2006 New York Code - Allocation To The City.

 
    §  11-508  Allocation to the city. (a) General; allocation of business
  income. If an unincorporated business is  carried  on  both  within  and
  without the city, as determined under regulations of the commissioner of
  finance, there shall be allocated to the city, in the manner provided in
  subdivision  (b),  (c)  or  (d)  of  this  section, a fair and equitable
  portion of its business income. For taxable years beginning before  July
  first,  nineteen  hundred ninety-six, if the unincorporated business has
  no regular place of business outside the  city,  all  of  such  business
  income shall be allocated to the city.
    (b)  (1)  Allocation  by taxpayer's books. For taxable years beginning
  before January first, two thousand five, the portion  allocable  to  the
  city  may  be  determined  from the books of the business if the methods
  used in keeping such books are approved by the commissioner  of  finance
  as fairly and equitably reflecting the income from the city.
    (2)(i)  If  a taxpayer determines the portion of business income to be
  allocated to the city using the method prescribed in  paragraph  one  of
  this  subdivision on a timely filed original return with respect to each
  of the two taxable years, each of which must consist of  twelve  months,
  immediately  preceding the taxpayer's first taxable year beginning on or
  after January first, two thousand five, the taxpayer may make a one-time
  election to continue to use that method for taxable years  beginning  on
  or  after January first, two thousand five and before January first, two
  thousand twelve. Such  election  shall  be  made  by  using  the  method
  prescribed  in  paragraph  one of this subdivision on an original timely
  filed return with respect to the first  taxable  year  beginning  on  or
  after  January  first,  two  thousand five and before January first, two
  thousand six. Such election may not be made, or if made, shall be deemed
  revoked as of the beginning of the taxable year if, for  either  of  the
  two  taxable  years immediately preceding the year in which the election
  is made, the commissioner of finance has determined the methods used  in
  keeping  such  books do not fairly and equitably reflect the income from
  the city.
    (ii) (A) A taxpayer  that  has  made  the  election  provided  for  in
  subparagraph  (i)  of this paragraph may revoke it by filing an original
  or amended return using an allocation method permitted by  this  section
  other  than  the  method prescribed in paragraph one of this subdivision
  unless the commissioner of finance has determined that such method  does
  not fairly and equitably reflect the income from the city.
    (B)  The  election  provided for in subparagraph (i) of this paragraph
  shall be deemed to have been revoked as of the beginning of the  taxable
  year  if,  for any taxable year during which the election is intended to
  be in effect, the  commissioner  of  finance  has  determined  that  the
  methods used in keeping the taxpayer's books do not fairly and equitably
  reflect the income from the city.
    (C)  In  the  case  of  a  taxpayer  that  is  a  partnership or other
  unincorporated entity, the election provided for in subparagraph (i)  of
  this  paragraph shall be deemed to have been revoked as of the beginning
  of the taxable  year  unless  one  or  more  of  the  persons  having  a
  proportionate  interest  or  interests,  amounting  to  more  than fifty
  percent of all such interests, in the taxpayer's unincorporated business
  gross income and unincorporated business  deductions  for  such  taxable
  year   were  persons  having  a  proportionate  interest  or  interests,
  amounting to more than fifty percent  of  all  such  interests,  in  the
  taxpayer's  unincorporated  business  gross  income  and  unincorporated
  business deductions at the end  of  the  taxpayer's  last  taxable  year
  beginning  before January first, two thousand five. For purposes of this
  clause, a transfer of an ownership interest in  unincorporated  business
  gross  income  or unincorporated business deductions upon the death of a


  partner or owner to such deceased partner's or owner's estate  shall  be
  disregarded  but  transfers  by  such  decedent's  estate  shall  not be
  disregarded.
    (D)  Once  the  election  provided  for  in  subparagraph  (i) of this
  paragraph has been revoked by the taxpayer pursuant  to  clause  (A)  or
  deemed  revoked pursuant to clauses (B) or (C) of this subparagraph, the
  taxpayer shall be barred from using the method prescribed  in  paragraph
  one  of  this subdivision for the taxable year in which the election has
  been revoked or deemed revoked and any subsequent taxable year.
    (c) Allocation by formula. If subdivision (b) does not  apply  to  the
  taxpayer,  the  portion  allocable  to  the  city shall be determined by
  multiplying (A)  the  business  income  by  (B)  a  business  allocation
  percentage  to be determined by adding together the percentages computed
  under paragraphs one, two and three of this  subdivision,  and  dividing
  the  result  by  the  number of percentages; provided, however, that for
  taxable years  beginning  on  or  after  July  first,  nineteen  hundred
  ninety-six, a taxpayer that is a "manufacturing business," as defined in
  subdivision  (g)  of this section, may determine its business allocation
  percentage as provided in such subdivision (g):
    (1) Property percentage. The percentage computed by dividing  (A)  the
  average  of  the value, at the beginning and end of the taxable year, of
  real and tangible personal property connected  with  the  unincorporated
  business  and  located within the city, by (B) the average of the value,
  at the beginning and end of the taxable year, of all real  and  tangible
  personal property connected with the unincorporated business and located
  both  within  and  without the city. For this purpose, for taxable years
  beginning before January first, two thousand five, real  property  shall
  include  real  property  rented  to the unincorporated business and, for
  this purpose, for taxable years beginning on and  after  January  first,
  two  thousand  five,  real  and tangible personal property shall include
  real  and  tangible  personal  property  rented  to  the  unincorporated
  business  and  the  value  of  such  real and tangible personal property
  rented to the unincorporated business shall  mean  the  product  of  (i)
  eight  and  (ii) the gross rents payable for the rental of such property
  during the taxable year.
    (2) Payroll percentage. The percentage computed by  dividing  (A)  the
  total  wages,  salaries  and other personal service compensation paid or
  incurred during the taxable year to employees  in  connection  with  the
  unincorporated  business carried on within the city, by (B) the total of
  all wages, salaries and other  personal  service  compensation  paid  or
  incurred  during  the  taxable  year to employees in connection with the
  unincorporated business carried on both within and without the city.
    (3) Gross income percentage. The percentage computed by  dividing  (A)
  the  gross  sales  or  charges  for  services performed by or through an
  agency located within the city, by (B) the total of all gross  sales  or
  charges for services performed within and without the city. The sales or
  charges  to  be allocated to the city shall include all sales negotiated
  or consummated, and charges for  services  performed,  by  an  employee,
  agent,  agency  or independent contractor chiefly situated at, connected
  by contract or  otherwise  with,  or  sent  out  from,  offices  of  the
  unincorporated  business,  or  other agencies, situated within the city;
  provided, however, that for taxable years beginning  on  or  after  July
  first,  nineteen hundred ninety-six, sales of tangible personal property
  shall not be allocated to the city  as  hereinabove  in  this  paragraph
  provided,  but  shall  be allocated to the city only where shipments are
  made to points within the city, and provided, further, that:
    (A) for taxable years beginning on or after July first,  two  thousand
  five,   for  taxpayers  having  gross  receipts  for  the  taxable  year


  (determined without regard to any deductions) of less than  one  hundred
  thousand  dollars,  charges for services performed shall be allocated to
  the city to the extent that the services are performed within the city;
    (B)  for  taxable years beginning on or after July first, two thousand
  six,  for  taxpayers  having  gross  receipts  for  the   taxable   year
  (determined without regard to any deductions) of less than three hundred
  thousand  dollars,  charges for services performed shall be allocated to
  the city to the extent that the services are performed within the  city;
  and
    (C)  for  taxable years beginning on or after July first, two thousand
  seven, for all other taxpayers, charges for services performed shall  be
  allocated  to  the  city  to  the extent that the services are performed
  within the city.
    (d) Other allocation methods. The portion allocable to the city  shall
  be   determined   in  accordance  with  rules  and  regulations  of  the
  commissioner of finance if  it  shall  appear  to  the  commissioner  of
  finance  that  the  income  from  the  city  is not fairly and equitably
  reflected under the provisions of either subdivision (b) or  subdivision
  (c) of this section.
    (e)  Special  rules  for  real  estate. Income and deductions from the
  rental of real property, and gain and loss from the  sale,  exchange  or
  other  disposition  of real property, shall not be subject to allocation
  under subdivision (b), (c),  or  (d)  of  this  section,  but  shall  be
  considered  as  entirely derived from or connected with the state, other
  than this state, in which such property is located or, if such  property
  is  located  in  this  state,  the political subdivision thereof. To the
  extent that anything in the preceding sentence is inconsistent with  any
  provision  of  subdivision  (d)  of  section  11-502, subdivision (c) of
  section 11-506 or subdivision sixteen of section 11-507 of this chapter,
  the provisions of such  subdivisions  shall  take  precedence  over  the
  provisions of the preceding sentence.
    (e-1)   Special   rules   for   publishers   and   broadcasters.   (1)
  Notwithstanding anything in paragraph three of subdivision (c)  of  this
  section to the contrary and except as provided in paragraph four of this
  subdivision,  in  the  case  of  a  taxpayer  engaged in the business of
  publishing newspapers or periodicals, there shall be  allocated  to  the
  city,  for  purposes of such paragraph three, the gross sales or charges
  for services arising from sales of  subscriptions  to,  and  advertising
  contained  in,  such  newspapers or periodicals, to the extent that such
  newspapers or periodicals are delivered to points within the city.
    (2) Notwithstanding anything in paragraph three of subdivision (c)  of
  this section to the contrary and except as provided in paragraph four of
  this  subdivision,  in the case of a taxpayer engaged in the business of
  broadcasting radio or television programs, whether  through  the  public
  airwaves  or by cable, direct or indirect satellite transmission, or any
  other means of transmission, there shall be allocated to the  city,  for
  purposes  of  such  paragraph  three,  a  portion  of the gross sales or
  charges for services arising from the  sale  of  subscriptions  to  such
  programs  or  from  the  broadcasting of such programs and of commercial
  messages  in  connection  therewith,  such  portion  to  be   determined
  according  to  the number of listeners or viewers within and without the
  city.
    (3) Notwithstanding anything in this section (other  than  subdivision
  (e)  of this section) to the contrary, in the case of a taxpayer that is
  substantially engaged, in the  aggregate,  in  any  combination  of  the
  businesses  referred  to  in  paragraphs  one,  two  and  four  of  this
  subdivision, the portion of business income allocable to the city  shall
  be  determined  in  accordance with the provisions of subdivision (c) of


  this section (as modified by  paragraphs  one,  two  and  four  of  this
  subdivision),  unless  the  commissioner  of finance determines that the
  business income from the city is  not  fairly  and  equitably  reflected
  under  the  provisions  of  such  subdivision  (c),  in  which event the
  provisions of subdivision (d) of this section shall apply in determining
  the portion of business income allocable to the city and the  provisions
  of subdivision (b) of this section shall not apply. For purposes of this
  subdivision, a taxpayer shall be deemed to be substantially engaged in a
  business  or  businesses  referred  to in such paragraphs one and two if
  more than ten percent of the taxpayer's gross receipts for  the  taxable
  year are attributable to such business or businesses.
    (4)   Notwithstanding  anything  in  paragraph  one  or  two  of  this
  subdivision to the contrary, for taxable years  beginning  on  or  after
  January  first,  two  thousand two, in the case of a taxpayer engaged in
  the business of publishing newspapers or  periodicals,  or  broadcasting
  radio  or television programs, whether through the public airwaves or by
  cable, direct or indirect satellite transmission, or any other means  of
  transmission,  there  shall  be  allocated  to the city, for purposes of
  paragraph three of subdivision (c) of this section, the gross  sales  or
  charges  to  subscribers  located  in the city for subscriptions to such
  newspapers, periodicals, or  program  services.  For  purposes  of  this
  paragraph,  a  subscriber shall be deemed located in the city if, in the
  case  of  newspapers  and  periodicals,  the  mailing  address  for  the
  subscription  is  within  the city and, in the case of program services,
  the billing address  for  the  subscription  is  within  the  city.  For
  purposes of this clause, "subscriber" shall mean a member of the general
  public who receives such newspapers, periodicals or program services and
  does not further distribute them.
    (e-2)   Rules   for  receipts  from  certain  services  to  investment
  companies.  (1) For taxable years beginning on or after  January  first,
  two  thousand one, for purposes of paragraph three of subdivision (c) of
  this section, the  portion  of  receipts  received  from  an  investment
  company   arising   from  the  sale  of  management,  administration  or
  distribution  services  to  such  investment   company   determined   in
  accordance  with  paragraph  two  of this subdivision shall be deemed to
  arise from services performed within the city (such portion referred  to
  herein as the New York city portion).
    (2)  The  New  York  city portion shall be the product of the total of
  such receipts from the  sale  of  such  services  and  a  fraction.  The
  numerator  of  that  fraction  is the sum of the monthly percentages (as
  defined  hereinafter)  determined  for  each  month  of  the  investment
  company's  taxable  year  for  federal income tax purposes which taxable
  year ends within the taxable year of the  taxpayer  (but  excluding  any
  month  during  which  the investment company had no outstanding shares).
  The monthly percentage for each such month is determined by dividing the
  number of shares in the investment company which are owned on  the  last
  day  of  the month by shareholders that are domiciled in the city by the
  total number of shares in the investment  company  outstanding  on  that
  date.  The  denominator  of  the  fraction is the number of such monthly
  percentages.
    (3)(A) For purposes of this subdivision the term  "domicile",  in  the
  case  of  an  individual  shall  have  the  meaning ascribed to it under
  chapter seventeen of this title; an estate or trust is domiciled in  the
  city  if  it  is a city resident estate or trust as defined in paragraph
  three of subdivision (b) of section 11-1705 of  this  code;  a  business
  entity  is  domiciled  in the city if the location of the actual seat of
  management or control is in the city. It  shall  be  presumed  that  the
  domicile of a shareholder, with respect to any month, is his, her or its


  mailing  address on the records of the investment company as of the last
  day of such month.
    (B)  For  purposes  of this subdivision, the term "investment company"
  means a regulated investment company, as defined in section 851  of  the
  internal revenue code, and a partnership to which section 7704(a) of the
  internal  revenue  code applies (by virtue of section 7704(c)(3) of such
  code) and that meets the requirements of section 851(b)  of  such  code.
  The  preceding sentence shall be applied to the taxable year for federal
  income  tax  purposes  of  the  business  entity  that  is  asserted  to
  constitute  an  investment  company that ends within the taxable year of
  the taxpayer.
    (C) For purposes of this  subdivision,  the  term  "receipts  from  an
  investment   company"   includes   amounts  received  directly  from  an
  investment company as well as amounts received from the shareholders  in
  such investment company in their capacity as such.
    (D)  For  purposes of this subdivision, the term "management services"
  means the rendering of  investment  advice  to  an  investment  company,
  making  determinations  as to when sales and purchases of securities are
  to be made on behalf  of  an  investment  company,  or  the  selling  or
  purchasing  of  securities constituting assets of an investment company,
  and related activities, but only where such activity or  activities  are
  performed  pursuant  to  a  contract with the investment company entered
  into pursuant to section 15(a) of the federal investment company act  of
  nineteen hundred forty, as amended.
    (E) For purposes of this subdivision, the term "distribution services"
  means   the   services   of  advertising,  servicing  investor  accounts
  (including redemptions),  marketing  shares  or  selling  shares  of  an
  investment  company, but, in the case of advertising, servicing investor
  accounts (including redemptions) or marketing shares,  only  where  such
  service is performed by a person who is (or was, in the case of a closed
  end  company) also engaged in the service of selling such shares. In the
  case of an open end company, such service  of  selling  shares  must  be
  performed  pursuant to a contract entered into pursuant to section 15(b)
  of the federal investment company act  of  nineteen  hundred  forty,  as
  amended.
    (F)  For  purposes  of  this  subdivision,  the  term  "administration
  services" includes clerical, accounting, bookkeeping,  data  processing,
  internal  auditing,  legal  and tax services performed for an investment
  company but only if the provider of such service or services during  the
  taxable  year  in  which  such  service  or services are sold also sells
  management or distribution services, as  defined  hereinabove,  to  such
  investment company.
    (f)  Allocation  of investment income. (1) The investment income of an
  unincorporated business shall be allocated to the  city  by  multiplying
  such  investment  income  by  an  investment allocation percentage to be
  determined as follows:
    (A) multiply the amount of its investment  capital  invested  in  each
  stock,  bond  or  other  security  (other  than governmental securities)
  during the period covered by  its  return  by  the  issuer's  allocation
  percentage (determined as provided in paragraph two of this subdivision)
  of the issuer or obligor thereof:
    (B) add together the products so obtained; and
    (C)  divide the sum so obtained by the total of its investment capital
  invested during such period in stocks, bonds and other securities;
  provided, however, that in case any investment capital  is  invested  in
  any  stock,  bond  or other security during only a portion of the period
  covered by the return, only such portion of such capital shall be  taken
  into  account;  and  provided,  further, that if a taxpayer's investment


  allocation percentage is zero, interest received on bank accounts  shall
  be  allocated  in  the manner provided in subdivision (b), (c) or (d) of
  this section.
    (2)  (A)  In  the  case  of  an issuer or obligor subject to tax under
  subchapter two of chapter six of this title, or  subject  to  tax  as  a
  utility  corporation  under  chapter  eleven of this title, the issuer's
  allocation percentage shall be the percentage of the appropriate measure
  (as defined hereinafter) which is required to be  allocated  within  the
  city on the report or reports, if any, required of the issuer or obligor
  under  chapter  six  or eleven of this title for the preceding year. The
  appropriate measure referred to in the preceding sentence shall  be:  in
  the  case  of  an issuer or obligor subject to subchapter two of chapter
  six of this title, entire capital; and in  the  case  of  an  issuer  or
  obligor   subject   to  chapter  eleven  of  this  title  as  a  utility
  corporation, gross income.
    (B) In the case of an issuer or obligor subject to tax under part four
  of  subchapter  three  of  chapter  six  of  this  title,  the  issuer's
  allocation percentage shall be determined as follows:
    (i)  In  the case of a banking corporation described in paragraphs one
  through eight of subdivision (a) of section 11-640 of this  title  which
  is  organized  under  the  laws  of the United States, this state or any
  other state of the United States,  the  issuer's  allocation  percentage
  shall  be  its  alternative  entire net income allocation percentage, as
  defined in subdivision (c) of section 11-642  of  this  title,  for  the
  preceding  year.  In  the  case  of  such  a  banking  corporation whose
  alternative  entire  net  income  for  the  preceding  year  is  derived
  exclusively  from  business  carried  on  within  the city, its issuer's
  allocation percentage shall be one hundred percent.
    (ii) In the case of a banking corporation described in  paragraph  two
  of  subdivision  (a)  of section 11-640 of this title which is organized
  under the laws of a country other than the United States,  the  issuer's
  allocation  percentage  shall  be  determined by dividing (I) the amount
  described in  clause  (i)  of  subparagraph  (A)  of  paragraph  two  of
  subdivision  (a)  of  section  11-642 of this title with respect to such
  issuer or obligor for the preceding year, by (II) the  gross  income  of
  such  issuer  or  obligor from all sources within and without the United
  States, for such preceding year, whether or not included in  alternative
  entire net income for such year.
    (iii)  In the case of an issuer or obligor described in paragraph nine
  of subdivision (a) or in paragraph two of  subdivision  (d)  of  section
  11-640  of  this  title,  the  issuer's  allocation  percentage shall be
  determined by dividing the portion of the entire capital of  the  issuer
  or  obligor  allocable  to the city for the preceding year by the entire
  capital, wherever located, of the issuer or obligor  for  the  preceding
  year.
    (C)  Provided,  however, that if a report or reports for the preceding
  year are not filed, or if filed do not contain information  which  would
  permit  the  determination  of such issuer's allocation percentage, then
  the issuer's allocation percentage to be used shall, at  the  discretion
  of  the  commissioner  of finance, be either (i) the issuer's allocation
  percentage derived from the most recently filed report or reports of the
  issuer or obligor or (ii) a percentage calculated, by  the  commissioner
  of  finance,  reasonably  to indicate the degree of economic presence in
  the city of the issuer or obligor during the preceding year.
    (3) For purposes of this  subdivision,  investment  capital  shall  be
  determined  by  taking  the  average  value of the gross assets included
  therein  (less  liabilities  deductible  therefrom   pursuant   to   the
  provisions  of  subdivision  (h) of section 11-501 of this chapter). The


  value of investment capital  which  consists  of  marketable  securities
  shall  be  the  fair  market  value  thereof and the value of investment
  capital other than marketable securities  shall  be  the  value  thereof
  shown  on  the  books  and  records  of  the  unincorporated business in
  accordance with generally accepted accounting principles.
    (g) Special rules for manufacturing businesses. (1) For taxable  years
  beginning  on  or  after  July  first,  nineteen  hundred  ninety-six, a
  manufacturing business may elect to determine  its  business  allocation
  percentage   by   adding   together  the  percentages  determined  under
  paragraphs one, two and three of subdivision (c) of this section and  an
  additional percentage equal to the percentage determined under paragraph
  three of subdivision (c) of this section, and dividing the result by the
  number of percentages so added together.
    (2)  An election under this subdivision must be made on a timely filed
  (determined with regard to extensions granted) original return  for  the
  taxable  year.  Once  made  for  a  taxable year, such election shall be
  irrevocable for that taxable year. A separate election must be made  for
  each  taxable  year. A manufacturing business that has failed to make an
  election as provided in this paragraph shall be  required  to  determine
  its  business  allocation percentage without regard to the provisions of
  this subdivision. Notwithstanding anything  in  this  paragraph  to  the
  contrary,  the  commissioner  of  finance  may  permit  a  manufacturing
  business to make or revoke an election under this subdivision, upon such
  terms and conditions  as  the  commissioner  may  prescribe,  where  the
  commissioner  determines  that  such permission should be granted in the
  interests of fairness and  equity  due  to  a  change  in  circumstances
  resulting from an audit adjustment.
    (3)  As  used  in  this subdivision, the term "manufacturing business"
  means an unincorporated business primarily engaged in the  manufacturing
  and   sale   thereof   of  tangible  personal  property;  and  the  term
  "manufacturing" includes the process (including  the  assembly  process)
  (i)  of  working raw materials into wares suitable for use or (ii) which
  gives new shapes, new qualities or  new  combinations  to  matter  which
  already  has  gone  through  some  artificial  process,  by  the  use of
  machinery,  tools,  appliances   and   other   similar   equipment.   An
  unincorporated  business  shall be deemed to be primarily engaged in the
  activities described in  the  preceding  sentence  if  more  than  fifty
  percent  of  its gross receipts for the taxable year are attributable to
  such activities.
    (h) Notwithstanding subdivision (d)  of  this  section,  if  it  shall
  appear  to  the  commissioner of finance that any business or investment
  allocation  percentage  determined  as  hereinabove  provided  does  not
  properly  reflect the activity, business, or income of a taxpayer within
  the city, the commissioner of finance shall be authorized in his or  her
  discretion,  in  the case of a business allocation percentage, to adjust
  it by (1) excluding one or more of the factors  therein;  (2)  including
  one or more factors, such as expenses, purchases, contract values (minus
  subcontract  values); (3) excluding one or more assets in computing such
  allocation percentage, provided the income therefrom is also excluded in
  determining unincorporated business entire net income, or (4) any  other
  similar  or  different  method  calculated  to  effect a fair and proper
  allocation of the income reasonably attributable to the city, and in the
  case of an investment allocation percentage, to adjust it  by  excluding
  one  or  more  assets  in computing such percentage; provided the income
  therefrom is also excluded in determining unincorporated business entire
  net income. The commissioner of finance from time to time shall  publish
  all  rulings  of general public interest with respect to any application
  of the provisions of this subdivision.