Automatic Extension to File Final Return) is filed and a properly estimated tax is paid on or before the due date of the return for the taxable period for which the extension is requested.

   (5) Place for filing returns. Returns must be mailed to the Department of Finance at the address designated on the return form.

   (6) Last day on a Saturday, Sunday or legal holiday. (Administrative Code, § 11-682(3)) When the last day prescribed in these regulations for filing a return (including the last day covered by an extension of time) falls on Saturday, Sunday or a legal holiday in New York State, the filing of such return will be considered timely if it is filed on the next succeeding date which is not a Saturday, Sunday or legal holiday.

   (7) Mailing of returns. (Administrative Code, § 11-682(1)) The provisions of the Regulations of the Commissioner of Finance Relating to the Mailing Rules for New York City Income and Excise Taxes apply with respect to banking corporation tax returns and payments. Generally, those regulations provide that if a tax return or payment properly addressed with sufficient postage prepaid is delivered to the Department of Finance by U.S. mail after the due date, the date of the U.S. Postal Service postmark stamped on the envelope will be deemed the date of delivery, provided the postmark date falls on or before the due date. Non-U.S. Postal Service postmarks will also be recognized, provided delivery to the Department of Finance occurs within five days of the postmark date. If the five-day limit is exceeded, the taxpayer must establish that the item was actually deposited in the mail by the due date, that the delay in receipt was due to a delay in the transmission of mail, and the cause of the delay.

   (8) Electronic filing. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of returns and reports required by this section.

   (9) Short period reports.

      (i) Taxpayers joining a Federal consolidated group.

         (A) Short period precedes joining the group. Except as otherwise provided in subparagraph (iii) or (iv) of this paragraph, where a taxpayer, not previously part of a Federal consolidated group, becomes part of a Federal consolidated group on a day other than the first day of its Federal taxable year, determined without reference to its membership in the group, and the taxpayer is required to file a Federal short period return for the period from the first day of its taxable year through the end of the day on which it becomes such a member pursuant to Treas. Reg. § 1.1502-76(b), the taxpayer must file a report under this section covering the same period. The short period report required by this subparagraph shall be due on the due date for the Federal short period return as provided by paragraph (1) or (2) of subdivision (c) of Treas. Reg. § 1.1502-76, whichever is applicable. This provision does not apply in the case of an amended Federal short period return required under Treas. Reg. § 1.1502-76(c)(2). An amended return for any such short period must be filed within 90 days after the taxpayer files an amended return with the United States Treasury Department. See paragraph (4) of subdivision (a) of this section.

         (B) Short period follows joining group. Except as otherwise provided in subparagraph (iii) or (iv) of this paragraph, where a taxpayer joins a Federal consolidated group, including a situation where a taxpayer leaves one group to join another, the taxpayer must file a short period report under this paragraph covering the period from the day it becomes a member of the group through the end of its new taxable year for purposes of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code of the City of New York, which shall be the same as the end of the taxable year of the new consolidated group. Such report shall be filed on or before the 15th day of the third month following the end of its new taxable year.

      (ii) Taxpayers leaving a Federal consolidated group.

         (A) Short period precedes leaving group. Except as otherwise provided in subparagraph (iii) or (iv) of this paragraph, where a taxpayer ceases to be part of a Federal consolidated group, including a situation where a taxpayer leaves one Federal consolidated group to join another, the taxpayer must file a report under this paragraph covering the period from the beginning of its taxable year up to the date it leaves the group. Such report shall be filed on or before the 15th day of the third month following the close of its taxable year determined as if it had not ceased to be a member.

         (B) Short period follows leaving group. Except as otherwise provided in subparagraph (iii) or (iv) of this paragraph, where a taxpayer ceases to be part of a Federal consolidated group, other than a situation where a taxpayer leaves one Federal consolidated group to join another, the taxpayer must file a short period report under this paragraph covering the period from the day it ceases to be a member of the group through the end of its taxable year determined as if it had not left the group. Such report shall be filed on or before the 15th day of the third month following the close of its taxable year determined as if it had not ceased to be a member.

      (iii) Short period returns relating to IRC § 338 elections.

         (A) Subject to the provisions of clause (B), if a taxpayer is an old target (within the meaning of Treas. Reg. § 1.338-2(c)(17)) any short period report required by 19 RCNY § 3-05(a)(2) shall cover the same period as is covered by the Federal report and shall be due on the due date for the Federal short period return set forth in Treas. Reg. § 1.338-10(a)(6), including any deemed extensions granted pursuant to Treas. Reg. § 1.338-10(a)(6)(ii)(B).

         (B) This subparagraph shall not apply to an amended return described in Treas. Reg. § 1.338-10(a)(6)(ii)(D). An amended return for any such short period must be filed within 90 days after the taxpayer files an amended return with the United States Treasury Department. See paragraph (4) of subdivision (a) of this section.

         (C) Subparagraph (i) of paragraph (3) of this subdivision shall not apply to a taxpayer for which an election is made pursuant to § 338 of the Internal Revenue Code, regardless of whether such election is deemed invalid pursuant to 19 RCNY § 3-03(b)(2)(vi), notwithstanding any deemed cessation of existence of such taxpayer pursuant to Treas. Reg. § 1.338(h)(10)-1(d)(4).

      (iv) If a corporation required to file a short period report as provided in this subdivision becomes subject to tax under Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code on a date other than the first day of such short period, the short period report shall begin on the date the corporation becomes subject to tax under such Subchapter. Except as provided in subparagraph (iii) of this subdivision, if a corporation required to file a short period report as provided in this subdivision ceases to be subject to tax under Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code on the last day of such short period, the provisions of paragraph (3) of this subdivision shall apply in determining the due date for such short period report.

  1. Secrecy provisions.

   (1) Secrecy of returns. (Administrative Code, § 11-682(1))

      (i) Except in accordance with a proper judicial order or as otherwise provided by law, it is unlawful for any of the following to divulge or make known in any manner the amount of income or any particulars set forth or disclosed in any return required under the banking corporation tax law:

         (A) the Commissioner of Finance;

         (B) the Department of Finance of the City of New York;

         (C) any officer or employee of the Department of Finance;

         (D) any person who, pursuant to the banking corporation tax law,is permitted to inspect any return, or to whom any information contained in any return is furnished;

         (E) any person engaged or retained by the Department of Finance on an independent contract basis; or

         (F) any person who in any manner may acquire knowledge of the contents of a return filed pursuant to the banking corporation tax law.

      (ii) The words “except in accordance with a proper judicial order or as otherwise provided by law” mean that a disclosure is permitted only in appropriate proceedings where the integrity of the return itself is attacked or defended as the main issue, and not merely as a collateral issue or where disclosure is explicitly permitted by statute.

      (iii) The officers charged with the custody of returns are not required to produce any of them or evidence of anything contained in them in any action or proceeding in any court, except on behalf of the City of New York in an action or proceeding involving the collection of a tax due under Chapter 6 of Title 11 of the Administrative Code to which the City of New York is a party or a claimant, or on behalf of any party in an action or proceeding under the provisions of such Chapter 6 when the returns or facts shown thereby are directly involved in such action or proceeding, in any of which events the court may require the production of, and may admit in evidence, so much of said returns or of the facts shown thereby as are pertinent to the action or proceeding and no more.

   (2) Secrecy exceptions. (Administrative Code, § 11-688(1), (3) and (4))

      (i) In spite of the provisions relating to secrecy, the Commissioner of Finance may publish a copy or a summary of any determination or decision rendered after the formal hearing provided for in § 11-680 of the Administrative Code.

      (ii) The provisions relating to secrecy do not prohibit:

         (A) the delivery to a taxpayer or its duly authorized representative of a certified copy of any return filed by it;

         (B) the publication of statistics so classified as to prevent the identification of particular returns;

         (C) the inspection by the Corporation Counsel or other legal representative of the City of New York of the return of any taxpayer which brings an action or proceeding to set aside or review the tax based thereon or concerning which an action or proceeding has been recommended by the Commissioner of Finance or has been instituted by the Corporation Counsel;

         (D) the inspection of the returns of any taxpayer by the duly designated officers or employees of the City of New York for purposes of audit under Chapter 6 of Title 11 of the Administrative Code; or

         (E) the publication of the percentage of net income of any corporation which may be required to be allocated within New York City for purposes of the tax imposed by Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code.

      (iii) In spite of the provisions relating to secrecy –

         (A) The Commissioner of Finance may permit the Secretary of the Treasury of the United States or his delegates, or the proper officer of New York State or any other state charged with tax administration, or the authorized representative or either such officer, to inspect returns filed under the banking corporation tax law or may furnish to them an abstract of a return or supply information concerning an item contained in a return, or disclosed by an investigation of tax liability under the banking corporation tax law. Such permission or information may be provided only if the laws of the United States or of such state grant substantially similar privileges to the Commissioner of Finance and such information is to be used for tax purposes only.

         (B) The Commissioner of Finance may furnish to the Secretary of the Treasury of the United States or to the New York State Tax Commission or their delegates such returns filed under the banking corporation tax law and other tax information, as he may consider proper, for use in court actions or proceedings under the Internal Revenue Code or the New York State Tax Law, whether civil or criminal, where a written request for them has been made to the Commissioner of Finance by the Secretary of the Treasury or the New York State Tax Commission or their delegates, provided the laws of the United States or the laws of the State of New York grant substantially similar powers to the Secretary of the Treasury or the New York State Tax Commission or their delegates. Where the Commissioner of Finance has so authorized the use of returns or other tax information in such actions or proceedings, officers and employees of the Department of Finance may testify in such actions or proceedings in respect to the returns or other tax information.

      (iv) In spite of the provisions relating to secrecy, the Commissioner of Finance, in his discretion, may permit or require any or all persons liable for any tax imposed under the banking corporation tax law to make payments on account of estimated tax and payment of any tax, penalty or interest imposed by the banking corporation tax law to banks, banking houses or trust companies designated by the Commissioner of Finance and to file declarations of estimated tax, applications for automatic extensions of time to file returns and returns with such banks, banking houses or trust companies as agents of the Commissioner of Finance, in lieu of making any such payment directly to the Commissioner of Finance. However, the Commissioner of Finance may designate only such banks, banking houses or trust companies as are depositories or financial agents of the City.

   (3) Penalty for violation of secrecy provisions. (Administrative Code, §§ 11-688(2), 11-4017) Any person who violates the secrecy provisions is guilty of a misdemeanor. If the offender is an officer or employee of New York City or New York State and he willfully violates the secrecy provisions, he must be dismissed from office and may not hold any public office in the City or State for a period of five years after such dismissal.

§ 3-06 Payment of Tax and Declaration and Payment of Estimated Tax.

(a) Payment of tax.

   (1) Time for payment of tax. (Administrative Code, § 11-647) The tax imposed by the banking corporation tax law is payable to the Commissioner of Finance in full at the time the return is required to be filed. The time when the payment is required to be made is determined without regard to any extension of time for filing such return.

   (2) Extension of time for payment of tax. (Administrative Code, § 11-647(c)) The Commissioner of Finance may grant a reasonable extension of time for payment of the tax upon receipt of a written request from the taxpayer giving complete information as to the reasons for its inability to make payment of the tax on or before the prescribed due date. Interest must be paid on any balance due from the original due date of the return, without regard to any extension, to the date of payment.

   (3) Properly estimated tax. (Administrative Code, § 11-647(b)) A taxpayer applying for an automatic six month extension for filing its tax return must pay on or before the date its return is required to be filed, without regard to any extension of time, its properly estimated tax. The estimated tax paid, or balance thereof, will be deemed properly estimated if the tax paid is either:

      (i) not less than 90 percent of the tax as finally determined; or

      (ii) not less than the tax shown on the taxpayer’s return for the preceding taxable year, if such preceding year was a taxable year of 12 months.

   (4) Cessation Tax. (Administrative Code, § 11-647(a)) Any taxpayer which ceases to be subject to the banking corporation tax must pay the tax, or balance thereof, at the time the return is required to be filed as described in 19 RCNY § 3-05(d)(3).

  1. Declaration of estimated tax.

   (1) Requirement of declaration. (Administrative Code, § 11-644) Every taxpayer subject to the banking corporation tax must make a declaration of its estimated tax for the current taxable year if such estimated tax can reasonably be expected to exceed $1,000 for the taxable year. The declaration must cover a calendar year accounting period if the taxpayer files its return on the basis of a calendar year, or a full fiscal year if the taxpayer files its return on the basis of a fiscal year, unless a declaration for a short period is required by 19 RCNY § 3-06(b)(6). No declaration may be made for a period of more than 12 months. For purposes of this section a taxable year of 52-53 weeks, in accordance with the provisions of 19 RCNY § 3-02(a)(4), will be deemed a period of 12 months.

   (2) Definition of estimated tax. (Administrative Code, § 11-644(b)) The term “estimated tax” means the amount which a taxpayer estimates to be the tax imposed by the banking corporation tax law for the current taxable year, less the amount which it estimates to be the sum of any credits allowable against the tax.

   (3) Time for filing declaration of estimated tax. (Administrative Code, § 11-644(c) and (f)) A declaration of estimated tax must be filed when the requirements of 19 RCNY § 3-06(b)(1) are first met:

      (i) on or before the first day of the sixth month of the current taxable year, then the declaration must be filed on or before the 15th day of the sixth month;

      (ii) after the first day of the sixth month of the current taxable year and before the second day of the tenth month, then the declaration must be filed on or before the 15th day of the tenth month;

      (iii) after the first day of the tenth month of the current taxable year, then the declaration must be filed on or before the 15th day of the first month of the succeeding taxable year.

   (4) Amendments of declaration. (Administrative Code, § 11-644(d)) In making a declaration of estimated tax, the taxpayer is required to take into account the then existing facts and circumstances as well as those reasonably to be anticipated which relate to the prospective banking corporation tax. Amended or revised declarations may be made in any case in which the taxpayer finds that its estimated tax differs from the estimated tax reflected in its most recent declaration of estimated tax. However, an amended declaration may only be made on an installment date (See: 19 RCNY § 3-06(c)(4) – Other Installments of Estimated Tax) and no further amendments may be made until a succeeding installment date. The amended declaration shall be made on form NYC-400F and marked “AMENDED”. No refund will be issued as a result of the filing of an amended declaration. Consideration will be given to a refund only in connection with a completed return filed by a taxpayer for the taxable year covered by its declaration or amended decla- ration.

   (5) Return as declaration or amendment. (Administrative Code, § 11-644(e) and (f))

      (i) If the taxpayer files its return for the calendar year on or before February 15 of the succeeding calendar year (or if the taxpayer is on a fiscal year basis, on or before the 15th day of the second month succeeding the taxable year) and pays therewith the balance, if any, of the full amount of the tax shown to be due on the return:

         (A) such return will be considered to be its declaration if no declaration was required to be filed during the taxable year for which the tax was imposed, but a declaration was required to be filed on or before the 15th day of the first month of the succeeding taxable year pursuant to 19 RCNY § 3-06(b)(3); or

         (B) such return will be considered as the amendment permitted by 19 RCNY § 3-06(b)(4) to be filed on or before the 15th day of the first month of the succeeding taxable year if the tax shown on the return is greater than the estimate shown on a declaration previously made.

Example 1: A taxpayer which reports on the basis of a calendar year first meets the requirements for making a declaration of estimated tax on October 5, 1981. The taxpayer may satisfy the requirement for making a declaration of estimated tax by preparing and filing its return for taxable year 1981 on or before February 15, 1982, and paying at the time of filing the balance, if any, of the full amount of tax shown to be payable. The return will be treated as the declaration required to be filed on or before January 15, 1982.

Example 2: The taxpayer makes and files on or before October 15, 1981 a timely declaration of estimated tax for such year and on or before February 15, 1982 files its 1981 tax return and pays the balance, if any, of the full amount of tax shown to be payable. If the taxpayer’s return shows the tax to be greater than the estimated tax shown on the declaration, the return will be treated as the amended declaration permitted to be filed on or before January 15, 1982.

      (ii) The filing of a declaration or amended declaration or the payment of the last installment of estimated tax on January 15, or the filing of a return by February 15 of the succeeding calendar year (or if on a fiscal year basis, on the 15th day of the first month of the succeeding taxable year or the 15th day of the second month of the succeeding fiscal year) will not relieve the taxpayer of the additional charge for underpayment of installments if it failed to pay its estimated tax due earlier in its taxable year.

   (6) Short periods. (Administrative Code, § 11-644(g)) If a taxpayer is required to make a declaration of estimated tax pursuant to 19 RCNY § 3-06(b)(1) and a short taxable year is involved, a declaration for the fractional part of the year is required. No declaration is required if the short taxable year is a period of five months or less.

   (7) Time for filing declaration of estimated tax for short taxable year. (Administrative Code, § 11-644(g)) In the case of a short taxable year of more than five months, the declaration of estimated tax must be filed when the requirements for filing a declaration (See: 19 RCNY § 3-06(b)(1)) are first met:

      (i) on or before the first day of the sixth month of the current taxable year, then the declaration must be filed on or before the 15th day of the sixth month;

      (ii) after the first day of the sixth month of the current taxable year but before the second day of the tenth month, then the declaration must be filed on or before the 15th day of the tenth month or the 15th day of the first month of the succeeding taxable year, whichever comes first;

      (iii) after the first day of the tenth month of the current taxable year, the declaration must be filed on or before the 15th day of the first month of the succeeding taxable year.

   (8) Extension of time for filing declaration of estimated tax. (Administrative Code, § 11-644(h)) The Commissioner of Finance may grant a reasonable extension of time, not to exceed three months, for the filing of any declaration of estimated tax upon receipt of a written request from the taxpayer giving complete information as to the reasons for its inability to file the declaration on or before the prescribed due date.

  1. Payments of estimated tax.

   (1) General. The amount of estimated tax due as shown on a declaration of estimated tax may be paid in installments or, at the election of the taxpayer, may be paid in full at the time of filing the declaration. If the estimated tax is paid in installments, the first payment must accompany the declaration.

   (2) Definition of preceding year’s tax. (Administrative Code, § 11-645(f)) The term “preceding year’s tax” as used in this subdivision (c) means the tax imposed by the banking corporation tax law for the preceding taxable year. It also means, for purposes of computing the first installment of estimated tax when an application has been filed for extension of the time for filing the return required to be filed for the preceding taxable year, the amount properly estimated (See: 19 RCNY § 3-06(a)(3) – Properly Estimated Tax) as the tax imposed upon the taxpayer for such preceding taxable year.

   (3) First installment of estimated tax for certain taxpayers. (Administrative Code, § 11-645(a)) Every taxpayer subject to the tax imposed by the banking corporation tax law must pay with its return required for the preceding taxable year, or with an application for extension of the time for filing such return, an amount equal to 25 percent of the preceding year’s tax, if such tax exceeded $1,000.

   (4) Other installments of estimated tax. (Administrative Code, § 11-645(b) and (j))

      (i) In the case of a declaration of estimated tax for a 12 month taxable year, the other dates for filing the declaration and for installment payments are as follows:

Dates for filing the declaration Dates for installment payments
  1. On or before the 15th day of the sixth month
  1. The estimated tax must be paid in three equal installments (after deducting the amount, if any, paid with the return for the preceding taxable year or with the application for extension of time to file such return). One payment must be made at the time of filing the declaration, one on or before the 15th day of the tenth month and one on or before the 15th day of the first month of the succeeding taxable year.
  1. On or before the 15th day of the tenth month
  1. The estimated tax must be paid in two equal install- ments (after deducting the amount, if any, paid with the return for the preceding taxable year or with the application for extension of time to file such return). One payment must be made at the time of filing the declaration and one on or before the 15th day of the first month of the succeeding taxable year.
  1. On or before the 15th day of the first month if the succeeding taxable year
  1. The estimated tax must be paid in full at the time of filing the declaration (after deducting the amount, if any, paid with the return for the preceding taxable year or with the application for extension of time to file such return).

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      (ii) If a declaration is filed after the time prescribed in 19 RCNY § 3-06(b)(3), or after the expiration of any extension of time, then the provisions of Subparagraphs (A), (B) and (C) of subparagraph (i) of this paragraph do not apply, and the taxpayer must pay at the time of filing the declaration all installments of estimated tax which would have been payable at or before such time if the declaration had been filed at the time prescribed in 19 RCNY § 3-06(b)(3). The remaining installments must be paid at the time and in the amounts in which they would have been payable if the declaration had been flied at the time prescribed in 19 RCNY § 3-06(b)(3).

Example: X Corporation was required to file a declaration of estimated tax on or before June 15, 1981, but it filed its declaration for calendar year 1981 on November 18, 1981. At the time of filing its declaration, X Corporation had failed to pay two installments of its estimated tax for the taxable year 1981. Upon filing the declaration on November 18, 1981, it must pay the two installments of estimated tax which it had previously failed to pay.

   (5) Amendments of declaration. (Administrative Code, § 11-645(c) and (j)) If an amendment of a declaration is filed, the remaining installments, if any, must be ratably increased or decreased to reflect any increase or decrease (as the case may be) in the estimated tax by reason of such amendment. If an amendment is made after the 15th day of the tenth month of the current taxable year, any increase in the estimated tax must be paid at the time of making such amendment.

Example: On June 15, 1981, a taxpayer files a declaration of estimated tax for $12,000 and pays the first installment of $4,000. On October 15, 1981, it files an amended declaration showing an estimated tax of $14,000. The balance of $10,000 must be paid in two remaining installments, $5,000 on October 15, 1981, and $5,000 on January 15, 1982.

   (6) Application of installments based on preceding year’s tax. (Administrative Code, § 11-645(d)) Any amount paid pursuant to 19 RCNY § 3-06(c)(3) must first be applied as payment of the first installment against the estimated tax for the current taxable year shown on the declaration required to be filed pursuant to 19 RCNY § 3-06(b)(1). If the amount paid pursuant to 19 RCNY § 3-06(c)(3) exceeds the declaration of estimated tax, such amount will be considered as a payment on account of the tax shown on the return required to be filed by the taxpayer for the current taxable year. If no declaration of estimated tax is required to be filed by the taxpayer pursuant to 19 RCNY § 3-06(b)(1), any amount paid pursuant to 19 RCNY § 3-06(c)(3) will be considered as a payment on account of the tax shown on the return required to be filed by the taxpayer for the current year.

Example: On March 15, 1983, a calendar year taxpayer files its tax return for the calendar year 1982 showing a tax due of $12,000 and a first installment of estimated tax for calendar year 1983 of $3,000. On June 15, 1983, the taxpayer files a declaration of estimated tax for calendar year 1983 in the amount of $18,000. After deducting the first installment of $3,000, the balance of $15,000 must be paid in three equal installments. The June 15, 1983 installment is $5,000 ($15,000/3).

   (7) Interest on certain installments based on the proceeding year’s tax.(Administrative Code, § 11-645(e)) If the amount paid pursuant to 19 RCNY § 3-06(c)(3) exceeds the tax shown on the return required to be filed by the taxpayer for the taxable year for which the amount was paid, interest will be allowed and paid on the amount by which the amount paid pursuant to 19 RCNY § 3-06(c)(3) exceeds the tax. Interest will be paid at the rate or rates set by the Commissioner of Finance in the Regulations of the Commissioner of Finance Relating to Interest Rates on New York City Income and Excise Taxes, or if no rate is set, at the rate of six percent per year from the date of payment of the amount to the 15th day of the third month of the succeeding taxable year. However, no interest will be allowed or paid if such interest is less than one dollar.

Example: X Corporation, a calendar year taxpayer, files its tax return for the calendar year 1981 on March 15, 1982 and shows a tax due of $4,000. The taxpayer pays $1,000, representing 25 percent of the preceding year’s tax, as its first installment for the current taxable year’s estimated tax. On March 15, 1983, X Corporation files its return for the calendar year 1982 and shows a tax due of $600. Interest will be paid on the difference of $400 from March 15, 1982 to March 15, 1983.

   (8) Short taxable years. (Administrative Code, § 11-645(g)) In the case of a short taxable year of a taxpayer for which a declaration of estimated tax is required to be made and filed, the estimated tax should be paid in equal installments (after deducting the amount, if any, paid with the return for the preceding taxable year), one at the time of filing the declaration, one on the 15th day of the tenth month of the taxable year (unless the short taxable year closed prior to such tenth month, in which case the installment will be eliminated) and one on the 15th day of the first month of the succeeding taxable year.

Example: In the case of a short taxable year of 11 months, from January 1, 1981 to November 31, 1981, the declaration is required to be made and filed on or before June 15, 1981. The estimated tax is payable in three equal installments, one on the date of filing the declaration and one each on October 15 and December 15, 1981. If the declaration is required to be filed after June 15, 1981 but on or before October 15, 1981, the estimated tax is payable in two equal installments, one on the date of filing the declaration and one on December 15, 1981.

   (9) Extension of time. (Administrative Code, § 11-645(i)) The Commissioner of Finance may grant a reasonable extension of time, not to exceed six months, for payment of any installment of estimated tax upon receipt of a written request from the taxpayer giving complete information as to the reasons for its inability to pay the installment on or before the prescribed due date. As a condition for granting an extension of time, the Commissioner of Finance may require the taxpayer to furnish a bond or other security in an amount not to exceed twice the amount of the installment. Interest must be paid from the original due date of the installment, without regard to any extension, to the date of payment.

   (10) Payments of installments in advance. (Administrative Code, § 11-645(j)) At the election of the taxpayer, any installment of the estimated tax may be paid prior to the date prescribed for its payment. No interest will be allowed or paid on such prepayment.

  1. Electronic filing and payment. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of any request for extension and payment of any tax required to be paid by this section.

Chapter 4: Cigarette Tax

§ 4-01 Definitions.

(a) When using these regulations the following words shall have the meanings here indicated:

   Agent. An “agent” shall mean any person authorized to purchase and affix adhesive or meter stamps under the law who is designated as an agent by the Commissioner of Finance.

   Cigarette. A “cigarette” shall mean any roll for smoking made wholly or in part of tobacco or any other substance irrespective of size or shape and whether or not such tobacco or substance is flavored, adulterated or mixed with any other ingredient, the wrapper or cover of which is made of paper or any other substance or material except tobacco.

   City. “City” shall mean the city of New York.

   Commissioner of Finance. The “Commissioner of Finance” shall mean the Commissioner of Finance of the City.

   Controlling person. A “controlling person” shall mean any person who is:

      (1) an officer, director or partner or, in the case of a limited liability company, a member or a person having with respect to such limited liability company authority analogous to that of an officer or director with respect to a corporation, of an applicant for a license, or

      (2) a shareholder, directly or indirectly owning more than ten percent of the number of shares of stock of such applicant (where such applicant is a corporation) entitling the holder thereof to vote for the election of directors or trustees. For purposes of this paragraph, where reference is made to ownership, directly or indirectly, of more than ten percent of the shares of stock of the applicant entitling the holder thereof to vote for election of directors or trustees, in the case of an applicant that at the relevant time has four or fewer shareholders holding shares entitling the holders thereof to vote for the election of directors or trustees, twenty-five percent or more shall be substituted as the applicable percentage in such reference to ownership, directly or indirectly, of voting stock.

   Dealer. A “dealer” shall mean any wholesale dealer or retail dealer as hereinafter defined.

   Package. “Package” shall mean the individual package, box or other container in or from which retail sales of cigarettes are normally made or intended to be made.

   Person. A “person” shall mean any individual, partnership, society, association, joint stock company, corporation, estate, receiver, trustee, assignee, referee or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals.

   Retail dealer. A “retail dealer” shall mean any person other than a wholesale dealer engaged in selling cigarettes. For the purposes of the law, the possession or transportation at any one time of 5,000 or more cigarettes by any person other than a manufacturer, an agent, a licensed wholesale dealer or a person delivering cigarettes in the regular course of business for a manufacturer, an agent or a licensed wholesale or retail dealer, is presumptive evidence that such person is a retail dealer.

   Sale or purchase. A “sale” or “purchase” shall mean any transfer of title or possession or both, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever or any agreement therefor. In addition to cash and credit sales, the giving of cigarettes as samples, prizes or gifts, and the exchanging of cigarettes are, for the purpose of the tax, considered sales.

   Use. “Use” shall mean any exercise of a right or power, actual or constructive, and shall include but is not limited to the receipt, storage, or any keeping or retention for any length of time, but shall not include possession for sale by a dealer.

   Wholesale dealer. “Wholesale dealer” shall mean any person who sells cigarettes to retail dealers or other persons for purposes of resale only, and any person who owns, operates or maintains one or more cigarette vending machines in, at or upon premises owned or occupied by any other person.

§ 4-02 Imposition of Tax.

(a)  On or after January 1, 1976, and before July 2, 2002, a tax at the rate of four cents for each ten cigarettes or fraction thereof, must be paid upon all cigarettes possessed in the City for sale, provided, however, on or after August 6, 1985 and before July 2, 2002, if a package of cigarettes contain more than 20 cigarettes, the rate of tax on the cigarettes in such package in excess of 20 shall be two cents for each five cigarettes or fraction thereof. On or after July 2, 2002 a tax at the rate of 75 cents for each ten cigarettes or fraction thereof, must be paid upon all cigarettes possessed in the City for sale, provided, however if a package of cigarettes contain more than 20 cigarettes, the rate of tax on the cigarettes in such package in excess of 20 shall be 38 cents for each five cigarettes or fraction thereof. Every package of cigarettes must have affixed thereto stamps of the proper amount. For example: on or after July 2, 2002 a package containing from 11 to 20 cigarettes must have affixed $1.50 in stamps; a package containing ten cigarettes or less must have affixed 75 cents in stamps; a package containing 20 to 25 cigarettes must have affixed $1.88 in stamps; a package containing 26 to 30 cigarettes must have affixed $2.26 in stamps.
  1. Payment of cigarette tax on inventory.

   (1) Local Law 10 of 2002 required every dealer of cigarettes, including agents licensed to purchase and affix stamps, to take a physical inventory of all cigarettes possessed in the City as of the close of business on July 1, 2002. In addition, such local law required every dealer who is a licensed agent to take a physical inventory of all unaffixed cigarette tax stamps possessed as of the close of business on such date. In the event that it was not possible to take a physical inventory of cigarettes in all vending machines that are located within the City, a dealer was permitted to take as many physical inventories of the contents of such machines as was possible with available personnel. For those machines that could not be physically inventoried on July 1, 2002, cigarettes could be accounted for at one-half the normal fill capacities of such machines, as reflected in the individual inventory records maintained for such machines.

   (2) i) (A) On or before September 20, 2002, every such dealer shall file a return on a form prescribed by the Department of Finance for such purpose, showing the quantity of all cigarettes and unaffixed stamps possessed as of the July 1, 2002 inventory. Such return must reflect the entire wholesale and/or retail inventories of the dealer within the City, as required by the Department of Finance, regardless of the number of business locations of the dealer. Except as provided in subparagraph (B) of this subparagraph (i), every dealer shall pay, with the filing of such return, an additional tax for all cigarettes in such inventory that are contained in packages bearing stamps evidencing tax payment at the rates in effect prior to July 2, 2002, and for all unaffixed cigarette tax stamps in such inventory evidencing tax payment at such rates. The additional tax shall be paid at the rate of 71 cents for each ten cigarettes or fraction thereof ($1.42 per package of 20 cigarettes) unless cigarettes are contained in packages of more than 20, in which case the additional tax for those cigarettes in excess of 20 shall be at the rate of 36 cents for each five cigarettes or fraction thereof ($1.78 per package of 25 cigarettes). Such tax shall be paid regardless of whether the affixed or unaffixed stamps show payment of the New York State tax or both the New York State and City taxes.

         (B) Notwithstanding any other provision of law to the contrary, the tax due on cigarettes possessed in the City, as of the close of business on July 1, 2002, by any person for sale solely attributable to the increase imposed by this local law, may be paid in two installments, due on the twentieth days of September 2002 and January 2003, subject to such terms and conditions as the Department of Finance may prescribe; provided, however, no less than 25 percent of each such tax due shall be paid by September 20, 2002. Provided, however, in no event shall such installment be less than $200 or the entire additional cigarette tax due, if less than $200. Thus a dealer having an additional cigarette tax liability on inventory of $100 would be liable for the full payment on September 20, 2002; a dealer having such a liability of $440 would be liable for a first installment of at least $200; and a dealer having such a liability of $10,000 would be liable for a first installment of at least $2,500 ($10,000 × 25%). The second and final installment must be paid to the Department of Finance on or before January 20, 2003, and must be accompanied by a final payment document prescribed by the Department of Finance for this purpose. Where the Department of Finance has cause to believe that the final installment of the additional cigarette tax on inventory may be jeopardized by delay, the Department of Finance may require such payment at any time prior to January 20, 2003. (See paragraph (3) of this subdivision for sanctions concerning untimely installments.)

      (ii) The additional cigarette tax on inventory and any applicable installment should be paid by check or money order, payable to the New York City Department of Finance.

   (3) i) Failure to file a return on cigarette and cigarette tax stamp inventory or to pay the additional tax due thereon, or failure to comply with any provision of this section may result in civil or criminal sanctions, or both.

      (ii) In the case of any dealer who elects to pay the additional cigarette tax liability in installments, as described in subparagraph (B) of subparagraph (i) of paragraph (2) of this subdivision, if the required first installment is not properly paid on or before September 20, 2002, the entire amount of additional tax shall be due and owing, and any civil penalty and interest imposed pursuant to § 11-1317 of the Administrative Code and 19 RCNY § 4-23 will accrue from such date on the entire tax liability that remains unpaid. Where the required first installment is timely paid but any portion of the second and final installment is paid after January 20, 2003, any civil penalty and interest so imposed will accrue from such date on the unpaid balance.

§ 4-03 Exemptions.

This law provides that the tax shall not apply to:

  1. The use, otherwise than for sale, of four hundred cigarettes or less brought into the city, on or in possession of, any person;
  2. Cigarettes sold to the United States;
  3. Cigarettes sold to or by a voluntary unincorporated organization of the Armed Forces of the United States operating a place for the sale of goods pursuant to regulations promulgated by the appropriate executive agency of the United States;
  4. Cigarettes possessed in the city by an agent or wholesale dealer for sale to a dealer outside the city or for sale and shipment to any person in another state for use there, provided such agent or wholesale dealer complies with the regulations relating thereto;
  5. Cigarettes sold to the State of New York or any public corporation (including a public corporation created pursuant to agreement or compact with another state or the Dominion of Canada), improvement district or other political subdivision of the State where it is the purchaser, user or consumer and does not purchase said cigarettes for resale.

§ 4-04 Liability for the Tax.

(a) Article 4. Except as otherwise provided herein, the tax shall be advanced by the agent or distributor. The agent shall be liable for the collection and payment of the tax to the Commissioner of Finance by purchasing from the Commissioner of Finance adhesive stamps of such design and denomination as may be prescribed by the Commissioner of Finance, subject to the approval of the State Tax Commission. The tax may also be paid by the use of such metering machines as are prescribed by the Commissioner of Finance subject to the approval of the State Tax Commission. In addition, every person liable for the tax on the use of cigarettes must file a return, in such form as the Commissioner of Finance may prescribe, with the Commissioner of Finance within twenty-four hours after liability therefor accrues together with a remittance of the tax shown to be due thereon.
  1. The amount of taxes advanced and paid by the agent or distributor as above provided shall be added to and collected as part of the sales price of the cigarettes.
  2. It is intended that the ultimate incidence of and liability for the tax shall be upon the consumer, and that any agent, distributor, or dealer who shall pay the tax to the Commissioner of Finance shall collect the tax from the purchaser or consumer.

§ 4-05 Licenses.

(a)  (1) A wholesale or retail dealer must apply to the Commissioner of Finance for a license for each place of business that he desires to have for the sale of cigarettes in the City. Every application for a cigarette license shall be made upon a form prescribed and prepared by the Commissioner of Finance. At the time of applying for a license as a wholesale dealer, each applicant also seeking appointment as an agent must submit a current financial statement prepared and signed by a certified public accountant or an enrolled public accountant. At the discretion of the Commissioner of Finance, all other applicants for a license as a wholesale dealer may be required to submit a current financial statement prepared and signed by a certified public accountant or an enrolled public accountant. The Commissioner of Finance may, for cause, refuse to issue a license. Upon approval of the application, the Commissioner of Finance will grant and issue to the applicant a cigarette license for each place of business within the City set forth in the application. Cigarette licenses shall not be assignable and shall be valid only for the persons in whose names issued and for the transaction of business in the places designated therein and shall at all times be conspicuously displayed at the places for which issued. Whenever any license that has been issued is defaced, destroyed or lost, the Commissioner of Finance will issue a duplicate license to the holder of the defaced, destroyed or lost license upon the payment of a fee of $1.

   (2) Cause for refusal of the Commissioner of Finance to issue a license or to relicense an applicant will generally exist where the applicant files an application for a license and, in considering such application, the Commissioner of Finance ascertains that:

      (i) Within the preceding five years, the applicant or a controlling person has failed to comply with any of the provisions of Chapter 13 of Title 11 of the Administrative Code or any rules or regulations promulgated thereunder;

      (ii) A warrant has been issued or a lien otherwise arises for any tax administered by the Department of Finance due from such applicant or a controlling person and such tax has not been paid in full, provided that liability for such tax arose out of the activities of the applicant or controlling person as a wholesale or retail dealer;

      (iii) Such applicant or any controlling person was convicted of a crime provided for in Chapter 40 of Title 11 of the Administrative Code or any other criminal offense the nature of which has a direct bearing on the applicant’s fitness or ability to perform any of the duties or responsibilities of a licensee under Chapter 13 of Title 11 of the Administrative Code within the preceding five years;

      (iv) Such applicant or any controlling person was the controlling person in another wholesale or retail dealer at the time that:

         (A) A warrant was issued or a lien otherwise arose for any tax administered by the Department of Finance due from such other dealer and such tax has not been paid in full, provided that liability for such tax arose out of the activities of such other dealer as a wholesale or retail dealer, or

         (B) Such other dealer had been convicted of a crime provided for in Chapter 40 of Title 11 of the Administrative Code or any other criminal offense the nature of which has a direct bearing on the applicant’s fitness or ability to perform any of the duties or responsibilities of a licensee under Chapter 13 of Title 11 of the Administrative Code within the preceding five years, or

         (C) The license of such other dealer had been canceled or suspended pursuant to this section within the preceding five years.

      (v) The license of such applicant has been canceled or suspended pursuant to this section within the preceding five years; or

      (vi) Such applicant or any controlling person has been finally determined to have violated any of the provisions of Article 20 or Article 20-A of the New York State Tax Law.

  1. The Commissioner of Finance may suspend or, after hearing, revoke a cigarette license whenever he finds that the holder thereof has failed to comply with any of the provisions of the law or any rules or regulations of the Commissioner of Finance prescribed, adopted and promulgated thereunder. Upon suspending or revoking any cigarette license, the Commissioner of Finance will direct the holder thereof to surrender to the Commissioner of Finance immediately all licenses or duplicates thereof issued to him and the holder shall surrender promptly all such licenses to the Commissioner of Finance as directed. Before the Commissioner of Finance suspends or revokes a cigarette license, he will notify the holder and afford him a hearing, if desired. After such hearing, the Commissioner of Finance good cause appearing therefore, may suspend or revoke the license. A person who has been refused a license by the Commissioner of Finance may likewise apply to the Commissioner of Finance for a hearing. After such hearing the Commissioner of Finance may rescind or affirm the refusal to issue a license, or issue a license.
  2. No agent or dealer shall sell cigarettes to an unlicensed wholesale or retail dealer, or to a wholesale or retail dealer whose license has been suspended or revoked. No dealer shall purchase cigarettes from any person other than a manufacturer or a licensed wholesale dealer.
  3. It is unlawful for a person to engage in business as a wholesale dealer or retail dealer without a license as herein prescribed. It is unlawful for a person to permit any premises under his control to be used by any other person in violation of this paragraph.

§ 4-06 Licensee Fees; Term.

(a) The annual fee for a wholesale cigarette dealer's license is $500. See Administrative Code § 11-1303(a) as add LL 34/87 § 2. The annual fee for a retail cigarette dealer's license is $10.
  1. Cigarette licenses will be regularly numbered and duly registered.
  2. Cigarette licenses expire on January 31st next succeeding the date of issuance unless sooner suspended or revoked. However, licenses issued prior to December 18, 1967 expire on March 16, 1968 unless sooner suspended or revoked.

§ 4-07 Adhesive Stamps.

(a) The Commissioner of Finance has prescribed adhesive stamps in two-cent and four-cent denominations. These stamps are on sale at banks throughout the city designated by the Commissioner of Finance as fiscal agents or sub-agents. Agents shall purchase stamps at the bank to which they have been assigned, either for each or upon thirty days' credit. An agent may purchase stamps from the banks over the counter or by mail. In the latter case, no shipping charge will be made by the bank. Payment for stamps shall be made by cash or by certified check.
  1. The Commissioner of Finance will prescribe and furnish stamps of such denominations and quantities and in such form as may be necessary for the payment of the tax imposed by the law. He may, from time to time, provide for the issuance and exclusive use of a new design and forbid the use of stamps of any other design. Such stamps shall be in the form of a single stamp for the payment of the tax imposed by the law, or in lieu thereof, a joint stamp prepared and issued by the State of New York and the city for the payment of both the tax imposed by the City Cigarette Tax Law and the tax imposed by Article 20 of the Tax Law (New York State Cigarette Tax), may be used.
  2. Whenever such a joint stamp is prescribed, it shall be used exclusively in lieu of any other form of stamp for the payment of the tax imposed by both the city and state laws. The Commissioner of Finance will appoint fiscal agents for the purpose of selling the stamps or may provide for the sale thereof at such other places as he may deem necessary. The Commissioner of Finance shall require each fiscal agent, appointed by him for the purpose of selling the stamps herein prescribed, to file with him a surety bond, in such form and in such amount as he deems appropriate, issued by a surety company licensed to do business in the State of New York, conditioned upon the faithful performance of any agreement made between the Commissioner of Finance of the City of New York and said fiscal agent, and to secure the Commissioner of Finance, or the City of New York against any loss or damage in any manner resulting from the acts of said fiscal agent or its employees. In lieu of the bond described in this paragraph, a fiscal agent may deposit with the Commissioner of Finance its personal bond together with securities, approved by the Commissioner of Finance, in such amounts as he may require. Such securities shall be kept in the custody of the Commissioner of Finance. Securities so deposited may be sold by the Commissioner of Finance, should it become necessary to do so, to recover any sums due from a fiscal agent pursuant to this article; but no such sale shall be had until a fiscal agent shall have had an opportunity to be heard regarding the amount due hereunder. Upon any such sale the surplus, if any, above the sums due shall be returned to such fiscal agent.

§ 4-08 Meter Stamps.

(a) The Commissioner of Finance, in addition to the sale of stamps herein provided for, in his discretion, and subject to the approval of the State Tax Commission, may permit the use of a cigarette tax stamp affixing machine (whether by meter impression or otherwise) approved by him, or, where a joint stamp for the payment of the tax imposed by Article 20 of the State Tax Law and the City Cigarette Tax Law is used, the use of a joint tax stamp affixed by machine to show payment of both state and city taxes. The Commissioner of Finance, however, may reserve the right to rescind such permission upon thirty days' notice should such action be deemed to be in the best interest of the city. Payment of the tax must be made either in cash at the time the tax stamps are purchased or on thirty days' credit upon the same terms and conditions as apply to any other stamps sold by the Commissioner of Finance. Payment for stamps shall be made by cash or certified check.
  1. Each agent, when his application for permission to use such tax stamp affixing machine is approved, shall be assigned a distinctive number which shall be the same as the number assigned to him by the State Tax Commission for the purposes of the state tax, and which must be clearly incorporated in the design of the tax stamps.
  2. Any person, including an agent, having in his possession an authorized tax stamp affixing machine may not transfer, sell or otherwise dispose of such machine without first securing the authorization and approval of the Commissioner of Finance.

§ 4-09 Sale or Use of Cigarettes without Stamps.

(a) Notwithstanding any other provision hereof, the Commissioner of Finance may, subject to the approval of the State Tax Commission, provide at any time that the tax imposed by the law shall be collected without the use of stamps.

§ 4-10 Affixation and Cancellation of Stamps.

(a) Each agent shall affix to each package of cigarettes subject to the tax the prescribed stamps evidencing the payment of the tax imposed by the law, and shall cancel such stamps before such cigarettes are sold or offered for sale and prior to delivery of such cigarettes to any such dealer in the city, unless stamps have been affixed to such packages of cigarettes and cancelled before such agent received them.
  1. Stamps shall be affixed to each package of cigarettes of an aggregate denomination not less than the amount of the tax upon the contents therein.
  2. The stamps must be so affixed that they are clearly visible to the purchaser. When affixed to “rounds” or “flats” of fifty cigarettes or more, they must be so placed that they will be destroyed when the container is opened. The stamps must be placed on the small, individual packages ordinarily sold to customers as distinguished from the carton or larger containers of cigarettes.
  3. Every agent must keep unstamped cigarettes separate and apart from stamped cigarettes.

§ 4-11 Cancellation of Stamps.

(a) All adhesive stamps must be cancelled in waterproof ink with the number assigned to each authorized agent before the cigarettes to which said stamps are affixed are offered for sale. The stamps may be cancelled before or after they are affixed.
  1. It is evident that, because of their nature and the fact that they carry the identifying number of the agent, meter stamps required no cancellation.
  2. Whenever any cigarettes are found in the place of business of a dealer other than an agent without the stamps affixed and cancelled the prima facie presumption shall arise that such cigarettes are kept therein in violation of the provisions of the law.
  3. Each dealer, other than an agent, in the city shall immediately upon the receipt of any cigarettes at his place of business mark in ink on each unopened box, carton or other container of such cigarettes the word “received”, and the year, month, day and hour of such receipt, and shall affix his signature thereto. In addition, each retail dealer shall within twenty-four hours after receipt of any cigarettes, open such box, carton or other container and, unless such stamps have been previously affixed, immediately notify the dealer from whom he purchased such cigarettes and arrange for the replacement by the dealer of such cigarettes by cigarettes with such stamps affixed within twenty-four hours. Such dealer shall make and keep, until the cigarettes are replaced, a record of the time at which such arrangements were made and the name of the individual representing the dealer with whom such arrangements were made.
  4. Whenever any cigarettes are found in the place of business of a dealer other than an agent without being marked as having been received within the preceding twenty-four hours, the prima facie presumption shall arise that such cigarettes are kept therein in violation of the provisions of the law.

§ 4-12 Destruction of Cancelled or Mutilated Stamps.

(a) Except as hereinafter provided, the Commissioner of Finance may destroy by incineration stamps which have been mutilated, broken, cancelled or otherwise become unfit for use or consumption. Such stamps shall be destroyed in the presence of the Commissioner of Finance, or his representative duly authorized in writing, who shall thereupon certify, in duplicate, to the fact of said destruction, the subject matter of the destruction in detail, and the persons before whom said destruction took place. Said certification, duly sworn to, shall be kept on file in the office of the Commission of Finance.
  1. The destruction of joint stamps used for the payment of the state cigarette tax and the city tax shall be in such manner as may be prescribed by the State Tax Commission and the Commissioner of Finance.

§ 4-13 Possession and Transportation of Unstamped Cigarettes.

(a) Every person who possesses or transports upon the public highways, roads or streets of the city more than four hundred cigarettes in unstamped packages, is required to have in his actual possession invoices or delivery tickets for such cigarettes. All such invoices or delivery tickets must show the true name and address of the consignor or seller, the true name and address of the consignee or purchaser, and the quantity and brands of cigarettes transported. The absence of such invoices or delivery tickets shall be prima facie evidence that such person is a dealer in cigarettes in the city and subject to the provisions of the law.

§ 4-14 Vending Machines; Visibility of Stamps.

(a) Owners and operators of cigarette vending machines are required to have the name, address, cigarette dealer's license number and telephone number of the owner displayed on each machine in operation within the City. The Commissioner of Finance may also require a report from such owners, which report shall contain information showing the location of each machine, the record of any change of location, placing of additional machines or withdrawal of previously listed machines, and such other information as the Commissioner of Finance may require.
  1. Every package of cigarettes placed in any cigarette vending machine having an area through which such packages are visible, must be so placed therein that the New York City cigarette tax stamps thereon are visible. Whenever any cigarettes are found in any vending machine in violation of the provisions of this section or whenever a vending machine is not properly labeled, the duly authorized agents or employees of the Department of Finance shall seal the machine to prevent sale or removal of any cigarettes from the vending machine until such time as the violation is corrected in the presence of a duly authorized agent or employee of the Department of Finance.

§ 4-15 Agents; Credit and Performance Bonds.

(a) The Commissioner of Finance may appoint as an agent to affix stamps to be used in paying the tax imposed by the law any person who has been appointed by the State Tax Commission to affix stamps used in payment of the tax imposed by Article 20 of the State Tax Law. Each agent so appointed will be assigned a distinctive number to be used by him in the cancellation of stamps and for other purposes when necessary and said number will be the same as that assigned to such agent by the State Tax Commission. An agent shall at all times have the right to appoint the person in his employ who is to affix the stamps to any cigarettes under his control. Such agent shall purchase stamps from banks to which he has been assigned.
    1. At the discretion of the Commissioner of Finance agents may be permitted to pay for the purchase of such stamps within thirty days after the date of purchase, provided a surety bond satisfactory to the Commissioner of Finance is filed with him.

   (2) A bond to secure the payment of sums due from an agent shall be on a form prescribed by the Commissioner of Finance and shall be issued by a surety company which is approved by the Superintendent of Insurance as to solvency and responsibility and which is authorized to transact business in the State of New York. Such bond, which must be filed in triplicate, shall secure the amount of credit for which application is made, and shall continue in full force and effect until a certificate has been issued by the Commissioner of Finance to the effect that all monies due the City for the purchase of stamps have been paid in full.

   (3) In addition to the credit bond described in paragraph (2) of this subdivision, an agent may be required to file with the Commissioner of Finance a surety bond issued by a surety company described in paragraph (2), in such amount as he deems appropriate, guaranteeing the proper discharge and performance of his duties as agent.

  1. A nonresident agent, that is, one located outside the City of New York, may likewise be appointed by the Commissioner of Finance for the purpose of purchasing and affixing stamps for cigarettes. Nonresident agents desiring to purchase stamps on credit may be permitted to do so, in the discretion of the Commissioner of Finance, in the same manner, and subject to the same conditions, as described in subdivision (b) of this section, in such amount as the Commissioner of Finance may deem appropriate, guaranteeing the proper discharge and performance of his duties as a nonresident agent. Such nonresident agent must agree to submit his books of account and records for examination during reasonable business hours.
  2. In lieu of the bonds described in the preceding subdivisions, an agent may deposit with the Commissioner of Finance his personal bond together with securities, approved by the Commissioner of Finance, in such amounts as he may require. Such securities shall be kept in the custody of the Commissioner of Finance. Securities so deposited may be sold by the Commissioner of Finance, should it become necessary to do so, to recover any sums due from an agent pursuant to this section but no such sale shall be had until an agent shall have had an opportunity to be heard regarding the validity of any tax or the amount due, or to have a court determination, as provided by the law or these regulations. Upon any such sale the surplus, if any, above the sums due shall be returned to such agent.
  3. No credit for the purchase of stamps shall be granted in excess of the amount secured by a credit bond or collateralized personal bond.
  4. If, on June 30, 1982, an agent has outstanding a sum due for stamps purchased on credit, which sum is not fully secured by a credit bond or collateralized personal bond, such agent shall, on the first day of each of the next forty succeeding months, reduce the sum which is not so secured by an amount equal to two and one-half percent of such unsecured sum by paying such amount in cash or by tendering a credit bond or collateralized personal bond, as described in the preceding subdivisions, in such amount. Provided, however, that the Commissioner of Finance in implementing the foregoing reduction in unsecured credit shall have the authority to make minor adjustments to the foregoing percentage to adjust for the purchase of stamps in full rolls and provided further, however, that all of such unsecured credit shall be eliminated within the foregoing period of forty months.
  5. In the event that the agent fails to remit any amount owed for stamps purchased on credit (with or without a credit bond or other security) when due, then, in such event, all or any part of the amounts then owing for credit purchases of stamps shall, at the option of the Commissioner of Finance, become immediately due and payable, the extension of credit to the agent shall immediately terminate, and no further sales to the agent will be made until such time as remittance in full is received for all such amounts so declared to be due and the Commissioner of Finance approves the restoration of credit and the making of sales to the agent.
  6. No person shall sell or offer for sale any stamps issued under the law, except by written permission of the Commissioner of Finance.

§ 4-16 Compensation of Agents for Services.

(a) The law provides that whenever the Commissioner of Finance shall sell, consign or deliver to any agent authorized to affix stamps to be used in payment of the tax imposed thereby, such agent shall be entitled to receive as compensation for his services and expenses in affixing such stamps and to retain out of the monies to be paid by him for such stamps, a commission on the par value thereof. The Commissioner of Finance is authorized to prescribe a schedule of commissions not exceeding five percentum of the par value of such stamps for affixing such stamps. The Commissioner of Finance hereby prescribes the following commissions to be allowed to each such agent as compensation for his services and expenses in affixing stamps.
  1. Where a joint stamp is issued by the State of New York and the City for the payment of the taxes imposed by the City’s Cigarette Tax Law and by Article 20 of the Tax Law of the State, in lieu of a single stamp evidencing payment of the cigarette tax, and such joint stamp is issued by the State of New York and the City of New York for payment of the State tax (at the rate of $1.50 per package of 20 cigarettes) and the City tax (at the rate of $1.50 per package of 20 cigarettes), the following schedule of commissions have been fixed by the Commissioner of Finance pursuant to the City’s Cigarette Tax Law with the approval of the New York State Department of Taxation and Finance, and for the purposes of this schedule the par value of a joint stamp issued by the State of New York and the City of New York for payment of the State tax (at the rate of $1.50 per package of 20 cigarettes), and the City tax (at the rate of $1.50 per package of 20 cigarettes) shall be deemed to be $1.50 each for State purposes and $1.50 each for City purposes. On the City par value of such joint stamps, not exceeding $5,611,200 purchased during each calendar year, a commission of 0.2171 percent thereof except as otherwise provided herein; and on the City par value of such joint stamps in excess of $5,611,200 purchased during each calendar year a commission of 0.0992 percent thereof. Said rate of 0.0992 percent shall also apply, even though the total City par value of joint stamps purchased during any calendar year does not exceed $5,611,200, whenever the value of New York State cigarette tax stamps (including the amount of the New York State cigarette tax represented by such joint stamps) purchased by any agent during each calendar year exceeds the sum of $5,611,200, computed at the State par value of $1.50 each. However, for the purpose of determining the point when said amount of $5,611,200 is reached, whenever the quantity of New York State cigarette tax stamps and/or the portion of the New York State cigarette tax included in joint stamps purchased by an agent at any one time brings the agent’s total purchases of stamps evidencing payment of the New York State cigarette tax to at least $5,611,200, the amount purchased at such time shall be first applied to the previous total of purchases of stamps evidencing payment of the New York State cigarette tax until $5,611,200 is reached.
  2. Where a single stamp is issued by the City of New York evidencing payment of the City’s cigarette tax, and such stamp is for payment of the City’s tax at the rate of four cents for each ten cigarettes or fraction thereof, the commission hereby fixed is 1.10 percent on the par value of such single stamp purchased.
  3. Any commissions allowable hereunder shall be deducted by the agent from the purchase price of the stamps at the time payment is made therefor. No commissions shall be allowed on purchases of less than one hundred dollars. No commission shall be allowed to any purchaser of stamps other than an agent.

§ 4-17 Records To Be Kept.

(a) The law requires that certain records be kept by all dealers of cigarettes.

   (1) All wholesale dealers, including agents, must keep records showing every purchase, sale or other disposition of all cigarettes and stamps handled.

   (2) All invoices or other records indicating the purchase, sale or other disposition of cigarettes by a wholesale dealer must be either separate and distinct from all other records which a wholesale dealer shall possess or the cigarette transactions on such invoices or other records must be distinct from non-cigarette transactions recorded on the same invoice or other record.

   (3) Agents authorized to keep cigarette tax stump affixing machines must keep a daily record of the meter readings, or the serial numbers of the rolls of stumps used, or other information required by the Commissioner of Finance on forms approved by him.

   (4) Each agent or wholesale dealer in the City (other than a manufacturer) must, at the time of delivering cigarettes to any person, make a true duplicate serially numbered invoice showing his name, his address, the number of the then current license issued to him pursuant to 19 RCNY § 4-05, the date of delivery, the number of cartons in each shipment of cigarettes delivered, the name and address of the purchaser to whom delivery is made.

   (5) Every wholesale dealer shall keep a record of the sales tax certificate number and city cigarette license number of each person to whom he delivers cigarettes. For this purpose, at the time of delivering cigarettes to any person, each wholesale dealer shall, unless previously obtained, request, and every retail dealer or other person to whom cigarettes are delivered shall furnish, his sales tax certificate number and the number of the then current license issued to him pursuant to 19 RCNY § 4-05. The failure or refusal to furnish these numbers shall be reported by the wholesale dealer to the Commissioner of Finance within five days of delivery.

   (6) Each dealer in the City shall procure and retain invoices showing the number of cartons in each shipment of cigarettes received by him, the date of delivery, the name and address of the shipper, and the number of the then current license issued to the shipper pursuant to 19 RCNY § 4-05.

  1. The Commissioner of Finance may require any railroad company, express company, trucking company or carrier transporting any shipment of cigarettes into the city to file with the Commissioner of Finance a copy of the freight bill within ten days after delivery in the city of each shipment.
  2. In addition to the foregoing, every agent or dealer (other than a manufacturer) shall keep and maintain records of cigarettes on which a tax must be paid and of those on which a tax is not required to be paid. These records must also show the quantity of cigarettes returned because the cigarettes have become unsalable and any transfers of stamped or unstamped cigarettes to or from other agents. Records must also be maintained of cigarettes which are sold and delivered in the city and those which are sold and delivered to points outside the city, including quantities so sold and the names and addresses of the purchasers. Agents (other than manufacturers) are also required to keep records showing monthly inventories, at the beginning and close of each month, of stamped and unstamped cigarettes, and of the number of stamps.
  3. Each agent, wholesale dealer or other dealer is required to maintain, retain and keep for a period of three years the records mentioned above, as well as such other records as may be required by the Commissioner of Finance from time to time, for the use and inspection of the Commissioner of Finance.
  4. To verify the accuracy of the payment of the tax imposed by the law each dealer is required to give to the Commissioner of Finance or his duly authorized representative, the means, facilities and opportunity to examine the records herein required or for any other reasonable examination.

§ 4-18 Reports.

(a) Agents (other than manufacturers) appointed by the Commissioner of Finance are required to file with him, on forms prescribed and prepared by the Commissioner of Finance, monthly reports showing such information as he may require, including, among other things:

   (1) The number of unstamped cigarettes:

      (i) on hand at the beginning of the month,

      (ii) purchased or received during the month,

      (iii) on hand at the end of the month,

      (iv) sold or disposed of during the month;

   (2) The number of stamps:

      (i) on hand at the beginning of the month,

      (ii) purchased during the month,

      (iii) on hand at the end of the month,

      (iv) affixed or otherwise disposed of during the month; and

   (3) The number of stamped cigarettes, with New York City stamps and joint New York State-New York City stamps affixed, on hand at the end of the month.

  1. Every agent (other than a manufacturer) is required to take a physical inventory of stamped cigarettes on hand at least twice a year. The results of such an inventory shall be reported on the agent’s monthly report in the form and manner prescribed by the Commissioner of Finance. One of the semiannual physical inventories must be as of the end of the fiscal or calendar year of the agent and the other six months later.
  2. Five days prior to the return of cigarettes to a manufacturer, because the cigarettes have become unsalable, damaged, or for any other reason, each agent shall notify the Commissioner of Finance in writing of the number of cartons to be returned and the name of the manufacturer to whom delivery is to be made.
  3. Each manufacturer having an agency permit shall file with the Commissioner of Finance monthly reports showing the total sales of unstamped cigarettes made to agents or wholesale dealers licensed by the City, specifying the name and address of the purchaser, the date of delivery, and the number of cartons in each shipment of cigarettes delivered. These reports shall also specify the quantity of cigarettes returned because the cigarettes have become unsalable, and the name and address of the agent, wholesale dealer or other person making the return.
  4. Fifteen days prior to the distribution of sample cigarettes in the city, each manufacturer shall notify the Commissioner of Finance, in writing, of the amount to be distributed.
  5. Each manufacturer shall file a monthly report of the total number of packages and the number of cigarettes contained therein of sample cigarettes distributed in the city. Payment of the tax due shall be made with the monthly report required herein. If no sample cigarettes are distributed in the city during a month, no report is required for that month.
  6. Wholesale dealers other than agents may also be required to file such reports as the Commissioner of Finance may prescribe, showing the receipts and disposition of all stamped and unstamped cigarettes and any other information which the Commissioner of Finance may require.
  7. Monthly reports shall be filed on or before the 15th day of each month covering the transactions for the preceding calendar month.

§ 4-19 Refunds.

(a) The law authorizes the Department of Finance to refund, without interest, any tax, interest or penalty erroneously, illegally or unconstitutionally collected or paid. In addition, a dealer is entitled to a refund of the amount of tax paid less applicable commissions, with respect to any cigarettes upon which stamps have been affixed which:

   (1) have been sold and shipped to a dealer outside the city for sale there or to any person in another state for use there, or

   (2) have become unfit for use and consumption or unsalable, or

   (3) which have been destroyed. An agent is entitled to a refund of the amount of tax paid, less applicable commissions, with respect to any stamps which have become unfit for use, or mutilated or destroyed.

  1. No refund will be granted unless written application to the Commissioner or Finance therefor is made within ninety days from the payment thereof.
  2. No refund, however, will be made unless a verified statement is submitted setting forth the applicant’s reasons for such requested refund on a form prescribed by the Department of Finance. If the Department of Finance approves the application for refund, he will issue to such dealer or agent stamps of sufficient value to cover the refund or to make such refund, subject to audit by the Commissioner of Finance.
  3. In the event any agent terminates his business during the effective period of the law for any reason whatsoever and has unused stamps on hand, he must return the same to the Department of Finance who will redeem such stamps at the par value thereof, less any commissions theretofore allowed thereon and less any outstanding liability for such tax by the person presenting said stamps for redemption, provided, however, that in the case of joint stamps used for payment of the state cigarette tax and the city’s tax, such surrender and redemption shall be in such manner as may be prescribed by the State Tax Commission and the Commissioner of Finance.
  4. No person shall sell or offer for sale any stamp issued under the law and these regulations except by written permission of the Commissioner of Finance, or as provided in Article 13 hereof.

§ 4-20 Out-of-City Sales.

(a) The law provides that the tax is not applicable to cigarettes possessed in the City by any agent or wholesale dealer for sale to a dealer outside the City, or for sale and shipment to any person in another state for use there.
  1. Under this provision, the only sales by an agent or wholesale dealer of cigarettes which are shipped to a point outside the city which are not subject to the tax, are sales to a dealer outside the city, or shipments to any person outside the state for use there. The sale of cigarettes shipped to a person outside the city, but within the state, for use there is subject to the tax. For example: A sale by an agent or wholesale dealer to another dealer in Westchester County is not subject to the tax. The sale of cigarettes by a dealer who ships them to an ultimate consumer in Westchester County for use there is subject to tax. The sale of cigarettes by a dealer shipped to an ultimate consumer in New Jersey for use there is not subject to the tax.
  2. Where an agent or wholesale dealer sells cigarettes to a dealer for sale outside the City or State, or to another dealer for sale to a dealer outside the City or State, he shall demand and receive from the purchaser, at the time of delivery of the cigarettes, or at the time of sale, a certificate in writing signed by the purchaser, which certificate shall be substantially in the following form: (Date) ________________

   “To ____________________________ (name of agent or wholesale dealer). “I hereby certify that the cigarettes purchased by me and described in the attached invoice will be resold outside the city of New York.

   ___________________________________________   Signature of Purchaser Address of Purchaser”

One copy of such invoice and the above certificate must be retained by the agent or wholesale dealer for inspection by the Commissioner of Finance representative.

§ 4-21 Drop-Shipments.

In the case of so-called “drop-shipments,” where an out-of-state manufacturer solicits an order directly from a retail dealer in this City, and the billing and payment on account of such sale is made through a wholesale dealer, the sale to the retail dealer is deemed to have been made by the wholesale dealer, and proper stamps must be affixed to the packages of cigarettes prior to delivery to the retail dealer, unless such retail dealer is any agent duly appointed by the Commissioner of Finance.

§ 4-22 Seizure and Sale of Cigarettes.

(a) Whenever a police officer designated in § 1.20 of the criminal procedure law or a peace officer designated in subdivision five of § 2.10 of such law, acting pursuant to his special duties, shall discover any cigarettes subject to the tax, and upon which the tax has not been paid or the stamps not affixed as required, they are hereby authorized and empowered forthwith to seize and take possession of such cigarettes, together with any vending machine or receptacle in which they are held for sale. Such cigarettes, vending machine or receptacle seized by a police officer or such peace officer shall be turned over to the Commissioner of Finance.
  1. The seized cigarettes and any vending machine or receptacle seized therewith, but not the money contained in such vending machine or receptacle shall thereupon be forfeited to the City, unless the person from whom the seizure is made, or the owner of such seized cigarettes, vending machine or receptacle, or any other person having an interest in such property, shall within ten days of such seizure, apply to the Commissioner of Finance for a hearing to determine the propriety of the seizure, or unless the Commissioner of Finance shall on his own motion release the seized cigarettes, vending machine or receptacle. After such hearing the Commissioner of Finance shall give notice of his decision to the petitioner. The decision of the Commissioner shall be reviewable for error, illegality, unconstitutionality or any other reason whatsoever by a proceeding under Article 78 of the Civil Practice Law and Rules if application therefor is made to the supreme court within thirty days after the giving of the notice of such decision. Such proceeding shall not be instituted unless there shall first be filed with the Commissioner of Finance an undertaking, issued by a surety company authorized to transact business in New York State and approved by the Superintendent of Insurance of New York State as to solvency and responsibility, in such amount as a justice of the supreme court shall approve, to the effect that if such proceeding be dismissed, or the seizure confirmed, the petitioner will pay all costs and charges which may accrue in the prosecution of the proceeding.
  2. The Commissioner of Finance may, within a reasonable time after the forfeiture to the city of such cigarettes, vending machines or receptacles, upon publication of a notice to such effect for at least five successive days, in a newspaper published or circulated in the City, sell such forfeited cigarettes and vending machines or receptacles at public sale and pay the proceeds into the treasury of the City. Cigarettes so seized and sold shall be sold only to an agent and the notice of sale shall contain a provision to this effect. Such seized cigarettes, vending machines or receptacles may be sold prior to forfeiture if the owner of the seized property consents to the sale. Notwithstanding any other provision of this section, the Commissioner of Finance may enter into an agreement with the State Tax Commission to provide for the disposition between the City and State of the proceeds from any such sale.
  3. In the alternative, the Commissioner of Finance, on reasonable notice by mail or otherwise may permit the person from whom said cigarettes were seized to redeem the said cigarettes, and any vending machine or receptacle seized therewith, or may permit the owner of any such cigarettes, vending machine or receptacle to redeem the same, by the payment of the tax due, plus a penalty of fifty percent thereof plus interest on the amount of tax due for each month or a fraction thereof, after such tax became due (determined without regard to any extension of time for filing or paying) at the rate prescribed by the law and the regulations of the Commissioner of Finance and the costs incurred in such proceeding, which total payment shall not be less than five dollars; provided, however, that such seizure and sale or redemption shall not be deemed to relieve any person from fine or imprisonment provided for in the law.
  4. In the alternative, if the Commissioner of Finance concludes that any cigarettes seized pursuant to this section, when offered at public sale, will bring a price less than the reasonably estimated price which the Department of Correction would have to pay for the purchase of such cigarettes for sale to or use by inmates in institutions under the jurisdiction of such Department, the Commissioner of Finance may dispose of such cigarettes by transferring them to the Department of Correction for sale to or use by inmates in such institutions.

§ 4-23 Penalties and Interest.

(a) Interest on underpayments. If any amount of tax is not paid on or before the last date prescribed for payment (without regard to any extension of time granted for payment), interest on such amount at the rate prescribed by the law and the regulations of the Commissioner of Finance shall be paid for the period from such last date to the date of payment. In computing the amount of the interest to be paid with respect to the taxes which remain or become due on or after July 1, 1985, such interest shall be compounded daily. No interest shall be paid if the amount thereof is less than one dollar.
  1. Civil penalties. Penalties are provided for violations of the law and of the rules and regulations of the Commissioner of Finance. These penalties are in addition to the possible suspension or revocation of the license of a wholesale or retail dealer or the authority of an agent. The following civil penalties are provided for by law (§ 11-1317 of the Administrative Code of the City of New York):

   (1) For failure to pay the tax under the law when due – a penalty of 50 percent of the amount of tax due. The Commissioner of Finance may, however, if satisfied that the delay was excusable, remit all or any part of such penalty.

   (2) In addition to any other penalty imposed by § 11-1317 of the Administrative Code of the City of New York, as amended, the Commissioner of Finance may impose a penalty of not more than $100 for each two hundred cigarettes or fraction thereof in excess of two thousand cigarettes in unstamped or unlawfully stamped packages in the possession or under the control of any person. The Commissioner of Finance, in his discretion, may remit all or part of such penalty.

   (3) The possession within the City of more than four hundred cigarettes in unstamped or unlawfully stamped packages shall be presumptive evidence that such cigarettes are subject to tax as provided by the law. Nothing in this subdivision shall apply to common or contract carriers or warehousemen while engaged in lawfully transporting or storing unstamped packages of cigarettes as merchandise, nor to any employee of such carrier or warehouseman acting within the scope of his employment, nor to public officers or employees in the performance of their official duties requiring possession or control of unstamped or unlawfully stamped packages of cigarettes, nor to temporary incidental possession by employees or agents or persons lawfully entitled to possession, nor to persons whose possession is for the purpose of aiding police officers in performing their duties.

   (4) The penalties provided by this subdivision shall be paid and enforced in the same manner as taxes.

   (5) Application for the remission of penalty may be made to the Commissioner of Finance. Such application must be made by the person against whom the penalty is assessed and must set forth the grounds upon which the remission is requested.

  1. Criminal penalties.

   (1) Failure to obey subpoena; false testimony.

      (i) Any person who, being duly subpoenaed in connection with a matter arising under the law, to attend as a witness or to produce books, accounts, records, memoranda, documents or other papers,

         (A) fails or refuses to attend without lawful excuse, or

         (B) refuses to be sworn,

         (C) refuses to answer any material and proper question, or

         (D) refuses, after reasonable notice, to produce books, papers and documents in his possession or under his control which constitute material and proper evidence shall be guilty of a misdemeanor.

      (ii) Any person who shall testify falsely in any material matter pending before the Commissioner of Finance shall be guilty of and punishable for perjury.

   (2) Willful failure to file a return or report or pay tax. Any person required to pay any tax or make any return or report, who willfully fails to pay such tax or make such return or report, at the time or times so required, shall be guilty of a misdemeanor.

   (3) Fraudulent returns, reports, statements or other documents.

      (i) Any person who willfully makes and subscribes any return, report, statement or other document which is required to be filed with or furnished to the Commissioner of Finance or to any person, pursuant to the provisions of the law, which he does not believe to be true and correct as to every material matter shall be guilty of a misdemeanor.

      (ii) Any person who willfully delivers or discloses to the Commissioner of Finance or to any person, pursuant to the provisions of the law, any list, return, report, account, statement or other document known by him to be fraudulent or to be false as to any material matter shall be guilty of a misdemeanor.

      (iii) For purposes of this paragraph, the omission by any person of any material matter with intent to deceive shall constitute the delivery or disclosure of a document known by him to be fraudulent or to be false as to any material matter.

   (4) Failure to file bond. Any person willfully failing to file a bond where such filing is required by the law shall be guilty of a misdemeanor.

   (5) Attempt to evade or defeat tax.

      (i) Any person who willfully attempts in any manner to evade or defeat any tax imposed by law or the payment thereof shall, in addition to other penalties provided by law, be guilty of a misdemeanor.

      (ii) Any person who willfully attempts in any manner to evade or defeat any tax imposed by law or payment thereof on twenty thousand cigarettes or more or has previously been convicted two or more times of a violation of subparagraph (i) of this paragraph shall be guilty of a Class E felony.

   (6) Any person, other than an agent so authorized by the Commissioner of Finance, who possesses or transports for the purpose of sale any unstamped or unlawfully stamped packages of cigarettes subject to tax under the law, or who sells or offers for sale unstamped or unlawfully stamped packages of cigarettes in violation of the provisions of the law shall be guilty of a misdemeanor.

   (7) Any person, other than an agent so authorized by the Commissioner of Finance, who willfully possesses or transports for the purpose of sale twenty thousand or more cigarettes subject to the tax imposed by law in any unstamped or unlawfully stamped packages or who willfully sells or offers for sale twenty thousand or more cigarettes in any unstamped or unlawfully stamped packages in violation of the law shall be guilty of a Class E felony.

   (8) For the purposes of this subdivision, the possession or transportation within this City by any person, other than an agent, at any one time of five thousand or more cigarettes in unstamped or unlawfully stamped packages shall be presumptive evidence that such cigarettes are possessed or transported for the purpose of sale and are subject to the tax imposed by law. With respect to such possession or transportation, any provisions of law providing for a time period during which a use tax imposed by the law may be paid on unstamped cigarettes or unlawfully or improperly stamped cigarettes or during which such cigarettes may be returned to an agent shall not apply. The possession within this City of more than four hundred cigarettes in unstamped or unlawfully stamped packages by any person other than an agent at any one time shall be presumptive evidence that such cigarettes are subject to tax as provided by law.

   (9) Nothing in this subdivision shall apply to common or contract carriers or warehousemen while engaged in lawfully transporting or storing unstamped packages of cigarettes as merchandise, nor to any employee of such carrier or warehouseman acting within the scope of his employment, nor to public officers or employees in the performance of their official duties requiring possession or control of unstamped or unlawfully stamped packages of cigarettes, nor to temporary incidental possession by employees or agents of persons lawfully entitled to possession, nor to persons whose possession is for the purpose of aiding police officers in performing their duties.

   (10) Any person who falsely or fraudulently makes, alters or counterfeits any stamp prescribed by the Commissioner of Finance under the law, or causes or procures to be falsely or fraudulently made, altered or counterfeited any such stamp, or knowingly and willfully utters, purchases, passes or tenders as true any such false, altered or counterfeited stamp, or knowingly and willfully possesses any cigarettes in packages bearing any such false, altered or counterfeited stamp, and any person who knowingly and willfully makes, causes to be made, purchases or receives any device for forging or counterfeiting any stamp, prescribed by the Commissioner of Finance under the provisions of the law, or who knowingly and willfully possesses any such device, shall be guilty of a Class E felony. For the purposes of this paragraph, the words “stamp prescribed by the Commissioner of Finance” shall include a stamp, impression or imprint made by a metering machine, the design of which has been approved by the Commissioner of Finance and the State Tax Commission.

   (11) Any willful act or omission, other than those described in paragraphs (5) through (10) of this subdivision, by any person which constitutes a violation of any provision of law shall constitute a misdemeanor.

Chapter 5: Coin-operated Amusement Devices Tax [Repealed]

§ 5-01 Definitions. [Repealed]

*§ 5-02 Imposition of the Tax. [Repealed]* ::

§ 5-03 Exemptions. [Repealed]

*§ 5-04 Filing of Returns. [Repealed]* ::

§ 5-05 Payment of Tax and Posting of Stamp. [Repealed]

*§ 5-06 Penalties and Interest. [Repealed]* ::

§ 5-07 Records To Be Kept. [Repealed]

*§ 5-08 Determination of Tax Deficiency. [Repealed]* ::

§ 5-09 Refunds. [Repealed]

*§ 5-10 Proceedings To Recover the Tax. [Repealed]* ::

§ 5-11 Bulk Sales. [Repealed]

*§ 5-12 General Powers of the Commissioner of Finance. [Repealed]* ::

§ 5-13 Returns To Be Secret. [Repealed]

*§ 5-14 Notices and Limitations of Time. [Repealed]* ::

Chapter 6: Commercial Motor Vehicles

§ 6-01 Definitions.

City. “City” shall mean the City of New York.

Commercial motor vehicle. A “commercial motor vehicle” is:

  1. Any truck, tractor, trailer or semi-trailer, and any other motor vehicle constructed or specially equipped for the transportation of goods, wares and merchandise which is commonly known as an auto truck or light delivery car;
  2. Any traction engine, road roller, tractor crane, truck crane, power shovel, road building machine, snow plow, road sweeper, sand spreader, well driller, or well servicing rig; and
  3. Any earth-moving equipment as defined in the Vehicle and Traffic Law; provided that such motor vehicles are used principally in the city or used principally in connection with a business carried on within the city. Although trailers and semi-trailers are defined as commercial motor vehicles under the law, they are only considered in computing the tax due on tractors, as more specifically set forth in 19 RCNY § 6-02. There is no separate or additional tax on trailers or semi-trailers as such.

Commissioner of Finance. The “Commissioner of Finance” is the Commissioner of Finance of the City.

Maximum gross weight. “Maximum gross weight” is the weight of the motor vehicle plus the weight of the maximum load to be carried, if any, by such vehicle.

Motor vehicle. A “motor vehicle” is any vehicle operated upon a public highway or public street propelled by any power other than muscular power.

Motor vehicle for transportation of passengers. A “motor vehicle for transportation of passengers” is:

  1. Any motor vehicle licensed as a taxicab or as a coach, or any motor vehicle, not so licensed, which carries passengers for compensation, including limousine service, whether the compensation paid by or on behalf of the passenger is based on mileage, trip, time consumed or any other basis; and
  2. Any omnibus, except one operated pursuant to a franchise when, under such franchise or under a contract (relating to transportation to or from airports in the city) with the Port of New York Authority, the holder of the franchise pays to the city or to the Port of New York Authority a percentage of its gross earnings or gross receipts or one used exclusively in interstate commerce; provided such motor vehicles are used regularly, even though not principally, in the city. The law excludes from the definition of a motor vehicle for transportation of passengers any motor vehicle used principally for the transportation of children to and from schools. It also excludes any motor vehicle used principally for the transportation of children to and from day camps operated by the non-profit organizations described in 19 RCNY § 6-03 or used exclusively for transportation of persons in connection with funerals. However, motor vehicles which are normally used for the transportation of persons in connection with funerals but which are also used for the transportation of persons for other purposes, are subject to the tax.

Omnibus. An “omnibus” is any motor vehicle for transportation of passengers for hire having a seating capacity of more than seven persons.

Owner. An “owner” is any person owning a commercial motor vehicle or a motor vehicle for the transportation of passengers and shall include a purchaser under a reserve title contract, conditional sales agreement or vendor’s lien agreement. In addition, an owner shall be deemed to include any lessee, licensee or bailee having the exclusive use of a commercial motor vehicle or a vehicle for the transportation of passengers, under a lease or otherwise, for a period of thirty days or more, except where the lessor, licensor or bailor has filed a return as provided by the law as owner thereof and paid the tax. In the case of a commercial motor vehicle or vehicle for the transportation of passengers under the exclusive use of a lessee, licensee or bailee for a period of less than thirty days, the tax is payable by the owner of the vehicle and not the lessee, licensee or bailee.

Person. “Person” shall mean an individual, partnership, corporation, joint stock company, society, association, receiver, lessee, trustee, estate, referee, assignee, or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals.

Registered owner. The “registered owner” is the person who registers a motor vehicle as owner thereof pursuant to the registration requirements of the Vehicle and Traffic Law of the State of New York.

Registration fee. The “registration fee” is the full annual fee or charge prescribed in the Vehicle and Traffic Law of the State of New York for the registration of a motor vehicle.

Tax year. The “tax year” begins June first of any calendar year and extends through May thirty-first of the following calendar year.

Use. “Use” is any use of a motor vehicle upon the public highways or streets of the city.

§ 6-02 Imposition of the Tax.

The law provides for a tax on certain motor vehicles payable for each tax year, as follows:

  1. On commercial motor vehicles used principally within the city, that is, if most of their mileage during the year is within the city, regardless of whether the business of their owners or operators is principally within the city; or on commercial motor vehicles used principally in connection with business carried on within the city, regardless of the mileage within or without the city.

   (1) For tax years ending on or before May 31, 1972, twenty dollars for each such vehicle having a maximum gross weight of five tons or less, and thirty dollars for each such vehicle having a maximum gross weight of more than five tons, provided, however, that for each such vehicle having a registration fee is prescribed in the Vehicle Traffic Law of the State of New York which is less than twenty dollars, the tax shall be an amount equal to such registration fee, and

   (2) For tax years beginning on and after June 1, 1972, forty dollars for each such vehicle having a maximum gross weight of five tons or less, and sixty dollars for each such vehicle having a maximum gross weight of more than five tons, provided, however, that for each such vehicle having a registration fee prescribed in the Vehicle and Traffic Law of the State of New York which is less than forty dollars, the tax shall be an amount equal to such registration fee.

  1. On motor vehicles for the transportation of passengers which are used regularly even though not principally in the city, one hundred dollars for each such vehicle. A motor vehicle for the transportation of passengers which does not do most of its traveling on the city streets but does travel on the city streets regularly is subject to the tax. A motor vehicle will be deemed to be used regularly in the city and subject to the tax where it is used in the city thirty or more different days during a tax year. In applying the tax on commercial motor vehicles with respect to tractors, trailers and semi-trailers, the tax is measured by the weight of the tractor plus the maximum gross weight of the trailer or semi-trailer with the greatest such maximum gross weight to be drawn by such tractor. No trailer or semi-trailer is subject to any separate or additional tax under the law. Where the first use of any motor vehicle subject to the tax occurs on or after December 1st and before March 1st in any tax year, the tax for that year shall be one-half of the annual tax hereinabove provided; and where the first use occurs on or after March 1st in any tax year, the tax for that year shall be one-fourth of the annual tax hereinabove provided. The above tax is in addition to any and all other taxes, including the Compensating Use Tax, imposed by the City. No tax is payable with respect to motor vehicles which do not travel upon the public highways or public streets of the city. Thus, the tax does not apply to vehicles which, during the entire tax year, are located outside the city, or are “dead storage,” or are upon private property within or without the city which they never leave to travel upon the public highways or public streets of the city.

§ 6-03 Exemptions.

The tax does not apply to motor vehicles owned and operated, or leased for their exclusive use by:

  1. The State of New York, or any public corporation (including a corporation created pursuant to agreement or compact with another state or the Dominion of Canada), improvement district or other political subdivision of the state;
  2. The United States of America;
  3. The United Nations or other world-wide international organizations of which the United States of America is a member;
  4. Any corporation, or association, or trust, or community chest, fund or foundation, organized and operated exclusively for religious, charitable or educational purposes, or for the prevention of cruelty to children or animals, and no part of the net earnings of which inures to the benefit of any private shareholder or individual and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation; provided, however, that nothing in this subdivision shall include an organization operated for the primary purpose of carrying on a trade or business for profit, whether or not all of its profits are payable to one or more organizations described in this subdivision;
  5. Any foreign nation or representative of a foreign nation with respect to motor vehicles for which they need not pay a registration fee under the provisions of the Vehicle and Traffic Law;
  6. Dealers in new and used motor vehicles where the use of the motor vehicle is confined solely to demonstrations to prospective customers or to delivery by or to the dealer and the vehicle bears dealer’s license plates. Where a lease of a motor vehicle for the exclusive use by any of the exempt persons described in this section, commences after June 1st or terminates prior to May 31st of any tax year, the owner thereof, who is otherwise subject to the tax, shall be liable for the tax with respect to such motor vehicle for the period during which such motor vehicle is not leased for the exclusive use by exempt persons. The date of first use during a tax year of the motor vehicle by such owner shall determine the amount of tax due with respect to such vehicle. In no event, however, is an exempt person subject to the tax, and in no event shall one owner be liable for payment of more than one tax with respect to any one motor vehicle during any one tax year. Persons claiming exemption from the tax under the provisions of this section shall make an application to the Commissioner of Finance for an exemption from the tax. Such application must be made in the form of an affidavit setting forth

   (1) the character of the organization,

   (2) the purposes for which it was organized,

   (3) its actual activities,

   (4) the sources of its income from the disposition of such income,

   (5) whether or not any of its income is credited to surplus or may enure to the benefit of any private shareholder or individual,

   (6) generally all facts relating to its operations which may affect its right to exemption.

Such affidavit must be supplemented by a copy of its certificate of incorporation or corporate charter, if a corporation; or a copy of its constitution or articles of association and by-laws, if an incorporated association. In addition, there should be submitted a current financial statement for a recent period of at least one year, in such form as to indicate its assets and liabilities, and its receipts and disbursements, as well as a photostatic copy of the letter, if any, from the Treasury Department of the United States granting the applicant exemption from the Federal Income Tax under § 501(c)(3) of the United States Internal Revenue Code. The Commissioner of Finance may require such further information as he deems appropriate. However, persons to whom the Commissioner of Finance has issued a certificate of exemption under either the New York City Sales Tax Law or the Tax On Occupancy of Hotel Rooms Law need not apply for exemption under this law, but may furnish such certificate of exemption or a photostatic copy thereof as evidence of exemption under the provisions of this law.

§ 6-04 Presumptions and Burden of Proof.

For the purpose of the proper administration of the law and to prevent evasion of the tax, the law presumes that all commercial motor vehicles used in the city are used principally in the city or used principally in connection with a business carried on within the city and are subject to the tax until the contrary is established; and the law presumes that all motor vehicles used for the transportation of passengers in the city are used regularly, even though not principally in the city and are subject to the tax until the contrary is established. The burden of proving that a motor vehicle is not taxable under the law shall be on the owner of the motor vehicle.

§ 6-05 Records To Be Kept.

Every owner of a commercial motor vehicle shall keep records of the acquisition and use in the City of each such commercial motor vehicle showing the date of acquisition, the number of miles traveled in the City, and the number of miles traveled by such article outside the City, the weight of the vehicle and the weight of the vehicle plus the weight of the maximum load to be carried, together with the full annual fee or charge paid under the Vehicle and Traffic Law of the State of New York for the registration of the vehicle. Every owner of a motor vehicle for transportation of passengers shall keep records of each such vehicle showing the date of acquisition and use in the City and the basis for the compensation charged to passengers for transporting such passengers. Where the owner operates the vehicle pursuant to a franchise under which he pays to the City a percentage of its gross earnings or gross receipts, or operates the vehicle for the transportation of children to and from schools or day camps, or operates the vehicle exclusively for the transportation of persons in connection with funerals, he shall maintain sufficient records to establish these facts. The foregoing records shall be open for inspection and examination at any time upon demand by the Commissioner of Finance or his duly authorized agent or employee and must be preserved for a period of three years, except that the Commissioner of Finance may consent to their destruction within that period or may require that they be kept longer.

§ 6-06 Registration.

In accordance with the powers granted to him by the law, the Commissioner of Finance has determined that the certificates of registration described in § 11-806(a) of the Administrative Code of the City of New York need not be filed. Further, in accordance with the powers granted to him by the law, the Commissioner of Finance has determined that information registration certificates described in § 11-806(b) of the Administrative Code of the City of New York need not be filed.

§ 6-07 Returns.

(a) On or before the twentieth day of June in each tax year, every owner of a motor vehicle subject to tax under the law shall file a return with the Commissioner of Finance. A supplemental return shall also be filed by every owner with respect to each motor vehicle subject to tax acquired after the commencement of any tax year and for which a return of supplemental return has not been filed. Such supplemental return shall be filed with the Commissioner of Finance within five days after the acquisition of the motor vehicle.
  1. Ordinarily information returns need not be filed. However, the Commissioner of Finance may permit or require returns, supplemental returns or information returns to be filed at times other than those specified in these regulations, where he deems it necessary in order to insure payment of the tax imposed by the law.
  2. The form of returns, supplemental returns or information returns shall be prescribed by the Commissioner of Finance and shall contain such information as he may deem necessary for the proper administration of the law. The Commissioner of Finance may require amended returns, amended supplemental returns or amended information returns to be filed within twenty days after notice and to contain the information specified in the notice.
  3. If a return, supplemental return or information return is not filed, or if a return of any kind when filed is incorrect or insufficient on its face, the Commissioner of Finance shall take the necessary steps to enforce the filing of such a return or of a corrected return.
  4. Electronic filing. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of returns and reports required by this section.

§ 6-08 Payment of Tax.

(a)  At the time of filing a return or supplemental return the owner shall pay to the Commissioner of Finance the tax imposed by the law. Such tax shall be due and payable on the last day on which such return or supplemental return is required to be filed, regardless of whether such a return is filed or whether the return which is filed correctly indicates the amount of tax due. Where an owner of a motor vehicle subject to tax under the law replaces it with another motor vehicle during a tax year, he shall be entitled, upon approval by the Commissioner of Finance, to have any tax paid with respect to the replaced vehicle credited toward the tax payable with respect to the replacement vehicle for the balance of such tax year, and he shall pay no additional tax for such tax year with respect to it unless its nature or its maximum gross weight requires the payment of a higher amount of tax than that paid with respect to the replaced vehicle. A supplemental return, where required, shall be filed with respect to a replacement vehicle irrespective of whether additional tax is payable. Where the transferrer does not desire credit for tax paid with respect to any replacement vehicle, a transferee of a motor vehicle subject to tax under the law who acquires it during a tax year from an owner who has paid the tax shall not be required to pay the tax with respect to such motor vehicle for the balance of such tax year if, and only if, he obtains and submits to the Commissioner of Finance together with his return or supplemental return, a certificate or its equivalent (as prescribed by the Commissioner of Finance) signed by the prior owner to the effect that the prior owner has not had the tax paid credited toward any replacement vehicle and will not seek to obtain such a credit for any replacement vehicle acquired in the future. Nothing contained in this section shall be deemed to authorize a refund merely because a motor vehicle with respect to which the tax has been paid is sold or otherwise disposed of during the course of the tax year. Payment of the tax may be made in cash, or by check, money order or draft drawn to the order of the City Collector, to the borough office of the Bureau of City Collections, where the taxpayer has his principal place of business. Cash payments may be made only to cashiers designated for that purpose. Under no circumstances should cash be sent by mail. Postage stamps will not be accepted in payment of the tax. Where payment is made by uncertified check, the Commissioner of Finance may withhold issuance of the stamp or other indicia or payment prescribed until the check has been converted into collectible funds. The borough offices of the Bureau of City Collections are located as follows:

Manhattan (New York County) Room 100 Municipal Building Center and Chambers Streets New York, N.Y. 10007 Bronx – Tremont and Arthur Avenues Bronx, N.Y. 10457 Brooklyn (Kings County) – Room 1 Municipal Building 210 Joralemon Street Brooklyn, N.Y. 11201 Queens Borough Hall 120-55 Queens Blvd. Kew Gardens, N.Y. 11424 Richmond-Borough Hall, Room 200 350 St. Marks Place Staten Island, N.Y. 10301

  1. Electronic payment. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic payment of any tax required to be paid by this section.

§ 6-09 Stamps or Other Indicia of Payment.

The Commissioner of Finance may issue suitable stamps or other indicia as evidence of payment of or exemption from the tax imposed by the law. If a stamp is issued it shall be affixed to and prominently and conspicuously displayed on the motor vehicle for which it has been issued so as to be readily visible, without, however, interfering with the vision of the operator thereof. Compliance with this section will be deemed sufficient when the stamp, if one is issued, is properly affixed to the front air-vent window on either the left or right side of such motor vehicle or, if there be none, on any side window, or if such motor vehicle is a type which has no side windows,on the top of the dashboard immediately facing the operator’s seat, or on some other visible and conspicuous place near the operator’s seat; or, if some other indicia of payment or exemption from the tax is issued, when it is kept with the vehicle so as to be readily available. An owner who transfers title to a motor vehicle shall not transfer any stamp or other indicia of payment to the transferee except on a transfer to a person to whom he has properly given the certificate provided for in 19 RCNY § 6-08 with regard to not obtaining a credit toward any tax payable with respect to a replacement vehicle. Upon the transfer of a vehicle subject to the law, the stamp or other indicia of payment issued shall be returned to the Commissioner of Finance, or shall be destroyed by the transferrer of the vehicle except where the transfer of the stamp or other indicia of payment is permitted as hereinabove provided.

§ 6-10 Fees for Issuance of Duplicate Tax Stamp.

Whenever any tax stamp or other indicia of payment that has been issued is lost, mutilated or destroyed, the Commissioner of Finance will issue a duplicate tax stamp or other indicia of payment to the holder of the lost, mutilated or destroyed tax stamp or other indicia of payment upon the payment of a fee of $5.00.

§ 6-11 Determination of Tax Deficiency.

If a return required by the law is not filed, or if a return when filed is incorrect or insufficient, the Commissioner of Finance will determine the amount of tax due from such records or information as may be obtainable and, if necessary, may estimate the tax on the basis of external indices such as motor vehicle registration with the Bureau of Motor Vehicles and/or any other factors. Notice of such determination will be given to the person liable for the payment of the tax. Such determination shall finally and irrevocably fix the tax unless the person against whom it is assessed, within thirty days after the giving of notice of such determination, shall apply in writing to the Commissioner of Finance for a hearing, or unless the Commissioner of Finance, on his own motion shall redetermine the same. After such hearing the Commissioner of Finance shall give notice of his determination to the person against whom the tax is assessed. The determination of the Commissioner of Finance shall be reviewable for error, illegality or unconstitutionality or any other reason whatsoever by a proceeding under Article 78 of Civil Practice Law and Rules if application therefor is made to the Supreme Court within thirty days after the giving of the notice of such determination. A proceeding under Article 78 of Civil Practice Law and Rules shall not be instituted unless;

  1. the amount of any tax sought to be reviewed, with penalties and interest thereon, if any, shall be first deposited with the Commissioner of Finance and there shall be filed with the Commissioner of Finance undertaking, issued by a surety company authorized to transact business in this state and approved by the Superintendent of Insurance of this state as to solvency and responsibility, in such amount and with such sureties as a justice of the Supreme Court shall approve, to the effect that if such proceeding be dismissed or the tax confirmed, the petitioner will pay all costs and charges which may accrue in the prosecution of the proceeding; or
  2. at the option of the applicant such undertaking filed with the Commissioner of Finance may be in a sum sufficient to cover the taxes, penalties and interest thereon stated in such determination plus the costs and charges which may accrue against it in the prosecution of the proceeding, in which event the applicant shall not be required to deposit such taxes, penalties and interest as a condition precedent to the application.

§ 6-12 Refunds.

The Commissioner of Finance shall refund or credit, without interest, any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid, if written application to the Commissioner of Finance for such refund shall be made within one year from the payment thereof. No refund will be granted merely because a motor vehicle with respect to which the tax has been paid is sold or otherwise disposed of during the course of the tax year. An application for refund or credit may be made by the owner of a motor vehicle or any other person who paid the tax to the Commissioner of Finance. The application must set forth the grounds upon which the claim for refund or credit is made and the application must show on its face that it has been filed with the Commissioner of Finance within one year from the date of payment of the tax. The application must be accompanied by a cancelled check or other evidence of payment of the tax, and such other additional information as the Commissioner of Finance may require. Whenever the Commissioner of Finance approves a refund or credit he may require a general release to the city before making such refund or granting such credit. Where payment of the tax is made by check and the check cannot be presented as evidence of payment, a photostatic copy thereof, showing both the front and back of the check, will be accepted in lieu thereof. The Commissioner of Finance may, in lieu of any refund required to be made, allow credit therefor on payments due from the applicant. The Commissioner of Finance reserves the fight to audit the taxpayer’s books and records prior to making any refund or he may grant the refund or credit subject to audit. The granting of a refund or credit before audit is without prejudice to the right of the Commissioner of Finance to determine after audit the applicant’s right to the refund or credit and his liability for tax. The Commissioner of Finance will deny any application for refund or credit where he determines that the statutory requirements have not been met or that the grounds set forth in the application are without merit. An application for refund or credit shall be deemed an application for a revision of any tax, penalty or interest complained of, and the Commissioner of Finance may receive evidence with respect thereto. The Commissioner of Finance will make his determination and give notice thereof to the applicant. The Commissioner of Finance’s determination may be reviewed by a proceeding pursuant to Article 78 of the Civil Practice Law and Rules, provided such proceeding is instituted within thirty days after the giving of notice of such determination and provided that a final determination of tax due was not previously made. Such proceeding shall not be instituted unless an undertaking is filed with the Commissioner of Finance for such amount and with such sureties as a Justice of the Supreme Court shall approve, to the effect that if such proceeding is dismissed or the tax confirmed, the petitioner will pay all costs and charges which may accrue in the prosecution of the proceeding. A person shall not be entitled to a revision, refund or credit of a tax, interest or penalty covered by a determination of tax for which he has had a hearing or an opportunity for a hearing as provided by law or has failed to avail himself of the remedies therein provided.

§ 6-13 Remedies Exclusive.

The remedies provided by the law shall be the exclusive remedies available to any person for the review of tax liability imposed by the law; and no determination or proposed determination of tax or determination on any application for refund shall be enjoined or reviewed by an action for declaratory judgment, an action for money had and received or by an action or proceeding other than a proceeding under Article 78 of the Civil Practice Law and Rules; provided, however, that a taxpayer may proceed by declaratory judgment if he institutes suit within thirty days after a deficiency assessment is made and pays the amount of the deficiency assessment to the Treasurer prior to the institution of such suit and posts a bond for costs as set forth in those regulations.

§ 6-14 Bulk Sales.

Whenever there is made a sale, transfer or assignment in bulk or any part or the whole of a stock of merchandise or of fixtures, or merchandise and of fixtures pertaining to the conducting of the business of the seller, transferrer or assignor, otherwise than in the ordinary course of trade and in the regular prosecution of said business, the purchaser, transferee or assignee shall at least ten days before taking possession of such merchandise, fixtures, or merchandise and fixtures, or paying therefor, notify the Commissioner of Finance by registered mail of the proposed sale and of the price, terms and conditions thereof whether or not the seller, transferrer or assignor, has represented to, or informed the purchaser, transferee or assignee that it owes any tax pursuant to the law and whether or not the purchaser, transferee or assignee has knowledge that such taxes are owing, and whether any such taxes are in fact owing. Whenever the purchaser, transferee or assignee shall fail to give notice to the Commissioner of Finance as required by the preceding paragraph, or whenever the Commissioner of Finance shall inform the purchaser, transferee or assignee that a possible claim for such tax or taxes exists, any sums of money, property or choses in action, or other consideration, which the purchaser, transferee or assignee is required to transfer over to the seller, transferrer or assignor shall be subject to a first priority right and lien for any such taxes theretofore or thereafter determined to be due from the seller, transferrer or assignor to the city, and the purchaser, transferee or assignee is forbidden to transfer to the seller, transferrer or assignor any such sums of money, property or choses in action to the extent of the amount of the city’s claim. For failure to comply with the provisions of this section, the purchaser, transferee or assignee, in addition to being subject to the liabilities and remedies imposed under the provisions of Article 6 of the Uniform Commercial Code, shall be personally liable for the payment to the city of any such taxes theretofore or thereafter determined to be due to the city from the seller, transferrer or assignor, and such liability may be assessed and enforced in the same manner as the liability for tax under the law.

§ 6-15 General Powers of the Commissioner of Finance.

In addition to all other powers granted to the Commissioner of Finance under the law, he is authorized and empowered:

  1. To make, adopt and amend rules and regulations appropriate to the carrying out of the law and the purposes thereof;
  2. To extend, for cause shown, the time for filing any return for a period not exceeding sixty days; and to compromise disputed claims in connection with the taxes thereby imposed;
  3. To request information concerning motor vehicles and persons subject to the provisions of the law from the Bureau of Motor Vehicles and from the Department of Taxation and Finance of the State of New York or any successor to their duties, or the Treasury Department of the United States relative to any person; and to afford information to such Bureau of Motor Vehicles, Department of Taxation and Finance or any successor to their duties, or to such Treasury Department relative to any person, any other provision of the law to the contrary notwithstanding;
  4. To delegate his functions thereunder to a Deputy Commissioner of Finance or other employee or employees of his department;
  5. To assess, reassess, determine, revise and readjust the tax imposed under the law;
  6. To provide methods for identifying motor vehicles not subject to or exempt from the tax imposed under the law;
  7. To provide that a certificate of registration need not be filed with respect to any or all types of motor vehicles, or to provide that such certificate of registration with respect to any or all types of motor vehicles shall be contained on or combined with any return or supplemental return required to be filed under the law.

§ 6-16 Penalties and Interest.

(a) Interest on underpayments. If any amount of tax is not paid on or before the last day prescribed for payment (without regard to any extension of time granted for payment), interest on such amount at the rate prescribed by the law and the regulations of the Commissioner of Finance shall be paid for the period from such last date to the date of payment. In computing the amount of interest to be paid with respect to taxes which remain or become due on or after July 16, 1985, such interest shall be compounded daily. No interest shall be paid if the amount thereof is less than one dollar.
  1. Civil penalties. Any person failing to file a return or to pay any tax due prior to February 24, 1983 within the time required by law shall be subject to a penalty of five percent of the amount due. If the Commissioner of Finance is satisfied that the delay was excusable he may remit all or any part of such penalty. With respect to returns or payments which become due on or after February 24, 1983, the following penalties apply:

   (1) Failure to file return.

      (i) In case of failure to file a return on or before the prescribed date (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there is to be added to the amount required to be shown as tax on such return five percent (5%) of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate.

      (ii) With respect to returns required to be filed on or after July 16, 1985, in the case of a failure to file a tax return within 60 days of the date prescribed for filing of such return (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, the addition to tax under subparagraph (i) of this paragraph shall not be less than the lesser of one hundred dollars ($100) or one hundred percent (100%) of the amount required to be shown as tax on such return.

      (iii) For purposes of subparagraphs (i) and (ii), the amount of the tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return.

   (2) Failure to pay tax shown on return. In case of failure to pay the amount shown as tax on a return required to be filed on or before the prescribed date (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there shall be added to the amount shown as tax on such return one-half of one percent (1/2%) of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. For the purpose of computing the addition for any month the amount of tax shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return. If the amount of tax required to be shown on a return is less than the amount shown as tax on such return, this paragraph shall be applied by substituting such lower amount.

   (3) Failure to pay tax required to be shown on return. In case of failure to pay any amount in respect of any tax required to be shown on a return required to be filed which is not so shown (including a determination made pursuant to 19 RCNY § 6-11), within ten (10) days of the date of notice and demand, unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there shall be added to the amount of tax stated in such notice and demand one-half of one percent (1/2%) of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. For the purpose of computing the addition for any month, the amount of tax stated in the notice and demand shall be reduced by the amount of any part of the tax which is paid before the beginning of such month.

   (4) Limitations on additions.

      (i) With respect to any return the amount of the addition to tax is limited to the following:

         (A) At no time will the addition for one (1) month be more than five percent (5%).

         (B) If paragraphs (1) and (2) of this subdivision are both applicable, the addition under paragraph (1) is reduced by the addition under paragraph (2). Thus, the addition to the charge will be four and one-half percent (4 1/2%) under paragraph (1) and one-half of one percent (1/2%) under paragraph (2) for each month up to and including the first five (5) months. After the first five (5) months, the addition of one-half of one percent (1/2%) per month pursuant to paragraph (2) will apply for the next forty-five (45) months for a maximum aggregate of forty-seven and one-half percent (47 1/2%) addition to tax. However, in any case described in subparagraph (ii) of paragraph (1) of this subdivision (relating to returns filed after 60 days of the due date) the amount of the addition to tax under such paragraph (1) shall not be reduced below the amount provided in such subparagraph (i.e., the lesser of $100 or 100% of tax due).

         (C) If paragraphs (1) and (3) of this subdivision are both applicable, the maximum amount of the addition to tax may not exceed twenty-five percent (25%) in the aggregate. The maximum amount of the addition to tax pursuant to paragraph (3) of this subdivision shall be reduced by the amount of the addition to tax pursuant to paragraph (1) of this subdivision (determined without regard to subparagraph (ii) of such paragraph (1)) which is attributable to the tax for which the notice and demand is made and which is not paid within ten (10) days of such notice and demand.

      (ii) The provisions of this paragraph may be illustrated by the following examples:

         (A) (a) Assume the taxpayer filed his tax return for the year June 1, 1983 to May 31, 1984 on September 25, 1983, and the failure to file on or before the prescribed date is not due to reasonable cause. The tax shown on the return is $800 and a deficiency of $200 is subsequently assessed, making the tax required to be shown on the return $1,000. The amount shown due on the return of $800 is paid on October 26, 1983. The failure to pay on or before the prescribed date is not due to reasonable cause. There will be imposed, in addition to interest, an additional amount under paragraph (2), of $20.00, which is 2.5 percent (2% for the 4 months from June 21 through October 20, and 0.5% for the fractional part of the month from October 21 through October 26) of the amount shown due on the return of $800. There will also be imposed an additional amount under paragraph (1) of $184, determined as follows:

20 percent (5% per month for 3 months from June 21 through September 20 and 5% for the fractional part of the month from September 20 through September 30) of the amount due of $l,000 required to be shown on the return $200
Reduced by the amount of the addition imposed under paragraph (2) for those months $16
Addition to tax under paragraph (1) $184

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            (b) A notice and demand for the $200 deficiency is issued on January 8, 1984, but the taxpayer does not pay the deficiency until December 23, 1984. In addition to interest there will be imposed an additional amount under paragraph (3) of $10, determined as follows:

Addition computed without regard to limitation: 6 percent (5 1/2% for the 11 months from January 19, 1984 through December 18, 1984, and 0.5% for the fractional part of the month from December 19 through December 23) of the amount stated in the notice and demand ($200) $12
Limitation on addition: 25 percent of the amount stated in the notice and demand ($200) $50
Reduced by the part of the addition under paragraph (1) for failure to file attributable to the $200 deficiency (20% of $200) $40
Maximum amount of the addition under paragraph (3) $10

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      (B) A taxpayer files his tax return for the year June 1, 1983 to May 31, 1984 on February 2, 1984, and such delinquency is not due to reasonable cause. The balance due, as shown on the return, of $500 is paid when the return is filed on February 2, 1984. In addition to interest and the addition for failure to pay under paragraph (2) of $20 (8 months at 0.5% per month, or 4%), there will also be imposed an additional amount under paragraph (1) of $112.50, determined as follows:

Penalty at 5% for maximum of 5 months, or 25% of $500 $125.00
Less reduction for the amount of the addition under paragraph (2):  
Amount imposed under paragraph (2) for failure to pay for the months in which there is also an addition for failure to file – 2 1/2% of the 5 months June 21 through November 20 of the net amount due ($500) $12.50
Addition to tax under paragraph (1) $112.00

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   (5) Reasonable cause as used in paragraphs (1), (2) and (3) must be affirmatively shown in a written statement. The taxpayer’s previous compliance record may be taken into account. Grounds for reasonable cause, where clearly established, may include the following:

      (i) death or serious illness of the responsible officer or employee of the taxpayer, or his unavoidable absence from his usual place of business;

      (ii) destruction of the taxpayer’s place of business records by fire or other casualty;

      (iii) inability to obtain and assemble essential information required for the preparation of a complete return despite reasonable efforts;

      (iv) any other cause for delinquency which appears to a person of ordinary prudence and intelligence as a reasonable cause for delay in filing a return and which clearly indicates an absence of gross negligence or willful intent to disobey the taxing statutes. Past performance should be taken into account. Ignorance of the law, however, will not be considered reasonable cause.

   (6) Underpayment due to negligence.

      (i) If any part of an underpayment is due to negligence or intentional disregard of the law, or rules or regulations thereunder (but without intent to defraud), there shall be added to the tax a penalty in an amount equal to five percent (5%) of the underpayment.

      (ii) With respect to taxes required to be paid on or after July 16, 1985, there shall be added to the tax (in addition to the amount determined under subparagraph (i) of this paragraph) an amount equal to fifty percent of the interest payable under this section of these regulations with respect to the portion of the underpayment described in such subparagraph (i) which is attributable to the negligence or intentional disregard referred to in such subparagraph (i), for the period beginning on the last date prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax).

   (7) Underpayment due to fraud.

      (i) If any part of an underpayment is due to fraud, there shall be added to the tax a penalty in an amount equal to fifty percent (50%) of the underpayment.

      (ii) With respect to taxes required to be paid on or after July 16, 1985, there shall be added to the tax (in addition to the penalty determined under subparagraph (i) of this paragraph) an amount equal to fifty percent of the interest payable under this section of these regulations with respect to the portion of the underpayment described in such subparagraph (i) which is attributable to fraud, for the period beginning on the last day prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax).

      (iii) The penalty under this paragraph (paragraph (7)) shall be in lieu of the maximum twenty-five percent (25%) penalty due to willful neglect for failure to file a return, five percent (5%) penalty due to negligence and the additional one-half of one percent (1/2%) per month penalty pursuant to paragraphs (2) and (3) of this subdivision.

   (8) Any person who fails to pay tax, or to make, render, sign or certify any return, or to supply information within the required time, with fraudulent intent, shall be liable for a penalty of not more than one thousand dollars ($1,000), in addition to any other amounts required under the law to be imposed, assessed and collected by the Commissioner of Finance. The Commissioner of Finance has the power, in his discretion, to waive, reduce or compromise any penalty under this paragraph.

   (9) The additions to tax and penalties provided by this subdivision shall be paid and enforced in the same manner as taxes.

   (10) Whenever a penalty is assessed for failure to pay the tax when due, an application for the remission thereof may be made to the Commissioner of Finance. Such application must be made by the person against whom the penalty is assessed, and must set forth the grounds upon which the remission is requested.

  1. Criminal penalties.

   (1) Failure to obey a subpoena; false testimony.

      (i) Any person who, being duly subpoenaed in connection with a matter arising under the law, to attend as a witness or to produce books, accounts, records, memoranda, documents or other papers,

         (A) fails or refuses to attend without lawful excuse,

         (B) refuses to be sworn,

         (C) refuses to answer any material and proper question, or

         (D) refuses, after reasonable notice, to produce books, papers and documents in his possession or under his control which constitute material and proper evidence shall be guilty of a misdemeanor.

      (ii) Any person who shall testify falsely in any material matter pending before the Commissioner of Finance shall be guilty of and punishable for perjury.

   (2) Willful failure to file a return or report or pay the tax. Any person required to pay any tax or make any return or report, who willfully fails to pay such tax or make such return or report, at the time or times so required, shall be guilty of a misdemeanor.

   (3) Fraudulent returns, reports, statements or other documents.

      (i) Any person who willfully makes and subscribes any return, report statement or other document which is required to be filed with or furnished to the Commissioner of Finance or to any person, pursuant to the provisions of the law, which he does not believe to be true and correct as to every material matter shall be guilty of a misdemeanor.

      (ii) Any person who willfully delivers or discloses to the Commissioner of Finance or to any person, pursuant to the provisions of the law, any list, return, report, account, statement or other document known by him to be fraudulent or to be false as to any material matter shall be guilty of a misdemeanor.

      (iii) For purposes of this paragraph, the omission by any person of any material matter with intent to deceive shall constitute the delivery or disclosure of a document known by him to be fraudulent or to be false as to any material matter.

   (4) Any person who counterfeits or forges, or causes or procures to be counterfeited or forged, or aids or assists in counterfeiting or forging, by any way, act, or means, any stamp, indicia of payment or indicia that no tax is payable authorized by the law, or who knowingly acquires, possesses, disposes of or uses such a counterfeited or forged stamp, indicia of payment or indicia that no tax is payable, or who transfers a stamp, indicia of payment or indicia that no tax is payable where such a transfer is not authorized by the law shall be guilty of a misdemeanor.

   (5) The owner or driver of any motor vehicle subject to the tax imposed by the law who, upon demand, shall fail to exhibit the stamp or other indicia of payment of the tax to the Commissioner of Finance, his duly authorized agent or employee, or any police officer of this city or state, as required by § 11-809(a) of the Administrative Code, shall be guilty of a misdemeanor (punishment for which shall be a fine of not more than two hundred fifty dollars, or imprisonment for not more than thirty days, or both such fine and imprisonment.)

   (6) Any person failing to file a certificate of registration or information registration certificate as required by the law shall be guilty of a misdemeanor.

  1. The Commissioner’s certificate. The certificate of the Commissioner of Finance to the effect that a tax has not been paid, that a motor vehicle has not been registered, that a return has not been filed, or that information has not been supplied pursuant to the provisions of the law, shall be presumptive evidence thereof.

§ 6-17 Returns To Be Secret.

Except in accordance with proper judicial order, or as otherwise provided by law, it is unlawful for the Commissioner of Finance or any other officer or employee of the City to divulge or make known in any manner any information relating to or contained in any registration, or any kind of return required by law. The officers charged with the custody of such registration and returns pertaining to the tax under the law shall not be required to produce any of them or evidence of anything contained in them in any action or proceeding in any court, except on behalf of the city, the Commissioner of Finance in an action or proceeding under the provisions of the law, or on behalf of any party to any action or proceeding under the provisions of the law when the registration, return or facts shown therein are directly involved in such action or proceeding, in either of which events, the court may require the production of, and may admit in evidence, so much said registration, return, or of the facts shown therein, as are pertinent to the action or proceeding and no more. Nothing herein shall be construed to prohibit the delivery to a person or his duly authorized representative of a certified copy of any registration or return filed by him; nor to prohibit the publication of statistics so classified as to prevent the identification of particular registrations and returns and the items thereof; nor to prohibit the delivery of a certified copy of any registration or return to the United States of America or any department thereof, the State of New York or any department thereof, the City of New York or any department thereof provided it is requested for official business; nor to prohibit the inspection by the Corporation Counsel or other legal representatives of the city, or by the District Attorney of any county within the city, of the registration or return of any person who shall bring action to set aside or review any tax hereunder, or against whom an action or proceeding under the law is instituted. Returns pertaining to any motor vehicle registered hereunder shall be preserved for three years and thereafter until the Commissioner of Finance permits them to be destroyed.

§ 6-18 Notices.

Any notice authorized or required by the law may be given to the person for whom it was intended by mailing it in a postpaid envelope addressed to such person at the address given in the last return or information registration certificate filed by him pursuant to the provisions of the law, or in any application or return made by him, or if no such registration or return has been filed or application made, then to such address as may be obtainable. The mailing of a notice as provided in this section shall be presumptive evidence of the receipt of the same by the person to whom addressed. Any period of time which is determined according to the provisions of the law by the giving of notice shall commence to run from the date of mailing of such notice as in this section provided.

§ 6-19 Statute of Limitations.

The provisions of the Civil Practice Law and Rules or any other law relative to limitations of time for the enforcement of a civil remedy shall not apply to any proceeding or action taken by the city to levy, appraise, assess, determine or enforce the collection of any tax or penalty provided by the law. However, except in the case of a willfully false or fraudulent registration or return with intent to evade the tax, no assessment of additional tax shall be made after the expiration of more than three years from the date of filing such return; provided, however, that where no registration or no return has been made as provided by law, the tax may be assessed at any time. Where, before the expiration of the period prescribed herein for the assessment of an additional tax, a person has consented in writing that such period be extended, the amount of such additional tax due may be determined at any time within such extended period. The period so extended may be further extended by subsequent consents in writing made before the expiration of the extended period.

Chapter 7: Commercial Rent Tax

§ 7-01 Definitions.

Allocation of single rent for two or more taxable premises. Where, under the terms of a lease, the lessee pays a single rent to the lessor for two or more taxable premises, the rent applicable to each such premises shall be ascertained in accordance with the allocation formula prescribed herein. The allocation formula is based on three factors as follows:

  1. Property factor.

   (i) The lessee is required to set forth:

      (A) the average value of the tangible personal property employed or used by him in each taxable premises occupied or used by him during the tax period, and

      (B) the average value of all tangible personnel property employed or used by him in all of the taxable premises occupied or used by him during the tax period.

   (ii) The words “tangible personal property” as used herein, mean and include all corporeal personal property, such as furniture, furnishings, machinery, tools, implements, goods, wares and merchandise, and do not mean or include money, deposits in banks, shares of stock, bonds, notes, credits, or evidences of an interest in property and evidences of debt. The values as at the beginning and the end of each tax period may be averaged to obtain the value of the tangible personal property employed or used in the taxable premises.

   (iii) A percentage for each taxable premises is then to be computed on the basis of a fraction, using the average value of the property of each taxable premises under (A) as the numerator, and the average value of all tangible personal property in all of the taxable premises under (B) as the denominator.

  1. Wages and salaries factor.

   (i) The lessee is required to set forth the total amount of wages, salaries and other personal services compensation paid during the tax period

      (A) to officers and employees who work in, or from, or are attached to, each taxable premises, and

      (B) to all officers and employees engaged or employed in all of the taxable premises.

   (ii) A percentage for each taxable premises is then to be computed on the basis of a fraction using the total amount set forth in (A) as the numerator and the total amount under (B) as the denominator.

   (iii) The wages and salaries factor shall include all forms of compensation paid to officers and regular employees. Amounts paid to persons whose relationship is that of an independent contractor are not to be included.

  1. Receipts factor. The lessee is required to ascertain the receipts from sales and services during each taxable period applicable to each taxable premises. A percentage is then to be computed for each taxable premises on the basis of a fraction, using as the numerator the total receipts from each such taxable premises and, as the denominator, the total receipts from all such taxable premises. The percentages which are determined for the three factors for each taxable premises are to be added and the total thereof is to be divided by three to obtain the average percentage for each taxable premises. If the numerator and denominator of any fraction are both zero, the factor is deemed to be non-existent and shall be omitted in calculating the average of the percentage. In such event, the total of the remaining percentages is to be divided by the existing factors. If, however, the numerator alone is zero and the denominator is represented by an amount, there is a resultant factor, viz., zero, which is to be included in the calculation of the average of the percentages. The average percentages thus obtained for each taxable premises is to be applied to the total single rent paid for all taxable premises to obtain the amount of the rent applicable to each taxable premises as illustrated below. The allocation formula shall be employed, even though included in the total number of premises for which a single rent is paid there may be included one or more premises which are not taxable premises. In such case, the premises which are not taxable premises shall, for the purposes of the allocation formula, be included in each factor. Whenever the Commissioner of Finance shall determine, either upon his own initiative or upon application by the taxpayer, that the prescribed allocation formula works unfairly or inequitably to a particular taxpayer or class of taxpayers, he may provide for a different or other method of allocation which is calculated to effect a fair and proper apportionment of rent applicable to each taxable premises. When preparing a final return for a tax year for each taxable premises, the factors described above shall cover the full tax year.

Example 1:

Taxable and/or Non-Taxable Premises          
Item No. Factors A B C Total
Tangible personal property $10,000 $15,000 $25,000 $50,000
Salaries and wages $30,000 $36,000 $54,000 $120,000
Receipts from sales and services $105,000 $150,000 $245,000 $500,000
Rent paid       $50,000
Percent to Total*          
    A B C Total
Tangible personal property 20% 30% 50% 100%
Salaries and wages 25% 30% 45% 100%
Receipts 21% 30% 49% 100%
Total percentage (Items 5 to 7) 66% 90% 144%  
Average percentage (Item 8÷ 3) 22% 30% 48%  
Rent applicable toeach premises (Item 9 × Item 4) Where premises are taxable, include applicable amount in base rent $11,000 $15,000 $24,000 $50,000

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* To obtain percentage of each factor for each premises, divide the amount of the factor for each premises by the total amount of the same factor for all premises.

Base rent. The rent paid for each taxable premises by a tenant to his landlord for a period, less the amounts received by or due such tenant for the same period from any subtenant of any part of such premises, as provided in the law. These allowable deductions are:

  1. Amounts received or due as rent for premises which constitute taxable premises of such subtenant.

Example 2: A tenant rents a store for business purposes for a rent of $34,000 per year. He sublets part of the store to a concessionaire for business purposes for a rent of $18,000 per year. The tenant’s base rent is $16,000.

   (i) No deduction is permitted where the subtenant is exempt from tax because he uses the premises for no more than fourteen days in a tax year, whether or not consecutive, where his agreement with the landlord does not require him to pay rent for a longer period (see 19 RCNY § 7-04(f)(1)).

Example 3: A tenant rents a store for business purposes for an annual rent of $12,000. During the year he permits the use of a portion of the store for a period of one day each month by a concessionaire who pays rent of $500 for each day’s occupancy. The tenant’s base rent is $12,000. Since the concessionaire is exempt from tax because he uses the premises for less than 14 days in a tax year, rent paid by the concessionaire is not deductible from the rent paid by the tenant.

   (ii) No deduction is permitted where the subtenant is exempt from tax because his base rent for the tax year is under the amount prescribed in 19 RCNY § 7-04(f)(2).

To illustrate: The tenant of a store pays rent of $20,000 per year. He sublets part of the store to a subtenant for business purposes for a rent of $4,500 per year. The tenant’s base rent is $20,000. Since the subtenant is exempt from tax because his base rent is not more than $4,999 per year (after December 1, 1984, not more than $10,999 per year), the subtenant’s rent payments are not deductible from the rent paid by the prime tenant.

    1. However for the periods beginning on and after June 1, 1985, rent received or due from a tenant exempt from tax pursuant to 19 RCNY § 7-04(f)(2) may be deducted if such subtenant occupies or uses the premises pursuant to a written agreement made prior to June 1, 1984 (or June 1, 1985 where the subtenant is exempt because of the reduction in base rent provided for in 19 RCNY § 7-01 “base rent” (6)(ii), the terms and conditions of which have not been changed or amended.

Example 4: The tenant of a store pays rent of $25,000 per year. He sublets part of the store to a subtenant for a rent of $10,000 per year pursuant to a written agreement executed May 1, 1984, the terms and conditions of which have not been changed or amended. The tenant’s base rent is $15,000. Although the subtenant is exempt from tax because his base rent is not more than $10,999 per year, the subtenant’s rent payments are deductible from the rent paid by the prime tenant because they are made pursuant to a written agreement made prior to June 1, 1984, the terms and conditions of which have not been changed or amended. The tenant of a store in Queens County pays rent of $25,000 per year. He sublets part of the store to a subtenant for a rent of $12,000 per year pursuant to a written agreement executed May 1, 1985, the terms and conditions of which have not been changed or amended. For the tax year June 1, 1985 through May 31, 1986, the tenant’s base rent is $13,000. The deduction is permitted because from June 1, 1985 through December 31, 1985, the subtenant is subject to tax and from January 1, 1986 through May 31, 1986, the tenant, though exempt from tax because the 10% reduction allowable under 19 RCNY § 7-01 “base rent” (6) brings his base rent under $11,000 for that period, occupies or uses the taxable premises under a lease executed before June 1, 1985, the terms and conditions of which have not been changed.

This exception allowing the deduction of rent paid by or due from an exempt subtenant does not apply if the terms and conditions of the written lease agreement are changed or amended in any material respect, including (but not limited to) any change or amendment to the amounts payable by the subtenant to or on behalf of his landlord or any other material change affecting the financial obligation of the subtenant; terms relating to the tenants use of the premises or his obligations relating to improvement, repair or maintenance of the premises; the amount of space leased or the term of lease. Not included are changes in the financial obligation of the subtenant fixed and determined by the terms of the lease at the time of its execution.

Example 5: A tenant of a store pays rent of $25,000 per year. On June 1, 1983, he sublets part of the store to a subtenant for business purposes. The lease is to run for five years and the annual rent is $4,000 for the first year, $5,000 for the second, and $7,000 for the third, fourth and fifth years. For tax periods June 1, 1983 through May 31, 1984, and June 1, 1984 through May 31, 1985, the tenant’s base rent is $25,000 (no deduction is permitted); for the tax periods June 1, 1985 through May 31, 1986 and June 1, 1986 through May 31, 1987, the tenant’s base rent is $18,000 ($25,000 – $7,000). On June 1, 1987, the lease is amended to increase the last year’s rental to $10,000 and to extend the term of the lease for an additional year for a $10,000 rental payment. The tenant’s base rent for the tax periods June 1, 1987 through May 31, 1988 and June 1, 1988 through May 31, 1989 is $25,000 (no deduction is permitted).

  1. Amounts received or due as rent for premises which do not constitute taxable premises and which are used by a tenant as lodging or residential premises (including such residential premises in hotels, apartment hotels or lodging houses as defined in the Tax on Occupancy of Hotel Rooms Law imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York, or effective August 1, 1965, in the Sales Tax Law imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York).

Example 6: The owner of a hotel leases the hotel to an operating company, which pays the owner an agreed rent. The operating company rents rooms in the hotel to residential guests. The operating company’s base rent consists of the rent paid by it to the owner, less the amounts received or due to it from the guests.

  1. Amounts received or due from a subtenant who is exempt from tax under subdivisions (a) through (f) of 19 RCNY § 7-04.

Example 7: A lessee of an office building rents office space in the building to commercial tenants and to a charitable organization which uses the office for non-profit purposes. The lessee, in order to arrive at the amount of his base rent, may deduct from the rent paid by him the rent received by him from the charitable organization, as well as the rent received by him from the commercial tenants.

  1. Amounts received or due as rent for premises which do not constitute taxable premises where such rent is, or to the extent that such rent is deductible from the base rent of such tenant by reason of the fact that such premises are taxed pursuant to the Tax on Occupancy of Hotel Rooms imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York City or, effective August 1, 1965, pursuant to the Sales Tax Law imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York, to the extent that such premises are subject to, and during the period they are subject to, such tax.

To illustrate: The owner of a hotel leases the hotel to an operating company, which pays an agreed rent to the owner. The operator rents a meeting room to a civic association, which pays the operator the tax on occupancy of hotel rooms imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York, or, effective August 1, 1965, the Sales Tax imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York. The operator, in order to arrive at the amount of his base rent, may deduct the amount of rent paid to it by the civic association.

  1. Amounts received as rent for premises which do not constitute taxable premises, pursuant to a common-law relationship of landlord and tenant (notwithstanding the definition given to those terms in 19 RCNY § 7-01 “Landlord” and “Tenant”), except where it is received as rent, whether or not such landlord-tenant relationship exists, for premises which are occupied as or constitute:

   (i) a locker, safe deposit box or beach cabana;

   (ii) storage space in part of a warehouse or in part of any other structure or area in which goods are stored;

   (iii) garage space or parking space in any part of a garage, of a parking lot or of a parking area where the entire garage, entire parking lot or entire parking area accommodates more than two motor vehicles;

   (iv) an occupancy of a type which customarily has not been the subject of such a common-law relationship of landlord and tenant. Thus, where the occupancy does not give rise to a common-law relation ship of landlord and tenant, the amount received for such occupancy may not be deducted from rent for the purpose of computing base rent subject to the tax, unless the occupancy is one for the conduct of business, in which case, the rent may be deducted by reason of the provisions of paragraph (1) above.

   (v) A civic organization enters into a lease with a sublessor of a building for a period of two years. Under the lease, the civic organization agrees to pay the lessor an annual rental of $3,000. The premises occupied by the civic organization does not constitute taxable premises. Accordingly, the rental paid by the civic organization to the sublessor may be taken as a deduction from the rent paid by the sublessor in determining the sublessors base rent.

   (vi) The lessee of a public garage rents space in the garage to a private individual for the storage of the latter’s automobile which is devoted solely to personal use. The lessee, for the purpose of determining the amount of his base rent, may not deduct from the rent paid by him to his landlord the amounts received by him from the owner of the automobile for storage of the car. If the space were rented for the storage of motor vehicles used in business, such as trucks, the lessee would be permitted to deduct the amounts received by him for the storage of such trucks in arriving at the amount of his base rent unless the subtenant is exempt from tax thereon under 19 RCNY § 7-04(f).

   (vii) A broker holding securities for the account of its customers places such securities in a safe deposit box rented from a bank, for which the broker pays a fixed rental charge. The bank is a tenant of the premises. No common-law relationship exists between the bank and the broker. The rent received by the bank from the broker may be deducted from its rent for the purpose of computing its base rent subject to tax. The broker must report the rent paid by him to the bank as his base rent for the occupancy of the safe deposit box.

Where the consideration paid or required to be paid by a tenant is for the use or occupancy of taxable premises and services, such as stenographic services, answering services, mail services and the like, furnished by the landlord or lessor, the total consideration paid or required to be paid shall be deemed to be base rent. However, if the agreement between the landlord or sublessor with the tenant separately states the amount of the consideration applicable to the rent for the premises and the amount applicable to the services, the amount applicable to the rent for the premises only shall be deemed to be base rent of the tenant. In such case the lessor, if a tenant, may deduct from his base rent the amount received from his tenant as such base rent. Where a theatre owner and a theatrical producer enter into an agreement for the rental of a certain theatre on the basis of what is commonly known as a “four wall contract,” whereby the theatre owner, as landlord, merely leases the theatre building to the producer for a fixed rental, the amount of rent paid by the producer to the theatre owner constitutes base rent and is subject to the tax. Where a theatre owner and a theatrical producer enter into an agreement for the use of a certain theatre on the basis of what is commonly known as a “booking contract,” whereby the theatre owner agrees to furnish to the producer a lighted, heated and cleaned theatre, with the scenery and equipment contained therein, the necessary stage hands, carpenters, electricians, property men, janitors, ushers, ticket sellers, doorkeepers, house orchestra, etc. for a percentage of the box office receipts, that portion of the receipts paid by the producer to the theatre owner which is applicable to the use or occupancy of the theatre shall be deemed to be base rent and subject to the tax. In such case, the burden of establishing the amount of the receipts not applicable to the use or occupancy of the theatre shall be on the producer. Where the rent paid for each taxable premises by a tenant to his landlord for a period is equal to, or is exceeded by, the amounts received by or due such tenant for the same period from any sublessees of all or any part of said premises, which are deductible in determining the base rent, the tenant is not required to pay any tax. However, both the tenant and sublessees are required to file returns for such periods. Nothing contained in these regulations shall be construed to permit a tenant to deduct the same rent from his base rent more than once.

    1. For tax periods beginning on and after June 1, 1967, whenever the rent paid by a tenant for his occupancy of taxable premises is measured in whole or in part by the gross receipts from his sales within such premises, his rent, to the extent paid on the basis of such gross receipts, shall not be deemed to exceed 15 percent of such gross receipts. This 15 percent limitation applies where the rental agreement provides for a rent based wholly or partly on a percentage of sales receipts and the stated percentage exceeds 15 percent. The maximum rent in such cases is the higher of 15 percent of gross receipts or the fixed rental plus 15 percent of sales subject to the percentage.

To illustrate:

      (A) A tenant leases a store for an annual rental of 25 percent of his gross receipts from sales. The gross receipts for the year total $200,000 and the tenant pays his landlord $50,000. The rent subject to tax is $30,000 (15 percent of $200,000).

      (B) A tenant leases a store for an annual rental of $50,000 plus 25 percent of his gross receipts from sales in excess of $200,000. The gross receipts for the year total $300,000 and the tenant pays his landlord $75,000. The rent subject to tax is $65,000 ($50,000 fixed rental plus 15 percent of sales over $200,000).

   (ii) For taxable premises located in Manhattan north of 96th Street,or in the Bronx, Brooklyn, Queens or Staten Island, a deduction may be taken in computing base rent (after all other deductions and exemptions have been taken) as follows:

For Tax Periods Reduction
Beginning January 1, 1986 ending May 31, 1987 10%
Beginning June 1, 1987 ending May 31,1989 20%
Beginning on and after June 1, 1989 30%

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To illustrate: For the tax year June 1, 1986 through May 31, 1987, a tenant rents a store in Queens for $20,000 per year. He is permitted a 20% reduction in computing his base rent. His base rent is $16,000.

Day. A “day” shall mean a calendar day or any part thereof.

Dramatic or musical arts performance. “Dramatic or musical arts performance” shall mean a performance or repetition thereof in a theatre, opera house or concert of a live dramatic performance, whether or not musical in part. The performances encompassed by this definition include so-called legitimate theatre plays, musical comedies and operettas. They do not include circuses, ice skating shows or aqua shows; they do not include performances of any kind in a roof garden, cabaret or other similar place; and they do not include radio or television performances, whether or not such performances are prerecorded for later broadcast.

Landlord. “Landlord” shall mean a person who grants the right to use or occupy premises to any lessee, sublessee, licensee or concessionaire, whether or not he is the owner of the premises.

Person. “Person” shall mean an individual, partnership, society, association, joint stock company, corporation, estate, receiver, assignee, trustee or any other person acting in a fiduciary capacity, whether appointed by a court or otherwise, and any combination of individuals.

Persons using or occupying two or more locations in the same premises. “Persons using or occupying two or more locations in the same premises” is where a person occupies or uses two or more locations in the same premises which under the law constitute taxable premises and for the occupancy or use of which he is subject to the tax, the aggregate of the rentals paid for all such locations in the same premises will be deemed to be rent paid for one taxable premises for the purpose of filing quarterly and final returns and computing the tax due thereon.

Premises. “Premises” shall mean any real property or part thereof, and any structure thereon or space therein.

Premises used for air transportation purposes. “Premises used for air transportation purposes” is the portion of any premises located within an airport or within an air transportation terminal shared by more than one airline, of any person actually operating an airline as a common carrier, used by such person for normal or necessary air transportation purposes. The words “normal or necessary air transportation purposes,” as used in the definition, do not include any activities which are normally carried on by persons not engaged in furnishing air transportation service, such as the operation of retail stores, barber shops, restaurants, theatres, hotels and newsstands.

Premises used for omnibus transportation purposes. “Premises used for omnibus transportation purposes” shall mean the portion of any premises located within a passenger terminal of any person actually operating an omnibus line or route as a common carrier, used by such person for normal or necessary omnibus line or route transportation purposes. The words “normal or necessary omnibus line or route transportation purposes,” as used in this definition, do not include any activities which are normally carried on by persons not engaged in furnishing omnibus line or route transportation services, such as the operation of retail stores, barber shops, restaurants, theatres, hotels and newsstands.

Premises used for railroad transportation purposes. “Premises used for railroad transportation purposes” shall mean the portion of any premises of any person actually operating a railroad, used by such person for normal or necessary railroad transportation purposes. The words “normal or necessary railroad transportation purposes,” as used in this definition, do not include any activities which are normally carried on by persons not engaged in furnishing railroad transportation service, such as the operation of retail stores, barber shops, restaurants, theatres, hotels and newsstands; nor do such words include any activities which are not deemed transportation purposes under § 489-b and § 489-m of the New York Real Property Tax Law. Where a railroad company rents taxable premises for normal and necessary railroad transportation purposes and a part of such premises is leased by it to sublessees and concessionaires, the tax shall be applicable to so much of the rent paid by the railroad company to its landlord as is ascribable to the part leased by it to the sublessees and concessionaires, less the amounts received by or due the railroad company for the same period from its sublessees and concessionaires.

Rent. The consideration paid or required to be paid by a tenant for the use or occupancy of premises, valued in money, whether received in money or otherwise, including all credits and property or services of any kind and including any payment required to be made by him on behalf of his landlord for real estate taxes, water rents or charges, sewer rents or any other expenses (including insurance) normally payable by a landlord who owns the realty other than expenses for the improvement, repair or maintenance of the tenant’s premises. Included in rent but not limited thereto are payments of a fixed rental, a rental based on a percentage of sales or profits and other payments made as rent. Consideration for the occupancy of premises may be in a form other than money. It may consist, for example, of services rendered or property furnished by the tenant. If the occupancy is gratuitous and without consideration in any sense of the word, no tax is payable. With respect to the rent paid or required to be paid by a tenant-owner in a cooperative building, it is necessary to determine the nature of such rent. The following payments are deemed to be made as an owner, and not as a tenant, and therefore not includable in determining the amounts of rent paid:

  1. The initial purchase price of the shares of stock or other evidence of the ownership of the tenant-owner.
  2. Payments made by the tenant-owner as his share on account of the principal amount of any mortgage on the premises or on account of any interest on such mortgage.
  3. Payments made by the tenant-owner as his share of the cost of capital improvements to the premises.
  4. Payment made by the tenant-owner as his share of:

   (i) real estate taxes and assessments, and

   (ii) water rents or sewer rents.

  1. Payments made by the tenant-owner as his share of the cost of insurance on the premises.
  2. All other payments made by the tenant-owner which are in the nature of capital expenditures. The following payments made by the tenant-owner are includable as rent:
  3. Payments made by a tenant-owner which are applicable to the operation of the premises, and are necessary for the occupancy and use by the tenant-owner, such as payments made for fuel, gas and electricity.
  4. Operating and maintenance expenditures other than those deemed to be in the nature of capital expenditures, such as expenditures for normal repairs, salaries and wages paid to elevator operators and doormen, superintendents and other personnel for the proper functioning and use of the” premises by the tenant-owner. Any rent paid by a tenant shall be included as base rent and reported as such in the return for the period when paid. However, any rent due a tenant from his sublessee for the period for which a return is filed, whether or not actually received by the tenant during the period covered by the return, shall be deducted, if deduction is permitted, (See 19 RCNY § 7-01 “base rent”) from the rent paid by the tenant during such period irrespective of the method of accounting employed by the tenant. The tenant may not again deduct such rent when received.

Return. “Return” shall mean any return filed or required to be filed as herein provided other than an information return.

Tax period. “Tax period” shall be the period for which any return is required to be filed under these regulations.

Tax year. “Tax year” shall be June first of any calendar year through May thirty-first of the following calendar year.

Taxable premises. “Taxable premises” shall mean any premises in the City occupied, used or intended to be occupied or used for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity, including any premises so used even though it is used solely for the purpose of renting, or granting the right to occupy or use, the same premises in whole or in part to tenants; except premises within the area leased by the City of New York to the New York World’s Fair 1964-1965 Corporation pursuant to Chapter 428 of the Laws of 1960, as amended, during the period of such lease. The following illustrate types of premises occupied by a tenant as taxable premises:

  1. Premises occupied or used as leased departments in department stores, as florists, beauty parlors, barber shops, lunchrooms, shoe repairing shops, optometrists, or any other commercial activity.
  2. Premises occupied or used in City parks, as restaurants, golf courses, archery ranges, boating concessions, or any other commercial activity.
  3. Advertising signs on the tops of buildings or outside of buildings or structures, or located on otherwise unoccupied land.
  4. Automobile parking lots and garages, tennis courts, skating rinks, baseball fields and other enterprises.
  5. Business of any kind conducted by a tenant in premises used for both residential and business purposes to the extent that such premises is used for business purposes.
  6. Safe deposit vaults rented as an incident to a business, such as the leasing of a safe deposit vault by a stockbroker for the safekeeping of securities.
  7. Office space and desk space.
  8. Premises occupied or used in ball parks, theatres, race tracks, etc. for the sale of refreshments, programs, or the checking of clothing. Premises not devoted to or intended for use in the conduct of a trade or business are not taxable premises. Premises used or occupied or intended to be used or occupied by a person or organization exempt from the tax under § 11-704(a)(4) of the Administrative Code are not taxable premises with respect to that person or organization.

Tenant. A person paying or required to pay rent for premises as a lessee, sublessee, licensee or concessionaire. Such person shall include, but shall not be limited to, a corporation which leases the premises from another corporation of which the lessee corporation is a subsidiary or with which it is affiliated. Where a tenant leases premises for a consideration to other persons, the tax applies to the tenant and to his sublessees. Rent received or due from such sublessees may, with certain exceptions, be deducted by the tenant in computing his base rent subject to tax (see: 19 RCNY § 7-01 “base rent”). The owner of record of a building, who occupies space therein, is not deemed to be a tenant for purposes of the tax. However, in such case, proof of his ownership may be required, such as a receipt for a mortgage payment, last owner’s card, or deed, etc. A tenant-stockholder or tenant-owner in a cooperative building who occupies premises in such building for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity is subject to the tax.

§ 7-02 Imposition of Tax.

In addition to any and all other taxes the law imposes a tax for each tax year beginning on or after June 1, 1963, on every tenant of taxable premises. For each tax year falling within the period beginning June 1, 1963 and ending May 31, 1970, the tax was imposed at the rate of 2 1/2 percent of the tenant’s base rent for such tax year where his base rent did not exceed $2,500 per year, or where his base rent was for a period of less than one year and would not exceed $2,500 for a year if it were paid on an equivalent basis for an entire year; or at the rate of 5 percent of his base rent for such tax year where his base rent exceeded $2,500 per year, or where his base rent was for a period of less than one year and would exceed $2,500 a year if it were paid on an equivalent basis for an entire year.

For each tax year commencing on or after June 1, 1970 and ending on or before May 31, 1977, every tenant was required to pay a tax at the rates shown in the following table:

When the base rent was: But not more than: The rate was:
0 $2,499 2 1/2% of the rent
$2,500 or over $4,999 5% of the rent
$5,000 or over $7,999 6 1/4% of the rent
$8,000 or over $10,999 7% of the rent
$11,000 or over   7 1/2% of the rent

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For tax years beginning on or after June 1, 1977 and ending on or before May 31, 1980, the tax was imposed at rates equal to 90 percent of the rates shown in the above table. For the tax year beginning June 1, 1980 and ending May 31, 1981, the tax was imposed at rates equal to 85 percent of the rates shown in the above table. For tax years beginning on or after June 1, 1981, the tax is imposed on every tenant having base rent in excess of $4,999 per year at the rates shown in the following table:

When the base rent is: But not more than: The rate shall be:
$5,000 or over $7,999 5% of the rent
$8,000 or over $10,999 5.6% of the rent
$11,000 or over   6% of the rent

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(See 19 RCNY § 7-04(f) for exemption from tax where base rent is under prescribed amounts.) Where the rent is for a period of less than one year, the rate shall be determined by assuming that the rent is on an equivalent basis for the entire year.

Example 1: A tenant occupies a store for business purposes, for which his base rent is $16,000 for the tax year. The applicable rate of tax is 6 percent. The tax due is $960 (6% × $16,000) for the tax year.

Example 2: A tenant occupies a boardwalk concession during the months of June, July, August and September, for which his base rent is $4,000. Since his base rent, if paid on an equivalent basis for the entire year, would amount to $12,000 ($4,000 ÷ 4) × 12), the applicable rate of tax is 6 percent. The tax due is 6 percent of $4,000 base rent, or $240.

Example 3: A tenant conducts his business in two stores, one located in Brooklyn, the other in Manhattan. The base rent for the Manhattan store is $16,000 for the tax year while the base rent for the Brooklyn store is $4,500. The tax is computed separately for each taxable premises. The rate of 6% applies to the base rent paid for the Manhattan store while no tax is due on the base rent paid for the Brooklyn store, since it does not exceed $4,999. (See 19 RCNY § 7-04(f) for exemption from tax where base rent is under prescribed amounts.)

Where a tenant pays an undivided rent for premises used by him for both residential purposes and as taxable premises, the tax is applicable to so much of the rent as is ascribable to the portion of such premises used as taxable premises. Where, however, the rent ascribable to so much of such premises as is used as taxable premises does not exceed $50 a month, such rent is to be excluded from such tenant’s base rent. However, this shall not be construed to exclude any base rent from tax merely because it is paid as part of an undivided rent for premises which are only partially used as taxable premises. (For tax years beginning on or after June 1, 1981, no tax will be due if the rent ascribable to the portion of the premises used as taxable premises does not exceed the amounts prescribed in 19 RCNY § 7-04(f).)

Example 4: An artist rents a three-room apartment in a residential building for which he pays rent of $l,200 for the tax year beginning June 1, 1977. He uses one room as a studio and the other two rooms as living quarters. For federal income tax purposes, he deducts $400 as his annual rent for the studio used in his work. Since the rent ascribable to the part of the premises used as taxable premises does not exceed $50.00 a month, the rent so ascribable is to be excluded from the tenant’s base rent, and the tax is not imposed with respect to his occupancy of the premises.

Example 5: A dentist is the tenant of a five-room apartment in a residential building, for which he pays rent of $30,000 per year. He uses two of the rooms for professional purposes and the other three rooms as a personal residence. In determining his federal income tax, he deducts two-fifths of his total rent, or $12,000, as rent ascribable to the part of the apartment devoted to his professional pursuits. For the purpose of the tax, it will be conclusively presumed against the tenant that the base rent of his taxable premises is $12,000, and the tax due is $720 (6% × 12,000).

Nothing in the law shall be deemed to require payment of a double or multiple tax pursuant to said law on any part of any taxable premises. Thus, where a tenant sublets the entire taxable premises to another person who is liable for payment of the tax, such tenant is not required to pay the tax on the amount of rent paid to him by the subtenant. This section shall not be construed as permitting base rent of a tenant for one taxable premises to be reduced by deducting rents received by him for another taxable premises of which he is also a tenant.

§ 7-03 Deductions from Base Rent.

Base rent shall be reduced by the amount of the taxpayer’s rent for, or reasonably ascribable to, the taxpayer’s own use of the premises:

  1. As premises used for railroad transportation purposes.
  2. As premises used for air transportation purposes.
  3. As premises used for omnibus transportation purposes.
  4. As piers insofar as such premises are used in interstate or foreign commerce.
  5. Which are located in, upon, above or under any public street, highway or other public place, and which are defined as special franchise property in the New York Real Property Tax Law.
  6. Which are taxed pursuant to the Tax on Occupancy of Hotel Rooms Law imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York or, effective August 1, 1965, pursuant to the Sales Tax imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York, to the extent that such premises are subject to and during the period that they are subject to, such tax.
  7. Which are taxed pursuant to § 11-1005(b) or (c) of the Administrative Code (premises occupied by vending machines). This provision is applicable to tax periods ending on or before July 15, 1981, after which date the general occupancy tax Chapter 10 of Title 11 is no longer imposed.
  8. Which are advertising signs, advertising space, vending machines or newsstands within or attached to stations, platforms, stairways, entranceways, passageways, mezzanines or tracks of a rapid transit subway or elevated railroad operated by the New York City Transit Authority when the rent of the tenant or of his landlord is payable to such Authority.

§ 7-04 Exemptions.

The following are exempt from the payment of the tax:

  1. The State of New York, or any public corporation (including a public corporation created pursuant to agreement or compact with another state or the Dominion of Canada), improvement district or other political subdivision of the State;
  2. The United States of America, insofar as it is immune from taxation;
  3. The United Nations or other worldwide international organizations of which the United States of America is a member; and
  4. Any corporation, or association, or trust, or community chest, fund or foundation, organized and operated exclusively for religious, charitable, or educational purposes, or for the prevention of cruelty to children or animals, and no part of the net earnings of which inures to the benefit of any private shareholder or individual and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation; provided, however, that nothing in this paragraph shall include an organization operated for the primary purposes of carrying on a trade or business for profit, whether or not all of its profit are payable to one or more organizations described in this paragraph.
  5. Any tenant who would be subject to tax under the law aggregating no more than $1.00 for a tax year with respect to all taxable premises used by him.

To illustrate: A tenant has desk space in an office which he is entitled to use for one day each week during the tax year beginning June 1, 1976, for which he pays $3.25 per month, or $39.00 a year. Since the tax on $39.00 is $.98 (2 1/2% × $39.00), which is less than $1.00 for the tax year, the tenant is exempt from the payment of such tax with respect to taxable premises used by him.

    1. A tenant who uses premises for no more than fourteen days in a tax year whether or not consecutive, where his agreement with his landlord does not require him to pay rent for a longer period with respect to the rent paid by him for such premises.

To illustrate: Under an agreement entered into by a tenant with his landlord, the tenant has the right to use office space on the landlord’s premises for one day a week for a period of one year, for which he is required to pay rent of $20.00 for each such day. Under the agreement, the tenant has the right to terminate his occupancy at any time before the end of the year without the payment of any additional rent. After the tenth day of occupancy, the tenant terminates his occupancy. Since the total occupancy of the tenant is not more than fourteen days, viz., ten days, and the tenant is not required to pay additional rent for a longer period, he is exempt from paying the tax with respect to the rent paid by him for such premises.

   (2) A tenant whose base rent is not more than the following amounts during the periods specified:

      (i) For tax years beginning on or after June 1, 1981 and ending on or before May 31, 1984…..$4,999

      (ii) For the tax year beginning June 1, 1984 and ending May 31, 1985…..$7,999

         Note: A tenant whose base rent for this tax year is not in excess of $10,999, is exempt from tax for the period beginning December 1, 1984 and ending May 31, 1985.

      (iii) For tax years beginning on or after June 1, 1985…..$10,999

In determining whether this exemption applies in a case where the base rent of a tenant is for a period of less than one year, such base rent must be determined as if it had been paid on an equivalent basis for the entire year.

To illustrate: A tenant rents a store during the months of June, July and August, for which his base rent is $4,000. Since his base rent, if paid on an equivalent basis for the entire year, would amount to $16,000 ($4,000 ÷ 3) × 12), he is not exempt from the tax.

  1. A tenant who uses taxable premises for renting to others for residential purposes to the extent of 75 percent or more of the rentable floor space is exempt from the tax imposed by the law with respect to the rent paid for such premises from the time that construction thereof commenced, provided, however, that this paragraph shall not be applicable to hotels, apartment hotels or lodging houses as defined in Chapter 25 of the Title 11 of the Administrative Code of the City of New York or, effective August 1, 1965, in Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York.

Example 1: On June 1, 1963, a builder leases a plot of land for ninety-nine years. Under the terms of the lease, the builder has the right to, and does, construct an apartment house for residential purposes. The builder pays the landlord an annual rent of $100,000. On December 1, 1963, the builder commences the construction of the apartment house. When the building is completed, it will contain apartments available for residential purposes to the extent of 80 percent of the rentable floor space in the building. The builder is required to pay the tax on the rent due the landlord for the period from June 1, 1963 to December 1, 1963. The builder is exempt from paying the tax with respect to the rent paid for the premises from the time that construction of the building commenced, viz., December 1, 1963. Nevertheless, such builder is required to file an information return as provided for in these regulations.

The foregoing exemption similarly applies to a lessee of a building erected prior to the time he became such lessee, and which building is rented to others for residential purposes to the extent of 75 percent or more of the floor space thereof.

Example 2: A real estate concern becomes the lessee of an apartment house erected in 1950. The apartment house contains 100,000 square feet of rentable floor space, of which 80,000 square feet are for residential purposes. The real estate concern is exempt from the payment of the tax on the rents paid by it, but, nevertheless, is required to file an information return as provided in these regulations.

  1. A tenant who uses taxable premises for a dramatic or musical arts performance for less than four weeks where there is no indication prior to or at the time such performance commences that the performance is intended to continue for less than four weeks.

Example 1: A producer of a play rents a theatre for the production of the play for a period of twelve weeks. The play is not a success, and the producer closes down the show at the end of the three weeks. The producer is exempt from the payment of the tax with respect to the rent paid by it for the use of the theatre.

    1. A tenant that uses taxable premises for the production and performance of a theatrical work shall be exempt with respect to the rent paid for such taxable premises for a period not exceeding 52 weeks beginning on the date that the production of that theatrical work commences in New York City.

   (2) The term “theatrical work” shall mean a performance or repetition thereof in a theater of a live dramatic performance (whether or not musical in part) that contains sustained plots or recognizable thematic material, including so-called legitimate or experimental theater plays or musicals, dramas, melodramas, comedies, compilations, farces, reviews or dance plays, provided that such performance is intended to be open to the public for at least two weeks. The term “theatrical work” shall not include performances of any kind in a roof garden, cabaret or similar place, circuses, ice skating shows, aqua shows, variety shows, magic shows, animal acts, concerts, industrial shows or similar performances, or radio or television performances, whether or not such performances are pre-recorded for later broadcast.

   (3) The date that the “production of a theatrical work commences” is the date that a taxable lease of the taxable premises commences. For purposes of this paragraph (3), a “taxable lease” is a lease with respect to which: (i) the tenant is not exempt from tax under § 11-704(a) paragraphs (1) through (4) of the Administrative Code; and (ii) the rent paid is subject to tax or would be subject to tax if it were greater than the amount that is exempt under § 11-704(b)(2) of the Administrative Code.

   (4) If a theatrical work has been previously produced and performed in New York City, a determination whether a subsequent production, e.g., a revival, is entitled to the 52-week exempt period will be based on all the facts and circumstances, including, but not limited to, the identity of the theatrical work (theatrical works will be distinguished from other theatrical works under the standards used to determine whether a work constitutes “an original work of authorship” as used in § 102(a) of title 17 of the United States Code, whether or not the theatrical work is subject to a copyright under the provisions of that title), the identity of the tenant, the identities of other participants in the production (e.g., the producer, executive producer, director or designers), changes to the production (e.g., changes to the script, sets, or musical numbers), and public statements about the production. This paragraph will apply both when the previous production and performance of the theatrical work has closed and when a new tenant takes over the production and performance of the theatrical work.

   (5) The 52-week exempt period will continue without interruption during periods when performances of the theatrical work are temporarily suspended.

   (6) A production of a theatrical work will be entitled to only one 52-week exempt period. If the same theatrical work is produced and performed by the same tenant at more than one taxable premises simultaneously, the 52-week exemption period can be applied to only one taxable premises at any given time.

   (7) The 52-week exempt period provided by this subdivision (i) will not apply to any theatrical work the production of which commenced before June 1, 1995.

   (8) The following examples illustrate this subdivision (i):

Example (i): Effective January 1, 2005, Theatrical Production Company K leases Theater A in Manhattan below the center line of 96th Street to produce and perform Theatrical Work X, a theatrical work that had never previously been produced and performed in New York City. Production Company K uses the theater for rehearsals and previews and Theatrical Work X opens on February 1. The rent for Theater A is $250,000 annually. The 52-week exemption period begins on January 1, 2005.

Example (ii): The facts are the same as in Example (i), except that Production Company K produced and performed Theatrical Work X for three months in New Haven before it leased Theater A to produce and perform that work in the City. The period of production and performance outside of the City is not included in the 52-week period. The 52-week exemption period begins on January 1, 2005.

Example (iii): The facts are the same as in Example (i), except that from November 1 until December 31, 2004, Production Company K produced and performed Theatrical Work X in Brooklyn before opening in Theater A on January 1, 2005. Because the rent paid to lease the theater in Brooklyn was not subject to tax under § 11-704(h)(1) of the Administrative Code, the 52-week exemption period begins on January 1, 2005.

Example (iv): The facts are the same as in Example (i), except that on June 15 Production Company K stops performances of Theatrical Work X at Theater A, and Production Company K’s lease of Theater A is terminated as of June 30. Production Company K leases Theater B for $260,000 annually beginning July 1, and soon thereafter, begins performances of Theatrical Work X at Theater B. The exemption period will end 52 weeks after January 1, 2005 and will apply to the rent paid by Production Company K to lease Theater A from January 1 to June 30 and the rent paid to lease Theater B from July 1 until the end of the exemption period. The exemption period includes the period from June 16 to June 30 when there are no performances.

Example (v): The facts are the same as in Example (iv), except that the rent Production Company K paid to lease Theater A was less than $250,000 on an annualized basis. Annualized rent of less than $250,000 is exempt from tax under § 11-704(b)(2)(x) of the Administrative Code. Under paragraph (3) of this subdivision, Company K’s lease of Theater A is a taxable lease for purposes of this section. As a result, the exemption period will end 52 weeks from January 1, 2005.

Example (vi): The facts are the same as in Example (iv), except that Production Company K’s lease of Theater A continues until July 31. Although Production Company K is paying rent on both Theater A and Theater B for the month of July, under paragraph (6) of this subdivision, the exemption applies to only one taxable premises at a time. Because Theatrical Work X is being produced and performed at Theater B during July, the exemption applies to the rent for Theater B during July. As a result, the exemption period will end 52 weeks from January 1, 2005 and will apply to the rent paid by Production Company K to lease Theater A from January 1 to June 30 and the rent paid to lease Theater B from July 1 until the end of the exemption period.

Example (vii): The facts are the same as in Example (i), except that Theatrical Work X is a revival of a theatrical work that was produced and performed in the City by Theatrical Production Company L, opening in 1975 and closing in 1977. Production Companies K and L are unrelated, and none of the participants involved in Company K’s production were involved in the 1975 production. Based on the facts and circumstances, under paragraph (4) for purposes of this subdivision, the production of Theatrical Work X by Production Company K is considered to commence on January 1, 2005.

Example (viii): The facts are the same as in Example (iv), except that on June 15 Production Company K stops performances of Theatrical Work X at Theater A. On July 1, Production Company L leases Theater B, and soon thereafter, begins performances of Theatrical Work X at that theater. Theatrical Work X, as performed at Theater B, constitutes the same “original work of authorship” as used in § 102(a) of title 17 of the United States Code, as it was when it was performed at Theater A. The majority of the principals of Production Company K were involved in Production Company L, but a few principals are different. There were only minor changes in the cast, script, and sets. The producer, director and set designer are the same. Production Company L refers to the production at Theater A in promotional material for Theatrical Work X. Based on all the facts and circumstances, for purposes of this subdivision (i), the production of Theatrical Work X is considered to have commenced on January 1, 2005, and will be considered to continue when production is taken over by Production Company L. A new exemption period does not begin when Production Company L leases Theater B to produce and perform Theatrical Work X. As a result, the rent Production Company L pays to lease Theater B is exempt from tax from July 1 until 52 weeks from January 1, 2005.

Example (ix): The facts are the same as in Example (viii), except that Production Company K was a nonprofit entity exempt from tax under § 11-704(a)(4) of the Administrative Code. Under paragraph (3) of this subdivision, the production of a theatrical work commences when a lease commences with respect to which the rent paid is subject to tax. Because the rent Company K paid to lease Theater A was not subject to tax, the production of Theatrical Work X commences on July 1, 2005. As a result, the rent Production Company L pays to lease Theater B is exempt from tax for 52 weeks beginning on July 1, 2005.

§ 7-05 Application for Exemption.

A person claiming exemption from the commercial rent or occupancy tax under § 11-704(a)(4) of the Administrative Code may make application for such exemption to the Commissioner. A person claiming that certain premises used by a nonprofit organizaton are not taxable premises may make an application to the Commissioner for a determination of whether such premises are taxable. The Commissioner, if satisfied that the applicant is entitled to the exemption or that the premises in question are not taxable, will issue a letter to that effect to the applicant. A corporation or unincorporated entity organized and operated for nonprofit purposes, making an application for exemption under § 11-704(a)(4) of the Administrative Code or claiming premises not to be taxable premises under 19 RCNY § 7-01, is required to submit an affidavit which shall set forth the following:

  1. The type of organization using the premises;
  2. The purposes for which it is organized;
  3. Its actual activities;
  4. The source and disposition of its income;
  5. Whether or not any of its income is credited to surplus or may inure to any private stockholder or individual; and
  6. Such other facts which may affect its right to exemption including, in the case of a claim that certain premises are not taxable premises, a description of the activities carried on at the premises by the organization and a description of any sublease or other arrangement whereby any other person or entity occupies or uses the premises. The affidavit must be supplemented by a copy of the articles and certificate of incorporation, or articles of association, as the case may be, a copy of the by-laws of the organization, a financial statement showing its assets and liabilities for the most recent year a statement of its receipts and disbursements for the most recent year and a copy of its federal, state and city income tax returns for the most recent three years, and a photostatic copy of the letter, if any, from the United States Treasury Department granting the organization exemption from federal income taxation.

§ 7-06 Presumptions and Burden of Proof.

It shall be presumed that all premises are taxable premises and that all rent paid or required to be paid by a tenant is base rent until the contrary is established, and the burden of proving that such presumptive base rent or any portion thereof is not included in the measure of the tax imposed by the law is on the tenant. Where a tenant uses premises both for residential purposes and as taxable premises and the tenant pays an undivided rent for the premises so used, it shall be conclusively presumed against such tenant that the rent ascribable to so much of such premises as is used as taxable premises shall be the amount which such tenant deducts as rent for such premises in determining his federal income tax (as reduced by any disallowance of such deduction which is not being contested) which is fairly attributable to the tax period or tax year. Where a tenant operating a garage or parking lot assigns specific space therein to another person for the parking of a motor vehicle used by the latter in the conduct of a trade, business, profession, vocation or commercial activity, the garage or parking lot operator may be permitted to deduct the amounts received by or due him for such space. To claim such deductions each such garage or parking lot operator is required to take from such other person, in good faith, and at the time the space is assigned, a Certificate of Assigned Space Use in the form of the certificate hereafter set forth. Unless the operator of a garage or parking lot shall have taken a completed certificate as described, and shall have signed the certificate, the presumption of law with respect to taxability shall prevail. Operators are required to retain such certificates and make them available to the Department of Finance on request therefor.

Note: This deduction is not permitted where the tenant of the parking space is exempt from tax under 19 RCNY § 7-04(f).

CERTIFICATE OF ASSIGNED SPACE USE  
Date ______________________________  
Name of Garage  
Operator  
Address of Garage  
The undersigned hereby certifies that he (it) has been assigned and is using specific space at the above garage or parking lot for a monthly or longer term, for the parking of a motor vehicle used in the conduct of a business or profession, as follows:  
   
Assigned Space ________________ Vehicle Reg. No. ____________________
 Stall or Lane No.  
The foregoing statements are true:  
  Signature of Vehicle Owner
Signature of Garage Operator  
   
  Address
  ______________   __________________
   Type of Business    Comm. Rent Reg. No.
Note: A vehicle owner engaged in commercial activity and occupying space in a garage is subject to the Commercial Rent or Occupancy Tax Law and is required to file returns and pay the tax imposed by said Law.  

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An organizaton that the Internal Revenue Service has determined to be exempt from federal income taxation pursuant to subsection (a) of § 501 of the Internal Revenue Code, other than organization described in paragraph (2) or (25) of subsection (c) of such section 501, will be deemed to have rebutted the presumption that premises occupied or used by such organization are taxable premises with respect to that organization, provided the premises are not used substantially in connection with an unrelated trade or business, as described in § 513 of the Internal Revenue Code. Such premises will be presumed not to be taxable premises with respect to that organization and the burden of proving that premises used or occupied by such an organization are taxable premises is on the Commissioner. However, if suchpremises are used substantially in connection with an unrelated trade or business, the presumption of taxability remains in effect and the burden of proving the premises are not taxable remains on the organization. An organization exempt from federal income taxation under subsection (a) of § 501 of the Internal Revenue Code, other than an organization described in § 501(c)(2) or (25) of the Internal Revenue Code, will be deemed to have rebutted the presumption of taxability of premises used or occupied by such organization notwithstanding that such premises are subleased in whole or in part by such organization, provided that rent received by such organization from such sublease qualifies for exclusion from unrelated business taxable income under subsection (b)(3) of § 512 of the Internal Revenue Code determined without regard to subdivisions (4) and (13) of that subsection. In determining whether premises occupied, used or intended to be occupied or used by a nonprofit organization will be considered to be used substantially in connection with an unrelated trade or business, consideration will be given to all of the facts and circumstances of each case, which may include, but are not limited to, the following factors: the portion of the square footage used in connection with the unrelated trade or business, the portion of gross receipts derived from unrelated business activities at the premises, and the number of personnel at the premises engaged in unrelated business activities. The following examples illustrate the foregoing:

Example 1: X Corp. is a nonprofit organization exempt from federal income tax under Internal Revenue Code § 501(c)(4). As part of its nonprofit activities, X Corp. publishes a magazine on topics related to its exempt purpose that carries advertisements of a general nature. The income from selling advertising space in the magazine is subject to tax as income from and unrelated business. Fifty percent (50%) of the staff located at premises rented by X Corp. in New York City are exclusively engaged in selling advertising space in the magazine. On the basis of the facts of this case, the premises will be considered to be used substantially in connection with an unrelated business and X Corp. will not be deemed to have rebutted the presumption that those premises are taxable premises.

Example 2: Y Corp. is a nonprofit organization exempt from federal income tax under Internal Revenue Code § 501(c)(4). Y Corp. enters into a lease of office space in New York City. Before the commencement of the lease term, Y Corp. determines that it does not require all of the space it leased and, therefore, Y Corp. immediately subleases 60 percent of the space to another organization exempt from federal income tax under Internal Revenue Code § 501(c)(4). The rent received from the sublease is not subject to federal income tax as income from an unrelated trade or business. Of the remaining 40 percent of the space, Y Corp. uses one half in connection with an unrelated trade or business and one half in connection with its nonprofit activities. Because 80 percent (60 percent plus 1/2 of 40 percent) of the total space leased by Y Corp. is not used in connection with an unrelated trade or business, Y Corp. will be deemed to have rebutted the presumption that the premises are taxable premises.

Nothing in this § 7-06 shall be construed to subject to the commercial rent or occupancy tax imposed by Chapter 7 of Title 11 of the Administrative Code persons or organizations exempt from the tax under § 11-704(a)(4) of the Administrative Code. See 19 RCNY § 7-04.

§ 7-07 Filing of Returns.

(a)  Every tenant subject to the tax is required to file with the Commissioner of Finance a return with respect to the taxes payable for the three month periods ending on the last days of August, November and February of each year, and a final return with respect to the taxes payable for the tax year ending on the last day of May of each year. For tax years ended on or before May 31, 1981, a tenant was required to file only a final return covering taxes payable for the tax year ending on the last day of May if: (a) the base rent payable for the tax year did not exceed $2,500 per year, (b) he occupied not more than one taxable premises, and (c) there were no allowable deductions from rent paid by the tenant. For tax years beginning on or after June 1, 1981, and ended on or before May 31, 1984, a tenant who was exempt from the tax because his base rent did not exceed $4,999 per year, was required to file a final return if his annual rent, without regard to any deduction allowed under the law, was $5,000 or more, or, irrespective of the amount of his annual rent, if the whole or any part of the premises rented to him was sublet to another. For tax years beginning on or after June 1, 1984, a tenant who is exempt from the tax under 19 RCNY § 7-04(f)(2) must file a final return. He must also file quarterly returns if he subleases all or part of his premises to another or his annual rent without deductions under the law is $11,000 or more. Such returns must be filed within twenty days from the expiration of the period covered thereby whether or not any tax is due. The form of return is prescribed by the Commissioner of Finance and requires the furnishing of such information as he deems necessary for the proper administration of the law. The Commissioner may also require amended returns to be filed within twenty days after notice, and to contain the information specified in the notice. Every owner of premises who grants the right to use or occupy taxable premises to any other person is required to file an information return as to each taxable premises on a form prescribed by the Commissioner of Finance, whether or not a tax is due and payable under the law by any of his tenants. The information return requires the furnishing of such information as the Commissioner of Finance deems necessary for the proper administration of the law. Such information returns must be filed upon such dates or at such times as the Commissioner of Finance may specify. The Commissioner of Finance may also require amended information return to be filed within twenty days after notice and to contain information specified in the notice. Where a new building is constructed having taxable premises, or if any part of an existing building becomes taxable premises, such a return must be filed within twenty days from the expiration of the tax period during which the first occupancy or use occurs. A return filed by a partnership must be signed by a partner or duly authorized agent having knowledge of the facts; a return of a corporation or other organization by an officer, agent or member thereof duly authorized to sign the same and having knowledge of the facts contained therein. A change of business organization from individual proprietorship to partnership or corporation, or otherwise, constitutes a change of taxable entity and a separate return must be filed and tax paid by such separate entity. A termination of business, or removal from the premises, or change of name, should be reported promptly to the Commercial Rent Registration Unit, 25 Elm Place, 3rd Floor, Brooklyn, New York 11201. If a person required to file a return does not receive a tax return from the Department of Finance, he should apply to the Commercial Rent Registration Unit, 151 West Broadway, New York, N.Y. 10013, for the necessary form. Returns should be mailed to the address designated on the return form or delivered to a borough office of the Bureau of City Collections.
  1. Electronic filing. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of returns and reports required by this section.

§ 7-08 Identifying Numbers.

Every person required to file a tax return, information return, certificate or other document pursuant to the law or these regulations shall include thereon an identifying number in the form of his federal employer identification number or, if no such number has been assigned, his social security account number, for purposes of proper identification. Every landlord of taxable premises required to file an information return or tax return, providing information relating to his tenants, shall identify each such tenant by name and identifying number when so required by the forms and instructions relating thereto. For this purpose, every tenant of taxable premises shall furnish to his landlord, and every landlord or taxable premises shall request and keep a record of, such tenant’s identifying number.

§ 7-09 Extension of Time for Filing of Returns.

(a)  For cause shown, the Commissioner may grant an extension of time not exceeding ninety days within which to file any return under the law. An application for such extension must be made in writing prior to the due date of a return. Where an extension of time is granted, the taxpayer is nevertheless required to file a tentative return on or before the due date of the return. The tentative return must show the estimated tax due which must be paid at the time of filing of the tentative return. A final return must be filed on or before the date of expiration of the period of time granted. The balance of the tax due, plus interest thereon at the rate prescribed by law, computed from the due date of the return, must be paid at the time of filing the final return.
  1. Electronic filing. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of requests for extension required by this section.

§ 7-10 Payment of Tax.

(a)  Every person subject to tax is required to pay the City Collector the tax imposed by the law, on or before the 20th day of the calendar month following the end of each tax period, as follows: The tax to be paid at such time shall be based on the base rent of such tax period and the rate of tax shall be the one which would be applicable if the base rent for such period were the same for each tax period during the tax year, except that the payment required to be made together with the final return or at the time that the final return should be filed shall be the amount by which the actual tax for the tax year exceeds the amounts previously paid for the tax year.

Example 1: Under the terms of a lease entered into by A, a tenant, with B, his landlord, for a tax year beginning on or after June 1, 1985, A agrees to pay B an annual rent of $14,000, as follows:

Tax Periods Base Rent
June, July and August $2,000
September, October and November $3,000
December, January and February $4,000
March, April and May $5,000
TOTAL $14,000

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Since the rent paid for the three months of June, July and August is $2,000, such amount is deemed to be the rent payable in each tax period during the tax year. Since the annualized rent payable on this basis ($2,000 × 4 = $8,000) is not in excess of $10,999, no tax is payable for the period; nevertheless a quarterly return must be filed for June, July and August since the annual rent exceeds $11,000 (see 19 RCNY § 7-07). Since the rent paid for the three months of September, October and November is $3,000 the rent payable on this basis for the year would be $12,000 ($3,000 × 4). The tax rate applicable would be 6 percent and the tax payable would be $180 (6% × $3,000). For the three months, December, January and February, the rate of tax applicable would also be 6 percent, and the tax payable would be $240 (6% × $4,000). In filing the final return, the total rental for the tax year to be shown on the return is $14,000. The rate of tax applicable thereto is 6 percent, and the tax payable thereon would be $840 (6% × $14,000). Since the tax previously paid is $420, the balance of the tax payable with the final return is $420 ($840  -  $420). Where the final return shows that the amount of the tax paid for the tax year exceeds the actual tax for such year, the Commissioner of Finance will make the appropriate refund as promptly as possible, provided, however, that where the Commissioner of Finance has reason to believe that the final return is inaccurate, he may withhold the refund in whole or in part. The making of the refund pursuant to this paragraph will not prohibit the Commissioner of Finance from making a determination that additional tax is due or from pursuing any other method to recover the full amount of the actual tax due for the tax year. Where a tenant ceases to do business, the tax, as measured by his base rent for the prior part of the tax year shall be due immediately and he shall file a final return within twenty days after he ceases to do business. However, should he continue to pay rent for the taxable premises, he must file the normally required returns and a final return for the tax year, provided, however, that any such tax payment shall be applied in reduction of the tax payments required to be made with such returns or with the final return for such tax year.

Example 2: B, a tenant of taxable premises, ceases to do business on November 1, 1963. B, however, continues to pay rent to May 31, 1964.

B is required to file a quarterly return for the three months of June, July and August, 1963, and pay the tax due thereon, and a final return within twenty days for the months of September and October, 1963, on or before November 21, 1963. B is also required to file a return for the three months of September, October and November, 1963 and pay the tax due thereon less the tax previously paid for the months of September and October, 1963. He also is required to file a quarterly return for the months of December, January and February, and a final return for the tax year ending May 31, 1964. The tax may be paid by check, post office money order, express company money order, bank draft, or cash. Postage stamps will not be accepted in payment of the tax. If payment is made by check, money order or draft and a receipt is requested, a duplicate copy of the return must also be submitted, accompanied by return postage, and the duplicate copy will be receipted by the City Collector’s cashier, indicating that payment has been made, and returned to the taxpayer. Cash payments will be accepted only at the borough offices of the Bureau of City Collections, by a cashier, before 3 p.m. Monday through Friday. Under no circumstances should cash be sent by mail. Where a cash payment is made at a borough office of the Bureau of City Collections, a duplicate copy of the return in addition to the original thereof must be submitted and the duplicate copy will be receipted by the cashier indicating that payment has been made.

  1. Electronic payment. Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic payment of any tax required to be paid by this section.

§ 7-11 Records To Be Kept.

Every landlord of taxable premises and every tenant of taxable premises shall keep records identifying each tenant, the rent required to be paid, the rent paid and received, the location of each premises, and the periods of commencement and termination of every occupancy. In addition, such persons are required to keep all leases or agreements which fix the rents or rights of tenants of taxable premises, and such other records, receipts and other papers relevant to the ascertainment of the tax due under the law. Such records shall be offered for inspection and examination at any time upon demand by the Commissioner of Finance or his duly authorized agent or employee and must be preserved for a period of three years, except that the Commissioner may consent to their destruction within that period or may require that they be kept longer, and except further that leases or agreements which fix the rents or rights of a tenant shall be kept for a period of three years after the expiration of the tenancy thereunder.

§ 7-12 Determination of Tax.

If a return required by the law is not filed, or if a return when filed is incorrect or insufficient, the Commissioner of Finance will determine the amount of tax due from such information as may be obtainable and, if necessary, may estimate the tax on the basis of external indices. Notice of such determination will finally and irrevocably fix the tax unless the person against whom it is assessed, within thirty days after the giving of notice of such determination, shall apply in writing to the Commissioner of Finance for a hearing or unless the Commissioner of Finance of his own notion shall redetermine the tax. After such hearing the Commissioner will give notice of his determination to the person against whom the tax is assessed. The determination of the Commissioner of Finance shall be reviewable for error, illegality or unconstitutionality or any other reason whatsoever by a proceeding under Article 78 of the Civil Practice Law and Rules if application thereof is made to the Supreme Court within thirty days after the giving of the notice of such final determination. A proceeding under Article 78 of the Civil Practice Law and Rules shall not be instituted unless (a) the amount of any tax sought to be reviewed, with interest and penalties thereon, if any, shall be first deposited and there is filed an undertaking with the Commissioner of Finance issued by a surety company authorized to transact business in this State and approved by the Superintendent of Insurance of this State as to solvency and responsibility as a Justice of the Supreme Court shall approve to the effect that if such proceeding be dismissed or the tax confirmed the petitioner will pay all costs and charges which may accrue in the prosecution of the proceeding or (b) at the option of the petitioner such undertaking must be filed with Commissioner of Finance in a sum sufficient to cover the taxes, penalties and interest stated in such determination plus the costs and charges which may accrue against it in the prosecution of the proceeding, in which event the petitioner shall not be required to pay such taxes, interest or penalties as a condition precedent to the application.

§ 7-13 Refunds.

The Commissioner of Finance will refund or credit, without interest, any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid if written application to the Commissioner of Finance for such refund shall be made within eighteen months from the date fixed by the law for filing the return on which such payment was based or within six months of the payment thereof, whichever of such periods expire later. The Commissioner of Finance may, in lieu of any refund required to be made, allow credit therefor on payments due from the applicant. In such case, the person to whom the credit is allowed shall attach to any subsequent return required to be filed the original of the letter authorizing the credit. Where the final return filed by a taxpayer shows that the amount of tax paid for the tax year exceeds the actual tax for such year, the Commissioner will make the appropriate refund, provided, however, that where the Commissioner has reason to believe that the final return is incorrect, he will withhold the refund in whole or in part. The making of a refund shall not prevent the Commissioner from making a determination that additional tax is due or from pursuing any other method to recover the full amount of the actual tax due for the tax year. The Commissioner of Finance reserves the right to audit the books and records of the person claiming a refund, prior to the making of any refund, or he may grant the refund or credit subject to such audit. The granting of a refund or a credit before an audit is without prejudice to the right of the Commissioner to determine after audit the applicant’s right to refund or credit and his liability for the tax. The Commissioner of Finance will deny any application for refund or credit where he determines that the statutory requirements have not been met or that the grounds set forth in the application are without merit. No special form of application for the filing of a claim for refund or credit has been prescribed by the Commissioner of Finance. However, an application for refund or credit must be in writing and signed by the applicant or his duly authorized agent. If the application is signed by an agent, it must be accompanied by a power of attorney from his principal in a form acceptable to the Commissioner. The application must set forth the grounds upon which the claim for refund or credit is made. It must be accompanied by a cancelled check or other evidence of payment of the tax by the applicant to the Commissioner, or where payment of the tax was made by check and the check is not available, a photostatic copy thereof showing both the front and back of the check will be accepted in lieu thereof. The Commissioner may require such other additional information as he deems necessary in order to pass upon the application for refund. An application for a refund or credit made as herein provided shall be deemed an application for a revision of any tax, penalty or interest complained of and the Commissioner may receive evidence with respect thereto. After making his determination, the Commissioner will give notice thereof to the applicant who shall be entitled to review such determination by a proceeding pursuant to Article 78 of the Civil Practice Law and Rules, provided such proceeding is instituted within ninety days after the giving of the notice of such determination, and provided that a final determination of the tax due was not previously made. Such a proceeding shall not be instituted unless an undertaking if filed with the Commissioner in such amount and with such sureties as a Justice of the Supreme Court shall approve to the effect that if such proceeding be dismissed or the determination confirmed, the petitioner will pay all costs and charges which may accrue in the prosecution of such proceeding. A person shall not be entitled to a revision, refund or credit of a tax, interest or penalty which had been determined to be due where he has had a hearing or an opportunity for a hearing, as provided by the law, or has failed to avail himself of the remedies provided by the law. No refund or credit will be made of a tax, charge, interest or penalty paid after a determination by the Commissioner pursuant to the law unless it be found that such determination was erroneous, illegal or unconstitutional or otherwise improper, by the Commissioner after a hearing or on his own motion, or in a proceeding under Article 78 of the Civil Practice Law and Rules, in which event refund or credit without interest will be made of the tax, interest or penalty found to have been overpaid.

§ 7-14 Proceedings To Recover Tax.

(a) Whenever any person shall fail to pay any tax or penalty or interest imposed by the law as therein provided the Corporation Counsel shall, upon the request of the Commissioner of Finance, bring or cause to be brought an action to enforce payment of the same against the person liable for the same on behalf of the City of New York in any court of the State of New York or of any other state or of the United States. If, however, the Commissioner of Finance in his discretion believes that a taxpayer subject to the law is about to cease business, leave the state, or remove or dissipate the assets out of which tax or penalties might be satisfied, and that any such tax or penalty will not be paid when due, he may declare such tax or penalty to be immediately due and payable and may issue a warrant immediately.
  1. As an additional or alternate remedy, the Commissioner of Finance may issue a warrant, directed to the City Sheriff commanding him to levy upon and sell the real and personal property of such person which may be found within the City, for the payment of the amount thereof, with any penalties and interest and the cost of executing the warrant, and to return such warrant to the Commissioner of Finance and to pay to him the money collected by virtue thereof within sixty days after the receipt of such warrant. The City Sheriff shall, within five days after the receipt of the warrant, file with the County Clerk a copy thereof, and thereupon such clerk shall enter in the judgment docket the name of the person mentioned in the warrant and the amount of the tax, penalties and interest for which the warrant is issued and the date when such copy is filed. Thereupon the amount of such warrant so docketed shall become a lien upon the title to and interest in real and personal property of the person against whom the warrant is issued. The City Sheriff shall then proceed upon the warrant in the same manner and with like effect as that provided by law in respect to executions issued against property upon judgment of a court of record, and for services in executing the warrant he shall be entitled to the same fees which he may collect in the same manner. In the discretion of the Commissioner of Finance a warrant of like terms, force and effect may be issued and directed to any officer or employee of the Department of Finance, and in the execution thereof such officer or employee shall have all the powers conferred by law upon sheriffs, but he shall be entitled to no fee or compensation in excess of the actual expenses paid in the performance of such duty. If a warrant is returned not satisfied in full, the Commissioner of Finance may from time-to-time issue new warrants and shall also have the same remedies to enforce the amount due thereunder as if the City had recovered judgment therefor and execution thereon had been returned unsatisfied.

§ 7-15 Bulk Sales.

Whenever there is made a sale, transfer or assignment in bulk of any part of the whole of a stock of merchandise or of fixtures, or merchandise and of fixtures pertaining to the conducting of the business of the seller, transferrer or assignor, otherwise than in the ordinary course of trade and in the regular prosecution of said business, the purchaser, transferee or assignee shall at least ten days before taking possession of such merchandise, fixtures, or merchandise and fixtures, or paying therefore, notify the Commissioner of Finance by registered mail of the proposed sale and of the price, terms and conditions thereof whether or not the seller, transferrer or assignor, has represented to, or informed the purchaser, transferee or assignee that it owes any tax pursuant to the law and whether or not the purchaser, transferee or assignee has knowledge that such taxes are owing and whether any such taxes are in fact owing. Whenever the purchaser, transferee or assignee shall fail to give notice to the Commissioner of Finance as required by the preceding paragraph, or whenever the Commissioner of Finance shall inform the purchaser, transferee or assignee that a possible claim for such tax or taxes exists, any sums of money, property or choses in action, or other consideration, which the purchaser, transferee or assignee is required to transfer over to the seller, transferrer or assignor shall be subject to a first priority right and lien for any such taxes theretofore or thereafter determined to be due from the seller, transferrer or assignor to the City, and the purchaser, transferee, or assignee is forbidden to transfer to the seller, transferrer or assignor any such sums of money, property or choses in action to the extent of the amount of the City’s claim. For failure to comply with the provisions hereof, the purchaser, transferee or assignee, in addition to being subject to the liabilities and remedies imposed under the provisions of Article 6 of the Uniform Commercial Code, shall be personally liable for the payment to the City of any such taxes theretofore or thereafter determined to be due to the City from the seller, transferrer or assignor, and such liability may be assessed and enforced in the same manner as the liability for tax under the law.

§ 7-16 General Powers of the Commissioner of Finance.

In addition to the powers granted to the Commissioner of Finance by the law, he is also authorized and empowered:

  1. To make, adopt and amend rules and regulations appropriate to the carrying out of the law and the purposes thereof;
  2. To extend, for cause shown, the time for filing any return for a period not exceeding ninety days; and to compromise disputed claims in connection with the taxes hereby imposed;
  3. To request information from the Tax Commissioner of the State of New York or the Treasury Department of the United States relative to any person; and to afford information to such Tax Commissioner or such Treasury Department relative to any person; (d) To delegate his functions hereunder to a Deputy Commissioner of Finance or other employee or employees of his department;
  1. To assess, determine, revise and adjust the taxes imposed under the law;
  2. To require any tenant who uses premises for both residential purposes and as taxable premises and who pays an undivided rent for the entire premises so used to provide him with a signed and notarized request to the United States Director of Internal Revenue for photostatic copies of the tenant’s income tax return for any year when he deems such income tax return necessary to determine the rent ascribable to so much of such premises as is used as taxable premises; and, if the tenant refuses to provide him with such a signed written request, to treat the rent for the entire premises as the rent for so much as is used as taxable premises;
  3. To prescribe methods for determining how much of any tenant’s base rent is ascribable to a use which results in a reduction of the base rent or for determining any other division of rent or of use of premises necessary for the determination of the base rent or the amount of the base rent subject to tax under the law.

§ 7-17 Penalties and Interest.

(a) Interest on underpayments. If any amount of tax is not paid on or before the last day prescribed for payment (without regard to any extension of time granted for payment), interest on such amount at the rate and for the periods prescribed by the law and the regulations of the Commissioner of Finance shall be paid. In computing the mount of interest to be paid with respect to taxes which remain or become due on or after July 16, 1985, such interest shall be compounded daily. No interest shall be paid if the amount thereof is less than one dollar.
  1. Civil penalties. Any person failing to file a return or to pay any tax due prior to February 24, 1983 within the time required by law shall be subject to a penalty of five percent of the amount due. If the Commissioner of Finance is satisfied that the delay was excusable he may remit all or any part or such penalty. With respect to returns or payments which become due on or after February 24, 1983, the following penalties apply:

   (1) Failure to file return.

      (i) In case of failure to file a return on or before the prescribed date (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause (see paragraph 5 of this subdivision) and not due to willful neglect, there is to be added to the amount required to be shown as tax on such return five percent (5%) of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. In addition thereto, for tax years beginning on or after June 1, 1984, where a tenant fails to file a final return for taxable premises with respect to which the tenant is exempt from the tax by reason of 19 RCNY § 7-04(f)(2), there shall be imposed a penalty of $50 for each $1,000 of base rent, or fraction thereof, attributable to such taxable premises.

      (ii) With respect to returns required to be filed on or after July 16, 1985, in the case of a failure to file a tax return within 60 days of the date prescribed for filing of such return (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, the addition to tax under subparagraph (i) of this paragraph shall not be less than the lesser of one hundred dollars ($100) or one hundred percent (100%) of the amount required to be shown as tax on such return.

      (iii) For purposes of subparagraphs (i) and (ii) the amount of the tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return.

   (2) Failure to pay tax shown on final return. In case of failure to pay the amount shown as tax on a final return to be filed on or before the prescribed date (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there shall be added to the amount shown as tax on such return one-half of one percent (1/2%) of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. For the purpose of computing the addition for any month the amount of tax shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return. If the amount of tax required to be shown on a return is less than the amount shown as tax on such return, this paragraph shall be applied by substituting such lower amount.

   (3) Failure to pay tax required to be shown on final return. In case of failure to pay any amount in respect of any tax required to be shown on a final return required to be filed which is not so shown (including a determination made pursuant to 19 RCNY § 7-12), within ten (10) days of the date of the notice and demand, unless it is shown that such failure is due to reasonable cause (see paragraph (5) of this subdivision) and not due to willful neglect, there shall be added to the amount of tax stated in such notice and demand one-half of one percent (1/2%) of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent (25%) in the aggregate. For the purpose of computing the addition for any month, the amount of tax stated in the notice and demand shall be reduced by the amount of any part of the tax which is paid before the beginning of such month.

   (4) Limitations on additions.

      (i) With respect to any return the amount of the addition to tax is limited to the following:

         (A) At no time will the addition for one (1) month be more than five percent (5%).

         (B) If paragraphs (1) and (2) of this subdivision are both applicable, the addition under paragraph (1) is reduced by the addition under paragraph (2). Thus, the addition to the charge will be four and one-half percent (4 1/2%) under paragraph (1) and one-half of one percent (1/2%) under paragraph (2) for each month up to and including the first five (5) months. After the first five (5) months, the addition of one-half of one percent (1/2%) per month pursuant to paragraph (2) will apply for the next forty-five (45) months for a maximum aggregate of forty-seven and one-half percent (47 1/2%) addition to tax. However, in any case described in subparagraph (b) of paragraph (1) of this subdivision (relating to returns filed after 60 days of the due date) the amount of the addition to tax under such paragraph (1) shall not be reduced below the amount provided in such subparagraph (i.e., the lesser of $100 or 100% of tax due).

         (C) If paragraphs (1) and (3) of this subdivision are both applicable the maximum amount of the addition to tax may not exceed twenty-five percent (25%) in the aggregate. The maximum amount of the addition to tax pursuant to paragraph (3) of this subdivision shall be reduced by the amount of the addition to tax pursuant to paragraph (1) of this subdivision (determined without regard to subparagraph (i) of such paragraph (1)) which is attributable to the tax for which the notice and demand is made and which is not paid within ten (10) days of such notice and demand.

      (ii) The provisions of this paragraph may be illustrated by the following examples:

Example 1: Assume the taxpayer filed his tax return for the year June 1, 1982 to May 31, 1983 on September 25, 1983, and the failure to file on or before the prescribed date is not due to reasonable cause. The tax shown on the return is $800 and deficiency of $200 is subsequently assessed, making the tax required to be shown on the return, $1,000. Of this amount, $700 has been paid on quarterly returns. The balance due, as shown on the return, of $100 ($800 shown as tax return less $700 previously paid) is paid on October 26, 1983. The failure to pay on or before the prescribed date is not due to reasonable cause. There will be imposed, in addition to interest, an additional amount under paragraph (2), of $2.50, which is 2.5 percent (2% for the 4 months from June 21 through October 20, and 0.5% for the fractional part of the month from October 21 through October 26) of the net amount shown due on the return of $100. There will also be imposed an additional amount under paragraph (1) of $58, determined as follows:

20 percent (5% per month for the 3 months from June 21 through September 20 and 5% for the fractional part of the month from September 20 through September 25) of the amount due of $300 ($1,000 required to be shown on the return less $700 paid previously) $60
Reduced by the amount of the addition imposed under paragraph (2) for those months $2
Addition to tax under paragraph (1) $58

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Example 2: A notice and demand for the $200 deficiency is issued on January 8, 1984, but the taxpayer does not pay the deficiency until December 23, 1984. In addition to interest there will be imposed an additional amount under paragraph (3) of $10, determined as follows: Addition computed without regard to limitation:

6 percent (5 1/2% for the 11 months from January 19, 1984 through December 18, 1984, and 0.5% of the fractional part of the month from December 19 through December 23) of the amount stated in the notice and demand ($200) $12
Limitation on addition:  
25 percent of the amount stated in the notice and demand ($200) $50
Reduced by the part of the addition under paragraph (1) for failure to file attributable to the $200 deficiency (20% of $200) $40
Maximum amount of the addition under paragraph (3) $10

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Example 3: A taxpayer files his tax return for the year June 1, 1982 to May 31, 1983, on February 2, 1984, and such delinquency is not due to reasonable cause. The balance due, as shown on the return, of $500 is paid when the return is filed on February 2, 1984. In addition to interest and the addition for failure to pay under paragraph (2) of the $20 (8 months at 0.5% per month, 4%), there will also be imposed an additional amount under paragraph (1) of $112.50, determined as follows:

Penalty at 5 percent for maximum of 5 months, 25 percent of $500 $125.00
Less reduction for the amount of the addition under paragraph (2):  
Amount imposed under paragraph (2) for failure to pay for the months in which there is also an addition for failure to file – 2 1/2% for the 5 months June 21 through November 20 of the net amount due ($500) $12.50
Additional to tax under paragraph (1) $112.50

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   (5) Reasonable cause as used in paragraphs (1), (2) and (3) must be affirmatively shown in a written statement. The taxpayer’s previous compliance record may be taken into account. Grounds for reasonable cause, where clearly established, may include the following:

      (i) death or serious illness of the responsible officer or employee of the taxpayer, or his unavoidable absence from his usual place of business;

      (ii) destruction of the taxpayer’s place of business or business records by fire or other casualty;

      (iii) inability to obtain and assemble essential information required for the preparation of a complete return despite reasonable efforts;

      (iv) any other cause for delinquency which appears to a person of ordinary prudence and intelligence as a reasonable cause for delay in filing a return and which clearly indicates an absence of gross negligence or willful intent to disobey the taxing statutes. Past performance should be taken into account. Ignorance of the law, however, will not be considered reasonable cause.

   (6) Underpayment due to negligence.

      (i) If any part of an underpayment is due to negligence or intentional disregard of the law, or rules or regulations thereunder (but without intent to defraud), there shall be added to the tax a penalty in an amount equal to five percent (5%) of the underpayment.

      (ii) With respect to taxes required to be paid on or after July 16, 1985, there shall be added to the tax (in addition to the penalty determined under subparagraph (i) of this paragraph) an amount equal to fifty percent (50%) of the interest payable under subdivision (a) of this section with respect to the portion of the underpayment described in such subparagraph (i) which is attributable to the negligence or intentional disregard referred to in such subparagraph (i), for the period beginning on the last date prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax).

   (7) Underpayment due to fraud.

      (i) If any part of an underpayment is due to fraud, there shall be added to the tax a penalty in an amount equal to fifty percent (50%) of the underpayment.

      (ii) With respect to taxes required to be paid on or after July 16, 1985, there shall be added to the tax (in addition to the penalty determined under subparagraph (i) of this paragraph) an amount equal to fifty percent (50%) of the interest payable under subdivision (a) of this section with respect to the portion of the underpayment described in such subparagraph (i) which is attributable to fraud, for the period beginning on the last day prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax).

      (iii) The penalty under this paragraph (7) shall be in lieu of the maximum twenty-five percent (25%) penalty due to willful neglect for failure to file a return, five percent (5%) penalty due to negligence and the additional one half of one percent (1/2%) per month penalty pursuant to paragraphs (2) and (3) or this subdivision.

   (8) Any person who fails to pay tax, or to make, render, sign or certify any return, or to supply any information within the required time, with fraudulent intent, shall be liable for a penalty of not more than one thousand dollars ($1,000), in addition to any other amounts required under the law to be imposed, assessed and collected by the Commissioner of Finance. The Commissioner of Finance has the power, in his discretion, to waive, reduce or compromise any penalty under this paragraph.

   (9) The additions to tax and penalties provided by this subdivision shall be paid and enforced in the same manner as taxes.

   (10) Whenever a penalty is assessed for failure to pay the tax when due, an application for the remission thereof may be made to the Commissioner of Finance. Such application must be made by the person against whom the penalty is assessed, and must set forth the grounds upon which the remission is requested.

   (11) Substantial understatement of liability. With respect to returns required to be filed on or after July 16, 1985, if there is a substantial understatement of tax for any taxable year, there shall be added to the tax an amount equal to ten percent (10%) of the amount of any underpayment attributable to such understatement. For purposes of this subdivision, there is a substantial understatement of tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of ten percent of the tax required to be shown on the return for the taxable year, or $5,000. For purposes of the preceding sentence, the term “understatement” means the excess of the amount of the tax required to be shown on the final return for the tax year, over the amount of the tax imposed which is shown on the return, reduced by any rebate. The amount of such understatement shall be reduced by that portion of the understatement which is attributable to the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return. The Commissioner of Finance may waive all or any part of the addition to tax provided by this subdivision on a showing by the taxpayer that there was reasonable cause for the understatement (or part thereof) and that the taxpayer acted in good faith.

   (12) Aiding or assisting in the giving of fraudulent returns, reports, statements or other documents.

      (i) With respect to returns required to be filed on or after July 16, 1985, any person who, with the intent that tax be evaded, shall for a fee or other compensation or as an incident to the performance of other services for which such person receives compensation, aid or assist in, or procure, counsel, or advise the preparation or presentation under, or in connection with any matter arising under the law of any return, report, statement or other document which is fraudulent or false as to any material matter, or supply any false or fraudulent information, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, report, statement or other document shall pay a penalty not exceeding ten thousand dollars.

      (ii) For purposes of subparagraph (i) of this paragraph, the term “procures” includes ordering (or otherwise causing) a subordinate to do an act, and knowing of, and not attempting to prevent, participation by a subordinate in an act. The term “subordinate” means any other person (whether or not a member, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control.

      (iii) For purposes of subparagraph (i) of this paragraph, a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance.

      (iv) The penalty imposed by this paragraph shall be in addition to any other penalty provided by law.

  1. Criminal penalties.

   (1) Failure to obey subpoena; false testimony.

      (i) Any person who, being duly subpoenaed in connection with a matter arising under the law, to attend as a witness or to produce books, accounts, records, memoranda, documents or other papers,

         (A) fails or refuses to attend without lawful excuse;

         (B) refuses to be sworn;

         (C) refuses to answer any material and proper question; or

         (D) refuses, after reasonable notice, to produce books, papers and documents in his possession or under his control which constitute material and proper evidence shall be guilty of a misdemeanor.

      (ii) Any person who shall testify falsely in any material matter pending before the Commissioner of Finance shall be guilty of and punishable for perjury.

   (2) Willful failure to file a return or report or pay the tax. Any person required to pay any tax or make any return or report, who willfully fails to pay such tax or make such return or report, at the time or times so required, shall be guilty of a misdemeanor.

   (3) Fraudulent returns, reports, statements or other documents.

      (i) Any person who willfully makes and subscribes any return, report, statement or other document which is required to be filed with or furnished to the Commissioner of Finance or to any person, pursuant to the provisions of the law, which he does not believe to be true and correct as to every material matter shall be guilty of a misdemeanor.

      (ii) Any person who willfully delivers or discloses to the Commissioner of Finance or to any person, pursuant to the provisions of the law, any list, return, report, account, statement or other document known by him to be fraudulent or to be false as to any material matter shall be guilty of a misdemeanor.

      (iii) For purposes of this paragraph, the omission by any person of any material matter with intent to deceive shall constitute the delivery or disclosure of a document known by him to be fraudulent or to be false as to any material matter.

   (4) Failure to keep records. Any person who willfully fails to keep or retain any records required to be kept or retained by the law shall be guilty of a misdemeanor.

  1. Commissioner’s certificate. The certificate of the Commissioner of Finance to the effect that a tax has not been paid, that a return has not been filed, or that information has not been supplied pursuant to the provisions of the law shall be prima facie evidence thereof.

§ 7-18 Returns To Be Secret.

Except in accordance with judicial order or as otherwise provided by law, it is unlawful for the Commissioner of Finance or any officer or employee of the Department of Finance to divulge or make known in any manner any information relating to the business of a taxpayer contained in any return required under the law. The officers charged with the custody of such returns are not required to produce any of them or evidence of anything contained in them in any action or proceeding in any court, except on behalf of the Commissioner of Finance in an action or proceeding under the provisions of the law, or on behalf of any party to any action or proceeding under the provisions of the law when the returns or facts shown thereby are directly involved in such action or proceeding, in either of which events the court may require the production of and may admit in evidence so much of the returns or of the facts shown thereby as are pertinent to the action or proceeding and no more. A taxpayer may obtain a certified copy of any return filed in connection with his tax upon application in writing to the Commissioner. Where a representative of a taxpayer applies for a certified copy of such return, he must file a power of attorney with the application. A certified copy of a taxpayer’s return or of information contained therein or relating thereto may be delivered to the United States of America or any department thereof, the State of New York or any department thereof, any agency or any department of the City of New York provided the same is requested for official business. The Corporation Counsel or other legal representatives of the City or the District Attorney of any county within the City may be permitted to inspect returns for official business. Nothing herein shall be construed to prohibit the publication of statistics so classified as to prevent the identification of particular returns or items thereof.

§ 7-19 Notices.

A notice authorized or required by the law may be given to the person for whom it is intended by mailing it in a postpaid envelope addressed to such person at the address given in the last return filed by him pursuant to the law or in any application made by him, or, if no return has been filed or application made, then to such address as may be obtainable. The mailing of a notice as provided herein shall be presumptive evidence of the receipt of the same by the person to whom addressed. Any period of time which is determined according to the provisions of the law by the giving of notice shall commence to run from the date of mailing of such notice as provided herein.

§ 7-20 Statute of Limitations.

The provisions of the Civil Practice Law and Rules or any other law relative to limitations of time for the enforcement of a civil remedy shall not apply to any proceeding or action taken by the City to levy, appraise, assess, determine or enforce the collection of any tax or penalty provided by the law. However, except in the case of a willfully false or fraudulent return with intent to evade the tax, no assessment of additional tax shall be amended after the expiration of more than three years from the date of filing the final return for the tax year to which the assessment relates; provided, however, that where no return has been made as provided by law, the tax may be assessed at any time. Where, before the expiration of the period prescribed for the assessment of an additional tax, a person has consented in writing that such period be extended, the amount of such additional tax due may be determined at any time within such extended period. The period so extended may be further extended by subsequent consent in writing before the expiration of the extended period.

Chapter 8: Court and Trust Funds

§ 8-01 Deposit with Commissioner of Finance of Funds or Securities.

Each deposit of money or securities with the Commissioner of Finance must be accompanied by either:

  1. a certified copy of the judgment, order or decree directing the deposit or payment into court, or an excerpt thereof that includes such direction, under the seal of the court, or
  2. a certificate, under the seal of the court, made by the clerk of the court whose duty it is first to receive the deposit in cases in which moneys or securities may be deposited or paid into court pursuant to statute. For example, a tender into court, a deposit to discharge a judgment or a mechanic’s lien, security for costs in certain cases; deposits of civil bail; a surplus arising upon the sale of property by a sheriff under an execution or by a referee in mortgage foreclosure proceedings by advertising. This certificate must contain the following information:

   (1) name of court, or source of receipt if deposited without court order;

   (2) title of the action or proceeding;

   (3) by whom, for whom, and for what purpose the deposit is made;

   (4) date of original receipt by official making deposit; and

   (5) if the deposit consists of cash, the amount thereof, or if it be securities, the nature and description of the same.

§ 8-02 Necessity of Certified Court Order for Payment.

(a) No payment, investment, surrender or delivery of court funds, property or security may be made by the Commissioner of Finance or any depositary, without a certified copy of an order or decree of the court having jurisdiction of such funds, property and securities, directing each such payment, investment, surrender or delivery. Payments may not be made on affidavits and proof of age alone. Moneys deposited for or on behalf of an infant payable when the infant attains his majority are not to be paid under the order directing the deposit unless that order also expressly directs the payment of such money on or after the day, month and year therein specified when the infant becomes of legal age.
  1. Court orders must be certified by the clerk of the court .
  2. When the whole or remaining balance of payments of money into court in an action, or of a distributive share thereof, or any security or other property, is directed to be paid out of court, the order must direct the payment of all accrued income belonging to the party to whom such money or distributive share or remaining balance thereof, or security or other property is paid.
  3. If it is desired that the check for payment be mailed to the attorney for the claimant, a direction to that effect must be incorporated in the order of payment.

§ 8-03 Certificate of Deposit by Commissioner of Finance.

A certificate of deposit or other document showing the amount of money held by the Commissioner of Finance for the benefit of any person will be issued by the Court and Trust Fund Division of the Department of Finance upon fulfillment of the following prerequisites:

  1. An application on forms furnished by the Department of Finance must be completed and filed by the person claiming the right to possession of the funds, or by an attorney acting on his behalf.
  2. The Commissioner of Finance or his designee may require the claimant to appear at the Commissioner’s office and to produce satisfactory evidence of the fact that the claimant is the person lawfully entitled to possession of the funds, and to complete and file additional written statements to satisfactorily establish the claimant’s right to the funds. If the claimant is absent from the City or is unable to appear in person at the Commissioner of Finance’s office by reason of physical or other disability, or by reason of military service, satisfactory proof of such fact may be required, and an attorney or other person acting on behalf of the claimant may be required to produce proof of his or her authority to act. At any time after the issuance of a certificate of deposit, and up to the actual payment of the funds on deposit to the claimant or to such other person as may be entitled thereto, the Commissioner of Finance or the Commissioner’s designee may require proof similar to that described in this section, as well as copies of the petition, affidavits and exhibits upon which the order was granted.

§ 8-04 Vouchers.

Any of the following will be considered a proper voucher for payments of money out of court, by the Department of Finance.

  1. A check properly endorsed and bearing proper evidence of payment by the bank on which it was drawn to the person or persons to whom payment was directed to be made.
  2. A proper receipt or voucher signed by the person or persons to whom payment is directed to be made or to whom securities or other property are directed to be assigned or delivered. Such receipt must be filed at the time of any payment, assignment or delivery directed by the order of the court.

§ 8-05 Transfer of Funds.

Funds may not be transferred from one depositary to another except pursuant to the direction of a court order, or of the State Comptroller.

§ 8-06 Fees.

(a) The Commissioner of Finance is entitled, for services, to the following fees:

   For each certificate of deposit - $1

   Upon moneys paid out of court - 2% except as set forth in subdivision (c)

   Upon moneys invested - 1/2 of 1%

   Upon securities deposited in court and received by the Commissioner - 2 percent of the par value of the securities

   Upon investments transferred or assigned out of court by the Commissioner, when the investments have been made by the Commissioner - 2 percent of the par value of the investments.

  1. Unless the court otherwise specially directs, all fees for payment of money out of court will be deducted from the amount paid and not from the balance remaining to the credit of the action or proceeding. However, if a judgment or other evidence of debt is a lien upon the funds or portion thereof, or the expenses of litigation (such as referee’s fees, county clerk’s fees or subpoena fees, etc.) are directed to be paid therefrom, the fees of the Department of Finance are to be deducted from the sum or sums remaining of the share or shares which bear such expenses, if sufficient; if insufficient, the amount to be applied to such expenses is the amount remaining of such sum or sums after deducting the fees of the Department of Finance.
  2. The Department waives the fees to which the Commissioner is entitled pursuant to subdivisions 1, 3 and 4 of Section 99-m of the general municipal law.

§ 8-07 Depositaries.

(a) Books of account. Each duly designated depositary is required to keep a separate account for each action or proceeding, in connection with which funds or moneys are deposited therein, showing the name of the court, the title of the action or proceeding, the amount deposited, the date of receipt, from whom received and a record of each additional receipt or credit of interest to and each withdrawal of moneys therefrom. Also an account of each change of investment if any.
  1. Payment of interest. Depositaries are required to pay interest on deposits of money paid into courts of record at a rate satisfactory to the State, Comptroller and in no event less than the highest rate being paid by the depositary on other accounts having similar maturities. Such interest must be computed from the date of deposit to the date of withdrawal, except that no interest shall be payable on moneys withdrawn within 30 days from the date of deposit. Interest is to be credited not less often than January 1 and July 1 of each year.
  2. Certificate of balances. Each depositary shall furnish annually to the Commissioner of Finance from whom deposits of money paid into court have been received, a certificate of the proper officer of such depositary stating the exact mount on deposit to the credit of each action and proceeding separately on December 31, including interest credits as of January 1 following. Such certificate shall be furnished within 10 days after December 31 in each year.
  3. Undertakings and collateral. Depositaries, other than savings banks, are required to execute and deliver undertakings and to pledge collateral to secure deposits of court and trust funds, as may be required by the State Comptroller.

Chapter 9: Fees

§ 9-01 Fees To Be Charged by the Commissioner of Finance, in Addition to Those Now Fixed by Statute.

The Commissioner of Finance is entitled to collect fees for the services hereinafter specified in addition to those now fixed by statute:

  1. for issuing certificate of payment when original receipt has been lost through the fault of the payor
$7.00
  1. For preparing and issuing certified transcript of record per item
$7.00
  1. For processing checks in payment of any tax, assessment, or charge returned unpaid by bank for any reason other than verified bank error
$20.00
  1. For preparing and furnishing certification of block and lot on a copy of a tax map (per lot fee)
$10.00
  1. For processing applications for tax lot mergers and/or apportionments, including processing new condominium/cooperative conversions, including issuance of new lot numbers
$73.00/tax lot
  1. For processing a request for a Letter Ruling and preparing and issuing a Letter Ruling based on a request received on or after November 6, 1989 (per ruling)
$250.00
  1. For conducting a lienor search to identify interested parties prior to final judgment of foreclosure against a parcel, from any person who seeks to redeem such parcel or obtain a release of the City’s interest following final judgment
$35.00
  1. For the processing of paper checks, drafts or similar paper instruments, written for payments issued through the City’s financial management system
$3.50

~

Notwithstanding the foregoing, the commissioner of finance may determine that this subdivision shall not apply to certain paper checks, drafts or similar paper instruments, including, but not limited to:

  1. Inter-governmental and intra-governmental transfers of funds;
  2. Transfer of funds to City financial accounts;
  3. Payments to City employees;
  4. Refunds of collected revenue;
  5. Payments made via the judgment and claims processes; and
  6. Payments determined by agencies to be “miscellaneous vendors” and, therefore, outside of the standard vendor enrollment process.

§ 9-02 Fee for credit card transactions.

(a) Definitions. As used in this section:

   (1) Card issuer. “Card issuer” means an issuer of a credit card, charge card or other value transfer device.

   (2) Covered agency. “Covered agency” means an agency described in subdivision (a) of section 385 of the New York City Charter, including all units within the Executive Office of the Mayor, and the following:

      (i) Board of Standards and Appeals;

      (ii) Business Integrity Commission;

      (iii) Commission on Human Rights;

      (iv) Conflict of Interest Board;

      (v) Franchise and Concession Review Committee;

      (vi) Landmarks Preservation Commission;

      (vii) Public Design Commission (Art Commission);

      (viii) Office of Administrative Trials and Hearings, including the Environmental Control Board;

      (ix) Office of Chief Medical Examiner; and

      (x) Taxi and Limousine Commission.

   (3) Credit card. “Credit card” means any credit card, credit plate, charge card, charge plate, courtesy card, debit card or other identification card or device issued by a person to another person which may be used to obtain a cash advance or a loan or credit, or to purchase or lease property or services on the credit of the person issuing the credit card or a person who has agreed with the issuer to pay obligations arising from the use of a credit card issued to another person.

   (4) Financing agency. “Financing agency” means a person engaged, in whole or in part, in the business of purchasing retail installment contracts, obligations or credit agreements or indebtedness of buyers under credit agreements from one or more retail sellers or entering into credit agreements with retail buyers. The term includes but is not limited to a bank, trust company, private banker, industrial bank or investment company, if so engaged. “Financing agency” shall not include a retail seller.

   (5) Muni-meter. “Muni-meter” means an electronic parking meter that dispenses timed receipts that must be displayed in a conspicuous place on a vehicle’s dashboard.

   (6) Non-covered agency. “Non-covered agency” means an agency of the City of New York that is not a covered agency.

   (7) Person. “Person” means an individual, partnership, corporation or any other legal or commercial entity.

  1. Credit card fee imposed by covered agencies.

   (1) Except as provided in paragraphs two, three, four and five of this subdivision and in subdivision (d) of this section, as a condition of accepting a credit card as payment of a fine, civil penalty, tax, fee, rent, rate, charge or other amount, a covered agency must charge and collect from the person offering a credit card as a means of payment a nonrefundable fee in the amount of 2% of the amount of the fine, civil penalty, tax, fee, rent, rate, charge or other amount to be paid with the credit card. A covered agency must not charge any other fee for accepting a credit card as payment of any such charges in lieu of, or in addition to, the fee authorized by this section.

   (2) Prior to thirteen months from final publication of this rule in the City Record, the fee provided in paragraph one of this subdivision shall not be charged or collected by any of the following covered agencies unless the agency first notifies the Commissioner of Finance in writing that charging and collecting the fee would not materially impede such agency’s operations or services to the public:

      (i) Business Integrity Commission;

      (ii) Department of Citywide Administrative Services;

      (iii) Department of Environmental Protection;

      (iv) Department of Finance;

      (v) Department of Health and Mental Hygiene;

      (vi) Department of Investigation;

      (vii) Department of Sanitation;

      (viii) Department of Transportation;

      (ix) Fire Department;

      (x) Human Resources Administration;

      (xi) Office of Administrative Trials and Hearings;

      (xii) Office of the Mayor; and

      (xiii) Taxi and Limousine Commission.

   (3) Prior to nineteen months from final publication of this rule in the City Record, the fee provided in paragraph one of this subdivision shall not be charged or collected by any of the following covered agencies unless the agency first notifies the Commissioner of Finance in writing that charging and collecting the fee would not materially impede such agency’s operations or services to the public:

      (i) Department of Buildings;

      (ii) Department of Consumer Affairs;

      (iii) Department of Housing Preservation and Development;

      (iv) Department of Parks and Recreation; and

      (v) Police Department.

   (4) The Commissioner of Finance may grant a waiver from charging and collecting the fee provided in paragraph one of this subdivision for up to six months beyond the thirteen and nineteen months in paragraphs (2) and (3) respectively, for agencies specified in such paragraphs, upon a determination that charging and collecting the fee earlier creates a risk of materially impeding an agency’s operations or services to the public.

   (5) A covered agency must charge and collect from the person offering a credit card as a means of payment a nonrefundable fee of 2% of the amount to be paid unless such covered agency notifies the Commissioner of Finance in writing that doing so negatively affects such covered agencies’ operations or services to the public. If a covered agency provides such written notice it may continue to charge and collect a nonrefundable fee of 2.49%. However, all covered agencies must charge and collect the nonrefundable fee of 2% as of November 15, 2018.

  1. Credit card fee imposed by non-covered agencies. Any non-covered agency may by rule opt to be treated as a covered agency pursuant to this section, in which case the provisions of this section shall apply to such agency in their entirety. Any non-covered agency that does not opt to be treated as a covered agency will not be subject to this section and may charge a fee in accordance with section 11-105 of the Administrative Code of the City of New York.
  2. When fee must not be imposed. The fee provided by this section must not be imposed:

   (1) for parking time purchased from a muni-meter or parking cards purchased to use at a muni-meter;

   (2) for retail transactions for the sale of merchandise or the purchase of parking time at municipal garages;

   (3) for payments made as donations, except when the donation is paid as part of an existing transaction for which a fee is charged;

   (4) for re-payments of Medicaid, Cash Assistance, or Supplemental Nutrition Assistance Program benefits for overpayments by any of these programs, for payments owed for child support, and for payments made by beneficiaries to reduce their income in order to qualify for eligibility for Medicaid;

   (5) for fees paid for emergency medical ambulance services;

   (6) for birth and death certificates issued by the Department of Health and Mental Hygiene’s Vital Records Bureau;

   (7) for fees paid to the Department of Parks and Recreation for tennis permits, summer camps, and recreation center memberships; and

   (8) where payment by credit card is the only means of payment accepted.

  1. Refund of fee. Notwithstanding the provisions of subdivision (b) of this section, a credit card fee will be refunded when the credit card payment was:

   (1) the result of certain technical errors, not caused by the customer, such as a duplication of a charge or an erroneous entry by a covered agency; or

   (2) was a fraudulent payment not made by the customer where the customer notifies the agency of the fraudulent payment.

  1. A covered agency must not accept a particular credit card for payment if imposition of the fee pursuant to subdivision (b) of this section would not be consistent with the terms of any agreements of such covered agency or the City of New York with any financing agency, card issuer or other commercial entity governing the acceptance of such credit card.

Chapter 10: Financial Corporations

§ 10-01 Bad Debts.

(a) Consolidated returns. Requests to the Commissioner of Finance for permission to file banking corporation tax returns on a consolidated basis (or to include corporations not previously included, or to exclude corporations previously included, in a consolidated return) must be filed not later than thirty days after the close of the taxable period for which permission is requested. In no event will a request be considered which is not filed on or before such thirtieth day.
  1. Bad debts may be treated in either of two ways: by a deduction from income as to debts ascertained to be worthless in whole or in part, or by a deduction from income of an addition to a reserve for bad debts. A corporation or association filing its first return of income, pursuant to Part 1 or 2 of Subchapter 3 of Chapter 6, Title 11, New York City Administrative Code, may select either of the two methods, subject to approval by the Commissioner of Finance upon examination of the return, provided however that a corporation or association electing the reserve method must use particular reserve method it uses for New York State franchise tax purposes. The method originally adopted on such first return must be used in filing returns for all subsequent years unless the Commissioner of Finance consents to a change. Application for permission to change the method of treating bad debts shall be made at least 30 days prior to the close of the year the income of which is to measure the tax to be paid under the changed method.
  2. Rules governing actual charge-off method.

   (1) Where all surrounding and attending circumstances indicate that debt is worthless, either wholly or in part, the amount which is worthless and charged off within the year on the books of the corporation or association shall be allowed as a deduction in computing net income. Where a debt is ascertained to be worthless, in whole or in part, and the amount so ascertained is credited to a specific reserve account for such debt, having the effect of removing the debt from the assets of the taxpayer, such credit is considered a charge-off. Before a corporation or association may charge off and deduct a debt in part, it must ascertain and be able to demonstrate, with a reasonable degree of certainty, the amount thereof which is uncollectible.

   (2) In determining whether a debt is worthless in whole or in part, the Commissioner of Finance will consider all pertinent evidence including the value of the collateral, if any, securing the debt and the financial condition of the debtor. Partial deductions will be allowed with respect to specific debts only. Where the surrounding circumstances indicate that a debt is worthless and uncollectible and that legal action to enforce payment would in all probability not result in the satisfaction of execution on a judgment, a showing of these facts will be sufficient evidence of the worthlessness of the debt for the purpose of deduction. Bankruptcy is generally an indication of the worthlessness of at least a part of an unsecured and unpreferred debt. Actual determination of worthlessness in bankruptcy cases is sometimes possible before, and at other times only when, a settlement in bankruptcy shall have been made. If a corporation or association computes its income upon the basis of valuing its notes or accounts receivable at their fair market value when received, which may be less than their face value, the amount deductible for bad debts in any case is limited to such original valuation.

   (3) Where a taxpayer which is subject to supervision by Federal or by State authorities charges off debts in whole or in part pursuant to the order, suggestion or policy of such authority, or in keeping with the classification of the debts by such authority, such debts shall, in the absence of affirmative evidence clearly establishing the contrary, be presumed, for the purpose of measuring this tax, as of the date of the charge-off by the taxpayer, to be worthless or recoverable only in part, as the case may be. The provisions of this paragraph, however, shall not be construed as limiting the validity of charge-offs for bad debts not directed or approved by the supervising authority.

   (4) All recoveries on charged-off loans, allocable to offices or branches located within New York City, including the release of specific reserves or valuation allowances therefor, must be included in gross income unless excludable under the provisions of 19 RCNY § 10-01(b)(6) below.

   (5) A corporation or association doing business or carrying on business through offices or branches both within and without New York City shall charge off only those worthless debts allocated and determined on the basis of separate accounting to the offices or branches located in New York City. Deductions for charge-off of loans administered by an office or branch must be allocated to that office or branch. If loans are administered and serviced centrally, the deduction for charge-off of such loans must be apportioned in a manner consistent with the apportionment of income derived therefrom.

   (6) Recoveries on loans allocated within New York City (exclusive of those evidenced by bonds or other securities) may be excluded from gross income to the extent that such write-off did not serve to reduce the amount of tax computable upon net income in the year made. Where such debts when charged off did serve to reduce the tax computable on net income, recoveries thereon may be excluded until they equal in the aggregate the sum of the charge-offs not accomplishing a reduction in tax liability. Recoveries on loans charged off during a year in which the taxpayer was not subject to tax under Part 1 or 2 of Subchapter 3 of Chapter 6 of Title 11, may not be excluded from gross income in whole or in part.

  1. Rules governing use of reserve method.

   (1) Taxpayers which have established the reserve method (other than specific reserves) of treating bad debts and maintain proper reserve accounts for bad debts, and which in accordance with subdivision (b) of this section adopt the reserve method of treating bad debts, may deduct from gross income a reasonable addition to a reserve for bad debts in lieu of a deduction for specific bad debt items.

   (2) What constitutes a reasonable addition to a reserve for bad debts must be determined in the light of the facts and will vary with conditions of business prosperity. It will depend primarily upon the total amount of debts outstanding as of the close of the taxable year, those arising currently as well as those arising in prior taxable years, and the total amount of the existing reserve. In case subsequent realizations upon outstanding debts prove to be more or less than estimated at the time of the creation of the existing reserve, the amount of the excess or inadequacy in the existing reserve must be reflected in the determination of the reasonable addition necessary for the taxable year. A taxpayer using the reserve method must show, in a statement made part of its return, the total amount of loans receivable at the beginning and close of the taxable year, the percentage of the reserve to the total loans outstanding at the close of the year, and the amount of the debts which have become wholly or partially worthless and have been charged off against the reserve account.

   (3) A corporation or association doing business or carrying on business through offices or branches both within and without New York City must determine what constitutes a reasonable addition to a reserve for bad debts on the basis of the total amount of debts and total amount of existing reserves of the New York City offices or branches. The statement required in 19 RCNY § 10-01(d)(2) above should show the total loans receivable at the beginning and close of the taxable year, the percentage of the reserve to the loans outstanding at the end of the year and the amount of the bad debts which have become totally or partially worthless and have been charged against the reserve account of the New York City offices or branches allocated or determined on the basis of separate accounting. Loans administered by an office or branch must be allocated to that office or branch. Loans administered and serviced centrally must be apportioned in a manner consistent with the apportionment of income derived therefrom. The existing reserve of New York City offices or branches, as of January 1, 1966, is that amount which bears the same ratio to the total amount of the existing reserve for New York State franchise tax purposes, as of January 1, 1966, that the amount of outstanding New York City loans, as of January 1, 1966, bears to the total outstanding loans, as of January 1, 1966.

   (4) As an alternative, a taxpayer may adopt the moving-average method of computing reserves. Deductions in such cases will be allowed for additions to reserves for bad debts in accordance with the principles and rules adopted by the Commissioner of Internal Revenue on December 8, 1947 and the rules interpretative thereof, issued by the Commissioner of Internal Revenue under dates of December 29, 1947, January 21, 1948, January 29, 1948, March 16, 1948 , March 1948, March 31, 1948, June 14, 1948, under GCM 25,605 and under I.T. 3936, except as otherwise expressly provided below.

      (i) In the case of a corporation or association using the moving-average method of determining the addition to the reserve for bad debts for New York State franchise tax purposes and electing the same method for New York City Financial Corporation Tax purposes, which is not doing business or carrying on business through offices or branches outside New York City, the initial balance of the New York City reserve for bad debts shall be the existing reserve for bad debts as determined for New York State franchise tax purposes under Article 9-B or 9-C of the Tax Law, as of the close of the calendar year preceding the year for which the election to use the moving-average method becomes effective. Accordingly, the addition to the reserve for bad debts for New York City Financial Corporation Tax purposes for such a corporation or association shall be an amount equal to, and shall be computed in the same manner as, the deduction reported for New York State franchise tax purposes under Article 9-B or 9-C of the Tax Law.

      (ii) A corporation or association using the moving-average method of determining the addition to the reserve for bad debts for New York State franchise tax purposes and electing the same method for New York City Financial Corporation Tax purposes, which is doing business or carrying on business through offices or branches both within and without New York City, must compute the addition to the reserve for bad debts in the manner provided under Mim. 6209 as interpreted, except that:

         (A) The moving average shall be the moving average for twenty years, including the taxable year for which the report is made, as determined for New York State franchise tax purposes; provided, however, that a taxpayer may apply to the Commissioner of Finance for permission to substitute the experience of New York City offices or branches for twenty consecutive years, including the taxable year for which the report is made, as determined by separate accounting.

         (B) Outstanding loans of New York City offices or branches of the taxpayer are those allocated or determined on the basis of separate accounting to the offices and branches located in New York City. Loans directly administered by a New York City office or branch are allocable to New York City. Loans administered and serviced centrally must be apportioned in a manner consistent with the apportionment of income derived therefrom.

         (C) The initial balance of the New York City reserve for bad debts shall be that amount which bears the same ratio to the New York State reserve for bad debts, as determined for New York State franchise tax purposes under Article 9-B or 9-C of the Tax Law as of the close of the calendar year preceding the year for which the election to use the moving-average method becomes effective, as the amount of outstanding loans of New York City offices and branches, as of the close of such preceding calendar year, bears to outstanding loans of all offices and branches, as of the close of such preceding calendar year.

         (D) In determining net charge-offs, outstanding loans ascertained to be worthless and charged off, and any recoveries of loans previously charged against the reserve allocable and apportioned under 19 RCNY § 10-01(d)(4)(ii)(B)(D) to offices and branches situated outside New York City, must be excluded. All other recoveries, including loans charged off prior to January 1, 1966, must be included.

      (iii) A corporation or association may deduct (in addition to any allowable deduction computed under Mim. 6209 as provided in subparagraph (i) or (ii) of this paragraph, if any) an amount equal to the difference between

         (A) the product of the current moving average percentage times the amount by which the outstanding loans of New York City offices and branches at the close of the taxable year for which the report is made exceeds the outstanding loans of New York City offices and branches at the close of the preceding calendar year, and

         (B) the deduction computed in accordance with Mim. 6209 and subparagraph (i) or (ii) of this paragraph; provided, however, that the total deduction allowable under this subparagraph for all taxable years shall not exceed the initial balance of the New York City reserve for bad debts as determined in subparagraph (i) or subparagraph (ii)(c) of this paragraph. A corporation or association claiming such additional deduction must attach a schedule to the return for the taxable year showing the computation of such deduction, the total of such deductions taken for all years (including that taken on the return), and the initial balance of the New York City reserve for bad debts as defined hereunder.

§ 10-02 Allocation of Income.

(Administrative Code §§ 11-620(2), 11-621(7), 11-628(2) and 11-629(1)(g))
  1. The New York City Financial Corporation Tax, Subchapter 3 of Chapter 6 of Title 11, New York City Administrative Code, is imposed upon that proportion of net income which is derived from business carried on within New York City. A corporation or association which maintains an office or place of business within the City, and not elsewhere, is taxable on all of its net income. A corporation or association which is doing business or carries on its business through offices or branches maintained both within the City and without the City must allocate its net income as provided in these regu- lations.
  2. Definitions.

   “Doing Business” and “Business Carried On.” A corporation or association is regarded as “doing business” or “carrying on business” within or without the City when it occupies, has or maintains an office, agency or branch where its functions are systematically and regularly carried on. In order to require an allocation of the income from business carried on within or without New York City, it is not necessary that the branch or agency maintained within or without the City conduct all functions of the banking business of the corporation or association. It is sufficient if the branch or office conducts some of the functions which the corporation or association is authorized to exercise regularly and with a fair measure of permanency and continuity.

  1. Allocation where business is carried on both within and without the City.

   (1) A corporation or association doing business or carrying on business both within and without the City which keeps accounts of the gross income and deductions of each office or branch, which, in the opinion of the Commissioner of Finance, accurately reflect the income from business carried on within the City of each office or branch, may report as its net income subject to tax the net income derived from the offices or branches maintained within the City. In all cases, however, the taxpayer must report the gross and net income of the corporation or association from all business carried on within and without New York City.

   (2) Where the corporation or association (other than an alien banking corporation or association) does not keep accounts of the gross income and deductions of each branch or agency so as to reflect accurately the net income from business carried on within the City, or the corporation or association elects to allocate and determine gross income and deductions under rules and regulations prescribed by the Commissioner of Finance (See: §§ 11-620(2), 11-628(2), 11-621(7) and 11-629(i)(g) of the Administrative Code), an allocation of gross income and deductions shall be made by a net income allocation formula as determined under subdivision (d) of this section.

   (3) A corporation or association which elects to allocate income and deductions by such net income allocation formula must use the formula in filing returns for all subsequent years to the year of adoption of the formula, unless the Commissioner of Finance consents to a change from the formula. Application for permission to change from use of the allocation formula shall be made at least 30 days prior to the close of the year the income of which is to measure the tax to be paid under the changed method.

   (4) If it shall appear to the Commissioner of Finance that the net income from New York City is not fairly and equitably reflected under the provisions of paragraphs (1) or (2), the Commissioner of Finance, in his discretion, may approve some other method which will more accurately reflect income within New York City. Application for permission to use an alternative method must be made, as provided in paragraph (3) above.

   (5) An alien banking corporation or association not reporting on the basis of separate accounting must allocate income and deductions in the same manner as for New York State franchise tax purposes, or by such other method approved by the Commissioner of Finance.

  1. Computation of net income allocation percentage.

   (1) If a corporation or association (other than an alien banking corporation or association) has a branch, office or agency outside New York City during the period covered by the report and its books and records do not accurately reflect the net income from business carried on within the City, or it does not elect to determine the proportion of its net income derived from business carried on within the City on the basis of accounts of income and deductions of each office or branch within the City, its net income from business carried on within the City shall be determined by multiplying net income by an allocation percentage. The net income allocation percentage, composed of four factors having different weights, is computed on the basis of the corporation’s or association’s:

      (i) payrolls within and without New York City,

      (ii) operating receipts within and without New York City,

      (iii) real and tangible personal property (including real property rented to it) within and without New York City, and

      (iv) deposits within and without New York City.

   (2) The net income allocation percentage is computed by adding together

      (i) the percentage of the corporation’s or association’s payroll factor, multiplied by two;

      (ii) the percentage of the corporation’s or association’s operating receipts factor, multiplied by two;

      (iii) the percentage of the corporation’s or association’s real and tangible personal property factor; and

      (iv) the percentage of the corporation’s or association’s deposits factor within New York City during the period covered by the report and dividing the total of such percentages by six.

   (3) For purposes of this paragraph, net income is gross income from all sources as defined in § 11-620 of the Administrative Code for corporations or associations taxable under Part 1 of Subchapter 3 of Chapter 6 of Title 11 and § 11-628 for corporations taxable under Part 2 of Subchapter 3, less the deductions provided in § 11-621 and § 11-629, respectively; subject to the adjustment provided in § 11-614(2) and § 11-625(2), respectively, provided, however:

      (i) In determining net income subject to allocation, no deduction for depreciation shall be allowed with respect to property for which a deduction was claimed under § 11-621(12) or § 11-629(1)(j), respectively, and that gain or loss from the sale or other disposition thereof shall be excluded. Any amount claimed under § 11-621(12) or § 11-629(1)(j) and gain or loss from the sale or other disposition of such property, computed by adjusting the basis of such property to reflect the deductions so allowed, shall be added to, or deducted from, the portion of net income allocated to New York City hereunder.

      (ii) The deduction for debts ascertained to be worthless and charged off within the year or a reasonable addition to a reserve for bad debts shall be the amount determined for New York State franchise tax purposes under 9-B or 9-C of the Tax Law.

  1. Computation of the payroll factor.

   (1) The percentage of the taxpayer’s payroll allocable to New York City is determined by dividing the wages, salaries and other personal service compensation of the taxpayer’s employees (except general executive officers) within New York City during the preceding calendar year by the total amount of compensation of all the taxpayer’s employees (except general executive officers) during the preceding calendar year.

   (2) Employees within New York City shall be all employees (including, but not limited to, bookkeeping, auditing, accounting, legal and personnel involved in the administration of all securities or loans) regularly connected with or working out of an office or place of business of the corporation or association within New York City, irrespective of where the services of such employees were employed.

   (3) General executive officers include the chairman, vice-chairman, president, vice-president, secretary, assistant-secretary, treasurer, assistant-treasurer, comptroller and all other officers charged with and performing general executive duties of the corporation or association. An executive officer whose duties or services are substantially restricted to one or more specific offices or branches, either within or without the City, or whose activities involve the administration of securities and loans, is not a general executive officer.

  1. Computation of the property factor.

   (1) The percentage of the taxpayer’s real and tangible personal property within New York City is determined by dividing the average fair market value of such property within New York City (without deduction of any encumbrances) by the average fair market value of all such property within and without New York City for the preceding calendar year. In determining such percentage, real property rented to the corporation or association, as well as real and tangible personal property owned by it, must be considered.

   (2) The average fair market value of real and tangible personal property owned by the corporation or association, both within and without New York City, is the price at which a willing seller not compelled to sell, will sell, and a willing buyer not compelled to buy, will buy, computed on a quarterly or more frequent basis. The fair market value of real property, both within and without New York City, which is rented to the taxpayer, is determined by multiplying the gross rent payable during the preceding calendar year by eight. The same methods of valuation must be used consistently with respect to property within and without the City. Any method of valuation adopted by the taxpayer on any report and accepted by the Commissioner of Finance may not be changed on any subsequent report without the prior approval of the Commissioner, and subject to such conditions and limitations which may be then imposed by the Commissioner.

   (3) The term “tangible personal property” means corporeal personal property, used in the conduct of the corporation’s or association’s business, such as business machines and furniture and fixtures, and does not include such intangibles as U.S. Government and Government Agency obligations; State, municipal and public securities; cash on hand, bonds, notes, mortgages and other evidences of indebtedness; or personal property acquired by foreclosure or in satisfaction of outstanding indebtedness.

   (4) The term “real property” means real estate and all improvements thereon, other than real estate acquired by foreclosure or transfers in satisfaction of outstanding in- debtedness.

  1. Computation of the operating receipts factor.

   (1) The percentage of a corporation’s or association’s receipts within New York City is determined by ascertaining the taxpayer’s operating receipts within the City during the period covered by the report and dividing the sum of the receipts by the taxpayer’s total operating receipts within and without New York City during such period. The following operating receipts are allocable to New York City:

      (i) Interest from loans directly administered by, or allocable on, the books and records of the corporation or association to New York City offices or branches.

      (ii) Rentals from safe deposit boxes serviced by New York City offices or branches.

      (iii) Rentals from property situated in New York City.

      (iv) Service charges directly allocable to the New York City office or branch handling the account.

      (v) Fees and commissions for services performed in New York City or by New York City offices or branches, or allocable to New York City offices or branches.

   (2) Receipts factor – interest from loans.

      (i) Where loans are directly administered from and by an office or branch, the interest from such loans is receipts allocable to New York City if the office or branch is situated in the City.

      (ii) If such loans are centrally administered and serviced, but the net income derived therefrom is regularly and properly allocated on the books and records of the corporation or association to an office or branch, the receipts from such loans may be apportioned in the same manner and are allocable to New York City if the office or branch is situated in the City.

      (iii) If any such loans are treated on the books and records of the corporation or association as an investment of the corporation or association, or are not properly allocable in the books and records of the corporation or association to an office or branch, the interest derived therefrom shall be excluded in computing the receipts factor.

   (3) Receipts factor – safe deposit box rentals. Rentals from safe deposit boxes are allocable to the branch that services the boxes.

   (4) Receipts factor – rents. Receipts from rentals or real and personal property situated in New York City are allocable to the City. Receipts from rentals include all amounts received by the taxpayer from the use or occupation of property, whether or not such property is owned by the corporation or association.

   (5) Receipts factor – service charges. Service charges are allocable to the office or branch that handles the account.

   (6) Receipts factor – fees and commissions. Fees and commissions are allocable to the office or branch that produced the income.

  1. Computation of the deposits factor.

   (1) In determining the percentage of a corporation’s or association’s deposits within New York City, due allowance must be made for variations in the amount of deposits held by the taxpayers during the preceding calendar year, both within and without New York City, by computing deposits on a quarterly basis.

   (2) The term “deposits” means demand deposits, savings accounts, Savings Certificates and any form of time deposits, no matter how termed, less total reserves in respect to such deposits.

   (3) A deposit is within New York City if, and so long as, in the case of a time deposit or demand account, it is domiciled at a New York City office or branch of the taxpayer; or, in the case of a Savings Certificate, if such certificate is issued by a New York City office or branch. A time deposit or saving deposit account is considered to be domiciled at a New York City office or branch if such account was opened at, or transferred to, a New York City office or branch of the taxpayer, no matter where subsequent deposits or withdrawals may be made, and so long as such account is maintained as an account of a New York City office or branch on the books of the taxpayer.

  1. Allocation of issued capital stock.

   (1) A corporation or association taxable under Part 1, of Subchapter 3 of Chapter 6 of Title 11, New York City Administrative Code, which is doing business or carrying on business through offices or branches maintained both within and without the City, must pay a minimum tax of not less than 1 mill except that for the years nineteen hundred seventy-one and those following such minimum tax shall be not less than one and one-quarter mills upon each dollar of that proportion of its issued capital stock on the last day of the calendar year preceding that in which such tax becomes due which its gross income from sources within New York City during such calendar year bears to its gross income derived from all business, both within and without the City, during said year.

   (2) In computing the minimum tax on its issued capital stock in the case of a corporation or association not reporting income and deductions on the basis of separate accounting, the part of its issued capital stock allocable to New York City shall be determined by multiplying its issued capital stock by the net income allocation percentage determined as provided in subdivision (d) of this section.

Chapter 11: General Corporation Tax

Subchapter A: Corporations Subject To Tax

§ 11-01 General.

(§ 11-603, subdivisions 1 and 4, Administrative Code.) Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code subjects to tax all corporations which are not subject to one of the specifically enumerated taxes imposed under some other title or part of the Administrative Code and which are not exempt from tax (See: 19 RCNY § 11-04, infra).

§ 11-02 Definitions.

Corporation. (§ 11-602(1), Administrative Code.)

  1. The term “corporation” includes an entity created as such under the laws of the United States, any State, territory or possession thereof, the District of Columbia, or any foreign country, or any political subdivision of any of the foregoing, which provides a medium for the conduct of business and the sharing of its gains.
  2. It also includes

   (i) a joint-stock company or association;

   (ii) any business conducted by a trustee or trustees wherein interest or ownership is evidenced by certificate or other written instrument, such as a Massachusetts or business trust, an investment trust and an entity treated as a real estate investment trust for Federal tax purposes; and

   (iii) a dissolved corporation which continues to conduct business (§ 11-603(3), Administrative Code).

  1. The term “corporation” does not include a membership or other nonstock corporation, unless it is doing business for profit.

Taxpayer. (§ 11-601(1), Administrative Code.) The term “taxpayer” means any corporation which is subject to the tax imposed by Subchapter 2 of Chapter 6 of Title 11, of the Administrative Code, and also includes a receiver, trustee, assignee or other fiduciary, or any officer or agent appointed by any court, who conducts the business of any such corporation § 11-603(3), Administrative Code).

§ 11-03 Corporations Subject to Tax.

(a) General.

   (1) The tax is imposed on every domestic and foreign corporation, with specified exceptions, whose activities include one or more of the following:

      (i) doing business in New York City in a corporate or organized capacity or in a corporate form; or

      (ii) employing capital in New York City in a corporate or organized capacity or in a corporate form; or

      (iii) owning or leasing personal or real property in New York City in a corporate or organized capacity or in a corporation form; or

      (iv) maintaining an office in New York City.

   (2) Except as provided in 19 RCNY § 11-04(b)(7), a corporation engaged in New York City in any one or more of the activities described in paragraph (1) of this subdivision is subject to tax even though its activities are wholly or partly in interstate or foreign commerce.

   (3) Pursuant to Public Law 86-272 (15 U.S.C. §§ 381 - 384), a foreign corporation is not subject to the general corporation tax if its activities in the State are limited to the solicitation of orders in New York City (or elsewhere in the State) by the corporation’s employees, representatives or independent contractors for sales of tangible personal property, which orders are sent outside New York State for approval or rejection, and which, if approved, are filled by shipment or delivery from a point outside New York State. (For further discussion of Public Law 86-272, see 19 RCNY § 11-04(b)(11), infra.)

   (4) A foreign corporation engaged in New York City in any one or more of the activities described in paragraph (1) of this subdivision is subject to tax regardless of whether it is authorized to do business in New York State.

   (5) If a partnership is doing business, employing capital, owning or leasing property or maintaining an office in New York City, then all of its corporate general partners are subject to the general corporation tax. The term “partnership” means a partnership, joint venture or other similar unincorporated entity. (For rules regarding the treatment of corporate limited partners, see 19 RCNY § 11-06, infra.)

   (6) A dissolved corporation that continues to conduct business is subject to the tax. (A corporation in liquidation that is not subject to the general corporation tax may be subject to the unincorporated business tax. See § 11-502(a) of the Administrative Code.)

  1. Doing business. (1) The term “doing business” is used in a comprehensive sense and includes all activities that occupy the time or labor of people for profit. Regardless of the nature of its activities, every corporation organized for profit and carrying out any of the purposes of its organization is deemed to be doing business for the purpose of the tax. In determining whether a corporation is doing business, it is immaterial whether its activities actually result in a profit or a loss.

   (2) Whether a corporation is doing business in New York City is determined by the facts in each case. Consideration is given to such factors as:

      (i) the nature, continuity, frequency, and regularity of the activities of the corporation in New York City;

      (ii) the purposes for which the corporation was organized;

      (iii) the location of the corporation’s offices and other places of business;

      (iv) the employment in New York City of agents, officers, and employees; and

      (v) the location of the actual seat of management or control of the corporation.

  1. Employing capital. The term “employing capital” is used in a comprehensive sense. Any of a large variety of uses, which may overlap other activities, may give rise to taxable status. In general, the use of assets in maintaining or aiding the corporate enterprise or activity in New York City will make the corporation subject to tax. Employing capital includes such activities as:

   (1) maintaining stockpiles of raw materials or inventories; or

   (2) owning materials and equipment assembled for construction.

  1. Owning or leasing property. The owning or leasing of real or personal property within New York City constitutes an activity that subjects a corporation to tax. Property owned by or held for the tax payer in New York City, whether or not used in the taxpayer’s business, is sufficient to make the corporation subject to tax. Property held, stored, or warehoused in New York City, whether on private premises or in public warehouse, creates taxable status. Property held as a nominee for the benefit of others creates taxable status. Also, consigning property to New York City may create taxable status if the consignor retains title to the consigned property.
  2. Maintaining an office. A corporation that maintains an office in New York City is engaged in an activity that makes it subject to tax. An office is any area, enclosure, or facility that is used in the regular course of the corporate business. A salesperson’s home, a showroom, a hotel room, or a trailer used on a construction job site may constitute an office.
  3. Examples. The following are examples of corporations that are subject to tax because they are doing business, or employing capital, or owning or leasing property in a corporate or organized capacity or maintaining an office in New York City:

   (1) A corporation is operated for and is organized for the purpose of buying and selling securities. It does not maintain a physical office anywhere, other than a statutory office in the state of its incorporation. Regular and continuous purchases of securities are directed by its officers or agents located in New York City. The corporation is subject to tax.

   (2) A corporation is created to take title to real property in New York City as an agent for the beneficial owner. The corporation is otherwise inactive. The corporation is subject to tax.

   (3) A corporation participates in a joint venture that carries on business in New York City. The corporation is not otherwise engaged in any activities in New York City. The corporation is subject to tax.

   (4) A manufacturing corporation has its factories and offices located outside New York City. Its sole activity in New York consists of holding or storing goods in a public warehouse. The corporation is subject ot tax.

   (5) A corporation that has no office or other place of business in New York City leases automobiles to New York City customers. It is subject to tax.

   (6) A corporation operates a commercial laundry. Its plant and offices are located outside New York City. Among its customers are hotels, restaurants, and other businesses located in New York City. Company-operated vehicles come into the City daily to pick up soiled laundry and to deliver the cleaned items. The corporation is subject to tax.

   (7) A corporation that operates several retail stores outside New York State, leases an office in New York City for the convenience of its buyers when they come to New York City. Salespeople for its suppliers call at the office to solicit orders. The merchandise is shipped by the suppliers directly to the offices of the corporation outside New York City. The corporation is subject to tax.

   (8) A corporation formerly engaged in manufacturing outside New York City, discontinues such business and transfers its office to New York City where its activities consist solely of the acquisition of bonds and the receipt of interest on such bonds and the holding of directors’ meetings. The corporation is subject to tax.

   (9) A foreign manufacturing corporation has its factory outside New York State. Its only activity in New York City is the solicitation of orders for its products through a sales office located in New York City. The orders are forwarded to its home office outside the State for acceptance and the merchandise is shipped by common carrier from the factory directly to the purchasers. The corporation is subject to tax.

   (10) A foreign manufacturing corporation has its factory outside New York State but maintains a stock of merchandise in Buffalo, New York. Its only activity in New York City is the solicitation of orders through traveling salesmen, or independent sales representatives, which orders are filled from its Buffalo warehouse. The corporation is subject to tax.

   (11) The facts are the same as in Example 10, except that the merchandise stored at the Buffalo warehouse is used exclusively to fill orders obtained from customers in upstate New York. Orders obtained from New York City customers are filled from its warehouse located outside New York State. The corporation is subject to tax.

   (12) A foreign corporation sends salespeople into New York City to solicit orders. The orders must be accepted at the home office of the corporation located in another state. The corporation displays goods in New York City at a space leased occasionally and for short terms. The corporation is subject to tax. (For further discussion of solicitation of sales issues, see 19 RCNY § 11-04(b)(11), infra, dealing with Public Law 86-272.)

   (13) [Reserved.]

§ 11-04 Corporations Not Subject to Tax.

(§ 11-603(4), Administrative Code.)
  1. A corporation which is subject to any of the following taxes is not subject to the general tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code;

   (1) the tax on banking corporations imposed by Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code;

   (2) the tax on utilities, imposed by Chapter 11 of Title 11 of the Administrative Code, except that any corporation, other than a utility corporation subject to the supervision of the New York State Department of Public Service, which is subject to the utility tax under Chapter 11 of Title 11 as a vendor of utility services shall be subject to the general corporation tax imposed by Subchapter 2 of Chapter 6 of Title 11, in the manner described in § 11-603(4).

  1. The following corporations are also exempt from the general corporation tax:

   (1) any trust company organized under a law of New York State, all of the stock of which is owned by not less than 20 savings banks organized under a law of New York State;

   (2) bank holding companies filing a combined return in accordance with § 11-646(f), Administrative Code;

   (3) an insurance corporation as defined in former § R46-41.0.4, Administrative Code (Repealed);

   (4) limited-profit housing companies organized pursuant to Article 2 of the Private Housing Finance Law;

   (5) housing development fund companies organized pursuant to the provisions of Article 11 of the Private Housing Finance Law;

   (6) organizations described in paragraph 2 or 25 of subsection (c) of § 501 of the Internal Revenue Code.

   (7) a corporation principally engaged in the operation of marine vessels whose activities in New York City are limited exclusively to the use of property in interstate or foreign commerce, provided, however, such a corporation will not be subject to the general corporation tax solely because it maintains an office in the City, or employs capital in the City in connection with such use of property;

   (8) corporations, including but not limited to corporations organized under the New York Not-For-Profit Corporations Law or the New York Religious Corporations Law, organized and operated for nonprofit purposes and not engaged in substantial commercial activities, which are not authorized to issue stock or saresor certificatesfor stock or shares, and no part of the net earnings of which insures to the benefit of any officer, director or member. Absent substantial evidence to the contrary;

      (i) a nonstock corporation described above that has been determined to be exempt by the Internal Revenue Service from Federal income taxation pursuant to subsection (a) of section 501 of the Internal Revenue Code will be presumed to be exempt from the general corporation tax; and

      (ii) a corporation denied an exemption from Federal income tax under Section 501 of the Internal Revenue Code will be presumed to be not organized and operated for non-profit purposes,

   (9) an Industrial Development Agency created pursuant to Article 18-A of the General Municipal Law.

   (10) an entity that is treated for Federal income tax purposes as a real estate mortgage investment conduit (REMIC);

   (11) foreign corporations that are exempt pursuant to the provisions of Public Law 86-272 (15 U.S.C. §§ 381 - 384).

      (i) Public Law 86-272 prohibits New York State and its political subdivisions including New York City from imposing taxes on or measured by net income on income derived within the State from interstate commerce by a foreign corporation if the activities of the corporation in New York State are limited to either or both of the following:

         (A) the solicitation of orders by employees or representatives in New York State for sales of tangible personal property, where the orders are sent outside New York State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside New York State, and

         (B) the solicitation of orders for sales of tangible personal property by employees or representatives in New York State in the name of or for the benefit of a prospective customer of such corporation, if the customer’s orders to the corporation are sent outside New York State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside New York State. The applicability of Public Law 86-272 to taxes imposed by New York City is determined by the nature of the corporation’s activities in the entire State. Therefore, if a corporation’s activities in New York City are limited to solicitation as described above and the corporation has no other activities in the State or its activities in the State are limited to the solicitation of orders in the State as described above, the corporation will not be subject to the general corporation tax. However, if in addition to sales solicitation activities in New York City, a foreign corporation carries on other activities in New York State sufficient to take it outside the scope of Public Law 86-272 for purposes of taxes imposed by New York State, Public Law 86-272 will not exempt the corporation from the general corporation tax.

      (ii) For purposes of this paragraph 11, if a foreign corporation engages in no other activities in New York State, the corporation will not be considered to have engaged in taxable activities in New York City during the taxable year merely by reason of sales in New York City or the solicitation of orders for sales in New York City, of tangible personal property on behalf of the corporation by one or more independent contractors. Such foreign corporation will not be considered to have engaged in taxable activities in New York City by reason of the maintenance of an office in the City by one or more independent contractors whose activities on behalf of the corporation in the City consist solely of making sales, or soliciting orders for sales, of tangible personal property.

      (iii) The term “independent contractor” means a commission agent, broker, or other independent contractor who is engaged in selling, or soliciting orders for the sale of tangible personal property for more than one principal and who holds himself of herself out as such in the regular course of his or her business activities. The term “representative” does not include an independent contractor.

      (iv) In order for a foreign corporation to be exempt from the general corporation tax by virtue of Public Law 86-272, the activities in New York State of employees or representatives must be limited to the solicitation of orders. The solicitation of orders includes offering tangible personal property and those ancillary activities, other than maintaining an office, that serve no independent business function apart from their connection to the solicitation of orders. Activities that are entirely ancillary to the solicitation of orders include:

         (A) the use of free samples and other promotional materials in connection with the solicitation of orders;

         (B) passing product inquiries and complaints to the corporations home office;

         (C) using automobiles furnished by the corporation;

         (D) advising customers on the display of the corporation’s products and furnishing and setting up display racks;

         (E) recruitment, training and evaluation of sales representatives;

         (F) use of hotels and homes for sales-related meetings;

         (G) occasional instances of intervention in credit disputes;

         (H) use of space at the salesperson’s home solely for the salesperson’s convenience. (However, see subparagraph (vi) of this paragraph as to loss of exemption for maintaining an office:)

         (I) participating in a trade show or shows provided that such participation is for not more than 14 days, or parts thereof, in the aggregate during the corporation’s taxable year for Federal income tax purposes. (However, see subparagraph (vi) of this paragraph as to loss of exemption for maintaining an office.)

      (v) Activities in New York State beyond the solicitation of orders will result in the loss of exemption unless such activities are de minimis. Activities will not be considered de minimis if such activities establish a nontrivial additional connection with New York State. Solicitation does not include those activities that the corporation would have reason to engage in apart from a desire to solicit orders but chooses to allocate to its in-State sales force. Activities that go beyond the solicitation of orders include but are not limited to:

         (A) making repairs to or installing the corporation’s products;

         (B) making credit investigations;

         (C) collecting delinquent accounts;

         (D) taking inventory of the corporation’s products for customers or prospective customer’s;

         (E) replacing the corporation’s stale or damaged products;

         (F) giving technical advice on the use of the corporation’s products.

      (vi) Maintaining an office, shop, warehouse, or stock of goods in New York State will result in the loss of exemption. However, a corporation will not be taxable solely because it maintains a supply of goods in New York State if such goods are used only as free samples in connection with the solicitation of orders. A corporation will be considered to be maintaining an office in New York State if the space is held out to the public as an office or place of business of the taxpayer. For example, a salesperson uses his or her house for business. A telephone, listed in the corporation’s name, is maintained at the salesperson’s house. The salesperson makes telephone contacts from the house or receives calls and orders at the house. The residence will be treated as an office of the corporation.

    1. A corporation will not be deemed to be doing business, employing capital, owning or leasing property in a corporate or organized capacity or maintaining an office in New York City because of:

      (i) the maintenance of cash balances with banks or trust companies or brokers in New York City;

      (ii) the ownership of shares of stock or securities kept in New York City in a safe deposit box, safe, vault or other receptacle rented for this purpose, or pledged as collateral security, or deposited in safekeeping or custody accounts with one or more banks or trust companies, or brokers who are members of a recognized security exchange;

      (iii) the taking of any action by any such bank or trust company or broker, that is incidental to the rendering of safekeeping or custodian service to such corporation;

      (iv) the maintenance of an office in the City by one or more officers or directors of the corporation who are not employees of the corporation, if the corporation is not otherwise doing business or employing capital in New York City and does not own or lease property in New York City;

      (v) the keeping of books or records of a corporation in New York City, if such books or records are not kept by employees of such corporation and such corporation does not otherwise do business, employ capital, own or lease property, or maintain an office in New York City;

      (vi) the participation in a trade show or shows, regardless of whether the corporation has employees or other staff present at such trade shows, provided the corporation’s activity at the trade show is limited to displaying goods or promoting services, no sales are made, any orders received are sent outside New York State for acceptance or rejection and are filled from outside the state, and provided that such participation is for not more than 14 days, or parts thereof, in the aggregate during the corporation’s taxable year for Federal income tax purposes; or

      (vii) any combination of the foregoing activities.

   (2) In addition, a corporation will not be subject to the general corporation tax if its sole connection with New York City is:

      (i) the maintenance of a statutory office at the address of its registered agent of the maintenance of a mailing address; or

      (ii) the mere ownership of shares of stock of corporations doing business in the City.

   (3) Effective for taxable years beginning on or after January 1, 1998, an alien corporation, as defined in § 11-603(2-a) of the Administrative Code, will not be deemed to be doing business, employing capital, owning or leasing property, or maintaining an office in New York City if its activities in the City are limited solely to investing or trading, for its own account, in (a) stocks and securities within the meaning of § 864(b)(2)(A)(ii) of the Internal Revenue Code, (b) commodities within the meaning of § 864(b)(2)(B)(ii) of the Internal Revenue Code, or (c) any combination of stocks, securities and commodities described in subparagraphs (a) and (b) above.

§ 11-05 Change of Classification.

(a) A corporation subject to tax under Subchapter 2 of Chapter 6 of Title 11, may, by reason of a change in the nature of its activities, cease to be subject to such tax and become taxable under some other chapter or subchapter of Title 11. Conversely, a corporation subject to tax under some other chapter or subchapter of Title 11, may, for the same reason, cease to be taxable thereunder and become subject to tax under Subchapter 2 of Chapter 6. The date on which any such change of classification becomes effective will be determined by the facts of each case.
  1. A corporation which becomes subject to tax under Subchapter 2 of Chapter 6 of Title 11, during one of its fiscal or calendar years by reason of a change in classification is treated in the same manner as a corporation which began to do business during such year (see: 19 RCNY § 11-13, infra). Similarly, a corporation which ceases to be subject to the tax imposed by Subchapter 2 of Chapter 6 of Title 11, during one of its fiscal or calendar years by reason of a change in classification is treated in the same manner as a corporation which ceases to do business in New York during such year (see: 19 RCNY § 11-14, infra).

§ 11-06 Corporations as Limited Partners.

(a) Subject to the provisions of paragraph (b) and (c) of this section, a corporation shall be deemed to be doing business in the City if it owns a limited partnership interest in a partnership that is doing business, employing capital, owning or leasing property, or maintaining an office in the City.
  1. A corporation whose only contact with the City is the ownership of a limited partnership interest in a limited partnership that is doing business, employing capital, owning or leasing property, or maintaining an office in the City will not be deemed to be doing business in the City if the partnership is a publicly-traded partnership as defined in § 7704 of the Internal Revenue Code unless:

   (1) the corporation is actively engaged in the conduct of the partnership’s business;

   (2) the corporation effectively controls the partnership; or

   (3) any general partner is effectively controlled by the corporation.

  1. A corporation whose only contact with the City is the ownership of a limited partnership interest in a portfolio investment partnership will not be deemed to be doing business in the City unless:

   (1) the corporation is actively engaged in the conduct of the partnership’s business; or

   (2) the corporation effectively controls the partnership; or

   (3) any general partner is effectively controlled by the corporation; or

   (4) the corporation entered into the limited partnership arrangement not for a valid business or economic purpose, but for the principal purpose of avoiding or evading the payment of tax.

  1. For purposes of paragraph (c) of this subdivision, the term “portfolio investment partnership” means a limited partnership that meets the gross income requirement of § 851(b)(2) of the Internal Revenue Code. The term “portfolio investment partnership” shall not include a dealer in stocks or securities (within the meaning of § 1236 of the Internal Revenue Code).

Subchapter B: Nature of Tax

§ 11-11 General.

Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code imposes a tax on every domestic and foreign corporation doing business, employing capital, owning or leasing property, or maintaining an office in New York City.

§ 11-12 Definitions.

Calendar and fiscal years. (§ 11-602(9), Administrative Code.) The term “calendar year” means a period of 12 calendar months ending on December 31 (for a period of less than 12 calendar months beginning on the date a taxpayer becomes subject to tax and ending on December 31), in cases where the taxpayer

   (1) keeps its books on the basis of such period, or

   (2) keeps its books on the basis of any period ending on any day other than the last day of a calendar month, or

   (3) does not keep books, and also includes, in the case of a taxpayer which changes the period on the basis of which it keeps books from a fiscal year to a calendar year, the period from the close of its last old fiscal year to and including the following December 31. The term “fiscal year” means a period of 12 calendar months ending on the last day of any month other than December (or a period of less than 12 calendar months beginning on the date a taxpayer becomes subject to tax and ending on the last day of any month other than December), in cases where the taxpayer keeps its books on the basis of such period, and also includes, in the case of a taxpayer which changes the period on the basis of which it keeps its books from a calendar year to a fiscal year or from one fiscal year to another fiscal year, the period from the close of its last old calendar or fiscal year to and including the date designated as the close of its new fiscal year. In general, the calendar or fiscal year on the basis of which the taxpayer is required to report for Federal income tax purposes is the calendar or fiscal year on the basis of which it is required to report for purposes of the tax imposed by Subchapter 2 of Chapter 6 of Title 11. Reports based on a 52-53 week accounting year will be accepted where such method of reporting is permissible and used for Federal tax purposes. If such method is used, a fiscal year which begins within seven days from the beginning of any calendar month shall be deemed for purposes of Subchapter 2 of Chapter 6 of Title 11 to have begun on the first day of such calendar month, and any fiscal year which ends within seven days from the end of any calendar month shall be deemed to have ended on the last day of such calendar month.

§ 11-13 Description of Tax.

(§ 11-603, Administrative Code.)
  1. The tax is imposed on every domestic and foreign corporation, with specified exceptions, for the privilege of doing business, or employing capital, or of owning or leasing property in New York City in a corporate or organized capacity, or of maintaining an office in the city. For exceptions, see 19 RCNY § 11-04, supra.
  2. The tax is imposed for each fiscal or calendar year of the taxpayer, or any part thereof, during which the taxpayer does business, employs capital, owns or leases property, or maintains an office in New York City.
  3. The tax for each such year or part thereof is measured by the taxpayer’s entire net income or capital, or by one of the other bases prescribed by paragraph (a) of subdivision 1 of § 11-604 of the Administrative Code, for such year or part thereof.
  4. Any corporation beginning to do business, employ capital, own or lease property, or maintain an office in New York City immediately becomes subject to tax. Its first privilege and base period is its first calendar or fiscal year (that is, the period beginning on the date it commenced to do business, employ capital, own or lease property, or maintain an office in New York City and ending on the last day of its accounting year). Its first report is due on the 15th day of March following the close of its calendar year or, in the case of a corporation keeping its books on the basis of a fiscal year, within two and one-half months after the close of such first fiscal year. For report by a taxpayer which ceases to be subject to tax, see 19 RCNY § 11-88, infra.

Example 1: A corporation, reporting on the basis of a calendar year, begins to do business in New York City on March 1, 1966 and continues to do business here throughout the balance of the year. The corporation is subject to the tax imposed for such privilege and is required to file a report on or before March 15, 1967. The tax on such report for the period March 1 to December 31, 1966 is measured as set forth in 19 RCNY § 11-31, infra.

Example 2: A corporation, reporting on the basis of a fiscal year ending November 30, begins to do business in New York City on March 1, 1966 and continues to do business here throughout the balance of its fiscal year. The corporation is subject to the tax imposed for such privilege and is required to file a report on or before February 15, 1967. The tax on such report for the period March 1 to November 30, 1966 is measured as set forth in 19 RCNY § 11-31, infra.

§ 11-14 Cessation Tax.

(§ 11-603(1), Administrative Code.)
  1. The tax is for all or any part of each calendar or fiscal year during which the taxpayer does business, employs capital, owns or leases property, or maintains an office in New York City. Accordingly, every taxpayer is required to pay a tax measured by its entire net income (or other applicable basis) up to the date on which it ceases to do business, employ capital, own or lease property, or maintain an office in New York City.
  2. A taxpayer may cease to be subject to tax under Subchapter 2 of Chapter 6 of Title 11, because of a change in the nature of its activities and, in such event, is required to pay a tax measured by its entire net income (or other applicable basis) up to the date of such cessation. As to such changes, see 19 RCNY § 11-05, supra.
  3. A corporation which is a member of a group taxed on the basis of a combined report, and which ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11 may, in the discretion of the Commissioner of Finance be permitted to be included in the next combined report of the group, instead of paying a separate tax covering the period up to the date of such cessation.

Subchapter C: Computation of Tax

§ 11-21 General.

(a) Under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code, every corporation is treated as a holding corporation to the extent that it holds investments in subsidiaries, as an investment trust to the extent that it holds other securities, and as a business corporation to the extent that it is engaged in ordinary business. In the case of every such corporation, Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code defines and treats differently

   (1) its subsidiary capital (capital invested in subsidiaries) and the income therefrom;

   (2) its investment capital and investment income (See 19 RCNY § 11-36 “Investment Capital” and 19 RCNY § 11-69 “Investment Income”); and

   (3) its business capital and business income (all capital other than subsidiary capital and investment capital, and all income other than investment income and income from subsidiary capital). However, for the sake of simplicity, the law gives some corporations which are predominantly business corporations an election to be taxed entirely as business corporations, and some corporations which predominantly hold investments in securities, an election to be taxed entirely as investment trusts.

  1. The taxpayer’s “entire net income,” or the portion thereof allocated to New York City, is the primary measure for the computation of the tax under Subchapter 2 of Chapter 6 of Title 11. In computing entire net income, all income from subsidiary capital (which does not include any recovery in respect of any war loss) and one-half of all dividends from nonsubsidiary corporations are excluded. The rate of the tax measured by entire net income is five and one-half percent for taxable years beginning before January 1, 1971, and six and seven-tenths percent for taxable years beginning on or after such date.
  2. Subchapter 2 of Chapter 6 of Title 11 also provides for three alternative bases for measuring the tax:

   (1) the tax on capital, measured by the value of assets (exclusive of subsidiary capital); (2) the tax measured by entire net income plus compensation paid to officers and certain stockholders; and

   (3) the fixed minimum tax of $25. In every case, the corporation is required to pay the tax measured by its entire net income, or one of the three alternative taxes, whichever is greatest. However, a real estate investment trust, as defined in subdivision 7 of § 11-603 of the Administrative Code, shall be subject only to the tax measured by its entire net income or the minimum tax of $25, whichever is greater. In addition, every corporation having any subsidiary capital is required to pay a tax measured thereby at the rate of one-half mill.

§ 11-22 Use of Dollar Amounts in Computation.

(a) Any amount required to be included in a report shall be entered at the nearest whole dollar amount. However, this does not apply to the items which must be taken into account in making the computations necessary to determine such amount. For example, each sale must be taken into account at its exact amount, including cents, in computing the amount of gross sales to be included in the tax report. A taxpayer may elect not to use whole dollar amounts by reporting all amounts in full, including cents, if a similar election is made for Federal tax purposes. Such election must be made at the time of filing the report and is irrevocable with respect to the taxable year covered by the report. A new election, however, may be made on any report for any subsequent taxable period.
  1. For the purpose of the computation to the nearest dollar, a fractional part of a dollar shall be disregarded unless it amounts to one-half dollar or more, in which case the amount (determined without regard to the fractional part of a dollar) shall be increased by one dollar.

Example:

Exact amount To be reported as
$500,000.49 $500,000.00
$500,000.50 $500,001.00
$500,000.51 $500,001.00

~

§ 11-23 Alternative Measures for Computation of Tax.

(§ 11-604(1)(a), Administrative Code.)
  1. Every corporation subject to tax under Subchapter 2 of Chapter 6 of Title 11 is required to pay:

   (1) a tax computed by one of the four alternative methods set forth below (whichever results in the highest tax), except that a real estate investment trust, as defined in subdivision 7 of § 11-603 of the Administrative Code, is required to pay only the tax determined under alternative (i) or alternative (iv), whichever is greater:

      (i) five and one-half percent for taxable years beginning before January 1, 1971 and six and seven-tenths percent for taxable years beginning on or after such date, of its entire net income 19 RCNY § 11-27, infra, or the portion thereof allocated to New York City;

      (ii) five and one-half percent for taxable years beginning before January 1, 1971 and six and seven-tenths percent for taxable years beginning on or after such date, of an amount equal to 30 percent of the balance remaining after adding to entire net income compensation paid to officers and certain stockholders and deducting therefrom $15,000 (or a proportionate part thereof in the case of a report for less than a year) and any net loss for the reported year, or the portion of such amount allocated to New York City;

      (iii) one mill (or one-fourth of a mill in the case of a cooperative housing corporation or a housing company organized and operated pursuant to the provisions of Article 2 or 4 of the Private Housing Finance Law) of the total of its business capital and investment capital, or the portion thereof allocated to New York City;

      (iv) $25; plus

   (2) a tax computed at the rate of one-half mill on the amount of its subsidiary capital, if any, or the portion thereof allocated to New York City. See 19 RCNY §§ 11-45 through 11-49, infra as to the tax measured by subsidiary capital.

  1. For purposes of this section, a cooperative housing corporation means a corporation:

   (1) having one and only one class of stock outstanding,

   (2) each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation,

   (3) no stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except on a complete or partial liquidation of the corporation, and

   (4) eighty percent or more of the gross income of which for the taxable year is derived from tenant-stockholders.

§ 11-24 Computation of Tax on Combined Reports.

(§ 11-605(4), Administrative Code.)

Where corporations are taxed on a combined basis, the tax will be measured by the combined entire net income or combined capital of all the corporations included in the combined report. (See: 19 RCNY § 11-32, infra.) As to when combined reports will be permitted or required, see 19 RCNY § 11-91, infra. For cross reference to other sections relating to combined reports, see 19 RCNY § 11-93, infra.

§ 11-25 Adjustments to Correct Distortions of Income or Capital.

(§ 11-605.5, Administrative Code.)
  1. In case it shall appear to the Commissioner of Finance that any agreement, understanding or arrangement exists between the taxpayer and any other corporation or any person or firm, whereby the activity, business, income or capital of the taxpayer within the City is improperly or inaccurately reflected, the Commissioner of Finance is authorized in his discretion to adjust items of income, deductions and capital, and to eliminate assets in computing any allocation percentage provided any income directly traceable thereto is also excluded from entire net income, so as equitably to determine the tax.
  2. Where (1) any taxpayer conducts its activity or business under any agreement, arrangement or understanding in such manner as either directly or indirectly to benefit its members or stockholders, or any of them, or any person or persons directly or indirectly interested in such activity or business, by entering into any transaction at more or less than a fair price which, but for such agreement, arrangement or understanding, might have been paid or received therefor, or

   (2) any taxpayer, a substantial portion of whose capital stock is owned either directly or indirectly by another corporation, enters into any transaction with such other corporation on such terms as to create an improper loss or net income, the Commissioner of Finance may include in the entire net income of the taxpayer the fair profits which, but for such agreement, arrangement or understanding, the taxpayer might have derived from such transaction.

§ 11-26 Tax Measured by Entire Net Income.

(a) The primary tax is measured by entire net income, or the portion thereof allocated to New York City, if such calculation results in a higher amount than that computed on any of the other three alternative bases. The rate of the tax measured by entire net income is five and one-half percent for taxable years beginning before January 1, 1971, and six and seven-tenths percent for taxable years beginning on or after such date.
  1. Entire net income is divided into business income and investment income. The portion of the entire net income allocated to New York City is determined by multiplying business income by a business allocation percentage, multiplying investment income by an investment allocation percentage, and adding together the results so obtained. (See: 19 RCNY §§ 11-61 et seq.)

§ 11-27 Definition of Entire Net Income.

(§ 11-602(8), Administrative Code.)
  1. Entire Net Income means total net income from all sources, and is the same as the taxable income which the taxpayer is required to report to the United States Treasury Department for purposes of the Federal income tax imposed by chapter 1 of the Internal Revenue Code or which the taxpayer would have been required to report if it had not made an election under subchapter S of chapter 1 of the Internal Revenue Code, with the exceptions hereinafter set forth, and subject to any modification required by paragraphs (d) and (e) of subdivision 3 of § 11-604 of the Administrative Code. However, neither the taxable income actually reported nor the taxable income actually determined for Federal income tax purposes is necessarily the same as the taxable income required to be reported for Federal income tax purposes under the provisions of the Internal Revenue Code. Ordinarily, the determination of the Commissioner of Internal Revenue is followed, but it is not binding on the Commissioner of Finance.
  2. Federal Taxable Income is the starting point in the computation of entire net income. This means taxable income as defined in section 63 of the Internal Revenue Code, not any special type of taxable income such as “investment company taxable income” however, the taxable income of a real estate investment trust is its “real estate investment trust taxable income” as defined in paragraph 2 of subdivision (b) of § 857 (as modified by § 858) of the Internal Revenue Code, plus the amount taxable under paragraph 3 of subdivision (b) of § 857 of such code. After determining Federal taxable income, it must be adjusted as follows:

   (1) Add to Federal taxable income:

      (i) all interest income which has not been included in computing Federal taxable income, such as interest on state and municipal bonds and certain obligations of the United States and its instrumentalities, less interest incurred to carry such investment, to the extent such interest has not been deducted in computing Federal taxable income;

      (ii) all Federal taxes on or measured by income or profits which were deducted in computing Federal taxable income;

      (iii) net operating losses of other years which were deducted in computing Federal taxable income;

      (iv) all New York State franchise taxes imposed under Article 9 or 9-A of the Tax Law which were deducted in computing Federal taxable income;

      (v) all New York City general corporation taxes imposed under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code;

      (vi) the amount deducted in computing Federal taxable income for interest on indebtedness (whether or not evidenced by written instrument) directly or indirectly owed to an individual stockholder or members of his immediate family (brothers and sisters of the whole or half blood, spouse, ancestors and descendants) who, in the aggregate, own beneficially more than five percent of the taxpayer’s issued capital stock, or to a corporate stockholder including its subsidiaries which owns beneficially more than five percent of the taxpayer’s issued capital stock, minus 10 percent of the amount so deducted or $1,000, whichever is larger. However, this provision does not apply to

         (A) interest paid or accrued on bonds or other evidences of indebtedness issued, with stock, pursuant to a bona fide plan of reorganization to persons who, prior to such reorganization, were bona fide creditors of the taxpayer or any predecessor corporation, but were not stockholders thereof, or

         (B) interest paid by a taxpayer all of the entire net income of which is allocated by the investment allocation percentage (see: 19 RCNY § 11-68(a) and (b), infra).

      (vii) all losses from subsidiary capital which were deducted in computing Federal taxable income; and

      (viii) in the case of a taxpayer organized outside the United States, all income from sources outside the United States less all allowable deductions attributable thereto, which were not taken into account in computing Federal taxable income.

      (ix) the amount deducted in computing Federal taxable income for interest directly or indirectly attributable, and any other amount directly attributable as a carrying charge or otherwise, to subsidiary capital or to income, gains or losses from subsidiary capital, except to the extent not required in the exercise of discretion by the Commissioner of Finance.

   (2) Deduct from taxable income:

      (i) all dividends, interest and gains from subsidiary capital (which does not include any recovery in respect of any war loss) which were taken into account in computing Federal taxable income, but not any other income from subsidiaries;

      (ii) fifty percent of all dividends from corporations other than subsidiaries, which were included in computing Federal taxable income;

      (iii) income, war-profits, and excess profits taxes imposed by foreign countries or possessions of the United States, allocable to income included in entire net income, any part of which was allowed as a credit against the Federal income tax under the applicable provisions of the Internal Revenue Code;

      (iv) all amounts received for the operation of school buses from school districts and from non-profit corporations and associations, organized and operated exclusively for religious, charitable or educational purposes, less any deductions allowed in computing Federal taxable income which are directly or indirectly attributable to such receipts;

      (v) a net operating loss deduction (See: 19 RCNY § 11-28, infra, for method of computation).

  1. For purposes of this subdivision, receipts for the operation of school buses means receipts for the transportation of pupils, teachers and other persons acting in a supervisory capacity, to and from school or school activities in omnibuses subject to the requirements of subdivision 20 of § 375 of the Vehicle and Traffic Law. Deductions attributable to school bus receipts may be determined from the corporate books, if in the opinion of the Commissioner of Finance, the books properly disclose the deductions attributable to school bus receipts. Otherwise, the deductions attributable to school bus receipts may be determined by applying to total allowable deductions the percentage which school bus receipts bear to total receipts from transportation by omnibus, or by any other method approved by the Commissioner of Finance.
  2. Recoveries with respect to war losses are required to be included in entire net income, to the extent included in Federal taxable income, irrespective of whether the war losses were theretofore deducted in computing entire net income under Subchapter 2 of Chapter 6 of Title 11, unless the corporation elected under the provisions of the Internal Revenue Code to exclude such recoveries from Federal taxable income in the year of recovery resulting in a computation or recomputation of any tax imposed by the United States. (See: 19 RCNY § 11-84, infra.)
  3. At the election of the taxpayer, a deduction from entire net income will be allowed for expenditures for the construction, reconstruction, erection or improvement of industrial waste treatment facilities and air pollution control facilities, computed as provided in paragraph (g) of subdivision 8 of § 11-602 of the Administrative Code.
  4. With respect to gain derived from the sale or other disposition of any property acquired prior to January 1, 1966 which had a Federal adjusted basis on such date lower than its fair market value on January 1, 1966 or the date of its sale or other disposition prior thereto, except property described in subsections 1 and 4 of § 1221 of the Internal Revenue Code, there shall be deducted from entire net income, the difference between

   (1) the amount of the taxpayer’s Federal taxable income, and

   (2) the amount of the taxpayer’s Federal taxable income (if smaller than the amount described in (1) above) computed as if the Federal adjusted basis of each such property (on the sale or other disposition of which gain was derived) on the date of the sale or other disposition had been equal to either

      (i) its fair market value on January 1, 1966 or the date of its sale or other disposition prior to January 1, 1966, plus or minus all adjustments to basis made with respect to such property for Federal income tax purposes for periods on and after January 1, 1966 or

      (ii) the amount realized from its sale or disposition, whichever is lower; provided, however, that the total modification provided by this paragraph may not exceed the amount of the taxpayer’s net gain from the sale or other disposition of all property.

  1. The entire net income of a real estate investment trust shall be computed without regard to the modification required by clause (2) of paragraph (a) and by paragraph (f) of subdivision 8 of § 11-602 of the Administrative Code.
  2. Each corporation included in a Federal consolidated group must compute its Federal taxable income for purposes of section 11-602 of the Administrative Code as if such corporation had computed its Federal taxable income on a separate basis for Federal income tax purposes. Provided, however, in the case of a target corporation, as defined in section 338(d)(2) of the Internal Revenue Code, that is a member of a selling consolidated group, as defined in section 338(h)(10)(B) of the Internal Revenue Code, with respect to which an election under section 338(h)(10) has been made, such election shall be recognized for purposes of Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code. For purposes of determining entire net income, the Federal taxable income of such target corporation shall include any gain or loss on the deemed asset sale by such target corporation recognized by virtue of such election. For purposes of determining entire net income, the Federal taxable income of a member of the selling consolidated group, as so defined, that is subject to tax under such Subchapter shall not include any gain or loss on the sale or exchange of stock of such target corporation not recognized by virtue of such election.
  3. For purposes of determining entire net income of an affiliated target corporation, as defined in Treasury Regulation section 1.338(h)(10)-1(b)(3) that is a member of a selling affiliated group that does not file a federal consolidated return, and for which an election under section 338(h)(10) of the Internal Revenue Code has been made, the Federal taxable income of such affiliated target corporation shall include any gain or loss on the deemed asset sale by such affiliated target corporation recognized by virtue of such election. For purposes of determining entire net income of the selling affiliate of such affiliated target corporation, Federal taxable income shall not include any gain or loss on the sale or exchange of stock of such affiliated target corporation not recognized by virtue of such election.
  4. Because the starting point for determining the entire net income of an S corporation is the taxable income that the corporation would have been required to report for Federal tax purposes had no S election been made, any election pursuant to section 338(h)(10) of the Internal Revenue Code made with respect to a target corporation that is an S corporation for Federal tax purposes will be deemed to be an invalid election and will not be recognized for purposes of Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code. If pursuant to this subdivision, a section 338(h)(10) election of an S corporation is not recognized, the corresponding election pursuant to section 338(g) of the Internal Revenue Code will be deemed invalid and will not be recognized for purposes of such Subchapter. See Treas. Reg. § 1.338(h)(10)-1(c)(4). As a consequence of the nonrecognition of the section 338(g) election pursuant to this subdivision, the basis of the assets of the target corporation will be determined without regard to any adjustments made pursuant to section 338(b).

§ 11-28 Net Operating Loss Deduction.

(§ 11-602(8)(f), Administrative Code.)
  1. A deduction similar to that allowed under § 172 of the Internal Revenue Code may be allowable in computing entire net income for the purposes of Subchapter 2 of Chapter 6 of Title 11. For New York City tax purposes, as for Federal tax purposes, except as provided in subdivision (b) of this section, a net operating loss may be carried back to each of the three taxable years preceding the year in which the loss was sustained, and may be carried forward to each of the five following taxable years. The New York `City net operating loss deduction is presumably the same as that allowed for Federal tax purposes, subject to three limitations explained hereunder.
  2. One of these limitations is that no deduction is allowable for a loss sustained during any taxable year in which the taxpayer was not subject to tax under Subchapter 2 of Chapter 6 of Title 11.

Example 1: A corporation is incorporated in Pennsylvania in January, 1967. During the taxable year 1967, it sustains an operating loss of $10,000. In January, 1968, it begins to do business in New York City. For the taxable year 1968, it has entire net income of $10,000. No deduction is allowed for any part of the loss sustained in 1967, since the corporation was not subject to New York City General Corporation Tax in 1967.

  1. Another limitation on the New York City net operating loss deduction is that any net operating loss which may be carried back or forward for Federal tax purposes must be adjusted to reflect the additions and subtractions required by 19 RCNY § 11-27 above.

Example 2: For the calendar year 1969, a taxpayer has Federal gross income of $400,000, including $100,000 dividends from nonsubsidiary corporations, and it has deductible operating expenses of $400,000, including $5,000 New York franchise tax and $5,000 New York City General Corporation Tax. Its Federal net operating loss is $85,000 and its New York City net operating loss is $40,000, computed as follows:

Federal    
Gross income   $400,000
Less operating expense   $400,000
Taxable income before special deductions   0
Less special dividends – received deduction   $85,000
Net operating loss   ($85,000)
New York City    
Federal taxable income (loss)   ($85,000)
Add amount of Federal deductions for    
New York franchise tax $5,000  
City General Corporation Tax $5,000  
Dividends received $85,000 $95,000
    $10,000
Subtract    
50 percent of dividends received   $50,000
New York City net operating loss   ($40,000)

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Example 3: If the dividends in example 2 were from subsidiaries, the New York City net operating loss would be $90,000, computed as follows:

Federal taxable income (loss)   ($85,000)
Add amount of Federal deductions for    
New York franchise tax $5,000  
City General Corporation Tax $5,000  
Dividends received $85,000 $95,000
    $10,000
Subtract    
Dividends from subsidiaries   $100,000
New York City net operating loss   ($90,000)

~

  1. The third limitation on the New York City net operating loss deduction is that in any year it may not exceed the deduction allowable for that year for Federal tax purposes under § 172 of the Internal Revenue Code.

Example 4: If the taxpayer in example 3 in 1966 and 1967 had Federal gross income of $500,000, including $100,000 of dividends from subsidiary corporations and expenses of $350,000 including New York franchise taxes of $5,000 and New York City General Corporation Tax of $5,000, its Federal and City net operating loss deductions will be $65,000 in 1966 and $20,000 in 1967, computed as follows:

Federal

  1966  
Gross income   $500,000
Expense   $350,000
    $150,000
Less dividends received   $85,000
    $65,000
Net operating loss deduction (out of total Federal loss for 1969 of $85,000)   $65,000
Taxable income   0

~

  1967  
Gross income   $500,000
Expenses   $350,000
    $150,000
Less dividends received   $85,000
    $65,000
1969 operating loss carry-back $85,000  
Less amount deducted in 1966 $65,000  
Net operating loss deduction   $20,000
Taxable income   $45,000

~

New York City

  1966  
Federal taxable income   0
Add    
New York franchise tax $5,000  
City General Corporation Tax $5,000  
Deduction for dividends $85,000  
Federal net operating loss deduction $65,000 $160,000
    $160,000
Less 100 percent of dividends   $100,000
    $60,000
Net operating loss deduction (out of total New York City loss for 1969 of $90,000)   $65,000
Entire net income (loss)   ($5,000)
     

~

  1967  
Federal taxable income   $$45,000
Add    
New York franchise tax $5,000  
City General Corporation Tax $5,000  
Deduction for dividends $85,000  
Federal net operating loss deductions $20,000 $115,000
    $160,000
Less 100 percent of dividends   $100,000
    $60,000
Net operating loss deduction (the unused balance of the New York City loss of $90,000 for 1969 – see example 3, supra – would be $25,000, but the New York City deduction may not exceed the Federal deduction   $20,000
Entire net income   $40,000

~

Since allowance of the net operating loss deduction in 1966 results in a net loss for the carry-back year, the taxpayer will be subject to tax for that year on one of the alternative bases mentioned in 19 RCNY § 11-23, supra. It should be noted that the $5,000 loss shown above may be subtracted in determining the base of the alternative tax measured by entire net income plus compensation paid to officers and stockholders (See: 19 RCNY § 11-34, infra). It may not, however, be carried back or forward to any other year as a net operating loss deduction. Although deductions totaling only $85,000 are allowed for 1966 and 1967 on account of the $95,000 loss sustained in 1969, the $10,000 balance cannot be carried forward to any year subsequent to 1967. Because, for Federal tax purposes, the entire amount of the 1969 loss has been used up in the 1966 and 1967 deductions, no Federal deductions will be allowable in any other year, and the New York City deduction for any year can never exceed the Federal deduction.

Example 5: In 1969 a corporation has a Federal net operating loss of $10,000 and a New York City net operating loss of $8,000. The corporation is allowed a Federal deduction of $10,000 for said loss in 1966. In 1966 its New York City General Corporation Tax was computed on the mill tax basis (see: 19 RCNY § 11-35, infra). There was, thus, no income base for the 1966 City General Corporation Tax against which the 1969 New York City operating loss can be applied. Nor can any New York City deduction on account of this loss be allowed in 1967 or any other year since (a) the Federal deduction on account of the loss was wholly allowed for 1966, (b) it was allowed in no part for any other year, and (c) the New York City deduction can never exceed the Federal deduction.

  1. The fact that a net operating loss is carried back or forward as a deduction in some other year does not prevent its use in computing, for the year in which the loss was sustained, the tax measured by entire net income plus compensation paid to officers and stockholders (see: 19 RCNY § 11-34, infra).

Example 6: In 1969 a corporation paid salaries of $30,000 to its officers and stockholders and sustained a New York City net operating loss of $10,000 for which it is allowed a deduction of the same amount against its entire net income for 1966. Such net operating loss would nevertheless be taken into consideration in computing the third alternative tax for 1969, as follows:

Salaries minus $15,00 $15,000
Net operating loss $10,000
  $5,000
30 percent of such balance $1,500
Tax at 5 1/2 percent $82.50

~

    1. In the case of a corporation which reports for New York City General Corporation Tax purposes on a combined basis with one or more related corporations, either in the year in which a net operating loss is sustained or in the year in which a deduction is claimed on account of such loss, the allowance of such deduction is subject to the same limitations which would apply for purposes of the Federal income tax if such corporation had filed for such year a consolidated Federal income tax return with the same related corporations. These limitations apply to allowance of the New York City net operating loss deduction regardless of whether in fact such corporation, for Federal income tax purposes, filed an individual or a consolidated return.

   (2) In general, any carry-back or carry-over from a year in which a combined report was filed (for New York City General Corporation Tax purposes) must be based upon the combined net operating loss of the group of corporations filing such report. The portion of such combined loss attributable to any member of the group which files a separate report for a preceding or succeeding taxable year will be an amount bearing the same relation to the combined loss as the net operating loss of such corporation bears to the total net operating losses of all members of the group having such losses, to the extent that they were taken into account in computing the combined net operating loss.

Example 7: In 1966, X Corp. filed a separate New York City General Corporation Tax report showing entire net income of $20,000 and also filed a separate Federal income tax return showing Federal taxable income of the same amount. In 1969, it filed a separate Federal return showing a net operating loss of $10,000 but joined with Y Corp. and Z Corp. in filing a combined New York City General Corporation Tax report showing the following:

X Corp. – net operating loss ($10,000)
Y Corp. – net operating loss ($20,000)
Z Corp. – entire net income $15,000
Combined net operating loss ($15,000)

~

For New York City General Corporation Tax purposes, the deduction allowable to X Corp. against its 1966 income must be based upon the combined net operating loss shown above, and the portion of the combined loss attributable to X Corp. is one-third thereof or $5,000. This is because the net operating loss of X Corp. was one-third of the total net operating losses of all members of the combined group having such losses (X Corp., $10,000 and Y Corp., $20,000).

§ 11-29 Entire Net Income of Certain Bridge Commissions.

(§ 11-602(8)(e), Administrative Code.) The entire net income of any bridge commission created by the act of Congress to construct a bridge across an international boundary is its gross income less the expense of maintaining and operating its properties, the annual interest on its bonds and other obligations, and the annual charge for the retirement of such bonds or obligations at maturity.

§ 11-30 Year in Which Income or Deductions Included in Entire Net Income.

(§ 11-602(8)(d), Administrative Code.) In general, the method of accounting used in computing taxable income for Federal income tax purposes is used in computing entire net income. However, whenever the Commissioner of Finance deems it necessary in order properly to reflect entire net income of the taxpayer, he may determine the year or period in which any item of income or deduction shall be included, without regard to the method of accounting used by the taxpayer.

Example: A taxpayer has a building, installation or construction contract covering a period in excess of one year. The taxpayer keeps his books so as to reflect the total income derived from the contract in the taxable year in which the contract is finally completed, and reports its Federal taxable income accordingly. The Commissioner of Finance may require that income from the contract be apportioned over the entire contract period, on the basis of percentage of completion in each year, or some other appropriate basis.

§ 11-31 Adjustment of Entire Net Income to Period Covered By Report.

(a) If the entire net income required to be reported under Subchapter 2 of Chapter 6 of Title 11 is for a period other than the period covered by the taxpayer's Federal income tax return, its Federal taxable income is first adjusted in the manner set forth in 19 RCNY § 11-27, then divided by the number of calendar months or major parts thereof covered by the Federal income tax return, and the result multiplied by the number of calendar months or major parts thereof covered by the report under Subchapter 2 of Chapter 6 of Title 11.

Example: A corporation was organized in 1959 under the laws of a State other than New York, in which other state it carried on its business until March 1, 1966, when it began to do business in New York City. It filed its return for Federal income tax purposes for the calendar year 1966, wherein its taxable income required to be reported was $70,000. In computing its entire net income for the period from March 1, 1966 to December 31, 1966, its Federal taxable income for the calendar year 1966 ($70,000) is first adjusted to conform to entire net income as defined in Subchapter 2 of Chapter 6 of Title 11, and then divided by 12 and the result multiplied by 10.

  1. The method of computing entire net income set forth in the above example is, under similar circumstances, also applicable to corporations reporting on a fiscal year basis for Federal income tax purposes.
  2. However, if in the opinion of the Commissioner of Finance this method does not properly reflect the taxpayer’s net income for franchise tax purposes during the period covered by its report, the Commissioner may determine entire net income solely on the basis of the taxpayer’s income during such period.

§ 11-32 Computation of Entire Net Income on Combined Reports.

In the case of combined reports, all intercompany dividends are eliminated in computing combined entire net income. As to when combined reports will be permitted or required, see 19 RCNY § 11-91, infra.

§ 11-33 Adjustments to Correct Distortions of Income.

For adjustments of income and deductions to correct distortions, see 19 RCNY § 11-25, supra.

§ 11-34 Computation of Tax Measured By Entire Net Income Plus Compensation.

(§ 11-604(1), Administrative Code.)
  1. An alternative basis for measuring the primary tax is entire net income plus certain compensation with various adjustments, or the portion of such sum allocable to New York City, if such calculation results in a higher amount than that computed on any of the other three alternative bases. The rate of the tax measured by income plus compensation is five and one-half percent for taxable years beginning before January 1, 1971, six and seven-tenths percent for taxable years beginning on or after January 1, 1971 and ending on or before December 31, 1974, ten and five one-hundredths percent for taxable years beginning on or after January 1, 1975 and before January 1, 1977, nine and one half percent for taxable years beginning on or after January 1, 1977 and before January 1, 1978, nine percent for taxable years beginning on or after January 1, 1978 and before January 1, 1987, and eight and eighty-five one-hundredths percent for taxable years beginning after December 31, 1986. The applicable rates for taxable years beginning in 1974 and ending in 1975 shall be those set forth in Administrative Code § 11-604(1)(C).
  2. The measure of the tax is computed as follows:

   (1) Add to the amount of entire net income or net loss (treated as a negative figure) (see example 4) for the year, if any,

      (i) all salaries and other compensation paid to every stockholder owning in excess of five percent of its issued capital stock, but only if and to the extent that a deduction was allowed for such salaries and compensation in computing entire net income (or net loss); and

      (ii) to the extent not required by subparagraph (i),

         (A) for taxable years beginning before July 1, 1996, all salaries and other compensation paid to the taxpayer’s elected or appointed officers, but only if and to the extent that a deduction was allowed for such salaries and compensation in computing entire net income (or net loss);

         (B) for taxable years beginning on or after July 1, 1996 but before July 1, 1998, 75 percent of the total amount of salaries and other compensation paid to the taxpayer’s elected or appointed officers for which a deduction was allowed in computing entire net income (or net loss);

         (C) for taxable years beginning on or after July 1, 1998 but before July 1, 1999, 50 percent of the total amount of salaries and other compensation paid to the taxpayer’s elected or appointed officers for which a deduction was allowed in computing entire net income (or net loss); and

         (D) for taxable years beginning on or after July 1, 1999, no part of salaries and other compensation paid to the taxpayer’s elected or appointed officers.

      (iii) Notwithstanding anything to the contrary in subparagraph (ii) of this paragraph (1), the full amount of salaries or other compensation paid to any elected or appointed officer for which a deduction was allowed in computing entire net income (or net loss) shall be added to that amount if such officer was, at any time during the taxable year, a stockholder owning more than five percent of the taxpayer’s issued capital stock.

   (2) Deduct from such total

      (i) for taxable years beginning before July 1, 1997, § 15,000,

      (ii) for taxable years beginning on or after July 1, 1997 but before July 1, 1998, $30,000,

      (iii) for taxable years beginning on or after July 1, 1998, $40,000, (or a proportionate part of the applicable amount in the case of a return for less than a year.)

   (3) Multiple the balance by 30 percent.

  1. An elected or appointed officer includes the chairman, president, vice-president, secretary, assistant secretary, treasurer, assistant treasurer, comptroller, and also any other officer, irrespective of his title, who is charged with and performs any of the regular functions of any such officer. A director is not an elected or appointed officer unless he performs duties ordinarily performed by an officer. However, there must be included all compensation received by an officer from the corporation in any capacity, including director’s fees.
  2. A stockholder owning in excess of five percentum of its issued capital stock is a person or corporation who is the beneficial owner of more than five percent of the capital stock of the taxpayer, issued and outstanding. Rules for determining the beneficial ownership of stock are set forth in § 11-46(a), “subsidiary,” infra.
  3. The provision for measuring the tax on the basis of entire net income plus compensation is designed to prevent tax avoidance by the distribution of profits in the form of excessive salaries. However, measurement of the tax on such basis does not affect the power of the Commissioner of Finance to disallow deductions claimed for unreasonable salaries in computing entire net income.
  4. The provisions of subdivision (b) of this section are illustrated by the following examples:

Example 1: HCO Corporation is a calendar year taxpayer with three shareholders, B, C and D. B owns 4% and C and D each own 48% of HCO’s stock. HCO has two subsidiaries. For calendar year 1999, HCO’s gross income, other than income from its subsidiaries is $2,000,000. HCO has no investment income or capital. HCO’s business allocation percentage is 100%. B is an officer of HCO; C and D are employees but not officers. HCO pays B a salary of $250,000 and C and D each a salary of $500,000. All of B’s salary is attributable to subsidiary capital. No portion of C’s or D’s salary is attributable to subsidiary or investment capital or income. HCO has other deductions of $700,000, of which HCO attributes $100,000 to subsidiary capital and $600,000 to business capital. HCO’s federal taxable income is $50,000. After adding back deductions attributable to subsidiary capital, HCO’s entire net income is $400,000. The tax on the entire net income base would be $35,400 (8.85% × $400,000). HCO is not subject to tax on the capital base. HCO’s alternative tax base is determined as follows:

Entire net income $400,000
plus  
C and D’s salaries $1,000,000
less  
fixed dollar amount ($40,000
  $1,360,000
multiplied by 30% ×  .30
  $408,000

~

B’s salary is not added back because no deduction was allowed for it in determining entire net income. The tax on the alternative basis would be $36,108 ($408,000 × 8.85%). Therefore, HCO pays tax on the alternative tax basis.

Example 2: The facts are the same as in example 1 except that only 60% of B’s salary is attributable to subsidiary capital and, therefore, $150,000 of B’s salary is disallowed as an expense attributable to subsidiary capital. After adding back that portion of B’s salary attributable to subsidiary capital, HCO’s entire net income is $300,000. For calendar year 1999, only 50% of that portion of B’s salary deductible in determining HCO’s entire net income is added back in calculating the alternative tax base. HCO’s alternative tax base is determined as follows:

Entire net income $300,000
plus  
C&D’s salaries $1,000,000
plus 50% of B’s deductible salary $50,000
less  
Fixed dollar amount ($40,000)
  $1,310,000
Multiplied by 30% ×  .30
  $393,000

~

The tax on the alternative base would be $34,781 which is more than the tax calculated on the entire net income base ($26,550). Therefore, HCO would pay tax on the alternative base.

Example 3: The facts are the same as in Example 1 but D is an officer but not a shareholder of HCO and the taxable year is calendar year 2000. No part of B’s or D’s salary is added back for years beginning after June 30, 1999. HCO’s alternative tax base is determined as follows:

Entire net income $400,000
plus  
C’s salary $500,000
less  
fixed dollar amount ($40,000)
  $860,000
multiplied by 30% ×  .30
  $258,000

~

The tax on the alternative base would be $22,833 ($258,000 × 8.85%). Because that amount is less than the tax measured by entire net income, $35,400, HCO would pay tax on the entire net income basis.

Example 4: ABC Corporation is a calendar year taxpayer. For calendar year 2000, ABC’s gross income is $1,000,000 all of which is business income. ABC’s business allocation percentage is 100%. ABC pays a salary of $700,000 to A, its vice president for finance. A also owns 6% of the stock of ABC. ABC has $400,000 of other deductions. ABC has a net loss for the year of ($100,000). ABC is not liable for tax on the capital base. ABC’s alternative tax base is calculated as follows:

Net loss ($100,000)
plus  
A’s salary $700,000
less  
fixed dollar amount ($40,000)
  $560,000
multiplied by 30% ×  .30
  $168,000

~

Because A owns more than 5% of ABC’s stock, all of A’s salary is added back in calculating the alternative tax base. The tax calculated on the alternative base is $14,868, which is higher than the tax on the ENI base, $0. Therefore, ABC pays tax on the alternative base.

§ 11-35 Computation of Tax Measured By Business and Investment Capital.

(§ 11-604(1), Administrative Code.)

An alternative basis for measuring the primary tax is total business and investment capital, or the portion thereof allocated to New York City, if such calculation results in a higher amount than that computed on any of the other three alternative bases. The rate of tax is one mill (or one-fourth of a mill in the case of a cooperative housing corporation or a housing company organized and operating pursuant to the provisions of Article 2 or 4 of the Private Housing Finance Law) on each dollar of total or allocated business and investment capital.

§ 11-36 Definition of Business Capital.

(§ 11-602(b), Administrative Code.)
  1. The term “business capital” means the total average fair market value of all the taxpayer’s assets (whether or not shown on its balance sheet), exclusive of stock issued by the taxpayer or assets constituting subsidiary capital (19 RCNY § 11-46, “subsidiary capital,” infra) or investment capital (19 RCNY § 11-36, “investment capital,” supra), less current liabilities (other than loans or advances outstanding for more than a year) payable by their terms on demand or not more than one year from the date incurred, to the extent such liabilities are not deducted in computing subsidiary capital or investment capital.
  2. Liabilities so deductible include notes, accounts payable, wages payable, accrued taxes, expenses and interest. Notes and other written obligations payable by their terms on demand or not more than one year from their date, which are regularly renewed from year to year, are not deductible in computing business capital. Loans or advances outstanding for more than a year as of any date during the year covered by the report, are not deductible in computing business capital. Where a taxpayer owns property subject to a debt, lien or encumbrance or other obligation, the fair market value of the property, not merely the taxpayer’s equity therein, shall be used in computing the average fair market value of the property in valuing business capital, whether or not the taxpayer has any personal liability under any obligation to which the property is held subject.
  3. The term “business capital” includes loans to a subsidiary, the interest on which is claimed by and allowed to the subsidiary as a deduction for purposes of any tax imposed by Title 11, Chapter 6, Subchapter 2 or Subchapter 3 of the Administrative Code, provided such loans do not constitute investment capital pursuant to 19 RCNY § 11-37.
    1. If in a taxable year a taxpayer has business capital but no investment capital, cash in hand and cash on deposit (as defined in 19 RCNY § 11-37(a)(3)) must be treated on all reports for the taxable year as business capital.

   (2) If in a taxable year a taxpayer has both business and investment capital, the taxpayer may elect to treat cash on hand and cash on deposit (as defined in 19 RCNY § 11-37(a)(3)) as business capital. A taxpayer may not elect to treat part of its cash as business capital and part as investment capital. No election to treat cash as business capital may be made if the taxpayer has no business capital exclusive of cash. Any taxpayer who may elect under this paragraph (2) will be presumed to have made an irrevocable election to treat cash as business capital for that taxable year unless such taxpayer properly elects under 19 RCNY § 11-37(a)(2)(ii) to treat cash on hand and on deposit as investment capital.

§ 11-37 Definition of Investment Capital.

(§ 11-602(4), Administrative Code.)
    1. The term “investment capital” means the taxpayer’s investments in stocks, bonds and other securities issued by a corporation (except as provided in paragraph (4) of this subdivision) or by the United States, any state, territory or possession of the United States, the District of Columbia, or any foreign country, or any political subdivision or governmental instrumentality of any of the forgoing (see subdivisions (c)-(h) of this section).

   (2) (i) If in a taxable year a taxpayer has investment capital but no business capital, cash on hand and cash deposit must be treated on all reports for the taxable year as investment capital.

      (ii) If in a taxable year a taxpayer has both business and investment capital, the taxpayer may elect to treat cash on hand and cash on deposit, as defined in paragraph (3) of this subdivision, as investment capital (see 19 RCNY § 11-36(d) for election to treat cash as business capital). Once an election is made for a taxable year, it shall be irrevocable for that taxable year. The election must be made on the original return for the taxable year; any purported election made on an amended return is invalid. A separate election must be made for each taxable year. A taxpayer may not elect to treat part of its cash as investment capital and part as business capital. No election to treat cash as investment capital may be made where the taxpayer has no investment capital exclusive of cash. Any taxpayer who may elect under this subparagraph (ii) and has filed a return for the taxable year but who has not properly made such an election will be presumed to have made an irrevocable election to treat cash on hand and on deposit as business capital.

   (3) Any debt instrument, including a certificate of deposit, described in paragraph (2) or (3) of subdivision (c) of this section and not described in paragraph (4) of this subdivision (a) that is payable by its terms on demand or within six months and one day from the date on which the debt was incurred, is deemed to be cash on hand or on deposit. Any such debt instrument that is payable by its terms more than six months and one day from the date on which the debt was incurred is deemed to be cash on hand or on deposit on any day that is not more than six months and one day prior to its date of maturity. Cash also includes shares in a money market mutual fund. A money market mutual fund is a no-load, open-end investment company registered under the Federal Investment Company Act of 1940 that attempts to maintain a constant net asset value per share and holds itself out to be a money market fund.

Example: On February 1, 1990, Corporation A, a calendar year taxpayer, purchased a certificate of deposit with a maturity date of January 31, 1991, which was a qualifying corporate debt instrument as that term is in subdivision (d) of this section. On July 1, 1990, Corporation A purchased a four-month qualifying corporate debt instrument on the day it was issued and renewed it, with the identical terms, on November 1, 1990. Corporation A bought a qualifying corporate debt instrument on August 1, 1990, the day it was issued, with a maturity date of February 2, 1991. On September 1, 1990, the corporation bought a nine-month qualifying corporate debt instrument which had been issued on January 1, 1990 and was due on October 1, 1990. The renewal of the four-month debt instrument purchased on July 1, 1990 is treated as the creation of a second, separate debt instrument, each of the two instruments being due within six months and one day of the date on which the debt was incurred. For the taxable year ending December 31, 1990, the two four-month debt instruments and the debt instrument due on February 2, 1991 is deemed to be cash because it is due on February 2, 1991 is deemed to be cash because it is due within six months and one day from the date on which it was issued. The nine-month debt instrument is deemed to be cash because each day on which the taxpayer owned it was a day not more than six months and one day prior to its maturity date. The one-year certificate of deposit is deemed to be cash on July 30, 1990 and each day thereafter.

   (4) Investment capital does not include:

      (i) stock issued by the taxpayer;

      (ii) stocks, bonds or other securities constituting subsidiary capital;

      (iii) securities issued by an individual, partnership, trust or other non-governmental entity that is not a corporation within the definition contained in Administrative Code § 11-602.1 (e.g., Federal National Mortgage Association and Government National Mortgage Association pass-through certificates);

      (iv) regular interests and residual interests in a real estate mortgage investment conduit (REMIC), as defined in section 860D of the Internal Revenue Code;

      (v) assets reflected in the taxpayer’s books and records in connection with futures contracts and forward contracts except as provided in subdivision (g) of this section; or

      (vi) stocks, bonds and other securities held by the taxpayer for sale to customers in the regular course of its business.

  1. The amount of investment capital is determined as set forth in subdivision (b) of 19 RCNY § 11-38.
  2. For purposes of paragraph (1) of subdivision (a) of this section, the phrase “stocks, bonds and other securities” means:

   (1) stocks and similar corporate equity instruments, such as business trust certificates; (2) debt instruments issued by the United States, any state, territory or possession of the United States, the District of Columbia, or any foreign country, or any political subdivision or governmental instrumentality of any of the foregoing;

   (3) qualifying corporate debt instruments (see subdivision (d) of this section); (4) options on any item described in paragraph (1), (2), or (3) of this subdivision and not described in paragraph (4) of subdivision (a) of this section, or on a stock or bond index, or on a futures contract on such an index, unless the options are purchased primarily to diminish the taxpayer’s risk of loss from holding one or more positions in assets that constitute business or subsidiary capital; and

   (5) stock rights and stock warrants not in the possession of the issuer thereof. Provided, however, debt instruments described in paragraph (2) or (3) of this subdivision that are deemed to be cash pursuant to paragraph (3) of subdivision (a) of this section do not constitute stocks, bonds or other securities.

  1. Qualifying corporate debt instruments.

   (1) The term “qualifying corporate debt instruments” means all debt instruments issued by a corporation other than the following:

      (i) instruments issued by the taxpayer;

      (ii) instruments that constitute subsidiary capital in the hands of the taxpayer; (iii) instruments acquired by the taxpayer for services rendered, or for the sale, rental or other transfer of property, where the obligor is the recipient of the services or property; however, where a taxpayer sells or otherwise transfers property that is investment capital in the hands of such taxpayer (e.g., stock) and receives in return a corporate obligation issued by the recipient of such property, such corporate obligation, if it is not otherwise excluded from the category of investment capital, would constitute investment capital in the hands of the taxpayer;

      (iv) instruments acquired for funds if (i) the obligor is the recipient of such funds, (ii) the taxpayer is principally engaged in the business of lending funds, and (iii) the obligation is acquired in the regular course of the taxpayer’s business of lending funds;

      (v) accepted drafts (such as banker’s acceptances and trade acceptances) where the taxpayer is the drawer of the draft; (vi) instruments issued by a corporation that is a member of an affiliated group that includes the taxpayer; and

      (vii) accounts receivable, including those held by a factor.

   (2) Terms used in this subdivision shall have the meanings prescribed as follows:

      (i) Affiliated group. The term “affiliated group” means a corporation or corporations and the common parent of such corporation or corporations. The “common parent” of a corporation or corporations means an individual, corporation, partnership, trust or estate that owns or controls, either directly or indirectly, at least 80 percent of the voting stock of such corporations or of each of such corporations. An affiliated group also includes all other corporations at least 80 percent of the voting stock of which is owned or controlled, either directly or indirectly, by one or more of the corporations included in the affiliated group, or by the common parent and one or more of the corporations included in the affiliated group.

      (ii) Principally engaged in the business of lending funds. A taxpayer is “principally engaged in the business of lending funds” for purposes of this subdivision if, during the taxable year, more than 50 percent of its receipts consist of interest from loans or net gain from the sale or redemption of notes or other evidences of indebtedness arising from loans made by the taxpayer. For purposes of the preceding sentence, receipts do not include return of principal or non-recurring, extraordinary items.

  1. For purposes of this section, the phrase “stocks, bonds and other securities” includes instruments held in book entry form.
  2. Repurchase agreements.

   (1) “Repurchase agreement” is a term used to describe a transaction in which one party (the seller/borrower), in formal terms, sells securities to a second party (the purchaser/lender) and simultaneously contracts to repurchase the same or identical securities. Depending upon the nature of the agreement, in some instances the purchaser/lender in fact will have purchased the securities, whereas in other instances the transfer of funds to the seller/borrower in fact will constitute a loan collateralized by the securities. If the purchaser/lender is a taxpayer, it is necessary to determine whether the result of such a transaction is the holding by the purchaser/lender of investment capital. If, as a result of the repurchase agreement, the purchaser/lender owns the securities and the securities are encompassed within the definition of investment capital contained in subdivision (a) of this section, such securities will constitute investment capital in the hands of the purchaser/lender. If the purchaser/lender has not acquired ownership of the securities, then it is a lender of funds and has acquired a debt instrument issued by the seller/borrower collateralized by the securities. Unless such debt instrument constitutes cash pursuant to paragraph (3) of subdivision (a) of this section, where such debt instrument is encompassed within the definition of investment capital contained in subdivision (a) and (c) of this section, such instrument will constitute investment capital in the hands of the purchaser/lender. Otherwise, it will constitute either business capital or subsidiary capital.

   (2) In a repurchase transaction, the question of whether the purchaser/lender is the owner of the securities, rather than the owner of a debt instrument issued by the seller/borrower, turns on whether such purchaser/lender has acquired the economic benefits and burden of ownership of the securities. The purchaser/lender is the owner of the securities if it (A) has the right freely to dispose of or pledge the securities to a third party and (B) has acquired the opportunity for profit and bears the risk of loss deriving from changes in the market value of the securities. All of these factors must be present simultaneously in order for a transfer of ownership to be recognized. The absence of any of these factors will render the transaction a loan. In such event, the purchaser/lender would be viewed as having acquired a debt instrument of the seller/borrower, collateralized by the securities. Where there is ambiguity as to the existence of any of the factors, recourse may be had to an examination of various other features of the transaction. Features that are consistent with a characterization of the transaction as a loan, but that are not dispositive in and of themselves are:

      (i) an obligation on the part of the purchaser/lender, where it sells the securities upon the failure of the seller/borrower to “repurchase” the securities, to turn over to the seller/borrower the proceeds in excess of the amount due to the purchaser/lender from the seller/borrower, and a right on the part of the purchaser/lender to hold the seller/borrower liable for any deficiency arising from such sale;

      (ii) an obligation on the part of the seller/borrower to pay interest at a stipulated rate; (iii) a disparity at the time of the initial transaction between the fair market value of the securities and the amount paid or advanced by the purchaser/lender;

      (iv) a right on the part of the purchaser/lender to require additional collateral if the market value of the securities declines (e.g., a mark to market provision); and

      (v) failure to treat the transaction as a sale or exchange for Federal income tax purposes; e.g., with respect to the reporting of gain or loss on each of the two purported sales, or the exclusion by the seller/borrower under Internal Revenue Code section 103(a) of interest, if any, earned on the securities during the period between the initial “sale” and the “repurchase.”

  1. Investment capital shall include assets reflected in the taxpayer’s books and records in connection with futures or forward contracts if such contracts substantially diminish the taxpayer’s risk of loss from holding one or more positions in assets that constitute investment capital or if such contracts substantially diminish the taxpayer’s risk of loss from holding one or more positions in assets that constitute investment capital or if such contracts substantially diminish the taxpayer’s risk of loss from making short sales of assets that constitute investment capital. If the taxpayer holds more positions in futures or forward contracts than are reasonably necessary to substantially diminish its risk of such losses, assets attributable to the excess positions in futures or forward contracts are not included in investment capital.
  2. The following example illustrates some of the provisions of this section.

Example: Corporation A is a manufacturing corporation and a taxpayer. It owns 10,000 shares of stock in Corporation B (a manufacturing firm that has 5,000,000 shares of stock issued and outstanding), a $1,000,000 Government National Mortgage Association (GNMA) pass-through certificate, a $1,000,000 Federal National Mortgage Association (FNMA) pass-through certificate and a $100,000 FNMA debenture. Corporation A’s investment capital consists of the shares of stock in Corporation B, and the FNMA debenture. The FNMA debenture constitute investment capital because it is a qualifying corporate debt investment issued by a corporation. Although the FNMA and GNMA certificates are guaranteed by FNMA and GNMA, respectively, they do not constitute investment capital because they are issued by a trust and thus are not “corporate or governmental.”

§ 11-38 Determination of Business and Investment Capital.

(§ 11-604(2), Administrative Code.)
  1. The amount of the business capital of the taxpayer is determined by taking the total average fair market value, during the period covered by the report, of all the assets of the taxpayer which constitute business capital, less certain current liabilities (19 RCNY § 11-36 “investment capital,” supra).
  2. The amount of the investment capital of the taxpayer is determined as follows:

   (1) ascertain the average value of each item of investment capital (including cash, where the election described in paragraph (2) of subdivision (a) of 19 RCNY § 11-37 is made);

   (2) ascertain the net value of each such item by subtracting from the average value of each such item average liabilities that are directly or indirectly attributable to that item; and

   (3) add the net values so arrived at. The average value of a marketable security included in investment capital is its average fair market value, and the average value of an item of investment capital that is not a marketable security is the average value shown (or which should have been shown, if not so shown) on the books and records of the taxpayer in accordance with generally accepted accounting principles.

§ 11-39 Fair Market Value.

(a) The fair market value of any asset owned by the taxpayer is the price at which a willing seller, not compelled to sell, will sell and a willing purchaser, not compelled to buy, will buy. For determination of the fair market value of real property rented to the taxpayer, see 19 RCNY § 11-64(b), infra.
  1. The fair market value, on any date, of stocks, bonds and other securities regularly dealt in on an exchange, or in the over-the-counter market, is the mean between the highest and lowest selling prices on that date. If there were no sales on the valuation date, such value is the mean between the highest and the lowest selling prices on the nearest date, within a reasonable time, on which there were sales. If actual sales within a reasonable time are not available, the fair market value is the mean between the bona fide bid and asked prices on the valuation date or the nearest date within a reasonable time.
  2. If actual sales prices or bona fide bid and asked prices within a reasonable time are not available or if by reason of the character or extent of the taxpayer’s investments or for any other reason such prices are not truly indicative of value, the fair market value is ascertained

   (1) in the case of shares of stock, on the basis of the issuing corporation’s net worth, earning power, book value, dividends paid, and all other relevant factors, and

   (2) in the case of bonds and other securities, by giving consideration to various factors including the soundness of the security, the interest yield, and the date of maturity.

  1. If a taxpayer consistently values its stocks, bonds and other securities on some other basis, such as the last selling price on the valuation date, such method of valuation may be accepted by the Commissioner of Finance. In all such cases, a complete explanation of the method of valuation must be included in the report.

§ 11-40 Average Fair Market Value.

In determining average fair market value, due allowance must be made for variations in the amount of assets held by the taxpayer during the period covered by the report, as well as variations in market prices. Average fair market value generally is computed on a quarterly basis where the taxpayer’s usual accounting practice permits of such computation. However, at the option of the taxpayer, a more frequent basis (such as a monthly, weekly or daily average) may be used. Where the taxpayer’s usual accounting practice does not permit of quarterly or more frequent computation of average fair market value, a semiannual or annual computation may be used where no distortion of average fair market value will result. If, because of variations in the amount or value of any class of assets, it appears to the Commissioner of Finance that averaging on an annual, semiannual or quarterly basis does not properly reflect average fair market value, the Commissioner may require averaging on a more frequent basis. Any method of determining average fair market value which is adopted by the taxpayer on any report and accepted by the Commissioner of Finance may not be changed on any subsequent report, except with the consent of the Commissioner.

Example 1: The taxpayer’s holdings of X corporation’s common stock, and the fair market value thereof, during the period covered by its report, on a quarterly basis, were as follows:

  1. end of first quarter, 100 shares of the fair market value of $10,000;
  2. end of second quarter, no shares;
  3. end of third quarter, no shares;
  4. end of fourth quarter, no shares. The average fair market value during the period covered by the report, on a quarterly basis, of the taxpayer’s holdings of X corporation’s common stock would be:

   $10,000 + 0 + 0 + 0 = $10,000 ÷ 4 = $2,500

Example 2: The taxpayers inventories, during the period covered by the report, on a quarterly basis, were as follows:

  1. end of first quarter, 1,000 tons of the fair market value of $2 a ton – $2,000;
  2. end of second quarter, 2,000 tons of the fair market value of $2 a ton – $4,000;
  3. end of third quarter, 2,000 tons of the fair market value of $3 a ton – $6,000;
  4. end of fourth quarter, 1,000 tons of the fair market value of $2 a ton – $2,000. The average fair market value of the taxpayer’s inventories during the period covered by the report, computed on a quarterly basis, would be:

   $2,000 + $4,000 + $6,000 + $2,000 = $14,000 ÷ 4 = $3,500.

Example 3: The taxpayer did not dispose of or acquire any part of its plant and equipment during the period covered by its report. Its plant and equipment were valued as follows:

  1. beginning of year, fair market value, $800,000;
  2. end of year, fair market value, $780,000.

The average fair market value of the taxpayer’s plant and equipment during the period covered by its report, computed on the basis of the average fair market values at the beginning and end of such period, would be:

   $800,000 + $780,000 = $1,580,000 ÷ 2 = $790,000.

§ 11-41 Adjustment of Capital to Period Covered by Report.

(§ 11-604(2), Administrative Code.)

If the period covered by the report is other than 12 calendar months, the amount of business capital and investment capital each is determined by multiplying the average fair market value thereof (19 RCNY § 11-37, supra) by the number of calendar months or major parts thereof included in such period, and dividing the product thus obtained by 12.

Example: A corporation previously organized under the laws of a State other than New York, begins to do business in New York City on June 10, 1966, and reports on a calendar year basis. The average fair market value of its total investment capital for such year is $60,000 and the average fair market value of its total business capital is $240,000. The amount of each class of capital, for purposes of the tax computed on the basis of the calendar year 1966 is determined by multiplying each of the above amounts by 7 (the months of June to December, inclusive) and dividing the product by 12, resulting in investment capital of $35,000 and business capital of $140,000.

§ 11-42 Computation of Business and Investment Capital on Combined Reports.

In the case of combined reports, there are eliminated, in computing combined business and investment capital, intercorporate stockholdings and intercorporate bills, notes and accounts receivable and payable and other intercorporate indebtedness. As to when combined reports will be permitted or required, see 19 RCNY § 11-91, infra.

§ 11-43 Adjustments to Correct Distortions.

For adjustment of business and investment capital in order to correct distortions, see 19 RCNY § 11-25, supra.

§ 11-44 Minimum Tax of $25.

(a) Minimum tax of $25. In no event is the tax for any period (exclusive of the tax measured by subsidiary capital) less than $25.
  1. Minimum tax on combined reports.

   (1) Where the tax as computed on a combined report is measured by combined entire net income (19 RCNY § 11-26, supra), or combined entire net income plus compensation (19 RCNY § 11-34, supra), or combined business and investment capital (19 RCNY § 11-35, supra), or is measured by the minimum tax (19 RCNY § 11-44(a), supra), each corporation included in the combined report except:

      (i) the corporation paying the combined tax, and

      (ii) any corporation described in subdivision (b) of this section is required to pay a minimum tax of $125. The corporation paying the combined tax will pay the minimum tax when the minimum tax is the greater of the alternative taxes.

   (2) A corporation which is not subject to tax pursuant to 19 RCNY § 11-03, supra, is not required to pay a minimum tax when included in a combined report.

§ 11-45 Computation of the Tax Measured by Subsidiary Capital.

(a)  Income, gains and losses from subsidiary capital are excluded from entire net income. In place of a tax measured by such income, a separate tax measured by subsidiary capital allocated to New York City is imposed, in addition to that measured by entire net income or other applicable basis.
  1. The tax measured by subsidiary capital is at the rate of three quarters of one mill for each dollar of subsidiary capital allocated within New York City.
  2. Where a group of corporations files a combined report, a tax measured by the combined subsidiary capital is imposed and must be paid in addition to the tax measured by entire net income or other applicable basis. See 19 RCNY § 11-48, infra, Subsidiary Capital on Combined Reports, for rules for calculating combined subsidiary capital.

§ 11-46 Definitions.

Subsidiary (§ 11-602(2), Administrative Code.)

   (1) The term “subsidiary” means a corporation over 50 percent of the voting stock of which is owned by the taxpayer. The term “voting stock” means shares of stock of a corporation, issued and outstanding, that entitle the holders thereof to vote for the election of the corporation’s directors or trustees. The determination of whether or not particular shares of a corporation’s stock entitle the holders thereof to vote for the election of directors or trustees of the corporation depends on the actual legal situation with respect to voting rights, as it exists from time to time.

Example: A taxpayer owns all the common stock of a corporation, which in ordinary circumstances is the only class of stock entitled to vote for the election of directors. The corporation also has outstanding an issue of preferred stock the holders of which, in certain circumstances, are entitled to vote for the election of directors either together with or exclusive of the holders of the common stock. The preferred stock will be treated as voting stock if, and so long as, its holders are entitled to vote. The common stock will not be treated as voting stock if, and so long as, its holders are not entitled to vote.

   (2) The test of ownership is actual beneficial ownership, rather than mere record title as shown by the stock books of the issuing corporation. Actual beneficial ownership of stock does not mean indirect ownership or control of a corporation through a corporate structure consisting of several tiers and/or chains of corporations. A corporation will not be considered a subsidiary of a taxpayer merely because over 50 percent of the shares of its voting stock is registered in the name of the taxpayer, unless the taxpayer is the actual beneficial owner of such stock. However, a corporation will not be considered a subsidiary of a taxpayer if more than 50 percent of the shares of its voting stock is not registered in the taxpayer’s name, unless the taxpayer submits proof that it is the actual beneficial owner of such stock.

Example 1: Corporation A is engaged in a stock brokerage business. Corporation A holds record title in street name to 60 percent of the voting stock of corporation X, a publicly traded corporation. Corporation A holds record title to this stock on behalf of 100 corporate customers, none of which owns more than one percent of the stock of Corporation X. These 100 corporations are the actual beneficial owners of the stock of Corporation X held in street name by Corporation A. Even though Corporation A is the record title holder of more than 50 percent of the voting stock of Corporation X, Corporation X is not a subsidiary of Corporation A because Corporation A is not the actual beneficial owner of the stock.

Example 2: Corporation C is the record title holder of 100 percent of the voting stock of Corporation D. Corporation C has the right to sell or pledge such stock. Corporation C receives all dividends paid by Corporation D. Corporation C enjoys the economic benefits, and bears the risk of economic loss, from the sale of such stock. Corporation C is the actual beneficial owner of Corporation D’s voting stock. Corporation D is a subsidiary of Corpor- ation C. Corporation B is the owner of 100 percent of the voting stock of Corporation C. Corporation B is not the actual beneficial owner of Corporation D’s voting stock merely by virtue of the fact that, through its ownership of the voting stock of Corporation C, Corporation B has practical control of the activities of Corporation D. Corporation D is not a subsidiary of Corporation B.

   (3) A corporation may be a subsidiary if the taxpayer is the actual beneficial owner of more than 50 percent of the shares of such corporation’s voting stock, even though the taxpayer has conferred the right to vote such stock on others, by means of a proxy, voting trust agreement or otherwise.

   (4) In any case where the record holder of shares of voting stock of a corporation is not the actual beneficial owner thereof, or where the right to vote such stock is not possessed by the record holder or by the actual beneficial owner thereof, a full and complete statement of all relevant facts must be submitted.

   (5) A corporation will be treated as a subsidiary of a taxpayer only for that part of the taxable year during which the taxpayer is the owner of more than 50 percent of the shares of stock of such corporation which, during that period, entitle the holders to vote for the election of directors or trustees.

Subsidiary Capital. (§ 11-602(3) Administrative Code.)

   (1) The term subsidiary capital means the total of

      (i) investments of the taxpayer in stock of its subsidiaries,

      (ii) the amount of indebtedness owed to the taxpayer by its subsidiaries, exclusive of accounts receivable acquired in the ordinary course of trade or business for services rendered or for sales of property held primarily for sale to customers, whether or not evidenced by written instruments, interest on which is not claimed by the subsidiary and allowed as a deduction for purposes of any tax imposed by Subchapter 2 or Subchapter 3 of Chapter 6 of Title II of the Administrative Code, and

      (iii) in certain cases, as explained below, cash on hand and on deposit, obligations of the United States and its instrumentalities, and obligations of New York State, its political subdivisions and instrumentalities, to the extent permitted by § 11-604(6) of the Administrative Code.

   (2) Subsidiary capital does not include stocks, bonds or other securities of a subsidiary held by the taxpayer for sale to customers in the regular course of business.

   (3) Indebtedness on which any interest is deducted by the subsidiary in computing any tax imposed on the subsidiary under Title 11, Chapter 6, Subchapter 2 or Subchapter 3 of the Administrative Code may not be included in the taxpayer’s subsidiary capital. Such indebtedness is includible in investment capital if it meets the definition of investment capital as set forth in 19 RCNY § 11-37; otherwise, it constitutes business capital.

Example: The taxpayer, parent, loaned its subsidiary $100,000. In computing entire net income for the taxable year 1990 for New York City General Corporation Tax purposes under Title 11, Chapter 6, Sub-chapter 2 of the Administrative Code, the subsidiary did not claim any part of the interest as a deduction. The subsidiary did claim such interest, or some part of it, as a deduction for taxable year 1991. The indebtedness is includible in the taxpayer’s subsidiary capital on its report for taxable year 1990. However, for taxable year 1991 such indebtedness is includible in the taxpayer’s investment capital if it meets the definition of investment capital as set forth in 19 RCNY § 11-37. Otherwise it is business capital.

   (4) Any taxpayer not taxed on the basis of a combined report, the subsidiary capital of which (computed without regard to this sentence) is more than 85 percent of its total capital, exclusive of cash on hand and on deposit, obligations of the United States and its instrumentalities, and obligations of New York State, its political subdivisions and its instrumentalities, may, at its election, treat as subsidiary capital a proportion of such cash and obligations not in excess of the proportion of its subsidiary capital (so computed) to its total capital (so computed). The balance of such cash may be included in either investment capital or in business capital, at the election of the taxpayer (19 RCNY § 11-37 “Investment Capital” and 19 RCNY § 11-36 “Business Capital” supra). The balance of such obligations of the United States and its instrumentalities, and obligations of New York State, its political subdivisions and its instrumentalities is includible in investment capital unless held for sale to customers in regular course of business, in which event it is includible in business capital.

   (5) Unless the Commissioner of Finance specifically authorizes to the contrary, each item of subsidiary capital shall be reduced by the deduction of any liabilities of the taxpayer, payable by their terms on demand or not more than one year from the date incurred, other than loans or advances outstanding for more than a year as of any date during the year covered by the report, which are attributable to that item of subsidiary capital. Such reduction will be made, for example, in cases where such liabilities have been incurred in connection with the acquisition or holding of stock or securities of a subsidiary, or the making of a loan to a subsidiary.

§ 11-47 Determination of Subsidiary Capital.

(§ 11-604(2), Administrative Code.) The amount of subsidiary capital of the taxpayer is determined by taking the average fair market value during the period covered by the report of all the assets of the taxpayer which constitute subsidiary capital, as in the case of investment capital, less certain current liabilities required to be deducted (19 RCNY § 11-46 "Subsidiary Capital," supra). Average fair market value is determined in the manner prescribed in 19 RCNY §§ 11-39 and 11-40, supra.

§ 11-48 Subsidiary Capital on Combined Reports.

(Section 11-605(4), Administrative Code.) In the case of combined reports, subsidiary capital is the total of the amounts of subsidiary capital of each corporation included in the combined report allocated within New York City. There is eliminated in computing the amount of combined subsidiary capital all investments of any corporation included in the combined report in the stock of, and any indebtedness from, any subsidiary corporation included in such report. See 19 RCNY § 11-42, infra. As to when combined reports will be permitted or required, see 19 RCNY § 11-91, infra.

§ 11-49 Adjustments to Correct Distortions.

For adjustments of subsidiary capital in order to correct distortions, see 19 RCNY § 11-25, supra.

§ 11-50 Unincorporated Business Tax Paid Credit.

Note: For simplicity, in this section the term “partnership” is used to refer to any unincorporated business in which a corporation owns an interest and the term “partner” or “corporate partner” is used to refer to the owner of an interest in an unincorporated business.

    1. For taxable years beginning on or after July 1, 1994, if a corporation is a partner in a partnership carrying on an unincorporated business in the City of New York and is required to include all or a portion of the income of the partnership in its entire net income or receives a guaranteed payment from the partnership includible in its entire net income, the corporate partner is allowed a credit against its general corporation tax liability, if determined on the entire net income basis (“ENI Basis”) or alternative income-plus-compensation basis (“Alternative Basis”), for its share of the unincorporated business tax paid by the partnership, subject to certain limitations (the “UBT Paid Credit”). The UBT Paid Credit is not allowed to a corporate partner in a partnership for any unincorporated business tax paid by the partnership with respect to any taxable year of the unincorporated business beginning before July 1, 1994.

   (2) For taxable years of a corporate partner beginning after 1995, the UBT Paid Credit allowed to the corporate partner may exceed the amount of UBT Paid Credit that the corporate partner may take in that year. In that event, the excess may be carried forward for up to seven years subject to certain limitations. See subdivision (c), infra, for a discussion of the carryover. However, for taxable years of a corporate partner beginning on or after July 1, 1994 but before 1996, the amount of UBT Paid Credit allowed to the corporate partner is the same as the amount of UBT Paid Credit that the partner may take against its general corporation tax liability that year and no carryover is available.

   (3) Application of credit to tax bases.

      (i) For taxable years of a corporate partner beginning before January 1, 1996, the corporate partner is allowed the UBT Paid Credit only in a year in which it would be liable, in the absence of any credits allowed by § 11-604 of the Administrative Code, for the tax on the ENI Basis or the Alternative Basis. For those taxable years, a partner liable for the tax on capital or for the minimum tax is not allowed a UBT Paid Credit.

      (ii) For taxable years of a corporate partner beginning after 1995, the corporate partner is allowed the UBT Paid Credit regardless of the tax base on which it is taxed. However, it may take the credit only in a year in which it pays tax on the ENI Basis or the Alternative Basis. For taxable years beginning after 1995, if a corporate partner is allowed the UBT Paid Credit in a year when it is liable for tax on capital or for the minimum tax, it may carry the UBT Paid Credit forward to the next seven succeeding taxable years. The corporation may take the credit in any of such seven years in which it is liable for tax on the ENI Basis or the Alternative Basis.

      (iii) The UBT Paid Credit does not alter the basis upon which a taxpayer must pay tax (e.g., on the basis of entire net income, alternative income-plus-compensation, capital, or minimum tax) even if the credit reduces the tax liability below the liability calculated on another basis.

  1. Calculation of the UBT Paid Credit.

   (1) (i) General. A corporate partner’s UBT Paid Credit allowed with respect to a specific partnership is the lesser of the amounts calculated in subparagraphs (i) (“Measure 1”) and (ii) (“Measure 2”) of paragraph (2) of this subdivision (b), subject to the limitation in subparagraph (iii) of paragraph (2) of this subdivision (b). Measure 1 is based on the corporate partner’s share of the unincorporated business tax liability of the partnership for the partnership’s taxable year ending within or with the corporate partner’s taxable year. Measure 2 is based on the incremental effect on the general corporation tax liability of the corporate partner attributable to partnership items entering into the calculation of the corporate partner’s general corporation tax liability. The incremental effect is modified to account for the rate differential between the unincorporated business tax and the general corporation tax. If a corporate partner is a partner in more than one partnership, Measures 1 and 2 must be determined and compared separately with respect to each partnership.

      (ii) Subparagraph (iii) of paragraph (2) of this subdivision limits the total amount of the UBT Paid Credit that a corporate partner may take in a taxable year to the corporate partner’s general corporation tax liability for that year modified, when appropriate, to account for the rate differential between the unincorporated business tax and general corporation tax. In the case of a corporate partner that is a partner in more than one partnership, this limitation is not applied separately with respect to each partnership, but rather it is applied to the sum of the UBT Paid Credits from all partnerships.

   (2) Measures of the credit and limitations.

      (i) Measure 1. Partner’s share of the partnership’s unincorporated business tax liability plus certain credits. Except as provided in subparagraph (i)(C) , Measure 1 is the product of the amount determined in subparagraph (i)(A) and the corporate partner’s distributive share percentage determined in subparagraph (i)(B):

         (A) Partnership’s tax liability plus certain credits. The amount determined in this sub- paragraph (i)(A) is the sum of:

            (a) the unincorporated business tax imposed on, and paid by, the partnership for its taxable year ending within or with the taxable year of the corporate partner, and

            (b) 1)  for taxable years of the corporate partner beginning on or after July 1, 1994, and before 1996, the amount of any UBT Paid Credit taken by the partnership for its taxable year ending within or with the taxable year of the corporate partner, or

               (2) for taxable years of the corporate partner beginning after 1995, the sum of all credits taken by the partnership under § 11-503 of the Administrative Code other than subdivision (b) of that section, for its taxable year ending within or with the taxable year of the corporate partner, but only to the extent that those credits do not reduce the partnership’s unincorporated business tax below zero. The amount determined under this subparagraph (i)(A)(b)(2) does not include the amount of any credit refundable to the partnership.

         (B) Partner’s distributive share percentage.

            (a) The corporate partner’s distributive share percentage is the sum of the corporate partner’s distributive shares of income, gain, loss, and deductions of the partnership and any guaranteed payment received from the partnership (the corporate partner’s “net distributive share”) divided by the sum of the net distributive shares of all partners of the partnership for whom such amounts are greater than zero. If the corporate partner’s net distributive share is less than zero, the net distributive share is deemed to be zero and the corporate partner is not allowed a UBT Paid Credit for the taxable year with respect to that partnership.

            (b) For purposes of this calculation, the net distributive shares should be based upon items of income, gain, loss and deductions and guaranteed payments as calculated by the partnership for purposes of computing its unincorporated business taxable income.

            (c) In addition, for purposes of this calculation, the net distributive share of each corporate partner is considered separately regardless of whether that partner files its general corporation tax return as a member of a combined group with one or more other corporations.

            (d) If a corporate partner owns more than one type of interest in a partnership, e.g., a general and a limited partnership interest, the partner’s distributive shares and guaranteed payments with respect to all such interests are combined in determining the partner’s net distributive share.

         (C) Modification. For corporations paying tax on the Alternative Basis for tax years beginning before 1996, Measure 1 is the product of the amount determined in subparagraph (i)(A) and the corporate partner’s distributive share percentage determined in subparagraph (i)(B) above multiplied by a fraction, the numerator of which is 2.655 and the denominator of which is 4. Multiplication by this fraction adjusts for the differential between the unincorporated business tax rate and the approximate effective general corporation tax rate on the Alternative Basis.

      (ii) Measure 2. Incremental tax effect of distributive share and guaranteed payments.

         (A) Tax Years beginning on or after July 1, 1994 and before 1996. For tax years of a corporate partner beginning on or after July 1, 1994 and before 1996, Measure 2 is the excess of the amount determined in subparagraph (ii)(A)(a) below over the amount determined in subparagraph (ii)(A)(b) below, modified as provided in subparagraph (ii)(A)(c) below. For taxpayers liable for tax on the ENI Basis, the amounts in subparagraph (ii)(A)(a) and (ii)(A)(b) below are computed on the ENI Basis. For taxpayers liable for tax on the Alternative Basis, the amounts in subparagraph (ii)(A)(a) and (ii)(A)(b) below are computed on the Alternative Basis. See subparagraph (ii)(B) for the calculation of Measure 2 for years after 1995.

            (a) Partner’s general corporation tax liability. The amount determined in this subparagraph (ii)(A)(a) is the general corporation tax liability of the corporate partner determined on the ENI Basis or the Alternative Basis, whichever is applicable, without allowance of any of the credits allowed under § 11-604 of the Administrative Code.

            (b) Partner’s general corporation tax liability without distributive share. The amount determined in this subparagraph (ii)(A)(b) is the general corporation tax liability of the corporate partner determined on the ENI Basis or Alternative Basis, whichever is applicable, (1) excluding any partnership items entering into the calculation of the corporate partner’s entire net income and any partnership allocation factors, if taken into account in calculating the corporate partner’s allocation to the City, and (2) determined without allowance of any of the credits allowed under § 11-604 of the Administrative Code.

            (c) Modification for taxpayers taxed on ENI Basis. For taxpayers liable for tax on the ENI Basis, the excess of the amount determined in subparagraph (ii)(A)(a) above over the amount determined in paragraph (ii)(A)(b) above must be multiplied by a fraction, the numerator of which is 4 and the denominator of which is 8.85. Multiplication by this fraction adjusts for the differential between the unincorporated business tax rate and the general corporation tax rate.

         (B) Tax years beginning after 1995. For tax years of a corporate partner beginning after 1995, Measure 2 is the excess of the amount determined in subparagraph (ii)(B)(a) below over the amount determined in subparagraph (ii)(B)(b) below, such excess modified as provided in subparagraph (ii)(B)(c) below and multiplied by a fraction, the numerator of which is 4 and the denominator of which is 8.85. Multiplication by this fraction adjusts for the differential between the unincorporated business tax rate and the general corporation tax rate. For taxable years beginning after 1995, all taxpayers must compute Measure 2 as if they were liable for tax on the ENI Basis.

            (a) Partner’s general corporation tax liability. The amount determined in this subparagraph (ii)(B)(a) is the general corporation tax liability of the partner determined on the ENI Basis without allowance of any credits under § 11-604 of the Administrative Code.

            (b) Partner’s general corporation tax liability without distributive share or guaranteed payments. The amount determined in this subparagraph (ii)(B)(b) is the general corporation tax liability of the corporate partner determined on the ENI Basis excluding any partnership items entering into the calculation of the corporate partner’s entire net income, excluding partnership allocation factors, if taken into account in calculating the corporate partner’s allocation to the City, and determined without allowance of any credits under § 11-604 of the Administrative Code.

            (c) Partner’s modified general corporation tax liability. For taxable years of the corporate partner beginning after 1995, the amounts in subparagraphs (ii)(B)(a) and (ii)(B)(b) above are computed with the following modifications:

               (1) The amounts are computed without taking into account any deduction for a net operating loss carried to the taxable year of the partner.

               (2) If, prior to taking into account any distributive share or guaranteed payments from the partnership or any net operating loss deduction, the entire net income of the partner is less than zero, the partner’s entire net income is deemed to be zero.

               (3) If the partner’s net total distributive share of income, gain, loss and deductions of, and guaranteed payments from, any unincorporated business other than the partnership with respect to which the amount of credit is being calculated is less than zero, such net total distributive share is deemed to be zero.

      (iii) Credit limited to partner’s general corporation tax.

         (A) For taxable years of a corporate partner subject to tax on the ENI Basis beginning on or after July 1, 1994 and before 1996, the sum of the UBT Paid Credits that the partner is allowed and may take in any given taxable year with respect to all partnerships in which it is a partner shall not exceed the tax computed on the ENI Basis without the allowance of any credits under § 11-604 of the Administrative Code, multiplied by a fraction, the numerator of which is 4 and the denominator of which is 8.85. This multiplication limits the credit that is allowed and may be taken to the corporate partner’s general corporation tax calculated as if the general corporation tax rate were the same as the unincorporated business tax rate.

         (B) For taxable years of a corporate partner subject to tax on the Alternative Basis beginning on or after July 1, 1994 and before 1996, the sum of the UBT Paid Credits that the partner is allowed and may take in any given taxable year with respect to all partnerships in which it is a partner shall not exceed the tax computed on the Alternative Basis without the allowance of any credits under § 11-604 of the Administrative Code.

         (C) For taxable years of a corporate partner subject to tax on the ENI Basis beginning after 1995, the sum of the UBT Paid Credits that the corporate partner may take in any given taxable year with respect to all partnerships in which it is a partner shall not exceed the tax computed on the ENI Basis without the allowance of any other credits under § 11-604 of the Administrative Code, multiplied by a fraction, the numerator of which is 4 and the denominator of which is 8.85. This multiplication limits the UBT Paid Credit that may be taken to the corporate partner’s tax calculated as if the general corporation tax rate were the same as the unincorporated business tax rate.

         (D) For taxable years of a corporate partner subject to tax on the Alternative Basis beginning after 1995, the sum of the UBT Paid Credits that the partner may take in any given taxable year with respect to all partnerships in which it is a partner shall not exceed the amount of credit that will reduce the tax computed on the Alternative Basis to zero and each dollar of credit shall be applied so as to reduce the tax by sixty-six and thirty-eight one hundredths cents . The purpose of applying the credit in this manner is to reflect the differential between the unincorporated business tax rate and the approximate effective general corporation tax rate under the Alternative Basis.

  1. Carryover of UBT Paid Credit after 1995. For taxable years beginning after 1995, if the amount of the UBT Paid Credit allowed to a corporate partner for a taxable year exceeds the amount of UBT Paid Credit that may be taken in that year, the corporate partner may carry the excess forward to each of its seven immediately succeeding taxable years. In applying the provisions of the preceding sentence, for each taxable year of a corporate partner, the UBT Paid Credit determined under this section for the current taxable year shall be taken before taking any credit carryforward pursuant to this subdivision (c), and the amount of any credit carryforward available under this subdivision (c) attributable to the earliest taxable year shall be taken before a credit carryforward attributable to a subsequent taxable year.
  2. Multiple tiers of partnerships. A corporate partner may only take a UBT Paid Credit with respect to distributive shares from partnerships in which it is a direct partner, i.e., the corporation is identified as a partner in the partnership agreement and on Schedule K-1 of IRS Form 1065 filed by the partnership.

Example: Corporation C is a partner in partnership B, which, in turn, is a partner in partnership A. Corporation C calculates its UBT Paid Credit only with respect to partnership B and is not entitled to a UBT Paid Credit with respect to partnership A. NOTE: Because the calculation of the UBT Paid Credit allowed for corporation C with respect to partnership B reflects credits claimed by partnership B, including its UBT Paid Credit with respect to partnership A, corporation C will get the benefit of partnership B’s UBT Paid Credit with respect to partnership A, subject to the limitations applicable in determining C’s UBT Paid Credit allowed.

  1. Combined Reports.

   (1) For corporations that file a report on a combined basis pursuant to 19 RCNY § 11-91, the UBT Paid Credit shall be computed as if the combined group were the partner in each partnership from which any of the members of such group receives a distributive share or guaranteed payments, provided, however, if more than one member of the combined group is a partner in the same partnership, for purposes of the calculation of the distributive share percentage of the combined group, the net distributive share of the combined group shall be the sum of the net distributive shares of all of the partners in the partnership who are members of the combined group for which such net distributive share (as separately determined for each partner) is greater than zero. The combined group’s distributive share percentage is the combined group’s net distributive share divided by the sum of the net distributive shares of all partners in the partnership (including the separate members of the combined group that are partners in the partnership) for whom or which such net total (as separately determined for each partner) is greater than zero. The combined group’s distributive share percentage should be the same as the sum of the distributive share percentages calculated by the partnership on its unincorporated business tax return for each member of the partnership that is a member of the combined group. See Example 2, infra.

   (2) Carryovers on combined reports.

      (i) For corporations that file a report on a combined basis pursuant to 19 RCNY § 11-91, if the amount of UBT Paid Credit allowed to the combined group, as determined under this subdivision exceeds the amount of UBT Paid Credit taken in a taxable year, as determined under such subdivision, each corporate partner receiving a distributive share or guaranteed payment to which the credit was originally attributable may carry such excess forward to each of its seven immediately succeeding taxable years, as provided in subdivision (c) of this section, regardless of whether such corporate partner or partners files a report on a separate or combined basis. A combined group allowed a UBT Paid Credit may take a UBT Paid Credit carried over from a prior year only if the member of the combined group that received the distributive share or guaranteed payment to which the credit was originally attributable is a member of the combined group in the year to which the credit is to be carried.

      (ii) If more than one member of a combined group received a distributive share or guaranteed payment from a partnership to which a credit carryover is attributable, for purposes of subparagraph (i), the amount of the carryover available to each such member shall be a portion of the carryover that bears the same ratio to the full amount of the carryover as the distributive share percentage of that member of the combined group with respect to that partnership bears to the sum of the distributive share percentages of all such members with respect to that partnership.

      (iii) If the UBT Paid Credit carryover of a combined group for a taxable year is attributable to more than one partnership, for purposes of subparagraph (i), the amount of such credit carryover attributable to each partnership shall be a portion of such carryover which bears the same ratio to the full amount of such carryover as the amount of the UBT Paid Credit allowed for the taxable year attributable to that partnership bears to the total amount of UBT Paid Credit allowed to the combined group for that taxable year.

  1. Order of credits. The UBT Paid Credit shall be taken before any other credit allowed by § 11-604 of the Administrative Code.
  2. The provisions of subdivisions (a) through (f) of this section are illustrated by the following examples. The facts in the following examples have been simplified and do not reflect the deduction allowed by § 11-509(a) of the Administrative Code or the exemption allowed by § 11-510(a)(1) of the Administrative Code. See 19 RCNY § 28-03(d) for additional examples illustrating the calculation of the UBT Paid Credit. The examples that follow illustrate only those aspects of the UBT Paid Credit that relate specifically to the general corporation tax.

Example 1: Credit calculation. ABC is a calendar year partnership doing business in New York City. ABC has a business allocation percentage of 100 percent. ABC has three partners, Corporation A, Corporation B and Corporation C, all of which are calendar year taxpayers and have a 100 percent business allocation percentage.

ABC’s unincorporated business taxable income (“UBTI”) for each of the taxable years 1995 and 1996 is $3,000,000. ABC pays unincorporated business tax of $120,000 each year. For both 1995 and 1996, ABC’s Form NYC-204 indicates that A, B and C each has a distributive share from ABC of $1,000,000 and a distributive share percentage of 33.33 percent.

A is subject to the general corporation tax on the ENI Basis for each of its taxable years 1995 and 1996. In each of 1995 and 1996, A has entire net income of $400,000 without regard to its distributive share of income, gain, loss or deduction from ABC (“Separate ENI”).

B is subject to general corporation tax on the Alternative Basis for 1995 and 1996. In each of 1995 and 1996, B’s Separate ENI is a net loss of ($985,000) after a $1,000,000 deduction for the salary paid to its sole shareholder.

C is a capital base taxpayer for 1995 and 1996. In each of 1995 and 1996 C’s Separate ENI is a loss of ($1,000,000).

Determination of the Credit for A (ENI Basis taxpayer):

A’s UBT Paid Credit for 1995 is determined as follows:

Measure 1: A’s distributive share percentage is 33.33 percent. Measure 1 is $40,000, equal to ABC’s unincorporated business tax of $120,000 multiplied by A’s distributive share percentage (33.33%).

Measure 2: A’s entire net income is $1,400,000, on which the general corporation tax would be $123,900 before any UBT Paid Credit. The general corporation tax on A’s separate ENI of $400,000 would be $35,400. Thus the incremental tax effect on A’s total taxable income of A’s distributive share from ABC is $88,500 ($123,900 - $35,400 = $88,500.) This amount is multiplied by the fraction 4/8.85, equaling $40,000. See subdivision (b)(2)(ii)(A)(c), supra.

Therefore, A’s UBT Paid Credit for 1995 is $40,000.

A’s UBT Paid Credit for 1996 is the same as for 1995.

Determination of the Credit for B (Alternative Basis taxpayer):

B’s UBT Paid Credit for 1995 is determined as follows:

Measure 1: B’s distributive share percentage is 33.33 percent. Measure 1 is $26,550, equal to ABC’s unincorporated business tax of $120,000 multiplied by B’s distributive share percentage (33.33%) and by the fraction 2.655/4. See subdivision (b)(2)(i)(C), supra.

Measure 2: B’s alternative tax base is $300,000 calculated as follows: B’s ENI is $15,000 (Separate loss of ($985,000) + distributive share of $1,000,000). To this is added the shareholder’s salary of $1,000,000 less $15,000 equaling $1,000,000, which is multiplied by 30 percent to arrive at the tax base of $300,000. (Administrative Code § 11-604.1(E)(3). See also Administrative Code § 11-604.1(H) for modifications of the alternative tax calculation for years beginning on or after July 1, 1996.) The tax on the Alternative Basis is $26,550. Excluding B’s distributive share from ABC, B’s alternative tax liability would be $0. (Separate loss of ($985,000) + shareholder’s salary of $1,000,000 less $15,000 multiplied by 30% = $0. $0 multiplied by 8.85% = $0.) The incremental tax effect of the distributive share from ABC is $26,550 ($26,550 - $0 = $26,550).

Therefore, B’s UBT Paid Credit for 1995 is $26,550.

B’s UBT Paid Credit allowed for 1996 is determined as follows:

Measure 1: B’s distributive share percentage is 33.33 percent. Measure 1 is $40,000, equal to ABC’s unincorporated business tax of $120,000 multiplied by B’s distributive share percentage (33.33%).

Measure 2: For tax years beginning after 1995, Measure 2 is calculated as if the taxpayer were on the ENI Basis. ENI, however is modified in making the calculation. B’s separate ENI is a loss of ($985,000). This is treated as zero. As a result, B’s modified ENI is $1,000,000 (separate modified ENI of $0 plus distributive share of $1,000,000) on which the general corporation tax would be $88,500. Excluding B’s distributive share from ABC, B’s modified ENI would be zero on which there would be no tax. Thus, the incremental tax effect on B of B’s distributive share from ABC is $88,500 ($88,500 - 0 = $88,500). This is multiplied by the fraction 4/8.85. See subdivision (b)(2)(ii)(B) supra. Thus, Measure 2 is $40,000.

Therefore, B’s UBT Paid Credit allowed for 1996 is $40,000.

Calculation of the amount of UBT Paid Credit that B may take in 1996. B’s general corporation tax liability on the Alternative Basis is $26,550, the same as in 1995. B’s allowed UBT Paid Credit of $40,000 is available to offset B’s general corporation tax liability at a rate of $1 of credit for every $.6638 of tax. See subdivision (b)(2)(iii)(D), supra. B may use $39,997 of its allowed credit to reduce its tax liability to zero ($26,550/.6638 = $39,997). The remaining credit allowed of $3 is eligible to be carried over by B to the next seven taxable years.

Computation of the credit for C (a capital base taxpayer):

Because C is subject to the tax on capital, C is not allowed a UBT Paid Credit in 1995. There is no carryover of a UBT Paid Credit for 1995 to any other year.

C’s UBT Paid Credit that is allowed for 1996 is determined as follows:

Measure 1: C’s distributive share percentage is 33.33 percent. Measure 1 is $40,000, equal to ABC’s unincorporated business tax of $120,000 multiplied by C’s distributive share percentage (33.33%).

Measure 2: Measure 2 is calculated as if C were on the ENI Basis. ENI, however, is modified in making the calculation. C’s separate ENI is a loss of ($1,000,000). This is treated as $0. As a result, C’s modified ENI is $1,000,000 (separate modified ENI of $0 plus distributive share of $1,000,000), on which there would be general corporation tax of $88,500 on the ENI Basis. Excluding C’s distributive share from ABC, C’s modified ENI would be zero on which there would be no tax. Thus, the incremental tax effect of C’s distributive share from ABC is $88,500 ($88,500 - 0 = $88,500). This is multiplied by the fraction 4/8.85. Thus, Measure 2 is $40,000.

Therefore, C’s UBT Paid Credit allowed for 1996 is $40,000. Because C is on the capital base C can not take a UBT Paid Credit in 1996. The entire credit allowed of $40,000 is eligible to be carried over by C to the next seven taxable years but may only be used in a year in which C is taxed on the ENI Basis or the Alternative Basis.

Example 2: Calculation of the credit for a combined group. ABCD is a partnership doing business in New York City. ABCD allocates 100 percent of its unincorporated business income to the City. ABCD has no investment income. ABCD has four partners, A, B, C and D. Partner A is an individual who does not independently do business in New York City. Partners B, C and D are all corporations that are members of a combined group (CG) that files a combined general corporation tax return. CG has a 100 percent business allocation percentage. Partners B, C, and D do not have any separate income.

ABCD’s UBTI for calendar year 1996 is $500,000. ABCD pays unincorporated business tax of $20,000. ABCD’s four partners share equally in income of $800,000 from ABCD. In addition, Partner D has a special allocation of a loss of ($300,000) from ABCD. Therefore, D’s net total distributive share is a net loss of ($100,000).

Calculation of Distributive Share Percentage (“DSP”). The distributive share percentages of the partners are indicated in the following table:

  Distributive Share (DS) DS – Modified for Calculation of DSP DSP
A $200,000 $200,000 33.33%
B $200,000 $200,000 33.33%
C $200,000 $200,000 33.33%
D ($100,000) $0 0%
Total $500,000 $600,000 100%

~

CG’s distributive share percentage, 66.66 percent may be determined by adding the distributive share percentages of its members, B and C, that have net distributive shares greater than zero.

Calculation of CG’s UBT Paid Credit.

Measure 1: ABCD’s unincorporated business tax of $20,000 is multiplied by CG’s distributive share percentage (66.66%). Thus, Measure 1 is $13,332.

Measure 2: CG’s separate ENI is 0. The distributive shares of its members total $300,000 ($200,000 + $200,000 - $100,000). The general corporation tax on that amount would be $26,550. Thus, the incremental tax effect of CG’s distributive share from ABCD is $26,550 ($26,550 - 0 = $26,550). This is multiplied by the fraction 4/8.85. Thus, Measure 2 is $12,000. Note: While D’s net loss is not taken into account in calculating CG’s distributive share percentage or in determining Measure 1, it is taken into account in determining Measure 2. Therefore, CG’s UBT Paid Credit is equal to $12,000.

Subchapter D: Allocation

§ 11-61 General Rules for Allocation.

(a) Title 11, Chapter 6, Subchapter 2 of the Administrative Code provides for separate allocations of business income and capital, investment income and capital, and subsidiary capital. Business income and capital generally are allocated by a business allocation percentage determined by three factors: tangible property, business receipts and payrolls (19 RCNY §§ 11-63 through 11-67, infra). Investment income and capital are allocated by an investment allocation percentage determined pursuant to 19 RCNY §§ 11-68 through 11-71 of these regulations. Subsidiary capital is allocated by a subsidiary allocation percentage determined by the amount of capital employed in New York City by the taxpayer's subsidiaries (19 RCNY § 11-71, infra).
  1. Every corporation is entitled to an allocation, within and without New York City, of its subsidiary capital and its investment capital and income, even if it transacts all of its business and maintains its only office in New York City. A corporation is entitled to allocate part of its business income and capital outside New York City only if it has a regular place of business outside the City; otherwise 100 percent of its business income and capital must be allocated to New York City.

§ 11-62 Allocation on Combined Reports.

In the case of combined reports, allocation is made on the basis of combined accounts from which intercompany items (including intercorporate receipts) are eliminated. The elections provided for in § 11-604(6) of the Administrative Code (19 RCNY §§ 11-63(a), 11-68(a) and 11-70(a), infra) are not available to corporations taxed on a combined basis.

§ 11-63 Business Allocation Percentage.

(§ 11-604(3)(a), Administrative Code.)
  1. Use of business allocation percentage. (§ 11-604(3)(a).)

   (1) There are many taxpayers which need to determine only a business allocation percentage, and need not be concerned with a subsidiary allocation percentage or an investment allocation percentage. Thus, a taxpayer which has only busi