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) 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) 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:
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) 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) 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) 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) 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.
§ 1-05 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) 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) previously unfiled returns
(2) amended returns, or
(3) an assessment document, or whichever is appropriate.
(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.
(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.)
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.
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) 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) 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.
§ 1-09 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).)
(2) Payments made in connection with a denied or revoked amnesty application will be credited to the taxpayer’s open account.
§ 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).)
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) 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.)
§ 1-12 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.
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.
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) 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) 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) 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) 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) 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.)
§ 1-15 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) 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) 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.)
§ 1-17 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.
(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) 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.
§ 1-18 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.)
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.
(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) 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.
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.
§ 1-21 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.
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.
§ 1-22 Requirements for Amnesty.
(Administrative Code § 11-127(b) and (c))
(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.
(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) 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))
§ 1-24 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) 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) 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.
§ 1-25 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)
§ 1-26 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) 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.
§ 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]* ::
§ 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.)
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:
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:
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 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) 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) 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) 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).
(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) 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) 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) 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) 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) 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
(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) 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) 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) 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) 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) 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) 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) 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. (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 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 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) 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) 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 |
|---|---|
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|
|
|
|
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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.
§ 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) 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:
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
(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.
§ 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.
§ 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.
§ 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.
§ 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.
§ 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.
“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.
§ 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) 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) 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.
§ 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]* ::
§ 6-01 Definitions.
City. “City” shall mean the City of New York.
Commercial motor vehicle. A “commercial motor vehicle” is:
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:
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) 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.
§ 6-03 Exemptions.
The tax does not apply to motor vehicles owned and operated, or leased for their exclusive use by:
(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.
§ 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
§ 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;
§ 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:
§ 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) 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 |
~
(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) 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.
§ 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.
§ 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:
(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.
(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.
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:
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.
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).
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.
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.
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.
(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.
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:
(i) real estate taxes and assessments, and
(ii) water rents or sewer rents.
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:
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:
§ 7-04 Exemptions.
The following are exempt from the payment of the tax:
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.
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.
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.
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.
(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:
§ 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.
§ 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.
§ 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.
§ 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.
§ 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:
§ 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) 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 |
~
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 |
~
(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) 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.
§ 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.
§ 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) 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.
§ 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:
§ 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.
§ 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.
§ 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.
§ 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:
|
$7.00 |
|---|---|
|
$7.00 |
|
$20.00 |
|
$10.00 |
|
$73.00/tax lot |
|
$250.00 |
|
$35.00 |
|
$3.50 |
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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:
§ 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) 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) 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.
(9) for payment of bail, unless the chief administrator of the courts requires a party making a payment of bail to pay a reasonable administrative fee.
(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.
§ 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) 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) 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))
“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) 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) 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) 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) 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) 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) 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) 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.
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.)
(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).
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.)
(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) maintaining stockpiles of raw materials or inventories; or
(2) owning materials and equipment assembled for construction.
(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) 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) 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.
(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.
§ 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) 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) 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.
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.)
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.)
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 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.
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) 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) 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.)
(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.
§ 11-27 Definition of Entire Net Income.
(§ 11-602(8), Administrative Code.)
(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) 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.
§ 11-28 Net Operating Loss Deduction.
(§ 11-602(8)(f), Administrative Code.)
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.
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) |
~
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) |
~
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.
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 |
~
(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.
§ 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) 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.
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.)
(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.)
(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) 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) 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) “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.”
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) 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) 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.
§ 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:
$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:
$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:
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) 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.
§ 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.
(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) (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.
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) 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.
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).
§ 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) 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 business income and capital allocates its entire net income and capital by the business allocation percentage.
(2) If the business income (before allowance of any net operating loss deduction) of a taxpayer, not reporting on a combined basis, is more than 75 percent of its entire net income (before allowance of any net operating loss deduction) and its business capital is more than 75 per cent of its total business and investment capital, it may elect to allocate its entire net income and total business and investment capital by the business allocation percentage.
(3) In other cases, a taxpayer which has both business and investment capital, but has only business income or has business income and an investment loss, allocates its entire net income and its business capital by the business allocation percentage. Its investment capital is allocated by the investment allocation percentage (19 RCNY § 11-68(a) and (b), infra).
(1) If the taxpayer did not have a regular place of business outside New York City during the period covered by the report, its business allocation percentage is 100 percent; in other words, the taxpayer may not allocate any of its business income or capital outside New York City.
(2) A regular place of business is any bona fide office (other than a statutory office), factory, warehouse, or other space which is regularly used by the taxpayer in carrying on its business. Where as a regular course of business, property of the taxpayer is stored by it in a public warehouse until it is shipped to customers, such warehouse is considered a regular place of business of the taxpayer and, where as a regular course of business, raw material or partially finished goods of a taxpayer are delivered to an independent contractor to be converted, processed, finished or improved, and the finished goods remain in the possession of the independent contractor until shipped to customers, the plant of such independent contractor is considered a regular place of business of the taxpayer. Where as a regular course of business a taxpayer, engaged in trucking operations, uses a terminal, garage, repair shop or any similar space under an agreement whereby it contributes to the cost of maintaining such facilities or furnishes similar facilities of its own in exchange therefor, such space is considered a regular place of business of the taxpayer.
(3) A taxpayer does not have regular place of business outside the City solely by consigning goods to an independent factor outside the City for sale at the consignee’s discretion.
(1) If the taxpayer had a regular place of business outside New York City during the period covered by the report, its business allocation percentage is generally computed on the basis of its
(i) real and tangible personal property (including real property rented to it) within and without New York City (19 RCNY § 11-64, infra).
(ii) business receipts within and without New York City (19 RCNY § 11-65(a), infra), and
(iii) payrolls within and without New York City (19 RCNY § 11-66(a), infra).
(2) (i) The business allocation percentage is computed by adding together the percentages of the taxpayer’s real and tangible personal property, business receipts and payrolls within New York City during the period covered by the report, and dividing the total of such percentages by three. However, if one of the factors (property, receipts or payrolls) is missing, the other two percentages are added and the sum is divided by two, and if two of the factors are missing, the remaining percentage is the business allocation percentage. (A factor is not missing merely because its numerator is zero, but it is missing if both its numerator and its denominator are zero.)
Example: A taxpayer owns no real or tangible personal property and rents no real property either within or without the City. The property factor being missing, the business allocation percentage may be computed by adding the percentages derived from the allocation of its receipts and payrolls, and dividing the total by two.
(ii) In the event that any of the percentages to be determined under subparagraphs (i), (iii) or (iii) of paragraph (1) of this subdivision cannot be determined because the taxpayer has either no property, no payroll or no business receipts within or without the City, then the computation to be made under subparagraph 10 of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code shall be made by taking the sum of the products that are determined under such subparagraph (10) 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 subparagraph (10). 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.)
(iii) Weight factor defined. For purposes of subparagraph (ii) of this paragraph, “weight factor” is the percentage used in the allocation computation in subparagraph 10 of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code, by which the percentage derived from paragraph (1) of this subdivision is multiplied in such allocation computation. For example, in subclause (i) of clause (A) of subparagraph (10) of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code, the weight factor is 30%; in subclause (i) of clause (I) of subparagraph (10) of paragraph (a) of subdivision (3) of § 11-604 of the Administrative Code, the weight factor is 3 1/2%.
(iv) Example: For the tax year 2009, a taxpayer has no employees either within or without the City. The property factor percentage determined under (c)(1)(i) of this section is 10%, and the business receipts factor percentage determined under (c)(1)(ii) of this section is 25%. As the payroll factor is missing, the allocation percentage may be computed by taking the sum of
(A) the product of 30% and 10%, and
(B) the product of 40% and 25%, which is .03 + .1 = .13, then dividing that sum by the sum of the weight factors for property and business receipts, which are .30 and .40, respectively: .13 = .13 = .18571, rounded to four decimal places = .1857 .30 + .40 .70
(3) If it appears that the business allocation percentage computed on the basis of all or any of the property-receipts-payroll factors does not properly reflect the activity, business, capital or income of the taxpayer in New York City, the Commissioner of Finance may adjust the business allocation percentage, as set forth in 19 RCNY § 11-67, infra.
(4) Double-weighted receipts factor for manufacturing businesses.
(i) For taxable years beginning on or after July 1, 1996, a corporation that is a manufacturing corporation as defined in subparagraph (ii) may elect to determine its business allocation percentage by adding together the percentages determined under 19 RCNY §§ 11-64 and 11-66 and adding to that sum two times the percentage determined in 19 RCNY § 11-65 and dividing the total by the number of percentages. See paragraph (2) of this subdivision (c) for the determination of the business allocation percentage where one or more factors is missing.
(ii) Manufacturing corporation. For purposes of this paragraph, a manufacturing corporation is defined as a corporation engaged primarily in the manufacturing and sale of tangible personal property.
(A) 1) Manufacturing. Manufacturing means the process, including assembly, of working raw materials into wares suitable for use or that, by the use of machinery, tools, appliances and other similar equipment, gives new shapes, qualities or new combinations to matter that already has gone through some artificial process.
(2) To qualify as manufacturing, a process, including assembly, must result in a significant change in the raw materials or component parts such that the end product of the process is substantially different in nature or form from the raw materials or component parts.
(3) Manufacturing includes finishing partially finished goods only if the partially finished goods are not usable for their intended purpose in their unfinished state and does not include the mere packaging or labeling of goods.
(4) Manufacturing includes printing in circumstances under which the taxpayer receives any combination of graphic or textual content from a customer, the taxpayer produces a tangible representation of that content, whether in print or other tangible form, through a series of processes using raw materials owned by the taxpayer and the taxpayer delivers that tangible product to the customer or one or more designees of the customer. Manufacturing also includes printing in circumstances under which the taxpayer uses any combination of graphic or textual content prepared by its own employees to produce a tangible representation of the content in print or other tangible form using raw materials owned by the taxpayer and the taxpayer delivers that tangible product to its customers or subscribers.
(5) Manufacturing does not include furnishing information services subject to the tax imposed by § 1105(c)(1) of the tax law regardless of whether the information is provided in tangible form.
(6) Manufacturing includes the design and development of pre-written computer software as defined in § 1101(b)(14) of the tax law to the extent that such pre-written computer software constitutes tangible personal property under § 1101(b)(6) of the tax law.
(7) A corporation that performs services for a customer, including manufacturing services, on property or raw materials belonging to the customer will not be considered a manufacturing corporation.
(8) A business that engages in pre-production activities, but not in the creation of the final product, will be considered to be engaged in manufacturing only if the pre-production activities are extensive and constitute an integral part of the manufacturing process.
(B) To qualify as a manufacturing corporation, a corporation must be engaged in both the manufacture of tangible personal property and the sale of such property that it manufactures. Therefore, a corporation that manufactures tangible personal property but does not engage in the sale of such tangible personal property will not be considered a manufacturing corporation. Similarly, a corporation that sells tangible personal property but does not engage in the manufacture of tangible personal property will not be considered a manufacturing corporation. For purposes of this paragraph, the lease of tangible personal property will be considered a sale of tangible personal property.
(C) For purposes of this paragraph, a corporation engaged in the manufacture and sale of tangible personal property will be considered to be primarily engaged in that activity if more than 50 percent of its gross receipts for the taxable year are derived from the sale of tangible personal property manufactured by the taxpayer.
(1) For purposes of this subparagraph (ii)(C), gross receipts include only amounts treated as business receipts for purposes of 19 RCNY § 11-65 earned in the ordinary course of the taxpayer’s trade or business.
(2) For purposes of this subparagraph (ii)(C), gross receipts derived from the sale of tangible personal property shall mean the sale price of such tangible personal property valued in money, whether received in money or otherwise, without any deduction for expenses or early payment discounts, and including;
(i) any amount for which credit is allowed to the purchaser,
(ii) any charges to the purchaser for shipping or delivery regardless of whether such charges are separately stated in the written contract, if any, or on the bill rendered to such purchaser and regardless of whether such shipping or delivery is provided by the taxpayer or a third party, and
(iii) any charges for services provided by the taxpayer relating to the sale of the tangible personal property provided that such services are subordinate to the sale of the tangible property and provided that such charges are not separately stated in a written contract or bill.
(iii) If a group of corporations is permitted or required to file a combined report and the group, including all corporations in the group whether or not taxpayers, would qualify as a manufacturing corporation if it were a single corporation, excluding all intercompany transactions, the combined group may make an election under this paragraph. If a combined group would not qualify as a manufacturing corporation if it were a single corporation, neither the group nor any of its members may make the election under this paragraph even if one or more member corporations would qualify as manufacturing corporations if they were not included in the combined group. In order for the combined group to qualify as a manufacturing corporation it is not necessary that there be any individual member of the group that would qualify if it were not included in the combined group. See examples 7 and 8.
(iv) An election to use the double-weighted receipts factor must be made on a timely filed original return (including extensions) for the taxable year. A separate election must be made for each taxable year. The election is irrevocable and cannot be made or revoked on an amended return except with the permission of the Commissioner upon such terms and as the Commissioner may specify where the Commissioner concludes that such permission should be granted in the interests of fairness due to changes in circumstances resulting from an audit adjustment. Except as otherwise provided in the preceding sentence, if a taxpayer fails to make an election to use the double-weighted receipts factor, its business allocation percentage must be determined under the provisions of paragraph (2) of this subdivision (c).
(v) The provisions of this paragraph are illustrated by the following examples:
Example 1: X Corporation is engaged in printing pamphlets, brochures, catalogues and business reports. Under an agreement with customer A, X Corporation receives graphic material and text from customer A that X uses to produce print plates, which are used to print multiple copies of a catalogue. X Corporation uses its own raw materials, including paper and ink, and its own equipment to produce the plates and the catalogue. X Corporation employees advise A with regard to the layout and typeface of the catalogue. In the course of performing the contract, X Corporation delivers a master print to A for its review and final approval. In addition, under the agreement with A, X Corporation prepares an electronic version of the catalogue for incorporation into a Web page maintained by A. X Corporation mails the print version of the catalogue to A’s customers and delivers the electronic version of the catalogue to A on a disk. X Corporation receives $500x under the agreement with no breakdown of the price among the various services and products provided.
Under an agreement with customer B, X Corporation receives the text of an annual financial statement required to be filed electronically with the SEC by B. B also requires print copies of the statement. X prints the report in hard copy, using its own ink and equipment but using paper belonging to the customer, delivers the hard copies to B and transmits the statement electronically to the SEC. X Corporation receives $200x under the agreement with B with no breakdown of the price among the various services and products provided.
X Corporation’s activities under the agreement with A are considered the manufacture and sale of tangible personal property. (Note: if X Corporation delivers the electronic version of the catalogue to A by means of the Internet the result would not change. The $500x received by X Corporation under the contract with A would be considered receipts from the manufacture and sale of tangible personal property provided that the provision of the electronic version is subordinate to the sale of the print version of the catalogue.) No part of X Corporation’s activities under the agreement with B are considered the manufacture and sale of tangible personal property because under the agreement with B, X Corporation is merely performing services on property owned by B. (Note: if X Corporation used its own paper for the print copies, X Corporation’s activities under the agreement with B would be considered the manufacture and sale of tangible personal property.) Of X Corporation’s total business receipts of $700X, $500X are from the manufacture and sale of tangible personal property. Therefore, X Corporation is considered to be a manufacturing corporation.
Example 2: Corporation X is engaged in compiling, printing and distributing a daily newspaper using material received from news services, its own reporters and editorial staff, its own paper and ink and printing equipment and its own technicians. Corporation X is considered engaged in manufacturing. Corporation X receives $100X in receipts from the sale of newspapers and $400X in receipts from the sale of advertising. Because less than 50 percent of Corporation X’s receipts are from the manufacture and sale of tangible personal property, X is not considered a manufacturing corporation.
Example 3: Corporation A is engaged in film processing whereby it receives undeveloped film from its customers and, using its own chemicals, paper and equipment, develops the film and makes print or slide copies for customers. Corporation A is engaged in manufacturing. If instead of using its own materials and equipment, Corporation A contracts with Corporation B to develop the film and make prints, Corporation A is not engaged in manufacturing.
Example 4: Y Corporation contracts with A Corporation, an unrelated entity, to produce a line of art supplies, crayons, paper, markers, glue, etc. from raw materials purchased by Y. The finished goods are delivered to Y. Y packages two or more of those products together with paper purchased from another unrelated supplier into kits that Y sells to toy and art supply retailers. A Corporation’s receipts under the contract with Y are not receipts from the manufacture and sale of tangible personal property because Y provides and owns the raw materials. Y’s receipts from the sale of the kits are not receipts from the manufacture and sale of tangible personal property because Y does not manufacture the component parts itself and the packaged kits do not differ substantially in nature or form from the various component parts.
Example 5: Corporation W washes, cuts, cooks, freezes and packages vegetables for wholesale and retail sale to customers. Corporation W is considered to be engaged in manufacturing.
Example 6: Corporation M collects, sorts, shreds and compresses scrap metal into blocks that are convenient for handling, storage and shipping and sells the scrap metal blocks to companies that manufacture finished goods from them. Corporation M is considered to be engaged in manufacturing because the scrap metal sold differs substantially in nature from the components collected by M, which were not suitable for convenient handling, storage, shipping and sale in their original form.
Example 7: Corporation C purchases fabric, cuts and sews clothing for sale to a wholesale distributor, Corporation E. Corporation C is engaged in the manufacture and sale of tangible personal property. Corporation E packages and labels the clothing for resale to its retail outlet customers. Corporation E is not considered to be engaged in manufacturing. If Corporation C cuts and sews fabric provided by Corporation D where Corporation D retains title to the fabric and D sells the finished clothing, neither Corporation C nor Corporation D would be considered to be engaged in the manufacture and sale of tangible personal property. Corporation C is providing manufacturing services and Corporation D is not conducting the manufacturing activities itself. Corporation C and Corporation D viewed as a single corporation would be considered to be engaged in manufacturing and sale of tangible personal property, and, if Corporation C and Corporation D are permitted or required to file a combined report and meet the other requirements of subparagraph (iii) of this paragraph, Corporation C and Corporation D may make the election under this paragraph.
Example 8: Corporation X operates a chain of supermarkets. Corporation X sets up a subsidiary, Corporation S to produce, package and sell food products through Corporation X’s markets and markets operated by third parties. Corporation X and Corporation S are required to file a combined return. Corporation S has receipts of $100X entirely from the manufacture and sale of tangible personal property. Corporation X has receipts of $900X from the supermarket business. The combined group may not make the election under this paragraph, because less than 50 percent of its total receipts are from the manufacture and sale of tangible personal property.
Example 9: Corporation T purchases finished articles of clothing and using its own equipment and raw materials, imprints or embroiders its logo on each article. Corporation T sells the clothing under its own label. Corporation T is not considered engaged in manufacturing. While the presence of the logo on the clothing may increase its marketability, it does not substantially alter the nature or form of the clothing itself and the clothing is useable as such without the logo.
Example 10: Corporation P purchases fabric from a mill and, using its own equipment, dyes, and other materials, puts a pattern on the fabric through a variety of processes and sells the fabric to clothing manufacturers. Corporation P is considered to be engaged in the manufacture and sale of tangible personal property because it substantially alters the nature of the material.
Example 11: CS Corporation is exclusively engaged in the bottling and sale of soft drinks. CS maintains a factory where it mixes syrup then combines the syrup with carbonated water, places the mixture in bottles, labels the bottles and places them in cartons, then sells the cartons to retailers and wholesalers. CS is a manufacturing corporation.
Example 12: X Corporation is engaged in the design, development and sale of computer software. X Corporation’s employees use computers, programming languages and a library of “pre-written” functions and routines to develop software for use by financial institutions to manage accounts. X Corporation sells the same software to several customers although the software is enhanced or modified to meet the specific needs of each customer. Some customers receive the software on a disk, others receive it electronically over the Internet. More than 50% of X Corporation’s gross receipts derive from both types of sales. The software is taxable as “pre-written computer software” under § 1101(b)(14) of the tax law. Sales of the software are treated as sales of tangible personal property for purposes of § 1101 of the tax law and, therefore, for purposes of subparagraph (ii)(C) of this paragraph. X Corporation is a manufacturing corporation.
Example 13: X Corporation publishes and sells a magazine. X maintains a large staff of reporters, writers, editors, photographers, photo-editors, and graphic artists. This staff produces and assembles stories and photographs for the magazine using a variety of equipment including computers, photographic equipment, printers, scanners and file servers. Each week the staff culls through and edits a large number of stories and photographs and selects a number for inclusion in the magazine. The staff explores various layouts for the components of the magazine. As part of the process the layouts are examined in print form. The staff then finally produces a completed prototype of the magazine in electronic form. The prototype is delivered electronically to an unrelated printer who prints the magazine following X Corporation’s detailed specifications, using raw materials including paper and ink supplied by X Corporation. The printer receives a fee for printing the magazine. The magazine is distributed by the printer to X’s customers.
X Corporation’s extensive preprinting activities leading to the production of the final product are considered an integral part of the manufacturing process. As a result X is considered to be engaged in the manufacture and sale of tangible personal property. If more than 50% of X Corporation’s receipts are from the subscription and newsstand sales of the magazine, X will be considered a manufacturing corporation.
Example (14): X Corporation produces and sells apparel. X maintains a large staff including designers, graphic artists, pattern makers, computer operators, cutters, sewers and drapers. X’s staff develops original ideas for garments, produces illustrations with the aid of computer systems, and selects certain of these ideas to be converted into finished samples. The creation of the samples involves selection of fabrics, cutting, sewing, testing of fabric quality and color and fitting the prototype garments. X then uses the computer systems to make style patterns, which it transfers electronically along with detailed instructions to third-party contractors to whom it also specifies or furnishes the fabrics and other raw materials used to produce the garments. The contractors, whose operations are overseen by X’s employees, assemble the garments using the patterns and materials supplied by X. X then sells the garments to its wholesale customers.
X’s extensive pre-production activities are considered an integral part of the manufacturing process. As a result X is considered to be engaged in the manufacture and sale of tangible personal property. If more than 50% of X Corporation’s receipts are from the sale of garments produced as described above, X will be considered a manufacturing corporation.
§ 11-64 Property Factor.
(a) Computation of 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. Such property should be included only for the period covered by the report. In determining such percentage real property rented to the taxpayer as well as real and tangible property owned by it must be considered.
(2) The average fair market value of real and tangible personal property owned by the taxpayer, both within and without New York City, is determined by the same method used to determine the amount of taxpayer’s capital, in accordance with the provisions of 19 RCNY §§ 11-39 and 11-40, supra. The fair market value of real property rented to the taxpayer must be determined in accordance with the provisions of 19 RCNY § 11-64(b), infra. The same method 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 my not be changed on any subsequent report except with the consent of the Commissioner.
(3) Tangible personal property is within New York City if and so long as it is physically situated or located here, even though it may be stored in a bonded warehouse. Property of the taxpayer held in New York City by an agent, consignee or factor is (and property held outside New York City by an agent, consignee or factor is not) situated or located within New York City. Property, while in transit from a point outside New York City to a point in New York City or vice versa, does not have a fixed situs either within or without the City and, therefore, will not be deemed to be “situated” or “located” within or without New York City. Accordingly, such property while so in transit should be omitted from both the numerator and the denominator of the property factor. Property in transit from a point outside New York City to another point outside New York City is situated or located without New York City. Property in transit from a point in New York City to another point in New York City is situated or located in New York City.
(4) Trucks and other rolling equipment used both within and without New York City may be allocated to New York City on the percentage that the mileage within New York City bears to the total mileage within and without New York City, or on the percentage that the time spent in New York City bears to the total time spent within and without New York City, or by any other method approved by the Commissioner of Finance.
(5) The term tangible personal property means corporeal personal property, such as machinery, tools, implements, goods, wares and merchandise, and does not mean money, deposits in banks, shares of stock, bonds, notes, credits or evidences of an interest in property and evidences of debt (§ 11-602(10), Administrative Code).
(1) As heretofore noted, in determining the property factor, real property rented to the taxpayer, as well as real property and tangible personal property owned by it, must be considered. In order to avoid unnecessary hardship on taxpayers and for ease of administration, 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 rents payable during the period covered by the report by eight.
(2) Gross rents as used in this subdivision, is the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use or possession of the property and includes:
(i) Any amount payable for the use or possession of real property, or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits, or otherwise.
Example 1: A taxpayer, pursuant to the terms of a lease, pays the lessor $1,000 per month and at the end of the year pays the lessor one percent of its gross sales of $400,000. Its gross rent is $16,000.
(ii) Any amount payable as additional rent or in lieu of rent, such as interest, taxes, insurance, repairs or any other amount required to be paid by the terms of a lease or other arrangement.
Example 2: A taxpayer, pursuant to the terms of a lease, pays the lessor $24,000 per annum and also pays real estate taxes in the amount of $4,000 and interest on a mortgage in the amount of $2,000. Its gross rent is $30,000.
(iii) A proportionate part of the cost of any improvement to real property made by or on behalf of the taxpayer which reverts to the owner or lessor upon termination of a lease or other arrangement, based on the unexpired term of the lease commencing with the date the improvement is completed (or the life of the improvement if its life expectancy is less than the unexpired term of the lease), provided, however, that where a building is erected on leased land by or on behalf of the taxpayer, the value of the land is determined by multiplying the gross rent by eight, and the value of the building is determined in the same manner as if owned by the taxpayer. (See 19 RCNY § 11-39, supra.) The proportionate part of the cost of an improvement (other than a building on leased land) is generally equal to the amount of the amortization allowed in computing entire net income, whether the lease does or does not contain an option of renewal.
Example 3: A taxpayer enters into a 21-year lease of certain premises at a rental of $20,000 per annum and after the expiration of one year installs a new store front at a cost of $10,000 which reverts to the owner upon the expiration of the lease. Its gross rent for the first year is $20,000. However, for subsequent years its gross rent is $20,500 ($20,000 annual rent plus 1/20th of $10,000, the cost of the improvement apportioned on the basis of the unexpired term of the lease).
Example 4: A taxpayer leases a parcel of vacant land for 40 years at an annual rental of $5,000 and erects thereon a building which costs $600,000. The value of the land is determined by multiplying the annual rent of $5,000 by eight, and the value of the building is determined in the same manner as if owned by the taxpayer.
(3) Gross rents do not include:
(i) Intercompany rents if both the lessor and lessee are taxed on a combined basis under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code.
(ii) Amounts payable as separate charges for water and electric service furnished by the lessor.
(iii) Amounts payable for storage provided no designated space under the control of the taxpayer as a tenant is rented for storage purposes.
(iv) That portion of any rental payment, which, in the discretion of the Commissioner of Finance is applicable to property subleased by the taxpayer and not used by it.
Example 5: A taxpayer leases certain premises, all of which are of equal value, at a rental of $20,000 per annum and subleases 50 percent of such premises to one or more subtenants receiving a total of $10,000 per annum as rent from such subtenants. Since 50 percent of the rent paid by the taxpayer is applicable to the portion of the premises subleased, 50 percent thereof or $10,000 is excluded in computing the taxpayer’s gross rent for such premises.
(4) In exceptional cases use of the general method above outlined may result in inaccurate valuations. Accordingly, in such cases any other method which will properly reflect the value may be adopted by the Commissioner of Finance either on his own motion or on request of a taxpayer. Such other method of valuation may not be used by a taxpayer until approved by the Commissioner. Any such request shall set forth full information with respect to the property, together with the basis for the valuation proposed by the taxpayer. Such other method once approved by the Commissioner may be used by the taxpayer in its reports for subsequent years until the facts upon which such other method is based are materially changed.
§ 11-65 Receipts Factor.
(a) General.
(1) The percentage of the taxpayer’s business receipts within New York City is determined by
(i) ascertaining the taxpayer’s business receipts within New York City during the period covered by the report and
(ii) dividing the sum of such receipts by the taxpayer’s total business receipts within and without New York City during such period.
(2) The following receipts are allocable to New York City:
(i) one hundred percent of receipts from sales of tangible personal property where shipment is made to points within New York City;
(ii) one hundred percent of receipts from services performed in New York City;
(iii) one hundred percent of rentals from property situated in New York City; (iv) one hundred percent of royalties from the use in New York City of patents and copyrights;
(v) all other business receipts earned in New York City. All such receipts of the period covered by the report (computed on the cash or accrual basis, in accordance with the method of accounting used in the computation of the taxpayer’s entire net income) must be taken into account.
(3) If a taxpayer receives a lump sum in payment for services and also for materials or other property, the sum received must be apportioned on a reasonable basis. That part apportioned to services performed is includible in receipts from services performed, and that part apportioned to materials or other property is includible in receipts from sales. Full details must be submitted with the taxpayer’s report.
(1) Receipts from services performed within New York City are allocable to New York City. All amounts received by the taxpayer in payment for such services are so allocable, irrespective of whether such services were performed by employees or agents of the taxpayer, by subcontractors, or by any other persons. It is immaterial where such amounts were payable or where they actually were received.
(2) Commissions received by the taxpayer are allocated to New York City if the services for which the commissions were paid were performed in New York City. If the taxpayer’s services for which commissions were paid were performed for the taxpayer by salesmen attached to or working out of a New York City office of the taxpayer, the taxpayer’s services will be deemed to have been performed in New York City.
Example: The taxpayer is a New York City sales agent of a Pennsylvania manufacturer and receives in New York City an order from a New Jersey customer. The order is forwarded to the manufacturer which accepts it and fills it by shipment direct to the customer. The taxpayers commission is allocable to New York City.
(3) (i) Where a lump sum is received by the taxpayer in payment for services within and without New York City, the amount attributable to services within New York City is to be determined on the basis of the relative values of, or amounts of time spent in performance of, such services within and without New York City, or by some other reasonable method. Full details must be submitted with the taxpayer’s report. (See also 19 RCNY § 11-65(a)(3).)
(ii) The broadcasting of radio and television programs and commercial messages by way of radio and television antenna pursuant to a license granted by the Federal Communications Commission is deemed to be a service. When a lump sum is received for such service, that lump sum shall be allocated within and without New York City according to the number of listeners or viewers within and without New York City.
(1) Receipts from rentals of real and personal property situated in New York City, and royalties from the use in New York City of patents or copyrights, are allocable to New York City. Receipts from rentals include all amounts received by the taxpayer for the use or occupation of property, whether or not such property is owned by the taxpayer.
(2) Receipts from royalties include all amounts received by the taxpayer for the use of patents or copyrights, whether or not such patents or copyrights were originally issued to or are owned by the taxpayer. A patent or copyright is used in New York City to the extent that activities thereunder are carried on in New York City.
(1) All business receipts earned by the tax payer within New York City are allocable to New York City. Business receipts are not considered to have been earned by the taxpayer in New York City solely by reason of the fact that they were payable in New York City or actually were received in New York City.
(2) Receipts from sales or capital assets (property not held by the taxpayer for sale to customers in the regular course of business) are not business receipts. Receipts from the sale of real property held by the taxpayer as a dealer for sale to customers in the regular course of business are business receipts and are allocable to New York City if the real property was situated in New York City. Receipts from sales of intangible personal property included in business capital, held by the taxpayer as a dealer for sale to customers in the regular course business, are business receipts and are allocable to New York City if the sales were made in New York City or through a regular place of business of the taxpayer in New York City.
§ 11-66 Payroll Factor.
(a) Computation of 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 period covered by the report, by the total amount of compensation of all the taxpayer’s employees (except general executive officers) during such period.
(2) Wages, salaries and other compensation include all amounts paid in good faith for services to the taxpayer, but do not include amounts paid by the taxpayer which do not have in them the element of compensation for personal services actually rendered or to be rendered.
(3) Wages, salaries and other compensation are computed on the cash or accrual basis, in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.
(4) Employees within New York City include all employees regularly connected with or working out of an office or place of business 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 that, because of the fact that a substantial part of its payroll was paid to employees attached to a New York City office who performed a substantial part of their services outside New York City, the computation of the payroll factor according to the general rule stated above would not produce an equitable result, the Commissioner of Finance may, in his discretion, permit the payroll factor to be computed on the basis of the amount of compensation paid for services actually rendered within and without the City. On the other hand, wherever it appears that, because a substantial part of the taxpayer’s payroll was paid to employees attached to offices outside the City who performed a substantial part of their services within the City, the computation of the payroll factor according to the general rule would not properly reflect the amount of the taxpayer business done within New York City by its employees, the Commissioner of Finance may require the payroll factor to be computed on the basis of the amount of compensation paid for services performed within and without the City. In any case, where an employee performs services both within and without the City, the amount treated as compensation for services performed within the City will be deemed to be:
(i) in the case of an employee whose compensation depended directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him for the business attributable to his efforts within New York City;
(ii) 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
(iii) in the case of an employee compensated on a time basis, the proportion of the total amount received by him which the working time employed within New York City bears to the total working time.
(1) Employees, whose wages, salaries and other personal service compensation are included in the computation of the payroll factor of the business allocation percentage, include every individual (except a general executive officer) where the relationship existing between the taxpayer and such individual is that of employer and employee.
(2) 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, are im- material.
(3) A director of a corporation is not an employee, and, therefore, compensation paid to directors for acting as such should not be included in computing the payroll factor.
(1) Personal service compensation paid to general executive officers of the taxpayer for acting as such should not be included in the computation of the payroll factor.
(2) General executive officers include the chairman, president, vice president, secretary, assistant secretary, treasurer, assistant treasurer, comptroller, and any other officer, charged with and performing general executive duties of the corporation. An executive officer whose duties or services are restricted to territory either within or without the City is not a general executive officer.
§ 11-67 Power of Commissioner of Finance to Adjust Business Allocation Percent- age.
(§ 11-604(8), Administrative Code.)
(1) excluding one or more of the factors therein,
(2) including one or more other factors, such as expenses, purchases, contract values (minus subcontract values),
(3) excluding one or more assets in computing any factor entering into the allocation percentage provided the income therefrom is also excluded in determining entire net income, or
(4) any other similar or different method calculated to effect a fair and proper allocation.
§ 11-68 Investment Allocation Percentage.
(a) Use of investment allocation percentage.
(1) A taxpayer, irrespective of whether it has a regular place of business outside New York City, may allocate its investment income and capital within and without New York City by the investment allocation percentage.
(2) There are taxpayers which need to determine only an investment allocation percentage, and need not be concerned with a business allocation percentage. Thus, a taxpayer which has only investment income and investment capital allocates its entire net income and capital by the investment allocation percentage.
(3) (i) For tax years beginning before January 1, 1989, if the investment income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 85 percent of its entire net income (before allowance of any net operating loss deduction) and its investment capital is more than 85 percent of its total business and investment capital, it may elect to allocate its entire net income and total business and investment capital by the investment allocation percentage.
(ii) Except as provided in subparagraph (i) of this subdivision, if a taxpayer has both business and investment capital, but has only investment income or has investment income and a business loss, the taxpayer must allocate its entire net income and its investment capital by the investment allocation percentage. Its business capital is allocated by the business allocation percentage.
(i) Ascertain the average net value of each stock, bond or other security, other than governmental securities, included in the taxpayer’s investment capital, pursuant to subdivision (b) of 19 RCNY § 11-38. The phrase “§ ock, bond or other security” as used in this paragraph does not include cash, even if treated as investment capital pursuant to 19 RCNY § 11-37(a)(2) of these regulations.
(ii) Multiply the net value of each such stock, bond or other security by its issuer’s allocation percentage.
(iii) Add all the products determined in paragraph (ii) of this subdivision.
(iv) Divide the sum obtained in paragraph (iii) of this subdivision by the net value of the taxpayer’s total investment capital, exclusive of cash even if such cash is treated as investment capital pursuant to 19 RCNY § 11-37(a)(2).
(2) (i) The issuer’s allocation percentage of an issuer of or obligor (other than an issuer or obligor subject to tax under Title 11, Chapter 6, Subchapter 3, Part 4 of the Administrative Code and other than in the case of an option on a stock or bond index or an option on a futures contract on such an index) on a stock, bond or other security constituting investment capital is computed as follows:
| Tax Applicable to Issuer or Obligor: | Issuer’s Allocation Percentage: |
|---|---|
| Administrative Code Title 11, Chapter 6, Subchapter 4 (Transportation Corporation Tax) | percentage of issued capital stock required to be allocated within New York City on its report for the preceding year |
| Administrative Code Title 11, Chapter 11 (Utility Tax) | percentage equal to a fraction, the numerator of which is the gross income of a utility corporation included on its New York City Utility Tax reports for periods during the preceding year, and the denominator of which is the gross income of the corporation as defined in Title 11, Chapter 11 of the Code for such periods, except that it shall include income from sources within and without the City. |
| Administrative Code Title 11, Chapter 6, Subchapter 2 (General Corporation Tax) | percentage of entire capital required to be allocated within New York City on its report for thepreceding year (equal to the sum of allocated business capital, allocated investment capital and allocated subsidiary capital divided by the sum of business capital, investment capital and subsidiary capital). |
~
(ii) In the case of an issuer or obligor subject to tax under Title 11, Chapter 6, Subchapter 3, Part 4 of the Administrative Code, the issuer’s allocation percentage shall be determined as follows:
(A) In the case of a banking corporation described in § 11-640(a)(1)-(8) of the Administrative Code that 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 § section 11-642(c) of the Administrative Code, 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 100 percent.
(B) In the case of a banking corporation described in § 11-640(a)(2) of the Administrative Code that 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 § 11-642(a)(2)(A)(i) of the Administrative Code 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.
(C) In the case of an issuer or obligor described in § 11-640(a)(9) or 11-640(d)(2) of the Administrative Code, 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.
(iii) For purposes of paragraphs (i) and (ii) of this subdivision, in determining an issuer’s allocation percentage, the term “preceding year” means the taxable year of the issuer or obligor ending during the taxpayer’s immediately prior taxable year. In general, if no taxable year of the issuer or obligor ends within the taxpayer’s immediately prior taxable year, then the term “preceding year” means the latest taxable year of the issuer or obligor ending before the taxpayer’s immediately prior taxable year. If an issuer or obligor was not required to file a report or return for the preceding year, as defined above, the issuer’s allocation percentage is zero. The taxable year of an issuer or obligor that is a utility corporation subject to tax under Title 11, Chapter 11 of the Administrative Code is the utility’s federal taxable year.
(iv) If a report or reports for the preceding year are required but not filed, or if filed do not contain information that would permit the determination of such issuer’s allocation percentage, then, at the discretion of the Department of Finance, the issuer’s allocation percentage to be used shall be either (A) the issuer’s allocation percentage derived from the most recently filed report or return of the issuer or obligor, or (B) a percentage calculated by the Department of Finance to reasonably indicate the degree of economic presence in the City of the issuer or obligor during the preceding year.
(v) The issuer’s allocation percentage of an option on a stock or bond index, or an option on a futures contract on such an index, will be calculated by the Department of Finance in such a manner as to reasonably indicate the economic presence in the City of the issuers of and obligors on the stocks, bonds or other securities included in the computation of the indexes.
(vi) Issuers or obligors.
(A) The issuer of stock is the corporation a portion of the equity of which is represented by such stock. Thus, the issuer of X Corporation stock is X Corporation; the issuer of Federal National Mortgage Association stock is the Federal National Mortgage Association.
(B) The issuer of, or obligor on, a bond or note is the maker of the instrument. A guarantor of a bond or note is not the issuer or obligor.
(C) The issuer of, or obligor on, a banker’s acceptance is the accepting bank, irrespective of endorsements by other banks. Where banker’s acceptances have been acquired in aggregate form, as in round lot trading, each banker’s acceptance shall be treated separately for purposes of this paragraph.
(D) The issuer of, or obligor on, a trade acceptance is the party that has accepted the draft.
(E) The issuer of, or obligor on, an option is the entity which is the issuer of, or obligor on, the item that is the subject of the option unless the subject of the option is a stock or bond index or a futures contract on such an index. For the computation of the issuer’s allocation percentage of an option on a stock or bond index or of an option on a stock or bond index or of an option on a futures contract on such an index, see § 11-68(2)(v) of these regulations.
(F) The issuer of, or obligor on, a stock which may be acquired when such right or warrant is exercised.
(G) The issuer of assets reflected in the taxpayer’s books and records in connection with futures or forward contracts that constitute investment capital is the issuer of the asset, the taxpayer’s position in which is hedged by the contract.
(3) The issuer’s allocation percentage with respect to any stock, bond or other security may be obtained from the Department of Finance upon the written request of any corporation subject to tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code. The request must be in duplicate and specify the correct name of each entity for which an issuer’s allocation percentage is needed.
(1) Where it appears to the Commissioner of Finance that the investment allocation percentage, computed in the manner prescribed by paragraph (b) of subdivision 3 of § 11-604 of the Administrative Code does not properly reflect the investment activity, business, income or capital of the taxpayer within New York City, the Commissioner of Finance, in his discretion, may adjust such investment allocation percentage by excluding any asset therefrom, provided the income from such asset is also excluded in determining entire net income.
(2) Rulings of general public interest will be published by the Commissioner of Finance from time to time, indicating the circumstances under which, and the manner in which, such adjustments will be made.
§ 11-69 Allocation of Entire Net Income.
(a) Allocation of entire net in-come.
(1) A taxpayer allocates its entire net income by the business allocation percentage (19 RCNY §§ 11-63 through 11-67, supra) in the following cases:
(i) if it has only business income; or
(ii) if it has both business income and investment income, but has the right to and does elect to allocate its entire net income by its business allocation percentage (19 RCNY § 11-63(a), supra) or
(iii) if it has business income and an investment loss.
(2) A taxpayer allocates its entire net income by the investment allocation percentage (19 RCNY § 11-68, supra) in the following cases:
(i) if it has only investment income; or
(ii) if it has both business income and investment income, but has the right to and does elect to allocate its entire net income by its investment allocation percentage (19 RCNY § 11-68(a), supra); or
(iii) if it has investment income and a business loss.
(3) Any taxpayer which has both business income and investment in come, and which cannot or does not elect to allocate its entire net income by either its business allocation percentage or its investment allocation percentage, allocates its entire net income by using both the business allocation percentage and the investment allocation percentage, as follows:
(i) business income is multiplied by the business allocation percentage;
(ii) investment income is multiplied by the investment allocation percentage; (iii) The two products thus obtained are added together. The sum thus obtained is the portion of the taxpayer’s entire net income allocable to New York City. This is so because the taxpayer’s entire net income is, in every case, the sum of its business income plus its investment income. If a net operating loss deduction is allowable in computing entire net income (see 19 RCNY § 11-28supra), such deduction should be apportioned between business income and investment income before multiplying by the allocation percentage (see 19 RCNY § 11-69(d), infra).
(4) If a taxpayer’s investment allocation percentage is zero, interest received on bank accounts is allocated by the business allocation percentage. (See 19 RCNY § 11-69(d), infra, for application of allocation percentage where net operating loss deduction is involved.)
Business Income. (§ 11-602(7), Administrative Code.) “Business income” means entire net income minus investment income. For definition of entire net income, see 19 RCNY § 11-27, supra. For definition of investment income, see 19 RCNY § 11-69(b)(2), infra.
Investment Income. (§ 11-602(5), Administrative Code.)
(i) (A) The term “investment income” means income from investment capital to the extent included in computing entire net income, less any deductions allowable in computing entire net income that are directly or indirectly attributable to investment capital or investment income and sell such portion of any net operating loss deduction allowable in computing entire net income as described in 19 RCNY § 11-69(d). Income from investment capital includes dividends from investment capital, interest from investment capital and capital gains in excess of capital losses from the sale or exchange of investment capital.
(B) Investment income also includes gain (or loss) from closing out a position in a futures or forward contract if such contract substantially diminishes the taxpayer’s risk of loss from holding one or more positions in 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 loss from holding such positions in assets constituting investment capital, the gain (or loss) attributable to any such excess positions in futures or forward contracts is not investment income.
(C) Investment income also includes gain (or loss) from short sales of assets that constitute investment capital.
(D) Investment income also includes gain (or loss) from closing out a position in a futures or forward contract if such contract substantially diminishes 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 loss from such sales, the gain (or loss) attributable to any such excess positions in futures or forward contracts is not investment income.
(E) Investment income also includes premium income from unexercised covered call option if the item which covers the call is an asset constituting investment capital. However, premium income from unexercised naked call options and premium income from unexercised put options is not investment income.
(ii) In no case may investment income be greater than entire net income. If a taxpayer has no business income, its investment income shall be deemed to be equal to its entire net income. For the definition of investment capital, see 19 RCNY § 11-37.
(iii) In computing investment income, dividends and interest from investment capital are includible in the same manner and to the same extent as in computing entire net income. Thus, where only one half of dividends from nonsubsidiary corporations is included in computing entire net income under § 11-602.8(a)(2), only one half of such dividends is included in computing investment income. Capital gains and losses are included in computing entire net income in the same manner and to the same extent as for Federal income tax purposes, subject to the modification provided in § 11-602.8(h). Accordingly, in computing investment income, capital gains and losses from sales and exchanges of assets constituting investment capital are included in the same manner and to the same extent as for Federal income tax purposes, subject to the modification provided in § 11-602.8(h).
(1) Investment income must be reduced by any deductions, allowable in computing entire net income, which are directly or indirectly attributable to investment capital or investment income. Deductions allowable in computing investment income are not to be taken into account in computing business income.
(2) Deductions allowable in computing entire net income which are directly attributable to investment capital or investment income include, among others: interest incurred to carry investment capital, safe deposit box rentals, financial news subscriptions, salaries of officers and employees engaged in the management and conservation of stocks, bonds and other securities included in investment capital, investment counsel fees, custodian fees, the cost of insurance and fidelity bonds covering investment capital, and legal expenses relating to investment capital.
(1) Investment income is reduced by such portion of any net operating loss deduction allowable in computing entire net income as the investment income before such deduction bears to entire net income before such deduction. (See: 19 RCNY § 11-28, supra, for allowable net operating loss deduction.)
(2) The effect of such reduction is to apportion the net operating loss deduction between business and investment income for the current year in the proportion that such income bears to entire net income for the current year, so that a portion of the net operating loss deduction will be allocated on the basis of the allocation percentage applicable to the current year’s investment income and a portion on the basis of the allocation percentage applicable to the current year’s business income.
Example 1: Taxpayer’s entire net income for 1966 is $200,000, consisting of $50,000 of investment income and $150,000 of business income. Its investment allocation percentage is 15 percent. Its business allocation percentage is 100 percent. It has an allowable net operating loss deduction of $100,000 for a loss sustained in 1967. Its investment income is $25,000
([$50,000 - $50,000 × $100,000]), $200,000
which is allocable 15 percent to New York City. Its business income is $75,000
([$150,000 - $150,000 × $100,000]), $200,000
which is allocable 100 percent to New York City. Thus, 25 percent of the net operating loss deduction is allocated on the basis of the investment allocation percentage of the current year and 75 percent is allocated on the basis of the business allocation percentage of the current year.
(3) If the investment allocation percentage of a taxpayer is zero, interest on bank accounts and obligations of the United States and its instrumentalities and obligations of New York State, its political subdivisions and its instrumentalities should (except as otherwise provided in 19 RCNY § 11-69(a)(4), supra) be added to business income before the apportionment of any net operating loss deduction, since such interest is treated as business income for allocation purposes.
Example 2: If the investment allocation percentage of the taxpayer in Example 1 was zero and $30,000 of its investment income was from United States government bonds, its investment income after allowance of the net operating loss deduction is $10,000
([$20,000 - $20,000 × $100,000]), $200,000
none of which is allocable to New York City. Its business income after allowance of the net operating loss deduction is $90,000
([$180,000 - $180,000 × $100,000]), $200,000
100 percent of which is allocable to New York City.
§ 11-70 Allocation of Business and Investment Capital.
(a) General.
(1) A taxpayer may not allocate any of its business capital without New York City unless it had a regular place of business outside New York City during some part of the year covered by the report. But a corporation may allocate its investment capital by its investment allocation percentage, even if all of its business and its only office were in New York City.
(2) Business capital allocable to New York City is computed by multiplying business capital by the business allocation percentage. Investment capital allocable to New York City is computed by multiplying investment capital by the investment allocation percentage. The sum of the products so obtained is the taxpayer’s total business and investment capital allocable to New York City.
(3) Where the investment income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 85 percent of its entire net income (before allowance of any net operating loss deduction) and its investment capital is more than 85 percent of its total business and investment capital, it may elect to allocate its total business and investment capital by the investment allocation percentage (see 19 RCNY § 11-68(a), supra). Also, where the business income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 75 percent of its entire net income (before allowance of any net operating loss deduction) and its business capital is more than 75 percent of its total business and investment capital, it may elect to allocate its total business and investment capital by the business allocation percentage (see: 19 RCNY § 11-63(a), supra).
§ 11-71 Allocation of Subsidiary Capital.
(§ 11-604(7), Administrative Code.) Every taxpayer irrespective of whether it has a regular place of business outside New York City is entitled to allocate its subsidiary capital within and without New York City. The subsidiary capital of the taxpayer allocable to New York City is computed as follows:
Subchapter E: Reports
§ 11-81 Corporations Required to File Reports.
(§ 11-605(1), Administrative Code.)
(1) every corporation subject to tax, irrespective of the amount of its entire net income or capital. As to what corporations are subject to tax, see 19 RCNY § 11-03, supra;
(2) every receiver, referee, trustee, assignee or other fiduciary, or other officer or agent appointed by any court, who conducts the business of any corporation subject to tax under Subchapter 2 of Chapter 6 of Title 11, of the Administrative Code (§ 11-603(3), Administrative Code); and
(3) every corporation which has an officer, agent or representative within New York City, irrespective of whether such corporation is subject to tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code), provided such corporation is not subject to a tax imposed by any other Chapter of Title 11 of the Administrative Code.
(1) a newly organized taxpayer whose first accounting period is less than 12 months; (2) a foreign corporation that becomes subject to tax in New York City subsequent to the commencement of its Federal accounting period;
(3) a taxpayer that dissolves, merges, consolidates or ceases to be subject to tax in New York City prior to the close of its accounting period for Federal income tax purposes;
(4) a taxpayer that changes its accounting period for Federal income tax purposes;
(5) a taxpayer that becomes part of or ceases to be part of a Federal consolidated group, i.e., an affiliated group that files a Federal consolidated return, during the year;
(6) a taxpayer that changes from one Federal consolidated group to another Federal consolidated group during the year; and
(7) 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 section 338 of the Internal Revenue Code and not deemed invalid pursuant to 19 RCNY § 11-27(j), if the acquisition date, as defined in section 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 19 RCNY §§ 11-13, 11-14 and 11-87 and shall be filed as provided in 19 RCNY §§ 11-87 and 11-88.
§ 11-82 Corporations Having an Officer, Agent or Representative Within New York City.
(a) Under § 11-605 of the Administrative Code, every corporation which has an officer, agent or representative in New York City is required to file reports, irrespective of whether it is subject to tax. As to a corporation not subject to tax, this requirement applies only if it maintains in New York City, with a fair degree of regularity and continuity, one or more officers, agents or representatives, between whom and the corporation there exists the relationship of employer and employee. (As to when the relationship of employer and employee exists between a corporation and its agents or representatives, see 19 RCNY § 11-66(b), supra.) A corporation not subject to tax is not required to file reports merely because one or more of its officers, agents or representatives reside or have an office in some other capacity in New York City or come into the City at infrequent intervals in connection with isolated transactions of the corporation.
§ 11-83 Reports Where Federal or New York State Taxable Income is Changed.
(§ 11-605(3), Administrative Code.)
§ 11-84 Reports Relating to War Loss Recoveries.
(§ 11-6059(3), Administrative Code.)
(1) The amount of any such recovery, the year in which recovered and the years in which the taxpayer deducted such recovered loss.
(2) Whether any such recovery has been included in taxable income for tax purposes and the year so included.
(3) Whether any such recovery was the basis for any adjustment by the United States Treasury Department or the State Tax Commission of the income of any year prior to the year of recovery.
§ 11-85 Form of Reports.
(§ 11-605(1), Administrative Code.)
§ 11-86 Form of Reports on Combined Basis.
In all cases where a combined report is required or permitted to be filed (see: 19 RCNY § 11-91, infra), such report must be filed on form NYC-3A, setting forth the information requested. In addition, a separate report on form NYC-3L is required to be filed for each corporation included in the combined report.
§ 11-87 Time for Filing Reports.
(§ 11-605(1), Administrative Code.)
(1) Taxpayers joining a Federal consolidated group.
(i) Short period precedes joining the group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, where a taxpayer, not previously part of a Federal consolidated group (i.e., an affiliated group filing a Federal consolidated return), 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 paragraph shall be due on the due date for the Federal short period return as provided by paragraphs (1) or (2) of subdivision (c) of Treas. Reg. § 1.1502-76(c), 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 subdivision (b) of this section.
(ii) Short period follows joining group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, 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 section 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 2 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.
(2) Taxpayers leaving a Federal consolidated group.
(i) Short period precedes leaving group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, 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 section 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.
(ii) Short period follows leaving group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, 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 section 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.
(3) Short period returns relating to IRC § 338 elections.
(i) Subject to the provisions of subparagraph (ii), 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 § 11-81(b)(7) 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).
(ii) This paragraph 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 subdivision (b) of this section.
(iii) 19 RCNY § 11-88(a) shall not apply to a taxpayer for which an election is made pursuant to section 338 of the Internal Revenue Code, regardless of whether such election is deemed invalid pursuant to 19 RCNY § 11-27(j), notwithstanding any deemed cessation of existence of such taxpayer pursuant to Treas. Reg. § 1.338(h)(10)-1(d)(4).
(4) If a corporation required to file a short period report as provided in this subdivision becomes subject to tax under Subchapter 2 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 paragraph (3) 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 2 of Chapter 6 of Title 11 of the Administrative Code on the last day of such short period, the provisions of 19 RCNY § 11-88 shall apply in determining the due date for such short period report.
§ 11-88 Time for Filing Reports of Corporations Ceasing To Be Subject to Tax.
(§ 11-605(1), Administrative Code.)
(1) 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
(2) it is properly included in such combined report (see: 19 RCNY § 11-14(c), supra.)
§ 11-89 Extension of Time for Filing Reports.
(§ 11-605(1), Administrative Code.)
(1) An automatic six-month extension of time for filing the annual tax report (form NYC-3L or NYC-4S) will be granted only on the condition that form NYC-6 (Application for Automatic Extension) is filed and a properly estimated tax is paid on or before the due date of the report for the taxable period for which the extension is requested. Such application must set forth the amount of tax that the taxpayer estimates it will be required to pay.
(2) Notwithstanding paragraph (1) of this subdivision, a corporation that ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11 shall receive an automatic six-month extension of time for filing an annual tax report (form NYC-3L or NYC-4S) only on the condition that form NYC-6F (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.
(3) Notwithstanding paragraphs (1) and (2) of this subdivision, an automatic six-month extension of time for filing a combined report (form NYC-3A) will be granted only on the condition that form NYC-6 (Application for Automatic Extension) is filed and a properly estimated combined tax is paid on or before the due date of the return for the taxable period for which the extension is requested. Such application must be filed by the corporation paying the tax for the combined group. The applicant must submit the following information:
(i) its complete corporate name;
(ii) its employer identification number;
(iii) a list showing the corporate name and employer identification number of each of the other corporations properly included as part of the combined group; and
(iv) a list showing the estimated tax for each taxpayer included as part of the combined group. A properly estimated tax includes a tax measure by the fixed dollar minimum for each of the other taxpayers included in the combined group.
(1) its complete corporate name;
(2) its employer identification number;
(3) the reason for requesting the additional extension; and
(4) in an application made by a combined group, a list showing the corporate name and employer identification number of each of the other corporations properly included as part of the combined group.
(1) not less than 90 percent of the tax as finally determined, or
(2) not less than the tax shown on the taxpayer’s report for the preceding taxable year, if such preceding year was a taxable year of 12 months.
(1) If a corporation has timely applied for an automatic extension of time to file a general corporation tax report and paid a properly estimated tax on or before the date such application is filed, the only amount payable in addition to any balance of general corporation tax due is interest at the underpayment rate prescribed by the Commissioner of Finance pursuant to the authority of § 11-687 of the Administrative Code on the balance due from the orginal due date of the report (determined without regard to any extensions of time) to the date of payment.
(2) The failure to meet any of the requirements of subdivisions (b) and (d) of this section will make the application for extension of time to file invalid and any report filed after the due date will be treated as a late filed report.
§ 11-90 Action to Compel Filing of Reports.
(§ 11-605(6), Administrative Code.)
An action may be brought at any time by the Corporation Counsel, at the instance of the Commissioner of Finance, to compel the filing of reports due under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code.
§ 11-91 Combined Reports: When Required or Permitted.
(§ 11-605(4), Administrative Code.)
(1) the requirement of stock ownership or control (as described in 19 RCNY § 11-91(e)(1) is met,
(2) the group of corporations is engaged in a unitary business (as described in subdivision (b) of 19 RCNY § 11-91(e)(2)), and
(3) the other requirement set forth in 19 RCNY § 11-91(f) or 19 RCNY § 11-92(a), as the case may be, has been met.
(1) A taxpayer which owns or controls either directly or indirectly substantially all the capital stock of a domestic international sales corporation (DISC) which is a tax-exempt DISC for purposes of Article 9-A of the New York State Tax Law must file a combined report with DISC whether or not the latter is doing business in New York City.
(2) In the case of a DISC which is a taxable DISC for purposes of Article 9-A of the State Tax Law, the Commissioner may permit or require a combined report where the requirements described in 19 RCNY § 11-91(e) and (f) are met. The provisions of 19 RCNY §§ 11-91(g) and 11-92 apply to the taxable DISC and its corporate shareholder.
(3) The combined report permitted or required under this subdivision is to be filed for the taxable year of the corporate shareholder. If any DISC included in a combined report has a taxable year which differs from that of its corporate shareholder, the combined report should include the results of the DISC’s operations for its taxable year which ends within the taxable year of its corporate shareholder. For example, if the shareholder reports on a calendar-year basis and the DISC has a taxable year ending on January 31 the combined report for the calendar year 1983 will include the DISC’s activities for its taxable year ended January 31, 1983.
(4) If any corporation required to file a combined report under this subdivision believes that such filing should not be required, it must nevertheless file on a combined basis and attach to the report a statement setting forth the reasons for its belief that a combined report should not be required. After considering such statement, the Commissioner of Finance, in his sole discretion, may waive the requirement that a combined report be filed.
(5) In addition to the circumstances described above in which a combined report is required, the Commissioner of Finance may require a combined report in other situations if he determines that such a report is necessary in order to properly reflect the tax due from a corporate shareholder and one or more DISC’s. Similarly, a corporation not required or permitted under this subdivision to file a combined report, which believes that it should be permitted to file such a report, may apply to the Commissioner of Finance for permission to file a combined report.
(1) Capital stock requirement. (i) In deciding whether to permit or require a group of corporations to file a combined report, the Commissioner of Finance will first determine whether
(A) the taxpayer owns or controls, either directly or indirectly, substantially all of the capital stock of all the other corporations which are to be included in the combined report; or
(B) substantially all the capital stock of the taxpayer is owned or controlled, either directly or indirectly, by other corporations which are to be included in the combined report; or
(C) substantially all of the capital stock of the taxpayer and substantially all of the capital stock of the other corporations which are to be included in the combined report are owned or controlled, either directly or indirectly, by the same interests.
(ii) The term “substantially all” means ownership or control of 80 percent or more of the voting stock. Ownership includes actual or beneficial ownership. To be considered the owner, the stockholder must have the right to vote and the right to receive dividends. The term “control” refers to all cases where the taxpayer controls the stock of all the other corporations or the stock of the taxpayer is controlled by other corporations or the taxpayer and the other corporations are controlled by the same interests. The decision as to whether or not a corporation is controlled by the same interests will be determined by the facts in each case.
Example 1: The taxpayer, X Corporation, owns 70 percent of the voting stock of Y Corporation. The remaining voting stock is owned by three employees of X Corporation. These employees have agreed in writing to sell their stock to X Corporation when they leave the corporation. As part of the agreement, the employees have given X Corporation their voting proxy. Thus, X Corporation owns or controls 80 percent or more of the voting stock of Y Corporation.
(2) Unitary business requirement.
(i) 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, such as:
(A) manufacturing or acquiring goods or property or performing services for other corporations in the group, or
(B) selling goods acquired from other corporations in the group, or
(C) financing sales of other corporations in the group.
(ii) The Commissioner of Finance, in deciding whether a corporation is part of a unitary business, will also consider whether the corporation is engaged in the same or related lines of business as the other corporations in the group, such as:
(A) manufacturing or selling similar products; or
(B) performing similar services, or
(C) performing services for the same customers.
(iii) Examples:
Example 2: A manufacturing corporation organizes an 80 percent or more owned subsidiary and transfers all of its selling activities to the subsidiary. The subsidiary sells only the parent’s products for which it receives a commission. The subsidiary has a place of business of its own and its own employees. The corporations are conducting a unitary business.
Example 3: The taxpayer, a manufacturing corporation, forms a holding company which is also subject to tax. The holding company owns all of the manufacturing company’s stock. The only activity of the parent-holding company is to receive dividends from the manufacturing corporation. The corporations are not conducting a unitary business.
(1) If the capital stock and unitary business requirements described in 19 RCNY § 11-91(e) have been met, the Commissioner of Finance may permit or require a group of taxpayers to file a combined report if reporting on a separate basis distorts the activities, business, income or capital in New York City of the taxpayers. The activities, business, income or capital of a taxpayer will be presumed to be distorted when the taxpayer reports on a separate basis if there are substantial intercorporate transactions among the corporations.
(2) If the requirements described in 19 RCNY § 11-91(e) have been met, the Commissioner of Finance may permit a corporation which is not a taxpayer to be included in a combined report if reporting on a separate basis distorts the activities, business, income or capital of one or more taxpayers. (For rules for requiring a corporation which is not a taxpayer to be included in a combined report, see 19 RCNY § 11-92(a).) The activities, business, income or capital of a taxpayer will be presumed to be distorted when the taxpayer reports on a separate basis if there are substantial intercorporate transactions among the corpor- ations.
(3) In determining whether there are substantial intercorporate transactions, the Commissioner of Finance will consider transactions directly connected with the business conducted by the taxpayer, such as:
(i) manufacturing or acquiring goods or property or performing services for other corporations in the group; or
(ii) selling goods acquired from other corporations in the group; or
(iii) financing sales of other corporations in the group; or
(iv) 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 requirement 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 this subdivision. 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 corporation or with a combined or combinable group of corporations.
Example: Corporation Z sells 30 percent of its product to Corporation X and 40 percent of its product to 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 sales are to 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.
(4) If a taxpayer fails to meet the presumption of distortion because it does not have substantial intercorporate transactions with any corporation described in 19 RCNY § 11-91(e) or with a combined or combinable group of such corporations and if the filing of a report on a separate basis nevertheless results in a distortion of such taxpayer’s activities, business, income or capital in New York City then the Commissioner of Finance will permit or require the filing of a combined report. If a taxpayer meets the presumption of distortion because it has substantial intercorporate transactions with any corporation described in 19 RCNY § 11-91(e) or with a combined or combinable group of such corporations and if the filing of a report on a separate basis does not result in a distortion of such taxpayer’s activities, business, income or capital in New York City then the Commissioner of Finance will not permit or require the filing of a combined report.
(5) Notwithstanding the fact that the members of one or more existing or proposed combined group or groups of corporations within an entire group meet, in addition to the requirements of 19 RCNY § 11-91(e), the requirement of the Commissioner of Finance may permit or require a different combination of such corporations within such entire group with respect to a combined report if any such different combination or combinations, in addition to meeting the requirements of such 19 RCNY § 11-91(e) would result in less distortion of the activities, business, income or capital in New York City of such corporations within. the entire group.
(6) Examples:
Example 1: Corporation A manufactures goods, of which 40 percent are distributed through five 80 percent or more owned subsidiaries. Corporation A and its subsidiaries are taxpayers. The only function of the subsidiaries is to act as distributor for Corporation A. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation A and its subsidiaries. However, if the subsidiaries were engaged in other activities from which they received significant income the result could be changed.
Example 2: Corporation B manufactures goods which it sells through unrelated retailers. Corporation B will accept notes of the retailers’ customers as part payment for its goods. These notes are sold to an 80 percent or more owned finance subsidiary of Corporation B. The subsidiary obtains funds by borrowing from a bank. The subsidiary’s income is the difference between the interest charged to the retail customers and the interest paid to the bank. All of the subsidiary’s business is obtained from Corporation B. Corporation B and the finance subsidiary are taxpayers. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation B and its finance subsidiary.
Example 3: A taxpayer’s sole activity is to provide a management service for four 80 percent or more owned subsidiaries which are also taxpayers. The four subsidiaries manufacture the same type of product. Each of the four subsidiaries pays 25 percent of the parent’s income for management services. There are no intercorporate transactions among the subsidiaries. Because there are insufficient intercorporate transactions among the corporations, it is presumed that reporting on a separate basis will not result in a distortion of the activities, business, income or capital of any of the corporations.
Example 4: Corporation C is a manufacturer. At the bank’s insistence, its new factory building in New York City is owned by an 80 percent or more owned subsidiary. This is the only activity of the subsidiary. The manufacturer pays a rent to the subsidiary equal to principal, interest and taxes on the factory building. Corporation C and its subsidiary are taxpayers. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation C and its subsidiary.
Example 5: Assume the same facts as in Example 4 except that the factory building is located outside New York City and the subsidiary is not a taxpayer. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation C and a combined report may be permitted. (For rules for requiring a corporation which is not a taxpayer to be included in a combined report, see 19 RCNY § 11-92(a).)
Example 6: A corporation is in the plumbing contracting business. In order to assure itself of a sufficient supply of a certain material, it acquires 80 percent or more of the voting stock of a corporation which produces that material. However, this subsidiary sells only 35 percent of its output to the parent which is 25 percent of the parent’s total purchases. The parent and the subsidiary are taxpayers. Because there are insufficient intercorporate transactions between the corporations, it is presumed that reporting on a separate basis will not result in a distortion of the activities, business, income or capital of either taxpayer.
Example 7: Corporation H owns 80 percent or more of the stock of Corporations D, E and F. All four corporations are taxpayers. Corporation H’s only activities are to receive the dividends of Corporations D, E and F and to pay dividends to its shareholders. Corporation D sells stocks, Corporation E sells municipal bonds and Corporation F sells corporate bonds. Corporations D, E and F each have their own employees. However, the employees of one corporation are authorized to and do sell extensively the securities sold by the other corporations. Eighty percent of the receipts of Corporation D, seventy percent of the receipts of Corporation E and sixty percent of the receipts of Corporation F are generated by sales made by the common pool of employees of Corporations D, E and F. All three corporations carry on their activities at or using common facilities. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporations D, E and F. Corporation H will not be permitted or required to be included in a combined report since it is not conducting a unitary business with Corporations D, E and F.
Example 8: The taxpayer, an advertising corporation, owns 80 percent or more of the voting stock of a publishing corporation which is also a taxpayer. The parent has total receipts of $900,000. $100,000 of the parent’s receipts are from services performed for the subsidiary and $300,000 are from services performed for unrelated corporations. The parent also receives $500,000 in dividends from its subsidiary. Since dividends are not considered in determining whether there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will not result in a distortion of the activities, business, income or capital of either taxpayer.
Example 9: Corporation T and three 80 percent or more owned subsidiaries, Corporations X, Y and Z, manufacture the same type product. All of the corporations are taxpayers. Corporation T conducts all research and development activities for the group without any direct charges to the subsidiaries. The parent owns all patents relating to the manufacture and marketing of each company’s product and charges the subsidiaries fees or royalties for the use of the patents. The parent receives this type of income only from its subsidiaries. Corporation T’s operations are located entirely in New York City. Each subsidiary has facilities in and out of the City. The following tabulation shows the business activities of each corporation for a particular taxable year.
| T | X | Y | Z | |
|---|---|---|---|---|
| Receipts from Products | 30,000 | 30,000 | 30,000 | 30,000 |
| Royalty Income (expense) | 10,000 | (3,000) | (3,000) | (4,000) |
| Dividends from Subsidiaries | 50,000 | |||
| Research & Development Expenditures | (25,000) | |||
| Other Deductions | (3,000) | (7,000) | (7,000) | (6,000) |
| Entire Net Income | 12,000 | 20,000 | 20,000 | 20,000 |
| Portion to New York City | 100% | 30% | 40% | 20% |
| Allocated Income | 12,000 | 6,000 | 8,000 | 4,000 |
~
The only intercompany transactions within the group are the royalty payments which represent 25 percent of Corporation T’s business income and are 40 percent or less of any subsidiary’s total expenses. The royalties are based on a percentage of sales and do not represent adequate compensation to Corporation T for the value of the patents or the research and development expenditures.
Since the research and development expenditures are incurred only by Corporation T on behalf of the group, the entire net income of Corporation T is understated and that of the subsidiaries is overstated. The research and development expenditures represent a major portion of the group’s overall expenses. Individually, these expenditures are allocated 100 percent to New York City whereas the income derived as a result of these expenditures is allocated to New York City at percentages ranging from 20 percent to 100 percent. The result is a distortion of the activities and income within New York City when the corporations report on a separate basis. A combined report will be permitted or required.
(1) A group of corporations meeting the requirements set forth in 19 RCNY § 11-91(e) and (f) does not need to request prior permission to file on a combined basis. To file on a combined basis, the group must file a completed combined report. The first year the group files on a combined basis, and each year thereafter in which the composition of the group changes, the group must include the following information, either on the report or attached thereto:
(i) the exact name, address, employer identification number and the state of incorporation of each corporation included in the combined report,
(ii) information showing that each of the corporations meets the requirements of 19 RCNY § 11-91(e) and (f) for the taxable year,
(iii) the exact name, address, employer identification number and the state of incorporation of all corporations (except alien corporations) which meet the capital stock requirement of 19 RCNY § 11-91(e)(1) for the taxable year, which are not included in the combined report,
(iv) for the taxable year:
(A) the nature of the business conducted by each corporation included in subparagraphs (i) and (iii) of this paragraph,
(B) the source and amount of gross receipts of each corporation and the portion derived from transactions with each of the other corporations for the taxable year,
(C) the source and amount of total purchases, services and other transactions of each corporation and the portion related to transactions with each of the other corporations for the taxable year, and
(D) any other data that shows the degree of involvement of the corporations with each other,
(v) a statement providing details as to why a combined report including only the corporations listed in subparagraph (i) of this paragraph equitably reflects the New York City activities of the corporations which meet the capital stock requirement of 19 RCNY § 11-91(e)(1) and why the corporations listed in subparagraph (iii) of this paragraph should be excluded, and
(vi) a statement indicating whether each corporation listed in subparagraphs (i) or (iii) of this paragraph files on a combined basis for purposes of Article 9-A of the New York State Tax Law for the same taxable year and indicating the first taxable year each such corporation filed on a combined basis for State purposes. A copy of the State letter authorizing that corporation to file on a combined basis, if one was received, and any subsequent document authorizing the continued filing on a combined basis, must be submitted with this statement. In addition, if any corporation was required to file on a combined basis for purposes of Article 9-A of the State Tax Law, documentation evidencing that such combined filing has been required must also be submitted.
(2) The filing of a combined report or the inclusion of a corporation in, or the exclusion of a corporation from, a combined report is subject to revision or disallowance on audit in which event the Commissioner of Finance may compute and assess the tax of each taxpayer not permitted to be included in a combined report on a separate basis.
(3) If a corporation properly reports on a combined basis, it must continue to file its reports on a combined basis until the facts relevant to the requirements of 19 RCNY § 11-91(e) and (f) materially change.
(4) 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.
§ 11-92 Corporations Not Required or Permitted to File a Combined Report.
(§ 11-605(4), Administrative Code.)
(1) substantial intercorporate transactions (see: 19 RCNY § 11-91(f)(3)); or
(2) an agreement, understanding, arrangement or transaction whereby the activity, business, income or capital of any taxpayer is improperly or inaccurately reflected.
Example 1: A parent corporation, which is a taxpayer, is the sole owner of a finance subsidiary which is a corporation not subject to tax. The parent manufactures furniture which it sells to independent retail dealers. The parent has an agreement with its finance subsidiary that the subsidiary will directly finance the purchase of the parent’s furniture when it is purchased by customers of the independent retail dealers. The subsidiary’s income is predominantly derived from financing retail sales of its parent’s products. The independent retail dealer arranges the financing for the customer with the subsidiary. The parent and finance subsidiary will be required to file a combined report because of this agreement.
Example 2: A taxpayer has several 80 percent or more owned alien subsidiaries. It organizes an 80 percent or more owned domestic subsidiary to provide financing for the alien subsidiaries. Assume the parent, the domestic subsidiary and the alien subsidiaries are conducting a unitary business. The parent and the domestic subsidiary will be permitted or required to file a combined report if they meet the requirement set forth in 19 RCNY § 11-91(f). However, in no event will the alien subsidiaries be allowed in a combined report.
§ 11-93 Combined Reports; Gross References.
For corporations taxed on a combined basis, see 19 RCNY §§ 11-86 and 11-91(a) through (c), supra. As to combined corporations ceasing to be subject to tax under Subchapter 2 of Chapter 6 of Title 11, see 19 RCNY §§ 11-14 and 11-88, supra. For computation of tax on the basis of combined reports, see 19 RCNY § 11-24, supra. For computation of minimum tax on combined reports, see 19 RCNY § 11-44(b), supra. For computation of entire net income on the basis of combined reports, see 19 RCNY §§ 11-24, 11-27(h), and 11-32, supra. For computation of business and investment capital on the basis of combined reports, see 19 RCNY § 11-42, supra. For computation of subsidiary capital on the basis of combined reports, see 19 RCNY § 11-48, supra. For determination of the receipts factor on the basis of combined reports, see 19 RCNY § 11-65(f), supra. For determination of the property factor based on intercompany rentals of real property, see 19 RCNY § 11-64(b), supra. For general rules of allocation in the case of combined reports, see 19 RCNY § 11-62, supra.
§ 11-94 Fee for Searches and Certificates.
A fee of five dollars will be charged for a search of the corporation tax records of the Commissioner of Finance and a certificate of the facts disclosed thereby, with respect to any corporation.
§ 11-95 Electronic Filing and Payment.
Pursuant to 19 RCNY § 17-03, the Commissioner may authorize the electronic filing of returns, reports, or other forms and the electronic payment of tax required by this chapter.
§ 12-01 Definitions.
Commissioner of Finance. The words “Commissioner of Finance” mean the Commissioner of Finance of the City of New York.
Hotel. A “hotel” is a building or portion of a building that is regularly used and kept open as such for the lodging of guests. The term “hotel” includes an apartment hotel, a motel, boarding house, bed and breakfast, or club, whether or not meals are served. An “apartment hotel” is a building or portion of it wherein apartments are rented to guests for fixed periods of time, either furnished or unfurnished. The term “boarding house” includes rooming houses, furnished-room houses and lodging houses. The term “bed and breakfast” includes a dwelling place ordinarily occupied by a person as his or her own dwelling in which more than one room is regularly used and kept open by such person for the lodging of guests for consideration regardless of whether services such as meals, telephone or linen services are provided. The term “club” includes a residence club, as well as private clubs. To illustrate:
Illustration (i): Individual A owns and lives in a three-bedroom house in New York City. Individual A rents one of the bedrooms to guests from time to time by listing the room with a bed and breakfast listing service. At no time during the year does A rent or offer to rent more than one room to guests. The rental of one room by A is not subject to tax.
Illustration (ii): The facts are the same as in illustration (i) except that A lists two of the three bedrooms or one bedroom and the living room, in his apartment for rental to guests. A’s rental of rooms in the apartment is subject to tax.
The term “hotel” also includes a bungalow, which is a furnished living unit intended for single family occupancy that is regularly used and kept open for the lodging of guests for consideration, except that for occupancies during taxable quarters beginning on or before September 1, 2003, the rental of a bungalow for at least one week will not be subject to the tax provided: no maid, food, or other common hotel services such as entertainment or planned activities are provided. The furnishing of linen by the lessor with the rental of a bungalow without the services of changing the linen does not alter the nontaxable status of the rental charges for such periods. To illustrate:
Illustration (iii): Individual B owns an apartment in New York City. Beginning on January 1, 2004, B begins to regularly rent or offer to rent the apartment, furnished, to guests on a transient basis. B’s rental of the apartment to guests on a transient basis is subject to the tax regardless of whether the rentals are for periods longer than one week.
The term “hotel” does not include the following:
Illustration (iv): A senior citizen’s lodging facility which only furnishes hotel facilities and services and does not furnish services or special care provided by attendants, etc., is a hotel.
Illustration (v): A maternity home or residence for expectant unwed mothers which is registered with the Department of Social Services and provides care and service for mothers to be. Such care and service includes maintaining a residence, social services, medical care, and arranging for delivery at a local hospital. This facility is not a hotel.
Illustration (vi): A owns a four-bedroom house in New York City. During the period September 1, 2004 through August 31, 2005, A rents three of the bedrooms as follows: one bedroom is rented for the entire twelve month period to individual B who does not sublease the room; one bedroom is rented for one week to individual C; one bedroom is rented for two days to individual D, three days to individual E and one day to individual F. The rental to individual B is not considered a rental occasion or included in determining the number of days of room rentals. A is considered to have rented rooms on four occasions. However, because the total number of days is less than 14, A is not considered to be operating a hotel.
Illustration (vii): Individual A owns four apartments in New York City. During the period September 1, 2004 through August 31, 2005, A rents the apartments as follows: one apartment is rented for the entire 12-month period to individual B who does not sublease the apartment; another apartment is rented for one week to individual C; a third apartment is rented for two days to individual D, five days to individual E and four days to individual F. The rental to individual B is not considered a rental occasion or included in determining the number of days of room rentals. A is considered to have rented three of the apartments on four occasions. Because the total number of days of rentals of the three apartments is more than 14, A is considered to be operating a hotel with respect to the three apartments rented to C, D, E, and F. If the apartment rented to B were rented to B for only 190 days and was subsequently rented during the period to individual G for three days, that apartment would also be included as part of the hotel operation of A.
Occupancy.
(1) (i) For taxable periods beginning before June 1, 2002, if the original occupant is itself an operator, as in the case of a private club located in a hotel, and subleases the occupancy to another, the taxable occupancy shall be the occupancy by the sublessee. In such case, the original occupant shall collect the tax from the sublessee and pay it over to the Commissioner of Finance.
(ii) For taxable periods beginning on or after June 1, 2002, if the original occupant or any sublessee of the room is directly or indirectly related to the original hotel operator, the taxable occupancy will be the occupancy by the sublessee of such related person. For purposes of this subparagraph (ii) an occupant will be considered to be directly or indirectly related to the original hotel operator if:
(A) the original hotel operator owns directly or indirectly a five percent or greater interest in such occupant.
(B) such occupant owns directly or indirectly a five percent or greater interest in the original hotel operator.
(C) one or more persons own directly or indirectly five percent or greater interests both in such occupant and in the original hotel operator, or
(D) such occupant is an officer, director, manager (including a manager of a limited liability company), trustee, fiduciary or employee of the original hotel operator or an individual that is a member of the family of an individual original hotel operator.
(E) For purposes of this subparagraph a five percent or greater interest shall mean, in the case of a corporation, five percent or more of the voting power of all classes of stock or five percent or more of the total fair market value of all classes of stock, and, in the case of a partnership, association, trust or other entity, five percent or more of the capital, profits or beneficial interests in such entity.
(F) To illustrate:
Illustration 1: In 2003, Z contracts for 100 rooms in a hotel at a rate of $100 per room per day for 190 consecutive days. Z subleases the rooms to its customers. Z is not a private club and is not related to the hotel operator within the meaning of this paragraph. The hotel operator is required to charge and collect the tax from Z for its occupancy of all 100 rooms for the entire 190-day period. Z is not a permanent resident with respect to any of the rooms. See 19 RCNY § 12-01 definition of a “permanent resident,” paragraph (3). Z is not required to charge and collect the tax from its customers for the occupancy of any of the rooms that it subleases for the days that such rooms are sublet.
Illustration 2: The facts are the same as in Illustration 1 except that Z is related to the hotel operator within the meaning of this paragraph. In this case, the taxable occupancy is the occupancy by the customers of Z and the hotel operator is required to charge and collect the tax from the customers of Z.
(2) (i) For taxable periods beginning before June 1, 2002, if the original occupant is not an operator, the occupant’s occupancy is taxable whether or not the occupant has the actual use or possession of the room and no tax will be paid by or collected from a sublessee of the occupant.
(ii) For taxable periods beginning on or after June 1, 2002, except as provided in subparagraph (ii) of paragraph (1), the occupancy of the original occupant is taxable whether or not the original occupant has the actual use or possession of the room and no tax will be paid by the person having actual use or possession of the room. See subdivision (b)(ii) of the definition of “occupancy,” supra, in this section for the application of the tax to the occupancy by a sublessee of an occupancy that is related to the hotel operator.
Occupant. An “occupant” is any person who, for a consideration, uses, possesses, or has the right to use or possess any room or rooms in a hotel under any lease, concession, permit, right of access, license to use or other agreement, or otherwise.
Operator.
Permanent resident.
Illustration (i): A person occupies a certain room in a hotel for 57 days. On the 57th day that person moves to a different room in the same hotel, which that person occupies for an additional 130 days. This person is considered a permanent resident with respect to the occupancy of both rooms and that person is entitled to a refund of any tax paid with respect to the occupancy of the rooms.
Illustration (ii): An airline corporation rents three rooms on an annual basis from a hotel. However, on occasion, when it requires additional rooms in the hotel for the use of its employees, it rents such additional rooms on a daily basis for a period less than 180 consecutive days. The hotel is required to charge and collect the tax from the airline corporation on the airline’s occupancy of the additional rooms.
Illustration (iii): B, an individual, resides in a hotel where that person has occupied a two-room suite for a period exceeding 180 consecutive days. B also rents a studio room for his own use in practicing piano. B has the exclusive use of this studio for a period of one hour per week. At other times, the room may or may not be rented to other persons. B’s use of the studio room is subject to the tax.
Illustration (iv): C, an individual, occupies a room in a hotel for a period of 180 days. He also rents two additional rooms for occupancy by his wife and his maid for a period of two weeks. The room occupied by his wife adjoins his room and the room occupied by his maid is on another floor of the hotel. The hotel operator is required to charge and collect the tax from C on the occupancy of the rooms occupied by C’s maid and his wife.
Illustration (v): D, an individual, occupies a room in a hotel for a period of more than 180 consecutive days. He rents an additional room in the same hotel for one day for the purpose of holding a party for his friends. The hotel is required to charge and collect the tax from D for the occupancy of the additional room.
Illustration (vi): A corporation maintains a suite of rooms at a hotel on a permanent basis. During one week of the year, it holds a general sales meeting and for that purpose rents 75 additional rooms in the same hotel for the use of its employees. The hotel operator is required to charge and collect the tax from the corporation for the occupancy of the 75 additional rooms.
Illustration (vii): Z, a tour company, contracts for 100 rooms in a hotel for 190 consecutive days. Z subleases 98 of the 100 rooms to its customers. Each of the 98 rooms is sublet for most of the 190-day period. However, there is no single day within the 190-day period on which all 98 rooms are sublet. Z uses the remaining two rooms to conduct its business. It does not sublease either of the two rooms for any period of time. Z becomes a permanent resident of the two rooms used to conduct its business when it completes 180 days of consecutive occupancy and is entitled to a refund of any tax paid with regard to the occupancy of these two rooms. Z does not become a permanent resident with respect to any of the 98 rooms that it subleases to customers even though at least one of the rooms is unoccupied for each of the 190 days.
Person. The term “person” includes an 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 or of the foregoing.
Place of assembly. A “place of assembly” is an enclosed room or space in which 75 or more persons gather for religious, recreational, educational, political or social purposes, or for the consumption of food or drink, or for similar group activities, but excluding such spaces in dwelling units; or an outdoor space in which 200 or more persons gather for any of the above reasons. For purposes of this definition a room or space will be considered to be a place of assembly if either:
Illustration (i) Hotel B has a ballroom, adjacent to which is a reception room and two small foyers. The four rooms, by use of folding doors, can be converted into one large space accommodating a maximum of 2,500 persons. Under certain circumstances the ballroom may be rented for a function for 1,000 persons, the reception room for 250 persons, and either one or both of the foyer rooms to groups of from 25 to 50 persons, by closing the folding doors and thus providing four separate units. Accordingly, the tax would not apply where the ballroom is rented for a function for 1,000 persons, or the reception room for 250, or for either or both rooms where rented for 75 or more persons. However, the tax does apply where one or both of the foyer rooms (which are not “certified” as places of assembly) may be rented to groups of from 25 to 50 persons.
Illustration (ii) Hotel B has a meeting room which has been certified as a “place of assembly” by the Department of Buildings. The rental of such room (regardless of the expected or actual attendance) shall be exempt from the tax.
Rent.
| If the total charge includes: | The portion of the total charges subject to tax is: |
|---|---|
| Breakfast, Lunch, Dinner | 50% |
| Lunch, Dinner | 60% |
| Breakfast, Dinner | 60% |
| Breakfast, Lunch | 70% |
| Dinner | 75% |
| Lunch | 85% |
| Breakfast | 85% |
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To illustrate: In 1982, A secures from B, an operator of Hotel C, the exclusive use of the Blue Room in Hotel C, in accordance with an arrangement whereby B will furnish and serve A and his guests with food and/or drink in the Blue Room. The total charge to A for such food and/or drink is $150.00. No separate charge is made to A for the use of the Blue Room. Operator B is required to collect a tax of $1.50 from A.
Where the exclusive use of a room is secured by a person as an incident to the furnishing by the operator of food and/or drink to the guests of such person, to be served in such room, and no separate charge is made for such use of the room, food and/or drink to such person, but a charge for the food and/or drink is made to the guests, 20% of the total charge to the guests for the food and/or drink shall be attributable to the use of such room by such person and taxable as rent. If the charge to the guests is less than a minimum amount guaranteed by such person, 20% of the guaranteed minimum shall be attributable to the use of such room by such person and taxable as rent.
To illustrate: A secures from B, an operator of Hotel C, the exclusive use of the Blue Room in Hotel C, in accordance with an arrangement whereby the charge for the food and/or drink to be served in such room will be made directly to the guests and no separate charge will be made for the use of the Blue Room. The total sales realized by B are $90.00. B is required to collect a tax of $.50 from A. If A guaranteed B a minimum sales volume to his guests of $200.00 then B will be required to collect a tax of $2.00 from A.
Illustration (i) An operator of a hotel furnishes free of charge hotel room accommodations to governmental officials, friends or relatives of management, visiting hotel representatives, hotel employees and representatives of charitable and religious organizations. These complimentary hotel rooms are deemed to have been furnished gratuitously, and as such are not subject to the tax.
Illustration (ii) An operator of a hotel furnishes complimentary rooms to persons who procure guests for the hotel, such as tour guides, travel representatives, teachers and chaperons in charge of student groups, or representatives of organizations at the time of the negotiations for future business for the hotel. The rooms furnished at such time are deemed to have been furnished in consideration of their efforts in bringing potential business to the hotel. Such occupancies are subject to the tax based upon the normal rental charge for the room.
Illustration (iii) Association ABC holds its December convention at Hotel Y and receives five complimentary rooms for use by the association’s officers and convention chairman for the duration of the convention. The complimentary rooms are not considered taxable.
Room. Any portion of a hotel, whether used for dwelling, commercial or any other purpose, is a “room” under the law and these rules, except:
(i) a sink with running water, or dishwater;
(ii) a refrigerator;
(iii) a cabinet, counter top, or table.
Example: A hotel suite contains a kitchenette with a microwave oven, refrigerator, sink, cabinets and a counter top.
(a) The kitchenette is a walk-in area with three walls and a wide opening on the fourth side. The kitchenette is a room.
(b) The above items are all set into a wall and there is no appurtenant walk-in area. The kitchenette is not a room.
(c) Same facts as in (a) except the microwave is not in the kitchenette but rather is outside the kitchenette. The kitchenette is a room.
§ 12-02 Imposition of the Tax.
(a) The law imposes a tax, measured by the rent per day, for every occupancy of a room or rooms in a hotel in the City of New York, commencing July 1, 1970, with certain exceptions set forth hereinafter.
| If the rent per day for the room was: | The tax was: |
|---|---|
| Less than $10 | $ .25 per day |
| $10 or more, but less than $15 | $ .50 per day |
| $15 or more, but less than $20 | $ .75 per day |
| $20 or more | $1.00 per day |
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| If the rent per day for the room is: | The tax is: |
|---|---|
| Less than $10 | $0.00 |
| $10 or more, but less than $20 | $ .50 per day |
| $20 or more, but less than $30 | $1.00 per day |
| $30 or more, but less than $40 | $1.50 per day |
| $40 or more | $2.00 per day |
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To illustrate: A checks into Hotel B at 1:00 P.M. Monday afternoon and checks out at 6:00 P.M. Wednesday evening. The established check-out time at Hotel B is 12 noon. The period from 1:00 P.M. Monday to 12 noon Tuesday constitutes a day for purposes of the tax, as does the period from noon Tuesday to noon Wednesday. The period from 12 noon Wednesday to 6:00 P.M. Wednesday will constitute a day for purposes of the tax only if the hotel charges the guest for such period after the 12 noon established check-out time. Accordingly, if Hotel B imposes a charge for the late check-out A is deemed to have spent 3 days at Hotel B. However, if Hotel B does not impose any additional charge for late check-out then A is deemed to have spent 2 days at Hotel B.
Where the rent is based on a term longer than one day, such as a weekly or monthly term, the rent per day is computed by dividing the total number of days of occupancy into the total charge for such occupancy.
To illustrate: A occupies a hotel room during the month of September, 1982, at the rate of $750 per month. The rate per day is 1/30 × $750, or $25, and the tax is $1.00 per day.
To illustrate: In 1982 A and his wife occupy a suite of hotel rooms for one day. The suite consists of a bedroom, a living room, and bathroom. The rent charged for the suite is $40 per day. When rented separately, the daily rents for the bedroom and living room are $20 and $30 respectively. The daily rent for the bedroom rented as part of the suite is 20/50 × $40, or $16; the daily rent for the living room is 30/50 × $40, or $24. Accordingly, the tax is $.50 for the bedroom and $1.00 for the living room. The bathroom is not considered a room, and is not subject to the tax.
Where an entire rent is charged for more than one room, whether or not a suite, if such rooms are not otherwise rented separately, the daily rent per room is to be determined by dividing the entire rent by the number of rooms for which the charge is made. For example, if the entire charge for a suite of 3 rooms is $90 per day, the charge for each room is considered to be $30. A tax of $1.50 must be paid for each room, a total tax of $4.50 for the suite.
§ 12-03 Exemptions.
The following persons are exempt from the tax:
(1) The type of organization,
(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. The affidavit must be supplemented by a copy of the articles 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, and a photostatic copy of the letter, if any, from the United States Treasury Department granting the organization exemption from Federal income taxation. An organization which is an occupant of a hotel room and claims exemption from tax on such occupancy must furnish a copy of the letter of exemption to the hotel operator when claiming such exemption. Where the occupancy is by an agent, representative, or employee of the organization, a certificate, on the form prescribed by the Commissioner, certifying that the occupancy is solely for official purposes and that the rent has or will be paid by the organization, must be furnished to the operator.
§ 12-04 Government Agencies, Diplomatic and Consular Representatives.
(a) Occupancy of rooms by the Federal government or by the State or City of New York or by an agency of such governments, is not subject to the tax. Employees and representatives of such governments and agencies, who occupy rooms solely for official purposes, are not required to pay the tax, providing that they furnish to the operator certificates on the form prescribed by the Commissioner, certifying that the rent has been or will be paid by the governmental agency concerned.
§ 12-05 Presumption and Burden of Proof.
It shall be presumed that all rents are subject to tax until the contrary is established, and the burden of proving that rent for occupancy is not taxable under the law shall be upon the operator or the occupant.
§ 12-06 Registration.
(a) Every operator is required to file a certificate of registration in a form prescribed by the Commissioner of Finance. In the case of operators commencing business or opening new hotels the certificate is required to be filed with the Commissioner of Finance within three days after such commencement or opening. An operator of a hotel having 10 or more rooms or 10 or more apartments or living units offered for lodging of guests is deemed to have commenced business or opened a new hotel when such rooms are first offered to the public. In the case of a building or portion of a building having fewer than 10 rooms or fewer than 10 apartments or living units offered for lodging of guests, the operator will be considered to have commenced business or to have opened a hotel as of the first date that the rental of such rooms or living units exceeds either of the de minimis thresholds described in subsection a of 19 RCNY § 12-01 (i.e., such rooms or units are rented on three or more occasions or for more than 14 days in the aggregate) during any four consecutive quarterly tax periods, or, beginning on and after March 1, 2005, during any twelve-month tax period. Within five days after such registration, the Commissioner of Finance shall issue, without charge, to each operator, a certificate of authority empowering such operator to collect the tax from the occupant, and, in addition, a certificate of authority for each additional hotel of such operator. Each certificate shall state the hotel to which it is applicable. Such certificate of authority must be prominently displayed by the operator in such manner that it may be seen and come to the notice of all occupants and persons seeking occupancy. Such certificates are not assignable or transferable and must be surrendered immediately to the Commissioner of Finance upon the cessation of business at the hotel named therein, or upon its sale or transfer, together with an affidavit setting forth the pertinent details of such cessation. An operator of fewer than 10 rooms or 10 apartments or living units, after having registered, is not deemed to have ceased business merely because the rental of rooms or living units falls below the de minimis thresholds set forth in the last paragraph of the definition of "hotel" contained in 19 RCNY § 12-01 during a subsequent quarterly or annual period unless the operator has filed annual reports for each of the immediately preceding three annual periods showing no rooms available for rental to transients (i.e., guests other than permanent residents). If the business is continued at the same place, but there is a change in the form of the organization, such as from a single proprietorship to a partnership or corporation, the operator is required to return his certificate for cancellation, and the successor is required to file a new application for a certificate of authority.
§ 12-07 Filing of Returns and Payment of Tax.
(a) Except as provided herein, every operator shall file with the Commissioner of Finance a return of occupancy and of rents, and of the taxes payable thereon, on the form prescribed by the Commissioner of Finance, for the quarterly periods ending on the last day of February, May, August, and November of each year. Notwithstanding the foregoing, with respect to tax periods beginning on and after the first day of September, 2004, (i) an operator of a hotel having fewer than 10 rooms may file the above return for each such hotel on an annual basis for each twelve-month period ending on the last day of February of each year, and (ii) an operator of fewer than 10 furnished apartments or living units may file the above return on an annual basis for each twelve-month period ending on the last day of February of each year covering all such apartments or living units. Such returns shall be filed within twenty days after the last day of each such period. For the period beginning September 1, 2004 and ending February 28, 2005, an operator of fewer than 10 apartments or living units or of a hotel having fewer than 10 rooms may file the above return for each such hotel or apartments or living units covering that period on or before March 21, 2005. An operator of fewer than 10 rooms or fewer than 10 apartments or living units, after having registered, is required to file a return for each subsequent quarterly or annual period thereafter regardless of whether the rental of rooms or living units falls below the de minimis thresholds set forth in the last paragraph of the definition of "hotel" contained in 19 RCNY § 12-01 during a subsequent quarterly or annual period unless the operator has filed annual reports for each of the immediately preceding three annual periods showing no rooms available for rental to transients (i.e., guests other than permanent residents). An operator who ceased business must file a final return within twenty days from the date such business ceased, covering the period or portion of the period during which he conducted such business subsequent to the period for which a return was last required to be filed. If the business was sold, the purchaser thereof must file a return for the period from the date of purchase to the end of the period of which a return is required to be filed. An operator of fewer than 10 rooms or 10 apartments or living units, after having registered, is not deemed to have ceased business merely because the rental of rooms or living units falls below the de minimis thresholds set forth in the last paragraph of the definition of "hotel" contained in 19 RCNY § 12-01 during a subsequent quarterly or annual period unless the operator has filed annual reports for each of the immediately preceding three annual periods showing no rooms available for rental to transients (i.e., guests other than permanent residents). Whenever an operator is not required to charge or collect the tax, the Commissioner of Finance may, upon application in writing made by such operator, waive the requirement for the filing of returns. All returns must be filed with the Bureau of Tax Operations of the Department of Finance at the address designated on the return form. The return of an individual must be signed by such individual unless he is absent from the City, ill or otherwise incapacitated, in which event the return may be signed by his duly authorized representative or agent. The return of a corporation must be signed by an officer thereof; the return of a partnership must be signed by a general partner thereof. The Commissioner of Finance may, for good cause, extend the time for filing any return for a period not exceeding 30 days.
§ 12-08 Liability for Charging, Collecting and Paying the Tax.
(a) The law requires that upon every taxable occupancy, the operator shall charge and collect the tax from the occupant. The tax to be collected must be charged and stated separately from the rent and shown separately on any record thereof, at the time when the occupancy is contracted and charged for. The tax shall also be stated and separately charged upon every evidence of occupancy or any bill or statement of charge made for said occupancy issued or delivered by the operator. The tax shall be paid by the occupant to the operator as trustee for and on account of the City, and kept separate from all other funds in the possession of the operator and the operator shall be liable for the collection thereof and for the tax. The operator and any officer of any corporate operator shall be personally liable for the tax collected or required to be collected under the law. The operator shall have the same right in respect to collecting the tax from the occupant, or in respect to nonpayment of the tax by the occupant, as if the tax were a part of the rent for the occupancy payable at the time such tax shall become due and owing, including all rights of eviction, dispossession, repossession and enforcement of any innkeeper's lien that he may have in the event of nonpayment of rent by the occupant; provided, however, that the Commissioner of Finance shall be joined as a party in any action or proceeding brought by the operator to collect or enforce collection of the tax.
§ 12-09 Surety Bond.
(a) Where the Commissioner of Finance in his discretion deems it necessary to protect revenues to be obtained under the law, he may require any operator required to collect the tax to file with him a bond, issued by a surety company authorized to transact business in New York State and approved by the Superintendent of Insurance of New York as to solvency and responsibility, in such amount as the Commissioner of Finance may fix, to secure the payment of any tax and/or penalties and interest due or which may become due from such operator. In the event that the Commissioner of Finance determines that an operator is to file such bond he shall give notice to such operator to that effect, specifying the amount of the bond required. The operator shall file such bond within five days after the giving of such notice, unless within such five days the operator shall request in writing a hearing before the Commissioner of Finance at which the necessity, propriety and amount of the bond shall be determined by the Commissioner of Finance. Such determination shall be final and shall be complied with within 15 days after the giving of notice thereof. In lieu of such bond, securities approved by the Commissioner of Finance, or cash in such amount as he may prescribe, may be deposited, and shall be kept in the custody of the Commissioner of Finance, who may at any time without notice to the depositor apply them to any tax and/or interest or penalties due, and for that purpose the securities may be sold by him at public or private sale without notice to the depositor thereof.
§ 12-10 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.
§ 12-11 Interest.
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.
§ 12-12 Penalties.
(a) 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, this 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 (1) 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 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 (a)) 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 § 12-15), 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 (a)) 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 (a) 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 (a) 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 (a) (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:
Example A: (a) Assume the taxpayer filed his tax return for the quarter ending February, 1983 on June 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 July 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 March 21 through July 20, and 0.5% for the fractional part of the month from July 21 through July 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 the 3 months from March 21 through June 20 and 5% for the fractional part of the month from June 20 through June 25) 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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Example A: (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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Example B: (a) A taxpayer files his tax return for the quarter ending February, 1983 on November 7, 1983, 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 November 7, 1983. In addition to interest and the addition for failure to pay under paragraph (2) of $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% for maximum of 5 months, 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 percent for the 5 months March 16 through August 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) of this subdivision (a) 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) timely prepared reports misplaced by a responsible employee discovered after the due date;
(iv) inability to obtain and assemble essential information required for the preparation of a complete return despite reasonable efforts;
(v) 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 (50%) of the interest payable under 19 RCNY § 12-11 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 19 RCNY § 12-11 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 (a).
(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 (a) 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) Any person who willfully fails to file a registration certificate as required by the law and such data in connection therewith as the Commissioner of Finance by regulation or otherwise may require, or willfully fails to display or surrender a certificate of authority as required by the law, or willfully assigns or transfers such certificate of authority, shall be guilty of a misdemeanor, provided, however, that the provisions of this paragraph shall not apply to a failure to surrender a certificate of authority which is required to be surrendered where business never commenced.
(2) Any person who willfully fails to charge separately the tax imposed under the law or willfully fails to state such tax separately on any bill, statement, memorandum or receipt issued or employed by such person upon which the tax is required to be stated separately as provided in the law, or who shall refer or cause reference to be made to this tax in a form or manner other than required by the law, shall be guilty of a mis- demeanor.
(3) Failure to collect tax. Any person who willfully fails to collect any tax required to be collected under the law shall be guilty of a misdemeanor.
(4) Failure to file bond. Any person willfully failing to file a bond where such filing is required under the law shall be guilty of a misdemeanor.
(5) 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.
(6) 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.
(7) 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.
(8) The penalties provided for in this subdivision (b) shall not preclude prosecution pursuant to the penal law with respect to the willful failure of any person to pay over to the City any hotel room occupancy tax imposed by law, whenever such person has been required to collect and has collected any such tax. In any such prosecution under the penal law, a person who has been required to collect and has collected any such tax shall be deemed to have acted in a fiduciary character with respect to the City, and the tax collected shall be deemed to have been entrusted to such person by the City.
(1) Officers of a corporate operator and partners in a partnership which is an operator are personally liable for the tax collected or required to be collected by such corporation or partnership, and are subject to the penalties and interest imposed by law.
(2) The certificate of the Commissioner of Finance to the effect that a tax has not been paid, that a return, bond or registration certificate has not been filed, or that information has not been supplied pursuant to the provisions of the law shall be presumptive evidence thereof.
§ 12-13 Refunds.
The Commissioner of Finance shall refund or credit, without interest, any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid, provided:
§ 12-14 Records To Be Kept.
Every operator is required to keep records of room rentals and of the tax payable thereon. In addition to the general books of account, such records shall also include guests’ registration records, rental contracts and leases, banquet records wherever applicable and such other records as will enable the Commissioner of Finance to determine the room rentals and the proportionate part of receipts from sale of food and/or drink which under these regulations constitutes rentals. In addition to the above records, operators must also retain all exemption certificates filed by exempt organizations and by the Federal government, or by the State or City of New York, or by an agency of such governments, and records of all other rentals which are not subject to tax. Exemption certificates from occupants who are not entitled to exemption should not be accepted, and the Commissioner of Finance will reject any exemption certificate obtained from an occupant who is not entitled to exemption. The records hereinabove prescribed are in addition to all other records which must be retained by an operator as provided for in any other State or City tax law. Unless the operator maintains adequate records showing rentals and the tax due thereon, the Commissioner of Finance reserves the right to determine the amount of such rentals and the tax due thereon from such information as may be obtainable and, if necessary, the tax may be estimated on the basis of external indices, such as the number of rooms, location, scale of rents, comparable rents, type of accommodation and service, number of employees and/or other factors. Records of operators are to 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 unless permission in writing is obtained from the Commissioner of Finance to destroy them before the expiration of such period.
§ 12-15 Determination of Tax.
If a return required by law is not filed or if a return when filed is incorrect or insufficient, the amount of tax due shall be determined by the Commissioner of Finance from such information as may be obtainable and, if necessary, the tax may be estimated on the basis of external indices, such as number of rooms, location, scale of rents, comparable rents, type of accommodations and service, number of employees and/or other factors. Notice of such determination shall be given to the person liable for the collection and/or payment of the tax. Such determination shall finally and irrevocable fix the tax unless the person against whom it is assessed, within 30 days after giving of notice of such determination, shall apply to the Commissioner of Finance for a hearing, or unless the Commissioner of Finance of his own motion shall re-determine 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 the Civil Practice Law and Rules if application therefor is made to the Supreme Court within 30 days after the giving of the notice of such determination. A proceeding under Article 78 of the Civil Practice Law and Rules shall not be instituted unless:
§ 12-16 Proceedings To Recover Tax.
Whenever any operator or any officer of a corporate operator or any occupant or other person shall fail to collect and pay over any tax and/or to pay any tax, penalty or interest imposed by this title, the Corporation Counsel shall, upon the request of the Commissioner of Finance bring or cause to be brought an action to enforce the payment of 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 any such operator, officer, occupant or other person is about to cease business, leave the state or remove or dissipate the assets out of which the tax, penalties or interest might be satisfied, and that any such tax, penalty or interest will not be paid when due, he may declare such tax, penalty or interest to be immediately due and payable and may issue a warrant immediately. 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 the operator or officer of a corporate operator or of the occupant or other person liable for the tax, 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 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 judgments 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 Finance Department, and in the execution thereof such officer or employee shall have all the powers conferred by law upon sheriffs, but 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 has recovered judgment therefor and execution thereon had been returned unsatisfied.
§ 12-17 Notice and Limitations of Time.
(a) Any notice authorized or required under the provisions of this law may be given by mailing the same to the person for whom it is intended in a postpaid envelope addressed to such person at the address given in the last return filed by him pursuant to the provisions of this 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 such notice 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 this law by the giving of notice shall commence to run from the date of mailing of such notice.
§ 12-18 Reference to Tax.
Whenever reference is made in placards or advertisements or in any other publication to the tax, such reference shall be substantially in the following form: “city tax on occupancy of hotel rooms,” except that in any bill, receipt, statement or other evidence or memorandum of occupancy or rent charge issued or employed by the operator the words “city tax” will suffice.
§ 12-19 Bulk Sales.
Whenever an operator shall make a sale, transfer, or assignment in bulk of any part or the whole of his hotel premises or his lease, license or other agreement or right to possess or operate such hotel, or of the equipment, furnishings, fixtures, supplies or stock of merchandise, or the said premises or lease, license or other agreement or right to possess or operate such hotel and the equipment, furnishings, fixtures, supplies and stock of merchandise pertaining to the conduct or operation of said hotel otherwise than in the ordinary and regular prosecution of business, the purchaser, transferee or assignee shall at least ten days before taking possession of the subject of the sale, transfer or assignment, 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 he owes any tax pursuant to 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 assigner 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.
§ 13-01 Late Payments.
(a) Application for release of property by the City. Receipt and deposit by the New York City Department of Finance of a payment made with respect to a property that was acquired by the City through in rem foreclosure shall not cause the release of the City's interest in the property unless such payment has been made in compliance with the provisions of § 11-424 of the Administrative Code of the City of New York.
§ 13-02 In Rem Installment Agreements for Class One and Class Two Properties.
(a) Where in rem foreclosure action has been filed.
(1) Application period. A request for an installment agreement for a class one or a class two property against which an in rem foreclosure action has been commenced may be made only during the period commencing with the filing of the in rem action against such property, and ending on the date on which the Commissioner of Finance is advised by the Corporation Counsel that the preparation of the judgment of foreclosure in such in rem action has been commenced.
(2) Agreement with Department of Housing Preservation and Development. The Commissioner of Finance, in his or her discretion, may approve a request for an installment agreement for a class one or class two property against which an in rem foreclosure action has been commenced if the owner of the property has (i) executed an agreement with the Department of Housing Preservation and Development to correct existing Housing Maintenance Code violations issued against such property and to participate in a housing education program as directed by the Department of Housing Preservation and Development, and (ii) filed all registration statements for the property that are required under article 2 of subchapter 4 of title 27 of the Administrative Code of the City of New York.
(1) Application period. A request for an installment agreement for a class one or class two property against which an in rem foreclosure judgment has been entered may be made to the Department of Finance only during the period commencing on the date judgment is entered pursuant to Administrative Code § 11-412.1(b) authorizing the award of possession of the property, and ending upon the expiration of four months immediately following such date.
(2) Referral to Department of Housing Preservation and Development. When the Department of Finance receives a request for an installment agreement for a class one or class two property against which an in rem foreclosure judgment has been entered, the Department of Finance may refer such application to the Department of Housing Preservation and Development for a recommendation as to whether such installment agreement should be granted. The basis for such recommendation may include but shall not be limited to the following:
(i) History of ownership and management of such property and other real property of the owner;
(ii) Record of Housing Maintenance Code violations, including but not limited to: class B and class C violations; legal proceedings to enforce the Housing Maintenance Code including, but not limited to, litigation by the Department of Housing Preservation and Development’s Housing Litigation Bureau and outstanding judgments in relation thereto; and Emergency Repair Program charges against such property and other real property of the owner;
(iii) History of arrears of taxes, water and sewer charges, or other real property related charges or past tax, mortgage, or lien foreclosure or enforcement proceedings with respect to such property and other real property of the owner;
(iv) History of tenant complaints and tenant-initiated housing court proceedings against the owner;
(v) Financial capacity of the owner;
(vi) Intent and ability of the owner to improve, manage and maintain such property;
(vii) Ability of the owner to obtain financing for the improvement and rehabilitation of such property;
(viii) Plans by the City for transfer of such property pursuant to Administrative Code § 11-412.1;
(ix) Plans by the city for disposition of such property through sale, development or alternative management;
(x) The execution by the owner of an agreement with the Department of Housing Preservation and Development to correct any existing Housing Maintenance Code violations issued against such property and to participate in a housing education program where directed to do so by the Department of Housing Preservation and Development;
(xi) Whether the owner has filed all registration statements that are required for the property under article 2 of subchapter 4 of title 27 of the Administrative Code of the City of New York; and
(xii) Any other factors that the Department of Housing Preservation and Development deems relevant to such recommendation.
§ 14-01 Fees.
(a) Preliminary application filing: $100.
§ 14-02 Where Building Permit Not Required for Project.
Where construction work that was the subject of an application for a certificate of eligibility does not require a building permit or is to be performed under authority of an open permit issued by the Department of Buildings, a notarized letter from the project’s architect or engineer notifying the Department of this fact must be filed within 30 calendar days. The date of commencement indicated in the letter will be the project’s effective date.
§ 14-03 Effective Date.
(a) New and previously abandoned projects. For a new project, or an abandoned project as defined in 19 RCNY § 14-05(g), a certificate of eligibility's effective date will be the date either a newly issued or renewal permit for the project is issued.
§ 14-04 Commencement of Construction.
(a) No benefits will be received for construction work commenced before the effective date of the certificate of eligibility for the work.
(1) submission of preliminary application and any notice required by law
(2) if a building permit is not required by the Department of Buildings, receipt by the Department of Finance of a letter from an architect or engineer licensed in the State of New York, a contractor, the applicant or its authorized representative detailing the project’s scope and the estimated date of construction commencement and an affirmation that no permit is required; and
(3) submission of a completed employment report or notice where required.
§ 14-05 Eligible Construction Work.
(a) For tax exemption benefits. For purposes of determining the minimum required expenditure, the exemption base and all other purposes, construction work will be eligible for tax exemption benefits under this program if the work is:
(1) a permanent capital improvement to real property with a useful life of at least three years;
(2) described or integrally related to work described in the approved plans and/or narrative description submitted as part of the application;
(3) performed during the construction period;
(4) not rendered ineligible by any provision of law or these rules or any agreement made as part of the application; and
(5) creates or enhances the value of eligible commercial or industrial property by means of construction of a new building, structure or extension, by the modernization, rehabilitation or alteration of an existing building, by the erection or installation of building systems that are real property or by other physical means.
(1) a permanent capital improvement to real property having a useful life of at least three years;
(2) described or integrally related to work described in the approved plans and/or narrative description submitted as part of the application;
(3) performed during the construction period; and
(4) not rendered ineligible by any provision of law or these rules or any agreement made as part of the application.
(1) alterations that increase the square footage or cubic content of an existing building; and
(2) modernization of core facilities including:
(i) upgrading of electrical and plumbing systems;
(ii) installation of new high-speed elevators and elevator banks;
(iii) renovation or new installation of the “skin” of a structure;
(iv) major upgrading of lobby space;
(v) reconfiguration of multi-tenant floor space to single tenant space;
(vi) installation of central HVAC systems;
(vii) major abatement of asbestos contamination;
(viii) conversion of obsolete office space into functional space; and
(ix) major conversion of a building’s use involving structural changes.
(1) Ordinary repairs, replacements or redecoration;
(2) Installation of personal property;
(3) Extension of streets, sewers, water or utility systems to a site not provided with such services; or
(4) Installation of satellite dishes, billboards, or cellular and microwave antennae.
(1) the earthwork or partial demolition is integrally related to the other construction work on the project and is commenced not more than one year before commencement of the other work and after the date that a preliminary application was filed;
(2) the applicant requests inclusion of the earthwork or partial demolition in the preliminary application or a subsequent notice filed at least 15 business days before the commencement of the earthwork or partial demolition and before a permit for the earthwork or partial demolition is issued; and
(3) for purposes of determining the exemption base only, the Department determines that the earthwork or partial demolition enhances the value of an eligible building.
(1) The applicant must notify the Department, in writing, within 60 days of completion of the project. If the project has not been completed by the end of the construction period, the applicant must notify the Department of the extent of construction completed as of that date.
(2) The notice of completion must contain certification by a New York State licensed engineer or architect, or general contrator that the narrative description provided in the final application, as last amended, is an accurate and complete description of the completed project; and
(i) A final certificate of occupancy or any equivalent document issued by the Department of Buildings acknowledging completion of construction; and
(ii) Where no certificate of occupancy is required by the Department of Buildings for construction work described in the narrative description, the date upon which that construction work was completed; or
(iii) Temporary certificate of occupancy plus proof that the applicant has incurred 90 percent of the construction expenses.
(3) The notice of completion must include a detailed itemized statement of the cost of construction. This statement must be certified by a certified public accountant, unless the project cost is less than $1,000,000, in which case the statement may be certified by the applicant.
§ 14-06 Restricted Activity.
Restricted activity means any commercial use of property that is unlawful or a public nuisance, as defined in § 7-703 of the New York City Administrative Code.
§ 14-07 Manufacturing Defined.
(a) A building or part of a building is used for manufacturing where it is used primarily for manufacturing activities. A manufacturing activity involves the assembly of goods or the fabrication or processing of raw materials.
(1) General management;
(2) Storage, shipping or receiving of materials and finished goods;
(3) Maintenance, repair or construction of real property;
(4) Professional, clerical or information processing activities; and
(5) Buying, selling, leasing or providing goods or services.
§ 14-08 Commercial Activities.
(a) Commercial activities include:
(1) Buying, selling, leasing or otherwise providing goods or services.
(2) Operating a transient hotel, except that
(i) a structure or part of any hotel owned or leased by a not-for-profit corporation for the purpose of providing governmentally funded emergency housing is not considered a hotel for purposes of the ICIP; and
(ii) a condominium or timeshare is a transient hotel building for the purposes of the ICIP only where the building, if viewed as a whole and as if it were under single ownership, would qualify as a transient hotel building under the Zoning Resolution. An individual condominium or timeshare unit located in a transient hotel building may qualify for exemption to the extent that the unit is
(A) made available to the general public at large for a minimum of 187 days during the calendar year on terms and dates which are consistent with standards in the hotel industry; and
(B) the unit is not occupied for more than 179 days in any calendar year by:
(I) the owner or any relative of the owner; or
(II) any employee of the owner, or employee of any corporation, partnership, limited liability corporation or other entity owned or controlled by the unit owner.
(3) Operating a theater or other entertainment business.
(4) Manufacturing conducted in a building or individual condominium unit where less than 75 percent of the floor area upon completion of construction is used for manufacturing.
(5) Providing information or services to businesses or investors on a nonprofit, limited profit, or cooperative basis, including operating a stock or commodity exhange, insurance rating bureau, testing service, clearinghouse, wire service, buying service, or private label company or the like.
(6) Computer software development and services, including:
(i) internet and web related activities;
(ii) computer graphics and designs; and
(iii) desk-top publishing.
(7) Other lawful businesses, including governmental or not-for-profit activities.
(8) Repair of equipment and service businesses such as HVAC, plumbing and refrigeration.
§ 14-09 Apportionment of Value in Multi-Use Property.
(a) In the event that the value of a multi-use property must be apportioned to determine the value attributable to a particular use for any purpose under these rules, including, but not limited to, determining the minimum required expenditure, the assessed value will be apportioned using the same method used by the Department to value property for tax and assessment.
(1) the land area of each portion;
(2) the market value of the buildings situated on each portion;
(3) the location of each portion on the lot;
(4) the topography of the lot;
(5) zoning and other land use restrictions applicable to the lot or portion thereof;
(6) analyses of income factors relating to each portion;
(7) analyses of cost factors; and
(8) other relevant factors.
§ 14-10 Minimum Required Expenditure.
(a) What may be included. Expenditures may include those made for
(1) construction contracts;
(2) materials, labor, equipment rental, insurance, permit fees and other direct expenses of construction;
(3) installation of partitions and other tenant work by or for the first tenant or occupant of new or substantially renovated space;
(4) architectural, engineering, construction management, legal, accounting and other professional services rendered in connection with the construction work to the extent that the total fees do not exceed ten (10) percent of the expenses incurred for direct construction costs;
(5) site preparation, such as the erection of fences, barricades, scaffolding, temporary walkways, removal of debris or any similar work allocable to the project; and
(6) fees for connection to existing sewer, water or utility lines.
(1) the costs of selecting or acquiring the site;
(2) the costs of determining the feasibility of the project;
(3) the costs of moving or installing machinery or equipment, except the cost of installing equipment that is real property and installed as part of the project;
(4) charges to any reserve, contingency or sinking fund;
(5) the costs of earthwork or demolition except as provided in 19 RCNY § 14-05(e);
(6) the costs or payments for the extension of streets, sewers, water lines or other public utilities to a site not provided with these services; or
(7) the costs or payments associated with vacating the site and/or existing buildings such as terminating existing leases or tenancies.
§ 14-11 Tax Abatement for Industrial Construction.
(a) Eligible applications. A real property tax abatement is available for qualifying industrial construction where the application has an effective date on or after July 1, 1995.
(1) No abatement benefit will be available for the first tax year after construction is completed unless satisfactory proof of completion on or before the taxable status date (January 5th), is submitted no later than 30 days following the taxable status date (February 4th). If satisfactory material is submitted, the abatement period will commence on July 1st.
(2) If proof of completion of industrial construction is not submitted as provided in this subdivision, no abatement will be available until the second tax year after completion of the work. In this case, the twelve (12) year abatement period will begin July 1st in the second tax year following completion of the work if satisfactory proof is submitted to the Department by February 4th for the tax year. This will be the Applicant’s final opportunity to qualify for a full twelve (12) year abatement.
(3) If the Applicant fails to submit satisfactory proof of completion by the deadlines, the twelve (12) year abatement period will commence on July 1 although no abatement benefits will be granted. The twelve (12) year period will continue in operation for the next eleven years without regard to the actual submission of proof of completion. Example: Applicant completed industrial construction work on January 4, 2005. If the Applicant submitted satisfactory proof of completion by February 4, 2005, the abatement priod would have commenced July 1, 2005. But Applicant failed to file timely and, therefore, must submit proof of completion by February 4, 2006, his last opportunity to file for a full 12-year abatement period to commence July 1, 2006. Whether or not the proof is submitted by February 4, 2006, the abatement period will begin July 1, 2006. Absent the timely filing of satisfactory proof of completion, however, no abatement benefit will be credited for the fiscal year commencing July 1, 2006. Assuming Applicant files satisfactory proof of completion on or before February 4, 2007, the abatement benefit will be credited July 1, 2007, the second year of the Applicant’s abatement period. Applicant will receive a tax abatement for a total of 11 years.
(1) a temporary certificate of occupancy and 90 percent of the final actual cost of eligible construction is made or
(2) a permanent certificate of occupancy is received for the completed project.
§ 14-12 Payment of Taxes and Other Charges Due the City.
As a condition of eligibility for benefits under this program, there must be no arrears in real property taxes or other charges imposed by the City of New York on the property unless all such arrears are subject to an installment agreement with the Department of Finance and all installments that have come due under the agreement have been paid.
§ 14-13 Equal Employment Opportunity; Trainee Programs.
(a) Employment reports.
(1) An applicant for a certificate of eligibility must file an employment report with the Department of Business Services (DBS), if it will perform construction work with a cost or value of $2.5 million or more or if any subcontractor will perform construction work with a cost or value of $1 million or more. If the applicant or the applicant’s subcontractor will not perform work meeting this dollar threshold, the applicant must file a letter stating that it will not perform construction work having this cost or value.
(2) Each application must contain a statement that the applicant and its contractors agree to be equal opportunity employers and comply with all applicable requirements of Executive Order No. 50 and the Department of Business Services, including those relating to trainee programs for economically disadvantaged persons employed in construction work that is the subject of the application for benefits.
(1) The Director of the Department of Business Services’ Division of Economic and Financial Opportunity will inform the Commissioner in writing where applicants, contractors, subcontractors or successors have failed to comply with any requirement of DBS or Executive Order No. 50 regarding trainee programs.
(2) The Director will issue a written recommendation to the Commissioner that benefits be denied, suspended, revoked or terminated.
(3) Where the Commissioner has determined that an applicant, contractor, or subcontractor has made false or misleading statements or omissions in employment reports provided to DBS, all benefits will be revoked from the date of the fase statement or omission.
§ 15-01 Definitions.
(§ 11-641(f), Administrative Code)
As used herein, the following terms have these meanings:
Bank. The term “bank” means any banking corporation doing a banking business as defined in § 11-640 of the Administrative Code or any similar banking corporation not subject to tax pursuant to Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code that is doing a banking business as defined in § 11-640 of the Administrative Code.
Corporation. The term “corporation” includes an association and a joint stock association.
Deposit. The term “deposit” means an IBF time deposit as defined in 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:
(1) a nonresident individual;
(2) a foreign corporation, a foreign partnership or a foreign trust, other than a domestic branch thereof;
(3) a foreign branch of a domestic corporation;
(4) a foreign branch of the taxpayer;
(5) a foreign government or an international organization or an agency of either; or
(6) an international banking facility.
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 section 7701(a)(18) of the Internal Revenue Code, an organization as described in section 204.125 of the Federal Reserve Board regulations, 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.
Place of business. The term “place of business” means a branch or agency at which the taxpayer is carrying on its business in a regular and systematic manner and which is continuously maintained, occupied, and used by 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 place of business during normal business hours. The occasional consummation of an isolated transaction does not constitute the carrying on of a business in a regular and systematic manner.
Resident individual. The term “resident individual” means an individual who resides principally within the Unites States at the time of the transaction.
Subsidiary. The term “subsidiary” means a corporation which is more than 50 percent owned or controlled, either directly or indirectly by another corporation.
United States. The term “United States” means the 50 states and the District of Columbia.
§ 15-02 General.
(§ 11-641(f), Administrative Code)
(1) expenses or other deductions directly or indirectly attributable to eligible gross income,
(2) the ineligible funding amount, and
(3) the floor amount.
(1) Be located within New York City.
(2) Make loans to and receive deposits from foreign persons as defined in 19 RCNY § 15-01, infra. (3) 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 Department of Finance upon its request any information necessary to substantiate the deduction determined hereunder. Such information may include, but shall not be limited to:
(i) a list of all loans made, arranged for, placed, or serviced during the taxable year indicating the borrower, loan number, date proceeds dispersed, maturity date, amount borrowed, and terms;
(ii) 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
(iii) a list of all depositors for the taxable year.
§ 15-03 Adjusted Eligible Net Income.
(§ 11-641(f) and (k), Administrative Code)
§ 15-04 Eligible Gross Income.
(§ 11-641(f)(2), Administrative Code)
(1) a nonresident individual;
(2) a foreign branch of a domestic corporation (other than a foreign branch of a domestic bank);
(3) 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
(4) 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 re for use outside the United States. For purposes of this subdivision, “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 subdivision, 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 capital interest of such partnership.
(1) banks;
(2) foreign branches of a bank, including foreign branches of the taxpayer;
(3) foreign banks which are subsidiaries of a bank, including foreign banks which are subsidiaries of the taxpayer; or
(4) other IBFs. The term “deposit” as used in this subdivision 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.
(1) the purchase, sale, or exchange of foreign currency; or
(2) 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.
§ 15-05 Direct Expenses of the IBF.
(§ 11-641(f)(3), Administrative Code)
§ 15-06 Interest Expense of the IBF.
(§ 11-641(f)(3), Administrative Code)
(1) Interest expense on 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 for Federal income tax purposes.
(2) Each deposit with the IBF by a branch, agency, or other office of the bank which established the IBF (for purposes of this paragraph called the “lending office”) and each borrowing from such lending office shall be deemed to bear interest computed by using one of the following applicable rates:
(i) a rate of interest representing the interest cost of the lending office on borrowings made to obtain funds from arm’s length transactions which were loaned to, deposited in, or placed with the IBF; or
(ii) 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
(iii) any other rate which the taxpayer establishes to the Commissioner of Finance as a more appropriate rate.
(i) The term “inter office” means the activities between the IBF and the separate branches, agencies, or offices of the taxpayer.
(ii) 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.
(iii) 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.
(iv) 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.
(v) A particular asset value or liability amount that is denominated in one currency is translated into U.S. dollars at the exchange rate for the date the value or amount is determined for purposes of this subdivision. 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 Section 1.964-1(d)(5) of the Federal income tax regulations (26 C.F.R. § 1.964-1(d)(5)).
(2) 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 for the taxable year, or portion thereof.
(3) 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 paragraph (2) of this subdivision by the same percentage actually used for Federal income tax purposes for the taxable year.
(4) 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:
(i) the amount of IBF-connected liabilities determined in paragraph (3) of this subdivision multiplied by
(ii) the ratio, stated in the same currency used for Federal income tax purposes, of
(A) 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
(B) the average total amount of all IBF liabilities shown on the books (including interoffice) for the taxable year, or portion thereof, multiplied by
(iii) the average worldwide interest rate actually used for Federal income tax purposes in computing that particular currency.
(5) 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 applied, the IBF interest expense for New York City tax purposes is determined by multiplying the IBF-connected liabilities, determined in paragraph (3) of this subdivision by the same average U.S.-connected interest rate actually used for Federal income tax purposes.
(6) 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)(B) of the Federal income tax regulations 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
(i) 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
(ii) the amount determined by multiplying the excess of IBF-connected liabilities, determined in paragraph (3) of this subdivision, 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.
(7) 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)(B) of the Federal income tax regulations 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
(i) 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 paragraph (3) of this subdivision, by the average interest rate on U.S. dollar liabilities actually used for Federal income tax purposes, from
(ii) the amount of IBF interest expense (stated in U.S. dollars) shown on the books (including 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 paragraph (3) of this subdivision, 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.
§ 15-07 Bad Debt Deduction of the IBF.
(§ 11-641 (f)(3), Administrative Code)
§ 15-08 Indirect Expenses of the IBF, Including Head Office Expenses.
(§ 11-641(f)(3), Administrative Code)
(1) 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 written consent of the Commissioner of Finance. Gross assets are valued at original cost. The term “original cost” means, if:
(i) the property was obtained for cash, the amount paid for the property in cash;
(ii) the property was obtained for cash plus property, the amount paid in cash plus the fair market value at the time of the exchange of the property exchanged;
(iii) the property was obtained in exchange for other property without any cash consideration, the fair market value at the time of the exchange of the property exchanged; or
(iv) none of the consideration for the property is cash or other property, the fair market value of the property acquired by the taxpayer as of the date of the acquisition by the taxpayer.
(2) 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.
(3) Other method. Any other method that the taxpayer establishes to the Commissioner of Finance as a more appropriate method.
§ 15-09 Apportionment of Expenses of the IBF.
(§ 11-641(f), Administrative Code)
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:
§ 15-10 Ineligible Funding Amount.
(§ 11-641(f)(5), Administrative Code)
(1) 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 § 15-01, supra).
(2) 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.
§ 15-11 Floor Amount.
(§ 11-641(f)(6), Administrative Code)
(1) The numerator is the amount determined in subparagraph (i) of this paragraph multiplied by the applicable percentage stated in subparagraph (ii) of this paragraph minus the amount determined in subparagraph (iii) of this paragraph.
(i) Determine the average aggregate amount of loans and deposits as described in 19 RCNY § 15-11(b) 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. 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.
(ii) The average aggregate amount determined in subparagraph (i) of this paragraph is multiplied by the following percentages:
(A) 100 percent for the first taxable year the taxpayer established the IBF and for the next succeeding four taxable years,
(B) 80 percent for the sixth taxable year,
(C) 60 percent for the seventh taxable year,
(D) 40 percent for the eighth taxable year,
(E) 20 percent for the ninth taxable year, and
(F) zero percent for the tenth taxable year and thereafter.
(iii) The product obtained in subparagraph (ii) of this paragraph is reduced by the average aggregate amount of loans and deposits as described in 19 RCNY § 15-11(b) 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 is greater than the amount determined in subparagraph (ii) of this paragraph, the numerator is zero.
(2) The denominator is the average aggregate amount of loans and deposits as described in 19 RCNY § 15-11(b) which were properly recorded in the financial accounts of the IBF for the taxable year.
(1) Loans means loans to foreign persons. The term “foreign person” is defined in 19 RCNY § 15-01, supra.
(2) Deposits mean deposits with foreign persons which are:
(i) banks;
(ii) foreign branches of a bank, including foreign branches of the taxpayer; or
(iii) foreign banks which are subsidiaries of a bank, including foreign banks which are subsidiaries of the taxpayer.
§ 15-12 Effective Date.
This regulation shall take effect immediately, and shall apply to all taxable years which end on or after March 25, 1982; provided, however, that where a taxable year begins prior to March 25, 1982 and ends on or after that date, this regulation shall only apply to the portion of the taxable year beginning on March 25, 1982.
§ 16-01 General – Definition and Nature of Letter Rulings.
(a) A letter ruling is a written statement setting forth the applicability of statutory and regulatory provisions of any tax or charge administered by the Department of Finance, to a specified set of facts. Letter rulings are issued on behalf of the Commissioner of Finance by the Deputy Commissioner for Legal Affairs, to whom the Commissioner of Finance's authority to issue letter rulings is delegated.
(1) covering an issue or set of facts regarding which a notice of determination or a notice of disallowance of a claim for refund or credit has been issued to the taxpayer; or
(2) covering an issue or set of facts regarding which any taxpayer has been granted leave to appeal or regarding which the Department of Finance is seeking or has been granted leave to appeal an adverse decision to any court of the State of New York or the United States; or
(3) covering an issue which is clearly and adequately addressed by statutes, regulations, published rulings or other official pronouncements of the Department of Finance; or
(4) where the issue presented pertains to subject matter which, in accordance with a public pronouncement, is under study by the Department of Finance; or
(5) if the conclusion reached in such a ruling would require a factual determination which is properly an audit function.
§ 16-02 Requests for Letter Rulings.
(a) Requests for a ruling should be typewritten, if possible, but handwritten requests will be accepted. The request must set forth the name, address and identification number (social security or federal employer identification number), the specific set of facts to which the request for a ruling relates, the exact issue to be resolved and all parties relative thereto. Copies of all tax returns, contracts, deeds, instruments or other documents relevant to the issues to be decided must be submitted. The request may include a presentation of the taxpayer's contentions as to the appropriate resolution of the issue raised in the request, together with any supporting arguments and citations of pertinent law or regulations. The taxpayer must state in the request whether or not the request relates to any matter currently under audit, or for which a notice of determination or a notice of disallowance of a claim for credit or refund has been issued, or for which there is a pending claim for credit or refund.
(1) A request for a ruling may be made by an individual on his or her own behalf, by a member of a partnership (without filing any power of attorney) on behalf of the partnership, or by an officer or employee of a corporation on behalf of the corporation. Where a corporation acts through an employee, a power of attorney executed by an officer of the corporation must be filed.
(2) The adult spouse, parent, guardian or any person having legal custody of a minor, or a person who prepared the tax return of a minor, may request a ruling on behalf of such minor. A committee or conservator appointed pursuant to the Mental Hygiene Law, an attorney-in-fact acting pursuant to section 5-1601 of the General Obligations Law, or other person authorized by law, may request a ruling on behalf of an individual who is mentally or physically incapable of making such request.
(3) Any of the following may also file a request for a ruling on behalf of another individual or business entity if authorized by a power of attorney signed by such individual, by a member of a partnership or by an officer of a corporation:
(i) an attorney-at-law licensed to practice in any state;
(ii) a certified public accountant duly qualified to practice in any state;
(iii) a person admitted to practice before the Internal Revenue Service or before the Tax Court of the United States;
(iv) the taxpayer’s spouse, domestic partner, child or parent. For purposes of this subparagraph, “domestic partner” means a person who has registered a domestic partnership in accordance with applicable law with the City Clerk, or has registered such partnership with the former City Department of Personnel pursuant to Executive Order 123 during the period August 7, 1989 through January 7, 1993. (The records of domestic partnerships registered at the former City Department of Personnel have been transferred to the City Clerk.) The power of attorney required by this section should be filed with the Office of Legal Affairs before or concurrent with the request for a ruling.
(1) A request for a ruling must be made on an application form prescribed by the Department of Finance and must be accompanied by a non-refundable processing fee as provided in the Regulations Relating to Fees to Be Charged by the Commissioner of Finance, in Addition to Those Now Fixed by Statute.
(2) A request for a ruling must be submitted to the Office of Legal Affairs, Department of Finance, 345 Adams Street, 3rd Floor, Brooklyn, N.Y. 11201.
§ 16-03 Procedure After Filing a Request for a Ruling.
(a) The Office of Legal Affairs will issue an acknowledgement letter upon receipt of a request for a ruling which, on its face, meets the procedural requirements of 19 RCNY §§ 16-01 and 16-02. Thereafter, the request will be reviewed for completeness and if it is determined that the request is not complete, or that additional information is required, a notice will be sent to the taxpayer advising him of the nature of the additional information required. The taxpayer may then revise and resubmit his request.
§ 16-04 Contents.
A ruling will identify the person to whom it is addressed by name and address. It will contain
§ 16-05 Effect.
(a) A ruling represents an expression of the views of the Department of Finance as to the application of law, regulations and other precedential material to the set of facts specified in the ruling request. A ruling shall be binding upon the Department of Finance only with respect to the person to whom the ruling is rendered, provided that the facts are as stated in the ruling request. A taxpayer may not rely on a ruling issued to another taxpayer. All bureaus of the Department of Finance must follow the conclusions stated in the ruling where the factual situations are the same.
(1) there has been no misstatement or omission of material facts,
(2) the facts developed later are not materially different from the facts on which the ruling was based,
(3) there has been no change in the applicable law,
(4) the ruling was originally issued with respect to a prospective or proposed transaction, and
(5) the taxpayer directly involved in the ruling acted in good faith in reliance upon the ruling and the retroactive revocation would be to the taxpayer’s detriment.
§ 16-06 Issuance, Publication and Availability.
(a) For all requests for rulings received by the Office of Legal Affairs, a ruling will be mailed to the taxpayer or the taxpayer's authorized representative within 90 days of the receipt of a complete request for such a ruling. The mailing of a ruling will constitute the rendering of a ruling. The 90-day period within which a ruling must be issued may be extended by the Commissioner of Finance for a period of up to 30 additional days. In such case, the taxpayer or the taxpayer's authorized representative will be notified of the extension and the reason therefor. At any time before their expiration, the 90-day or additional 30-day periods may be extended by a written agreement between the taxpayer and the Office of Legal Affairs.
§ 17-01 Timely Mailing Rule.
(a) General rule.
(1) Date of delivery. If any document, as defined in 19 RCNY § 17-01(d), required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of Title 11 of the Administrative Code of the City of New York relating to taxes administered by the Commissioner of Finance is, after such period or date delivered by United States mail to the Commissioner of Finance, bureau, office, officer or person with which or with whom such document is required to be filed or to which or to whom such payment is required to be made, the date of the United States postmark stamped on the envelope will be deemed the date of delivery.
(2) Mailing requirements. Any such document or payment will not be considered to be timely filed or timely made unless the document or payment is mailed in accordance with the following requirements:
(i) The document or payment must be contained in an envelope or other appropriate wrapper and properly addressed to the Commissioner of Finance, bureau, office, officer or person with which or with whom the document is required to be filed or to which or to whom such payment is required to be made.
(ii) The envelope containing the document or payment must be deposited in the mail of the United States within the prescribed period or on or before the prescribed date with sufficient postage prepaid. For this purpose, such document is considered to be deposited in the mail of the United States when it is deposited with the domestic mail service of the United States Postal Service. The domestic mail service of the United States Postal Service includes mail transmitted within, among and between the United States, its territories and possessions, and Army – Air Force (APO) and Navy (FPO) post offices.
(iii) The envelope or other wrapper containing the document or payment must bear a date stamped by the United States Postal Service which is within the prescribed period or on or before the prescribed date for the filing of such document, or for making the payment, including any extension granted for such filing or payment. If the postmark stamped by the United States Postal Service on the envelope or wrapper containing the document or payment does not bear a date which falls within the prescribed period or on or before the prescribed date for filing such document, or for making such payment, the document or payment will be considered not to be timely filed, regardless of when the envelope or wrapper containing such document or payment is deposited in the mail. Accordingly, the sender assumes the risk that the envelope containing the document or payment will bear a postmark date stamped by the United States Postal Service within the prescribed period or on or before the prescribed date for the filing of such document, or for making the payment (including any extension of time granted for such filing or payment), but see 19 RCNY § 17-01(c) with respect to the use of registered mail or certified mail to avoid this risk. Furthermore, if the postmark made by the United States Postal Service on the envelope or wrapper containing the document or payment is not legible, the person who is required to file the document or make the payment has the burden of proving when the postmark was made.
(1) If the postmark on the envelope or wrapper containing the document or payment is made by other than the United States Postal Service, the document or payment will be deemed to be timely filed or timely made in accordance with the following requirements:
(i) the postmark so made must bear a date which falls within the prescribed period or on or before the prescribed date for the filing of such document, or for making the payment (including any extension granted for such filing or payment); and
(ii) the document or payment must be delivered by United States mail to the Commissioner of Finance, bureau, office, officer or person with which or with whom such document is required to be filed, or to which or to whom such payment is required to be made, within five days of the date of the postmark.
(2) In case the document or payment is received after five days from the date of the postmark, such document or payment will be treated as having been timely filed or timely made, if the person who is required to file the document or make the payment establishes:
(i) that it was actually deposited in the mail within the prescribed period or on or before the prescribed date for filing the document or for making the payment;
(ii) that the delay in receiving the document or payment was due to a delay in the transmission of the mail; and
(iii) the cause of such delay.
(3) If the envelope or wrapper containing the document or payment has a postmark made by the United States Postal Service in addition to the postmark not so made, the postmark which was not made by the United States Postal Service will be disregarded, and whether the envelope was timely mailed will be determined solely by applying the provisions of subdivision (a) of this section.
(1) If an envelope or wrapper containing a document or payment is sent by United States registered mail, the date of such registration is treated as the postmark date and the date of delivery.
(2) If an envelope or wrapper containing a document is sent by United States certified mail and the sender’s receipt is postmarked by the postal employee to whom such envelope is presented, the date of the postmark on such receipt is treated as the postmark date of the document or payment and the date of delivery.
§ 17-02 Saturday, Sunday or Legal Holidays.
When the last day prescribed under authority of Title 11 of the Administrative Code relating to taxes administered by the Commissioner of Finance (including any extension of time) for performing any act falls on a Saturday, Sunday, or legal holiday in the State of New York, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday or legal holiday.
§ 17-03 Electronic Filing and Payment.
(a) General rule. Notwithstanding anything to the contrary in any other section of these rules, in addition to requiring the electronic filing of returns under 19 RCNY § 17-04, the Commissioner of Finance may establish programs or systems whereby taxpayers or other persons required to file any return, report, or other form required to be filed with the Commissioner under Chapters 5, 6, 7, 9, 11, 12, 14, 21, 24 and 25 of Title 11 of the Administrative Code of the City of New York or the rules relating thereto, may elect to file any designated return through electronic means. As used in this section, the term "designated return" shall mean any return, report or other form required to be filed under such chapters or rules that the Commissioner has designated for filing through electronic means. For purposes of Chapters 5, 6, 7, 9, 11, 12, 14, 21, 24, and 25 of Title 11 of the Administrative Code and these rules, an electronically filed designated return will be deemed to be filed on the date of issuance of a confirmation number or other evidence of filing, by the Commissioner, to the person filing the return. The issuance of such a confirmation number or other evidence of filing by the Commissioner shall be prima facie evidence that the person filed a return, as required under such Chapters or rules. Any designated return filed electronically must be signed electronically by the same natural person or persons who are required to sign or certify the return under any provision of Title 11 of the Administrative Code or under these rules. The required person or persons will be deemed to have electronically signed the return upon the entry of each such person's identifying information in accordance with the instructions set forth by the Commissioner.
§ 17-04 Mandatory Electronic Filing and Payment.
(a) Definitions. For purposes of this section:
(1) “Authorized tax documents” means the (i) New York City General Corporation Tax Forms NYC-4S, NYC-4SEZ and NYC-3L, (ii) New York City Unincorporated Business Tax Forms NYC-204 and NYC-204EZ, and (iii) Form NYC-EXT, when filed to request an extension for filing any of the aforementioned forms.
(2) “Electronic” means computer technology.
(3) “Original tax document” means a tax document that is filed during the calendar year for which that tax document is required or permitted to be filed. Such term includes extensions, amended returns, returns for prior years, returns for estimated tax payments and any other New York City tax documents regardless of whether such documents are defined in this subdivision as authorized tax documents.
(4) “Tax” means any tax or other matter administered by the Commissioner of Finance pursuant to the Administrative Code or any other provision of law.
(5) “Tax document” means a return, report or any other document relating to a tax or other matter administered by the Commissioner of Finance.
(6) “Tax return preparer” means any person who prepares for compensation, or who employs or engages one or more persons to prepare for compensation, any authorized tax document. For purposes of this section, the term “tax return preparer” also includes a payroll service.
(7) “Tax software” means any computer software program intended for tax return preparation purposes. The term “tax software” includes, but is not limited to, an off-the-shelf software program loaded onto a tax return preparer’s or taxpayer’s computer, an online tax preparation application, or a tax preparation application hosted by the Department of Finance.
(1) tax return preparers as described in subdivision (c) of this section, and
(2) entities who meet the criteria specified in subdivision (d) of this section, are required to file authorized tax documents electronically. In any case in which authorized tax documents are required to be filed electronically, the taxpayer shall pay any tax liability or other amount due shown on, or required to be paid with, an authorized tax document, by means of an electronic funds transfer.
(1) A tax return preparer who (i) prepared more than one hundred original tax documents during any calendar year beginning on or after January 1, 2009, and (ii) prepares one or more authorized tax documents using tax software in any succeeding calendar year shall file electronically all authorized tax documents prepared by such tax return preparer for that succeeding calendar year and for each subsequent calendar year thereafter.
(2) For purposes of paragraph (1) of this subdivision, the number of original tax documents that have been prepared by the tax return preparer shall be the sum of the number of original tax documents prepared by the tax return preparer and, if the tax return preparer is a member of a firm, all of the members of the firm. If the firm has multiple locations, the combined total of original tax documents prepared by members of the firm at all locations shall be included in the calculation.
(1) Tax return preparer. If a tax return preparer is required to file authorized tax documents electronically pursuant to this section, and that preparer fails to file one or more of those documents electronically, then that preparer shall be subject to a penalty of fifty dollars for each failure to file electronically an authorized tax document, unless it is shown that the failure is due to reasonable cause and not due to willful neglect. For purposes of this paragraph, reasonable cause shall include, but not be limited to, a taxpayer’s election not to file electronically the authorized tax document.
(2) Taxpayer. If a taxpayer is required to pay electronically any tax liability or other amount due shown on, or required to be paid with, an authorized tax document required to be filed electronically pursuant to this section, and that taxpayer fails to pay electronically one or more of those liabilities or other amounts due, then that taxpayer shall be subject to a penalty of fifty dollars for each failure to pay electronically.
(3) Assessment and collection of penalties. The penalties provided for by this subdivision shall be paid upon notice and demand, and shall be assessed, collected and paid in the same manner as the tax to which the electronic transaction relates.
§ 18-01 Definitions.
Annual solicitation campaign. “Annual solicitation campaign” shall mean the period of organized solicitation of municipal employees conducted annually by the combined municipal campaign to obtain contributions with respect to the ensuing year of contributions. Charitable non-profit organization. “Charitable non-profit organization” shall mean a private non-profit organization performing charitable services for human health and welfare or recreation, eligible for approval as a coordinating agency, or for membership in the combined municipal campaign in accordance with the provisions of these rules. Combined municipal campaign. “Combined municipal campaign” shall mean the joint campaign of the coordinating agency with one or more other charitable non-profit organizations, based on their written agreement, approved by the director pursuant to 19 RCNY § 18-06, for the joint conduct and sharing in the result of annual solicitation campaign. Coordinating agency. “Coordinating agency” shall mean a federated community campaign, as defined in section 93-b of the General Municipal Law, which is approved by the director pursuant to 19 RCNY § 18-05 to serve as the agent for the combined municipal campaign. Director. “Director” shall mean the City Personnel Director. Year of contributions. “Year of contributions” shall mean the calendar year or other period designated by the Director for collection of the payroll deductions authorized by municipal employees pursuant to § 93-b of the General Municipal Law on behalf of the Combined Municipal Campaign.
§ 18-02 Coordinating Agency; Constituent Organizations.
The coordinating agency shall consist of the charitable non-profit organizations named as constituent members thereof upon the director’s approval of the coordinating agency, subject to changes by discontinuance of such participation or the addition of eligible charitable non-profit organizations. The coordinating agency shall give prompt written notice of any such changes to the director.
§ 18-03 Charitable Non-Profit Organizations.
To be eligible as a constituent organization of the coordinating agency or as a participating organization in the combined municipal campaign, a charitable non-profit organization must meet and maintain the following requirements:
(1) a private, non-profit corporation, association, or organization,
(2) incorporated or authorized to do business in New York, or a member of a federation of charitable organizations which is authorized to do business in New York, and
(3) organized to render voluntary charitable services for human health and welfare or recreation.
§ 18-04 Coordinating Agency; Qualification Requirements.
To be eligible for approval as the coordinating agency, a charitable non-profit organization shall meet all of the conditions specified in 19 RCNY § 18-03, and in addition, shall
§ 18-05 Approval of Coordinating Agency.
(a) To solicit contributions among municipal employees, a charitable non-profit organization eligible pursuant to the conditions specified in 19 RCNY § 18-04 may make written application to the Director for approval as the coordinating agency for the City.
(1) corporate or registered business name and address of the organization; name, titles and addresses of its directors or principals and executive officers; registration number obtained upon registration pursuant to article 7-A of the Executive Law;
(2) concise description of the organization’s structure, origin, and history of its activities in the City; financial statements for its two immediately preceding years of operation, showing contributions and other revenues received, administrative and overhead expenses, costs of operations and other significant financial data; a specification of the extent its operations have been carried out by volunteers’ services;
(3) statement of its plan and program for performing charitable services within the City over the next three-year period, with particular description of projected benefits to employees’ communities of residence;
(4) copies of charter or certificate of incorporation, bylaws, latest external audit by a certified public accountant and letter from the Internal Revenue Service certifying tax exempt status pursuant to Section 501(c)(3) of the Internal Revenue Code;
(5) a listing, by corporate or registered business name, address, and name of the authorized principal representative, of each constituent charitable non-profit organization included in the coordinating agency; the applicant shall certify that it has examined and established compliance by- all of its constituent organizations with the conditions and requirements of eligibility specified in 19 RCNY § 18-03.
§ 18-06 Combined Municipal Campaign; Structure and Operations.
(a) For the purposes of conducting a joint annual solicitation campaign and sharing in the contributions of municipal employees obtained therefrom, the coordinating agency shall contract with all other organizations approved pursuant to 19 RCNY §§ 18-07 and 18-08 to form a Combined Municipal Campaign.
(1) identify each charitable non-profit organization participating with the coordinating agency by corporate or business name and address, and name its authorized representative;
(2) provide an annual budget of the campaign and specify the allocation among the coordinating agency and participating organizations of administrative expenses including publicity, central receipt, accounting and distribution of contributions, and loss of anticipated income to the campaign due to withdrawal of consent to contribution, termination of employment, or other discontinuation of payroll deduction;
(3) state the method of calculation of the share of total contributions to be received respectively by the coordinating agency and each participating organization, and the manner of payment to them;
(4) inform participants that the administrative expenses of the campaign shall be divided equally among each participating agency; for this purpose each participating constituent member of a federation of charitable non-profit organizations shall be counted as a separate participating agency.
(5) Contain such other terms and conditions as may be required by the Director.
§ 18-07 Application for Participation in the Combined Municipal Campaign.
(a) A charitable non-profit organization seeking participation in the Combined Municipal Campaign shall make written application therefor to the Director, who shall forward such application to the coordinating agency.
§ 18-08 Review of Non-Acceptance for Participation.
(a) An organization which has been notified of non-acceptance for participation in the Combined Municipal Campaign may, within fourteen days of the date notice was sent to the applicant by the coordinating agency, appeal in writing to the Director for review of the determination of the coordinating agency. Copies of all material previously submitted to the coordinating agency shall be furnished to the Director by the organization seeking review.
§ 18-09 Conduct of Solicitation Among City Employees.
(a) Contributions by employees to any charitable non-profit organization shall be purely voluntary.
§ 19-01 Definitions.
When used in these rules the following terms shall have the meanings herein indicated:
Individual resident. “Individual resident” means a natural person who maintains a permanent place of abode in the County of New York which is such person’s primary residence.
Motor vehicle. “Motor vehicle” means a motor vehicle registered by an individual resident pursuant to the vehicle and traffic law at the address of his or her primary residence in New York County or, in the case of a leased vehicle, registered pursuant to the vehicle and traffic law and leased to an individual resident at the address of his or her primary residence in New York County, and, in either case, which is not used in carrying on any trade, business or commercial activity. The term includes passenger and suburban vehicles, trucks, motorcycles and recreational vehicles.
| Examples: | |
|---|---|
| Example 1: | A passenger motor vehicle which is owned and used by an individual resident for family or personal use, and for traveling to and from his or her place of employment, but not used in carrying on a trade, business or other commercial activity, may qualify for exemption. |
| Example 2: | A delivery van used in carrying on the individual’s trade or business does not qualify for exemption. |
| Example 3: | A passenger motor vehicle leased for three years by an individual resident from a leasing company located in Kings County and registered pursuant to the vehicle and traffic law in the name of the leasing company at the address of the leasing company in Kings County will qualify for exemption provided the lease shows the address of the individual resident’s primary residence in New York County and the vehicle is not used in the individual resident’s trade or business. |
| Example 4: | A passenger motor vehicle leased for three years by an individual resident from a leasing company located in New Jersey and registered in New Jersey in the name of the leasing company does not qualify for exemption because the vehicle is not registered pursuant to the vehicle and traffic law which requires a vehicle operated in New York State by a resident to be registered in New York State. |
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A permanent place of abode. “A permanent place of abode” means a dwelling place permanently maintained by an individual, whether or not owned by him or her. It will generally include a dwelling place owned or leased by his or her spouse. A place of abode is not deemed permanent if it is maintained only during a temporary stay for the accomplishment of a particular purpose.
Primary residence. “Primary residence” means the dwelling place which is a permanent place of abode and where an individual resides or intends to reside more than 183 days in the 12 months following the date of the application for exemption. In determining whether a dwelling place is a primary residence the factors that may be examined include whether the individual identifies that dwelling place as his place of residence in tax returns, for voting registration and motor vehicle registration purposes, on his or her driver’s license, or on other documents filed with a public agency. Utility bills (electric, gas or telephone) may also be examined to determine whether a dwelling place is a primary residence.
| Examples: | |
|---|---|
| Example 1: | If an individual resides in New York County during Monday through Friday of each week, and maintains a weekend home outside the City, the New York County residence will be deemed primary if more than 183 days are spent there, and in addition, the individual uses that address in filing tax returns and registering his motor vehicle. |
| Example 2: | Where an individual’s family resides outside the City, but the individual stays in an apartment in New York County less than 183 days, votes outside the City and files non-resident City tax returns, the New York County apartment will not be deemed a primary residence. |
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Principal location for the parking, garaging or storing of a motor vehicle. “Principal location for the parking, garaging or storing of a motor vehicle” means the parking facility where the motor vehicle is parked, garaged or stored the majority of the time. If an individual resident garages a motor vehicle on a monthly or longer term basis both near his or her primary residence and his or her place of employment for an approximately equal amount of time, then the parking facility near the primary residence will be deemed the principal location. Only parking facilities paid for on a monthly or longer term basis qualify for exemption. If services are paid for on a daily or weekly basis for a period of 30 or more days, the exemption does not apply. A written agreement is not required as long as adequate proof of payment on a monthly or longer term basis exists (for example, invoices and cancelled checks).
Vendor. “Vendor” means a person operating a garage, parking lot, or other place of business engaged in providing parking, garaging or storing services for motor vehicles.
§ 19-02 Eligibility for Exemption.
(a) An individual resident is required to apply for and be issued an exemption certificate to be exempt from the additional 8% tax on the amount paid for the services of parking, garaging or storing of motor vehicles.
§ 19-03 Exemption Certificate; Obligations of Individual Residents and Vendors.
(a) To apply for an exemption certificate, a completed application, on a form prescribed by the Commissioner of Finance, must be filed with the Commissioner of Finance at the address designated on the form.
(2) A vendor who receives notification from an individual resident or the Department of Finance that the individual resident no longer qualifies for exemption from the additional 8% tax must collect the additional parking tax on all receipts for parking, garaging or storage services rendered to that individual resident that the vendor receives on or after the date on which the vendor received such notification, unless and until the individual resident subsequently submits a new exemption certificate to the vendor.
| Examples: | |
|---|---|
| Example 1: | T is an individual resident. T garages a motor vehicle on an annual basis near T’s primary residence. Payment for the garaging service is required monthly. The monthly payment period begins on the first day of the month, but T has until the 15th day of the month to pay for the garaging service. T applies for an exemption certificate, which is issued to T on October 10th. The exemption is effective for payments made to the vendor on or after the date on which T submits the certificate to the vendor with respect to parking, garaging or storing services rendered on or after October 1. If T pays for the garaging service on October 11th and submits the certificate on October 12th, the entire amount paid on October 10th is subject to the additional 8% parking tax because the vendor received the payment before T submitted the certificate. |
| Example 2: | The facts are the same as in example (1), except that T submits the certificate and payments for September and October to the vendor on October 13th. The payment for October is exempt from the additional 8% parking tax because T paid the vendor on or after the day that T submitted the certificate to the vendor, and the certificate is effective as of the first day of the month in which issued. However, the payment for September is subject to the additional 8% tax because it applies to services rendered prior to October 1, the effective date of the certificate, even though the vendor received payment for September with the exemption certificate. |
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§ 19-04 Penalties, Refunds.
(a) Any person not meeting the requirements for exemption who wrongfully obtains or uses an exemption certificate shall, in addition to the tax due, be liable for a penalty of not more than one hundred dollars if such certificate was obtained or used through negligence, and a penalty of not more than five hundred dollars if such certificate was obtained or used through fraud. The term "uses" includes failure to notify the vendor and the Department of Finance of change of parking location or primary residence, sale or transfer of the vehicle for which a certificate was issued, commercial use or other reason for loss of eligibility for exemption. These penalties shall be in addition to any penalties imposed under Section 1145 of Article 28 of the New York State Tax Law.
§ 20-01 General.
In connection with the renewal of licenses by food and general vendors, and pursuant to § 17-310(c) (pertaining to food vendors) and § 20-457(c) (pertaining to general vendors) of the Administrative Code of the City of New York, the Commissioner of Finance is directed to establish
§ 20-02 Food Vendors.
(§ 17-310(c), Chapter 3, Title 17 of the Administrative Code).
§ 20-03 General Vendors.
(§ 20-457(c), Subchapter 27 of Chapter 2 of Title 20 of the Administrative Code).
§ 21-01 General.
(a) Definition of a decision. A decision of the Commissioner of Finance is a report, containing findings of fact and conclusions of law, which is issued after the conclusion of a hearing before the Bureau of Hearings.
§ 21-02 Publication Availability by Kinds of Proceedings.
(All statutory references are to Title 11 of the Administrative Code of the City of New York).
§ 21-03 Requests for Copies.
Requests for copies of decisions of the Commissioner of Finance should be made to the City of New York, Department of Finance, Hearings Bureau Disclosure Officer, 345 Adams Street, Brooklyn, N.Y. 11201.
§ 22-01 Who May Claim Abatement.
(a) An owner of real property may claim an abatement of the taxes thereon based on rent exemptions, pursuant to § 467-b of the Real Property Tax Law and subdivision (m) of § 26-405 of the Administrative Code of The City of New York, as amended, whether or not a maximum base rent order has been issued for such property.
§ 22-02 How Abatement is Claimed.
(a) A claim for abatement of taxes shall be made by an owner by filing with the Department of Finance a certification in writing, on forms provided by the Department of Housing, Preservation and Development of The City of New York, showing that the owner is entitled to such abatement, and containing the following information: block and lot number of the property, monthly rent without exemption, monthly rent with exemption, the exemption for each month, the total abatement for the period for which abatement is claimed, adjustments if any, and such other information as is directly related to the rent exemption or tax abatement.
§ 22-03 Periods of Abatement.
(a) The periods in which abatements will be recognized by the Department of Finance are as follows:
| In or after the following month (see subdivision (b) below): | For the following rent exemption period: |
|---|---|
| August 1973 | Calendar year 1972 |
| October 1973 | First 3 quarters 1973 |
| January 1974 | 4th quarter 1973 |
| April 1974 | 1st quarter 1974 |
| August 1974 | 2nd quarter 1974 |
| October 1974 | 3rd quarter 1974 |
| January 1975 | 4th quarter 1974 |
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For rent exemption periods after 1974, the dates of recognizing abatements will correspond to those for 1974 rent exemption periods, with only the respective years changed.
§ 22-04 Recognition of Abatement.
(a) A claim for tax abatement will be recognized by the Department of Finance after receipt by it, in person or by mail, for each period, of
(1) a properly completed certification for each tenant, as above described, for such period,
(2) if there is more than one certification, a tabulation showing the total abatement claimed for all eligible tenants for such period,
(3) the quarterly real estate tax bill, and
(4) remittance of the balance of tax, if any, then payable.
§ 22-05 Adjustment of Abatement.
(a) A certification by an owner shall be accepted by the Department of Finance as prima facie proof of the tax abatement due, subject to annual adjustment on the basis of audit by the Department of Housing, Preservation and Development. The Department of Finance will notify the Department of Housing, Preservation and Development of abatements recognized.
§ 22-06 Lien.
If the annual adjustment of taxes payable and abatements recognized discloses that an abatement previously recognized on the basis of an owner’s certification is excessive, the amount of tax payable by reason of the adjustment, and the statutory penalty thereon, shall be a lien upon the property as of the due date of the tax for which the excessive abatement was claimed, unless the Department of Housing, Preservation and Development, in its sole discretion, certifies to the Department of Finance that such excessive abatement claim was excessive because an order, based upon an audit of the personal and financial data submitted in the application for rent exemption, was issued by the Department of Housing, Preservation and Development after filing of the abatement claim which specifically and directly modified or revoked the rent exemption underlying the tax abatement retroactively, in which case the amount of tax payable by reason of the adjustment shall be a lien upon the property as of the due date for payment of taxes next following certification of such adjustment by the Department of Housing, Preservation and Development. Amounts of tax payable by reason of an adjustment shall be collected and enforced in the manner provided by law for the collection and foreclosure of the lien of taxes.
§ 22-07 Discount for Tax Prepayment.
Where a discount is allowed by law for the payment of taxes prior to the due date thereof, such discount shall be computed on the amount found to be payable after recognition of an abatement.
§ 22-08 Penalties.
Any person who shall make any certification which is willfully false shall be subject to the penalties prescribed by law.
§ 23-01 General Powers of the Commissioner of Finance.
In addition to all other powers granted to the Commissioner of Finance and set forth in these regulations, he is also authorized and empowered:
§ 23-02 Definitions.
Affixed. “Affixed” includes attached or annexed by adhesion, stapling or otherwise, or a notation by stamp, imprint, or writing.
City. “City” means the City of New York.
Commissioner of Finance. “Commissioner of Finance” means the Commissioner of Finance of the City of New York.
Confirmation. “Confirmation” shall mean the document or electronic transmission that will be issued by the Commissioner of Finance on the date that the electronic format of the return is deemed received by the Department of Finance and indicates the date upon which the electronic return is so filed with the Department of Finance, and may be in the form of a number or other indication entered by the Department on a copy of the electronic return.
Consideration.
Illustration (i): A parcel of real estate is sold for $50,000 cash subject to an existing mortgage of $30,000 which remains on the property after delivery of the deed. The consideration for the transfer is $80,000 and the tax applies to the deed.
Illustration (ii): A parcel of real estate is sold for $30,000. The deed recites that the consideration is $10 and other good and valuable consideration. The consideration for the transfer is $30,000 and the tax applies to the deed.
Illustration (iii): Separate deeds by which each of the tenants-in-common of realty conveys his own interest in the property to a common grantee for a consideration of less than $25,000 for each deed are not subject to tax, even though in total the consideration paid by the grantee is more than $25,000.
Illustration (iv): A owns real property worth $50,000. B owns real property which is also worth $50,000. A and B exchange their real property. The tax applies to the transfer of A’s realty and the transfer of B’s realty. The consideration in each case is the fair market value of the property received in exchange for the realty conveyed.
Illustration (v): A owns real property having a fair market value of $50,000, subject to a $30,000 mortgage. B owns unencumbered realty having a fair market value of $20,000. A and B exchange realty. The consideration for the transfer of A’s property is the fair market value of the property received ($20,000) plus the amount of the mortgage upon the realty conveyed ($30,000), or $50,000. The consideration for the transfer of B’s property is $20,000. Although B receives consideration having a fair market value of $50,000, only $20,000 of this is in exchange for B’s property. The balance ($30,000) is deemed to be in exchange for B’s taking A’s property subject to the $30,000 mortgage. Since the consideration for B’s property is less than $25,000, there is no tax on the transfer of B’s property.
(i) Calculate the “tentative” City and State transfer taxes based on the consideration exclusive of the transfer tax liabilities which the grantee is assuming.
(ii) Add the sum of the “tentative” taxes to the consideration and calculate the City transfer tax (and State transfer tax) to be Paid on the total.
To Illustrate: Assume real property is sold for $300,000 with the purchase price being paid in cash (or purchase money mortgage) of $220,000 and by taking subject to a continuing mortgage lien of $80,000, and the grantee agrees to pay the City and State transfer taxes due on the sale. The tax due is computed as follows:
| Tentative City Tax: | |
|---|---|
| Consideration | $300,000 |
| Tax Rate | × 1% |
| Tentative Tax | $3,000 |
| Tentative State Tax: | |
| Consideration | $220,000 |
| Tentative tax at $2 per $500 | $880 |
| City Transfer Tax Due: | |
| Consideration | $300,000 |
| Add: Tentative Taxes | $3,880 |
| Taxable Consideration | $303,880 |
| Tax Rate | × 1% |
| Tax Due | $3,038.80 |
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(i) In the case of the transfer of a controlling economic interest in real property, a proportionate share of the amount of any mortgage on the real property must be added to the amount paid for the stock in a corporation or the interest(s) in a trust, partnership, association, or other unincorporated entity.
To illustrate: X Corporation owns real property in New York City with a fair market value of $1,000,000 but encumbered by a $900,000 mortgage. X’s stock is sold for $100,000 cash. The $900,000 mortgage is to be added to the $100,000 cash and the tax computation is based on $1,000,000 of consideration.
(ii) Where the entity whose stock or ownership interest is being transferred owns other assets in addition to real property, only the consideration attributable to the real property is subject to tax.
(iii) (A) An apportionment of the consideration between the real property (or an interest therein) and the other assets, which in the opinion of the Commissioner of Finance represents an apportionment made in good faith, will be accepted by the Department.
(B) If no apportionment of the consideration for the real property (or interest therein) and the other assets has been made, or if, in the opinion of the Commissioner of Finance, the apportionment of the consideration does not represent an apportionment made in good faith, then the consideration for the real property (or interest therein) shall be calculated by multiplying total consideration by the following ratio: Fair market value of the real property (or interest therein) owned by the entity being transferred. Fair market value of all assets owned by the entity, including the real property (or interest therein) To illustrate:
Illustration a: X Corporation owns real property in New York City with a fair market value of $500,000 and other assets valued at $1,000,000. All of X’s stock is sold for $1,500,000 cash. The consideration subject to tax is $500,000.
Illustration b: X Corporation owns real property in New York City with a fair market value of $500,000, but encumbered with a $300,000 mortgage, and other assets valued at $1,000,000. All of X’s stock is sold for $1,200,000 cash. The consideration subject to tax is $500,000 calculated as follows:
| Value of real property | $500,000 | |
|---|---|---|
| Less amount of mortgage | $300,000 | |
| Reduced value of real property | $200,000 | |
| Value of other assets | $1,000,000 | |
| Total reduced value of assets | $1,200,000 | |
| Cash paid | $1,200,000 | |
| Cash paid attributable to real property | ||
| 200,000 × $1,200,000 = 1,200,000 | $200,000 | |
| Add amount of mortgage | $300,000 | |
| Total consideration attributable toreal property | $500,000 |
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Illustration c: X Corporation owns real property in New York City with a fair market value of $500,000. Y Corporation owns 100% of the stock of Z Corporation. Z owns real property in New York City with a fair market value of $600,000 and personal property valued at $400,000. X deeds its realty to Y in exchange for 50% of the stock of Z. Two transfer taxes are due. First, the conveyance of X’s real property by deed to Y is taxable. The consideration for this conveyance is the Z stock received by X which has a value of $500,000. The total consideration of $500,000 is subject to tax. Second, the transfer of 50% of Z’s stock to X is a transfer of a controlling economic interest in real property and, thus, is subject to tax. The consideration for this transfer is the real property valued at $500,000 received by Y. This consideration, however, must be apportioned between Z’s real property and its other assets. Accordingly, since the real property represents 60% of Z’s total assets, 60% of the consideration, or $300,000, is subject to tax.
(iv) If the aggregation of related transfers results in the transfer of a controlling economic interest in an entity which owns real property (or an economic interest therein), the tax on such transfer shall be measured only by that part of the consideration for the controlling interest which is apportioned to such real property (or such economic interest therein) which was owned by the entity throughout the period during which the transfers were made.
To illustrate: X Corporation owns two parcels of realty in New York City, Parcel 1 and Parcel 2. Parcel 1 has a fair market value of $1 million and Parcel 2 has a fair market value of $500,000. X also owns other assets valued at $500,000. A owns all of X’s outstanding stock. In year 1, A sells 40% of X to B for $800,000. In year 2, X sells Parcel 2 for $500,000. In year 3, A sells 10% of X to C for $200,000. If A’s transfers are related, then a controlling economic interest in Parcel 1 has been conveyed. The consideration apportioned to Parcel 1 is calculated by multiplying the consideration for each separate transfer by the ratio of the fair market value of Parcel 1 to the fair market value of X’s total Assets. Thus, in year 1 the consideration apportioned to Parcel 1 is calculated as follows:
$1,000,000 × $800,000 = $400,000 $2,000,000
In year 3, the consideration is apportioned to Parcel 1 as follows:
$1,000,000 × $200,000 = $100,000$2,000,000
Therefore, the total consideration subject to tax is $500,000. (Note: X’s transfer of Parcel 2 is also subject to tax.)
Controlling interest. “Controlling interest” shall mean:
Illustration (i): X Corporation owns real property in New York City. A, B and C each own 1/3 of X’s outstanding stock. A and B, acting in concert, each sell their entire interest in X Corporation to D. B’s sale occurs four years after A’s sale. The transfers made by A and B are related and, therefore, subject to the transfer tax, even though made more than three years apart.
Illustration (ii): X Corporation owns real property in New York City. A, B and C each own 1/3 of X’s outstanding stock. A sells his entire 1/3 interest in X to D for $20,000. Within three years of A’s sale, B sells his entire 1/3 interest in X to D for $20,000. The transfers made by A and B are presumed to be related because they were made within a three year period. Since the total consideration exceeds $25,000, the transfers are presumed to be related and the transfer tax will apply to the sales of stock by A and B.
Illustration (iii): X Corporation owns real property in New York City. A owns 100%- of the stock of X. On January 1, 1988, A sells 20% of X to B. On December 31, 1990, A sells 30% of X to C. Since A has transferred a controlling economic interest in real property within a three year period, the transfer tax will apply to both sales made by A.
Illustration (iv): X Corporation owns real property in New York City. A owns 100% of the stock of X. In year 1, A transfers 20% of X to B. In year 3, A transfers 30% of X to C. In year 5, A transfers 25% of X to D. In year 9, A transfers his remaining 25% interest in X to E.
Illustration (v): X Corporation owns real property in New York City. A owns 100% of the stock in X. In year 1, A transfers 20% of X to B. In year 3, A transfers 10% of X to C. In year 5, A transfers 20% of X to D. No transfer of a controlling economic interest in X has occurred within three years. Therefore, if A’s transfers to B, C and D were each independent and not made pursuant to a plan, the transfers are not aggregated. No transfer tax will be due on A’s transfers to B, C and D.
Illustration (vi): X Corporation owns real property in New York City. A owns 100% of X’s stock. On January 1, 1986, A sells 20% of X to B. On April 1, 1986, A sells 25% of X to C. On September 1, 1986, A sells 25% of X to D. Since A has only transferred 25% of X on or after July 13, 1986, no taxable transfer of a controlling economic interest in real property has occurred and no transfer tax is due on A’s transfers to B, C and D.
Illustration (vii): X Corporation owns real property in New York City. A owns 100% of the outstanding stock of X. A embarks on a five year plan to sell 75% of X. These sales are made to unrelated parties, none of whom will acquire 50% or more of X. All of A’s transfers are related and, therefore, are aggregated. Once a 50% interest in X, in the aggregate, has been transferred, a transfer tax will be due and transfer tax returns will be required to be filed for every transfer which has been made pursuant to the plan. In addition, each subsequent transfer by A made after the 50% interest has been transferred will require the filing of a return and the payment of tax.
Illustration (viii): X Corporation owns real property in New York City. A owns 4% of the outstanding stock of X. B, C, D, E, F, G, H, and I each own 12% of the outstanding stock of X. J enters into agreements with A, B, C, D, and E to purchase their interests in X over a five year period. All of the transfers to J are related and, therefore, will be aggregated. A transfer tax will be due and transfer tax returns will be required to be filed for each transfer once a 50% interest in X, in the aggregate, has been transferred.
Illustration (ix): X Corporation owns realty in New York City. A has owned 40% of the outstanding stock of X for five years. B sells 20% of the outstanding stock of X to A. B’s sale is not subject to the transfer tax because a controlling economic interest in real property has not been transferred.
Illustration (x): X Corporation owns real property in New York City. A and B each own 50% of X. On January 1, 1987, A sells 20% of X to C. On December 31, 1989, B sells 30% of X to C. Since these transfers occur within a three year period, they are presumed to be related and, thus, subject to the transfer tax.
Illustration (xi): X Corporation owns real property in New York City worth $3,000,000. A, B and C each own 1/3 of X and are unrelated. In 1987, A loses a lawsuit related to her business and transfers her 1/3 interest in X in satisfaction of a $1,000,000 judgment. In 1989, pursuant to a separation agreement, B transfers his 1/3 interest in X to his spouse. The transfers by A and B will not be aggregated because the transfers are not related. Thus, no tax is due.
Illustration (xii): A owns 100% of the stock of X Corporation. X owns real property in New York City. A sells 30% of X to B. One year after this sale, B sells this 30% interest in X to C. Resales of the same interests are not aggregated. Thus, no tax is due.
Illustration (xiii): X Corporation owns real property in New York City. A owns 30% of X. In year 1, A sells 20% of X to B. In year 2, A buys 30% of X from C. A’s 20% sale is not aggregated with A’s 30% purchase. Therefore, no tax is due.
Illustration (xiv): Y Partnership owns real property in New York City. Pursuant to a syndication, partnership interests are transferred. Such syndication is subject to aggregation, and thus taxable, if 50% or more of the capital, profits or beneficial interest in the partnership is transferred pursuant to the syndication.
Illustration (xv): X Corporation owns real property in New York City. A, pursuant to a tender offer plan, seeks to acquire a controlling economic interest in X. If 50% or more of the total combined voting power of all classes of stock or 50% or more of the total fair market value of all classes of stock are transferred to A, then all such transfers are subject to tax as soon as 50% of such stock is conveyed.
(i) All transfers made pursuant to a plan are aggregated without regard to amount sold or when sold.
(ii) All other sales made within a three year period are presumed to be related, and thus aggregated, except for sales or purchases of less than 5% of a corporation’s outstanding stock.
Illustration (i): A transfers 80% of the stock of X Corporation to B. X owns 70% of the stock of Y Corporation, which owns real property. Assume that A’s interest in X is an economic interest in the real property. A has transferred a controlling economic interest in real property to B.
Illustration (ii): Assume the same facts as in illustration (i), except that X Corporation owns only 60% of the stock of Y Corporation. A has not transferred a controlling economic interest in real property to B.
(For rules on consideration in the cases of transfers of controlling economic interests, see 19 RCNY § 23-02 “Consideration” (3). For rules relating to the impact of the exemption for transactions constituting a mere change of identity or form of organization or ownership on transfers of controlling economic interests, see 19 RCNY § 23-05(b)(8).)
Deed. “Deed” shall mean any document or writing (other than a will), regardless of where made, executed or delivered, whereby any real property or interest therein is created, vested, granted, bargained, sold, transferred, assigned or otherwise conveyed, including, on and after February 1, 1982, any such document, instrument or writing whereby any leasehold interest in real property is granted, assigned or surrendered. To illustrate:
Illustration 1: The devise of an interest in real property under a will is not subject to tax.
Illustration 2: A deed given by an executor in accordance with the terms of a will is not subject to tax; however, if by reason of a consideration passing between devisees, one of them takes a greater share in the realty than that to which he is entitled under the will, the deed given by the executor to convey such greater share is subject to tax computed upon the amount of such consideration.
Illustration 3: A deed given by an executor in connection with the sale of an interest in real property is subject to tax.
Illustration 4: A collateral assignment of rents due under the terms of a leasehold, given as security for an indebtedness, is not a leasehold interest in real property and is not subject to tax.
Economic interest in real property. “Economic interest in real property” shall mean:
Illustration (i): X Corporation is a holding company whose sole asset is 100% of the stock of Y Corporation. Y owns real property located in New York City. Since X exists principally for the purpose of holding stock in a subsidiary which owns real property, the ownership of X stock constitutes an economic interest in real property and the sale prior to April 24, 1995, of all the stock of X Corporation is a transfer of a controlling economic interest in real property.
Illustration (ii): X Corporation is primarily engaged in manufacturing outside of New York City. X does not own real property in the City, but does own 100% of the stock of Y Corporation, which owns real property in the City. Since X does not exist principally for the purpose of holding stock in a subsidiary which owns real property, but rather is substantially engaged in other bona fide activities, the ownership of X stock does not constitute an economic interest in real property and the sale prior to April 24, 1995, of all the stock of X Corporation will not constitute a transfer of a controlling economic interest in real property.
Illustration (iii): X Corporation is engaged in manufacturing outside New York City. X Corporation does not own real property in the City but owns 100% of the stock of Y Corporation, which owns real property located in New York City. The ownership of X Corporation stock constitutes an economic interest in real property and the sale on or after April 24, 1995, of all the stock of X Corporation is a transfer of a controlling economic interest in real property. The result would be the same if, instead of owning the property directly, Y Corporation owns 100% of the stock of Z Corporation, which owns the property.
Illustration (iv): X Corporation is engaged in manufacturing outside New York City. X Corporation does not own real property in the City but owns 49% of the stock of Y Corporation, which owns real property in the City. The ownership of X stock constitutes an economic interest in real property. However, a sale on or after April 24, 1995, of all the stock of X Corporation is not subject to tax as a transfer of a controlling economic interest in real property because there has been no transfer of a controlling interest in Y Corporation.
Illustration (v): X Corporation is engaged in manufacturing outside New York City. X Corporation does not own real property in the City but does own 75% of the stock of Y Corporation, which owns real property in the City. In December, 1994, the sole shareholder of X Corporation entered into a binding written agreement to sell all her shares of X Corporation stock. At that time, the purchaser made the required down payment, which the shareholder deposited in her bank account. The closing took place on May 1, 1995 at which time the shares of X Corporation stock were delivered to the purchaser in exchange for the balance of the purchase price. The transfer of the X shares on May 1, 1995 is not subject to tax as a transfer of a controlling economic interest in real property because it took place pursuant to a binding written contract entered into prior to April 24, 1995.
Illustration (vi): X Corporation is engaged in manufacturing outside New York City. X Corporation does not own real property in the City but does own 75% of the stock of Y Corporation, which owns real property in the City. A, B and C each own 20% of X Corporation and D owns the remaining 40% of the stock. On March 30, 1995, A sold his 20% of the X Corporation stock to E, an unrelated party. On May 1, 1995, B and C transfer their X Corporation stock to E. Because A’s transfer occurred prior to April 24, 1995, his transfer is not aggregated with the transfers by B and C. Therefore, because B’s and C’s transfers represent only 40% of the X Corporation stock, there has been no transfer of a controlling economic interest in Y Corporation.
Illustration (vii): X Corporation is engaged in manufacturing outside New York City. X Corporation does not own real property in the City but does own 100% of the stock of Y Corporation, which owns real property in the City. A, B and C each own 20% of X Corporation and D owns the remaining 40% of the stock. On March 30, 1995, A sold his 20% of the X Corporation stock to E, an unrelated party. On May 1, 1995, B and D transfer their X Corporation stock to E. Because B’s and D’s transfers represent 60% of the X Corporation stock, those transfers are subject to the tax as a transfer of a controlling economic interest in Y Corporation. However, because A’s transfer occurred prior to April 24, 1995, his transfer is not aggregated with the transfers by B and D and is not subject to the tax.
Electronic return.”Electronic return” shall mean the completed real property transfer tax return in the electronic format prescribed by and formatted by the Department of Finance and available through the internet website of the Department of Finance, and filed electronically through the Department of Finance website.
Filed electronically. “Filed electronically” shall mean submitted to the Department of Finance through, and in accordance with the instructions found on, the internet website of the Department of Finance.
Grantee. “Grantee” shall mean the person or persons accepting the deed or who obtain any of the real property which is the subject of the deed or any interest therein. The term “grantee” also includes the person or persons to whom an economic interest in real property is transferred.
Grantor. “Grantor” shall mean the person or persons making, executing or delivering a deed. The term “grantor” also includes the person or persons who transfer an economic interest in real property.
Instrument. “Instrument” shall mean any document or writing (other than a deed or a will), regardless of where made, executed or delivered, whereby any economic interest in real property is transferred.
Net Consideration. “Net Consideration” shall mean any consideration, exclusive of any mortgage or other lien or encumbrance on the real property or interest therein which existed before the delivery of the deed and remains thereon after the delivery of the deed. The term “net consideration”, as a basis for computing the real property transfer tax, applies to conveyances made prior to February 1, 1982, or conveyances made after that date if made in performance of a contract executed prior thereto. It also applies to conveyances made on or after February 1, 1982 and before July 1, 1982 where the conveyance involves a 1, 2 or 3 family house or individual residential condominium unit or where the consideration for the conveyance is less than $500,000. (See 19 RCNY § 23-03.) In determining the amount of net consideration, only the amounts of liens and encumbrances on the property existing before the sale and not removed thereby may be deducted. Thus, for example, taxes or assessments which are liens on the property before the sale and are not paid at the time of sale are deductible. No deduction shall be made on account of any lien or encumbrance placed on the property in connection with the sale, or by reason of deferred payments of the purchase price whether represented by notes or otherwise. As used herein, the term “sale” refers to the delivery of the deed. To illustrate:
Illustration 1: A parcel of real property is sold for $50,000 subject to an existing mortgage of $35,000 which remains thereon after delivery of the deed. The mortgage is not treated as part of the net consideration for the conveyance. Consequently, the tax is to be computed upon the net consideration, viz: $15,000 ($50,000 – $35,000).
Illustration 2: A parcel of real estate is sold for $50,000, free and clear of mortgages, liens and encumbrances. The purchaser gives a purchase money mortgage to the seller or a third party in the amount of $35,000 to secure the payment of a portion of the purchase price. The mortgage was placed on the property as the result of the sale and cannot be deducted in determining the net consideration. Consequently, the tax is to be computed on the consideration of $50,000.
Illustration 3: A parcel of real property was sold on January 10, 1950, for $60,000 subject to a first mortgage of $30,000. On July 10, 1959 the property is sold for $80,000 subject to the balance of the mortgage remaining unpaid, viz: $10,000. The balance of the purchase price, viz: $70,000 is paid in cash. The tax is to be computed on the net consideration of $70, 000. Illustration 4: A parcel of real property is sold on July 15, 1959 for $75,000. Under the terms of the contract of sale, the grantor agrees to, and does, pay off an existing mortgage of $20,000, and agrees to take $45,000 in cash and a purchase money mortgage for $30,000. The tax is to be computed on the consideration of $75,000.
Paper return. “Paper return” shall mean the paper copy of the completed real property transfer tax return as it is printed after completion in electronic format or by other means as designated by the Commissioner of Finance, bearing the original signatures of the grantor or the grantor’s agent and the grantee or the grantee’s agent.
Person. “Person” shall mean an 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, any combination of individuals, and any other form of unincorporated enterprise owned or conducted by two or more persons.
Real Property. “Real Property” shall mean every estate or right, legal or equitable, present or future, vested or contingent, in lands, tenements or hereditaments, which are located in whole or in part within the City of New York, including, on and after February 1, 1982, a leasehold interest in real property. To illustrate:
Illustration 1: The term includes an easement (including a negative easement) in real property, but not a license to use real estate in which a person confers upon another only a personal, revocable and unassignable privilege to make use of the property but grant no interest or estate therein.
Illustration 2: The term includes excess zoning rights in connection with zoning lot mergers and development rights relating to landmark-designated parcels.
Illustration 3: The term includes not only an estate in fee simple but also a life estate. The estate granted need not take effect immediately upon conveyance but may be postponed to a future time, as where a grantor grants a remainder to another to take effect upon the termination of a precedent life estate conveyed at the same time.
Illustration 4: The term includes an ownership interest in a condominium unit.
Illustration 5: The term does not include a mortgage, or a release of,mortgage.
Illustration 6: The term does not include rights to sepulture.
Register. “Register” includes the City Register and the County Clerk of the County of Richmond.
Return. “Return” shall mean the electronic return together with the paper return as they are defined in this section, and together with any other documents required by these rules to be attached to the paper return.
Transaction. “Transaction” shall mean any act or acts, regardless of where performed, and whether or not reduced to writing, unless evidenced by a deed or instrument, whereby any economic interest in real property is transferred (other than a transfer pursuant to a will or the laws of the intestate succession).
Transfer or transferred. When used in relation to an economic interest in real property, the terms “transfer” or “transferred” shall include the transfer or transfers or issuance of shares of stock in a corporation, interest or interests in a partnership, association or other unincorporated entity, or beneficial interests in a trust, whether made by one or several persons, or in one or several related transactions, which shares of stock or interest or interests constitute a controlling interest in such corporation, partnership, association, trust or other entity.
§ 23-03 Imposition of Tax.
(a) General. The tax is imposed on:
(1) each deed at the time of delivery by a grantor to a grantee when the consideration for the real property and any improvement thereon (whether or not included in the same deed) exceeds $25,000,
(2) after July 12, 1986, when the consideration for the transfer exceeds $25,000,
(i) on each instrument or transaction (unless evidenced by a deed otherwise subject to tax) at the time of the transfer, whereby any controlling economic interest in real property is transferred by a grantor to a grantee,
(ii) on initial transfers of shares of stock in a cooperative housing corporation by the cooperative housing corporation or sponsor, and
(iii) on subsequent transfers (resales) of cooperative housing corporation stock (except that no subsequent transfer (resale) of shares of stock in a cooperative housing corporation made before August 1, 1989 shall be taxable unless the owner held the shares in connection with, incidental to or in furtherance of a trade, business, profession, occupation or commercial activity engaged in or conducted by him or it) and
(3) On or after August 1, 1989, when the consideration for the transfer exceeds $25,000, on each transfer of shares of stock in a corporation (other than a cooperative housing corporation), or interest in a partnership, association, trust or other entity, formed for the purpose of cooperative ownership of real property, in connection with the grant or transfer of a proprietary leasehold. The tax applies to each such deed, instrument or transaction evidencing the conveyance of real property, or an economic interest therein, which is situated in whole or in part within the City of New York, unless the deed, instrument or transaction is expressly exempt by the law. Anything to the contrary notwithstanding, after July 12, 1986, in the case of a transfer of real property or an economic interest therein in complete or partial liquidation of a corporation, partnership, association, trust or other entity, the tax imposed shall be measured by
(i) the consideration for such conveyance or transfer, or
(ii) the value of the real property or economic interest therein, whichever is greater. Conveyances or transfers of controlling economic interests in real property or transfers of shares of stock in a cooperative housing corporation made pursuant to a written contract (including option contracts, but not rights of first refusal) entered into prior to July 31, 1981, are not subject to tax.
(1) at the rate of 1/2 of 1% of the net consideration with respect to conveyances made before July 1, 1971, or made in performance of a contract therefor executed before such date;
(2) at the rate of 1% of the net consideration with respect to:
(i) conveyances made on or after July 1, 1971 and before February 1, 1982, or made in performance of a contract therefor executed during such period,
(ii) conveyances made on or after February 1, 1982 and before July 1, 1982 of 1-, 2- or 3-family houses and individual residential condominium units,
(iii) conveyances made on or after February 1, 1982 and before July 1, 1982 where the consideration is less than $500,000 (other than grants, assignments or surrenders of leasehold interests in real property taxable under paragraph (3) below);
(3) at the rate of 1% of the consideration with respect to grants, assignments or surrenders of leasehold interests in real property made on or after February 1, 1982 and before July 1, 1982 where the consideration is $500,000 or more, provided, however, that for purposes of this paragraph (3) the amount subject to tax in the case of a grant of a leasehold interest in real property shall be only such amount as is not considered rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the New York City Administrative Code);
(4) at the rate of 2% of the consideration with respect to all other conveyances made on or after February 1, 1982 and before July 1, 1982, except that for purposes of this paragraph, (4), where the consideration includes the amount of any mortgage or other lien or encumbrance on the real property or interest therein which existed before the delivery of the deed and remains thereon after the delivery of the deed, the portion of the consideration ascribable to such mortgage, lien or encumbrance shall be taxed at the rate of 1%, and only the balance of such consideration shall be taxed at the rate of 2%;
(5) at the rate of 1% of the consideration with respect to conveyances made on or after July 1, 1982 and before August 1, 1989 of 1-, 2- or 3-family houses and individual residential condominium units;
(6) at the rate of 1% of the consideration with respect to conveyances made on or after July 1, 1982 and before August 1, 1989 where the consideration is less than $500,000 (other than grants, assignments or surrenders of leasehold interests in real property taxable as hereafter provided);
(7) (i) at the rate of 1% of the consideration with respect to a grant, assignment or surrender, made on or after July 1, 1982 and before August 1, 1989 of a leasehold interest in a 1-, 2- or 3-family house or an individual dwelling unit in a dwelling which is to be occupied or is occupied as the residence or home of four or more families living independently of each other;
(ii) at the rate of 1% of the consideration with respect to all other grants, assignments or surrenders of leasehold interests in real property made on or after July 1, 1982 and before August 1, 1989 where the consideration is less than $500,000; or
(iii) at the rate of 2% of the consideration with respect to all other grants, assignments or surrenders of leasehold interests in real property made on or after July 1, 1982 and before August 1, 1989 where the consideration is $500,000 or more;
(iv) provided, however, that for purposes of subparagraphs (i), (ii) and (iii) of this paragraph (7), the amount subject to tax in the case of a grant of a leasehold interest shall be only such amount as is not considered rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the New York City Administrative Code);
(8) at the rate of 2% of the consideration with respect to all other conveyances made on or after July 1, 1982 and before August 1, 1989;
(9) at the rate of 1% of the consideration with respect to conveyances of 1-, 2- or 3-family houses or individual condominium units (other than grants, assignments or surrenders of leasehold interests as hereafter provided) made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 1.425% of the consideration with respect to such conveyances made on or after August 1, 1989 where the consideration is more than $500,000. For purposes of this paragraph (9), an individual condominium unit that is used for residential purposes shall be presumed to be a residential condominium unit, unless such residential use is de minimis; provided, however, an individual condominium unit that is required to be used in whole or part as a hotel room by the contract of sale or other document determining the conditions under which such condominium is transferred shall be presumed not to be a residential condominium unit. To illustrate:
Illustration (i): X owns an individual condominium unit in New York City. X leases the unit to Y, who uses the unit solely as a residence. During the term of the lease, X sells the unit to Z for $600,000. The unit is deemed a residential condominium unit, and the tax is calculated as follows: 1.425% of $600,000, for a tax dueof $8,550. Although the unit produced income for X, the unit was used for residential purposes. Illustration (ii): An artist owns an individual condominium unit in New York City worth $600,000. The artist both resides and maintains a studio in the unit. When the artist sells the unit, the transfer tax will be calculated as follows: 1.425% of $600,000, for a tax due of $8,550. The unit is deemed a residential condominium unit because the unit was used for residential purposes.
(10) at the rate of 1.425% of the consideration with respect to all other conveyances (other than grants, assignments or surrenders of leasehold interests taxable as hereafter provided) made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 2.625% of the consideration with respect to such conveyances made on or after August 1, 1989 where the consideration is more than $500,000; To illustrate:
Illustration (i): An artist owns an individual condominium unit in New York City that is located in a building classified as class two property pursuant to section 1802 of the Real Property Tax Law, and which the artist uses as a studio. Although the artist maintains a separate residence, the artist keeps a bed in the studio and spends twelve nights per year in the studio. When the artist sells the unit for $300,000, the tax will be calculated as follows: 1.425% of $300,000, for a tax due of $4,275. Since the residential use of the unit is de minimis, the unit is not deemed a residential condominium unit.
Illustration (ii): A physician owns an individual condominium unit in New York City which is used only as the physician’s office. When the physician sells the unit for $800,000, the tax will be calculated as follows: 2.625% of $800,000, for a tax due of $21,000. Since the unit is not used for residential purposes, it is not deemed a residential condominium unit.
Illustration (iii): X purchases a condominium unit in a building consisting of 150 separate condominium units. Each unit consists of bedroom(s), sitting areas or rooms and kitchen facilities. Under the terms of sale, X (or X’s designee) is entitled to occupy the unit for their own purposes for a limited period in each calendar year. When not occupied by the purchaser (or their designee), the condominium unit must be made available for rental as a transient hotel accommodation. The Certificate of Occupancy for floors containing the condominium units will state “hotel.” The cost of X’s condominium unit is $1 million. The tax due will be calculated as follows: 2.65% of $1,000,000 for a tax due of $26,250. The unit is not considered an individual residential condominium unit for purposes of calculating the tax.
(11) at the rate of 1% of the consideration with respect to a grant, assignment or surrender made on or after August 1, 1989 of a leasehold interest in a 1-, 2- or 3-family house or an individual dwelling unit in a dwelling that is to be occupied or is occupied as the residence or home of four or more families living independently of each other where the consideration is $500,000 or less, and at the rate of 1.425% of the consideration with respect to a grant, assignment or surrender of such a leasehold interest made on or after August 1, 1989 where the consideration is more than $500,000;
(12) at the rate of 1.425% of the consideration with respect to a grant, assignment or surrender of a leasehold interest in any other real property made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 2.625% of the consideration with respect to a grant, assignment or surrender of such a leasehold interest made on or after August 1, 1989 where the consideration is more than $500,000;
(13) provided that for purposes of paragraphs (11) and (12) of this subdivision (b), the amount subject to tax in the case of a grant of a leasehold interest shall be only such amount as is not considered rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the Administrative Code).
(1) at the rate of 1% of the consideration with respect to transfers of economic interests in real property made on or after July 13, 1986 and before August 1, 1989 where the real property the economic interest in which is transferred is a 1-, 2- or 3-family house, an individual cooperative apartment, an individual residential condominium unit or an individual dwelling unit in a dwelling which is to be occupied or is occupied as the residence or home of four or more families living independently of each other, or where the consideration for the transfer is less than $500,000;
(2) at the rate of 2% of the consideration with respect to all other transfers of economic interests in real property made on or after July 13, 1986 and before August 1, 1989;
(3) at the rate of 1% of the consideration with respect to transfers made on or after August 1, 1989 of economic interests in real property in which the economic interest that is transferred is a 1-, 2- or 3-family house, an individual cooperative apartment, an individual residential condominium unit or an individual dwelling unit in a dwelling that is to be occupied or is occupied as the residence or home of four or more families living independently of each other and where the consideration is $500,000 or less, and at the rate of 1.425% of the consideration with respect to such transfers made on or after August 1, 1989 where the consideration is more than $500,000; and
(4) at the rate of 1.425% of the consideration with respect to all other transfers of an economic interest in real property made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 2.625% of the consideration with respect to such transfers made on or after August 1, 1989 where the consideration is more than $500,000. Where the transfer of a controlling economic interest involves more than one parcel of real property, the applicable rate is determined based upon the consideration apportioned to each parcel.
Example: X Corporation owns two parcels of commercial property in New York City. Building A is worth $400,000 and Building B is worth $600,000. Y, X’s sole shareholder, sells his X Corporation stock, which represents his entire interest in both parcels, to Z for $1,000,000. The tax is calculated as follows: 1.425% of $400,000 (Building A) 2.625% of $600,000 (Building B). The tax due is $21,450.
(1) A conveyance by a defaulting mortgagor to the mortgagee. The tax is computed on the amount of the outstanding mortgage debt and unpaid accrued interest. The tax applies without regard to whether the mortgagor is personally liable for the mortgage debt or whether the mortgage is cancelled of record.
(2) Deeds given by referees, receivers, sheriffs, etc., for realty sold under foreclosure or execution. The tax is computed on the amount bid for the property, senior liens not canceled by the sale, and advertising expenses, taxes and other costs paid by the purchaser, whether the purchaser is the mortgagee, judgment creditor, or other person.
(3) A conveyance of realty from one spouse to the other pursuant to the terms of a separation agreement. In the absence of evidence establishing the consideration, it is presumed that the consideration for the conveyance, which includes the relinquishment of marital rights, is equal to the fair market value of the interest in the property conveyed.
(4) The assignment of a successful bid at a mortgage foreclosure sale. The consideration is the amount paid for the assignment.
(5) Realty distributed by a corporation in redemption for stock or by a partnership in return for the surrender of a partnership interest. Example:
Example (i): A, B, C and D are equal shareholders of X Corporation. X owns two buildings in New York City. In 1990, X redeems A’s shares in exchange for one of the buildings, which is unencumbered and valued at $250,000 (Parcel 1). X’s other building is also unencumbered and valued at $750,000 (Parcel 2). X has no other assets. The value of A’s shares is $250,000. The consideration for this transfer is the X stock owned by A. Therefore, the amount of tax due is $3,562.50 (1.425% × $250,000). If the redemption occurs on or after June 9, 1994, the transfer would be exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remained the same. Because A had a 25% beneficial ownership interest in Parcel 1 before the redemption and a 100% beneficial interest afterwards, the transfer of Parcel 1 to A is exempt as a mere change of identity or form of ownership or organization to the extent of 25%. Therefore only 75% of the consideration or $187,500 ($250,000 × 75%) is subject to tax. The tax is calculated by multiplying $187,500 by the applicable tax rate of 1.425% for a tax due of $2,671.88. See 19 RCNY § 23-05(b)(8).
Example (ii): Assume the same facts as in example (i) above, except that, in 1990, instead of redeeming A’s shares in exchange for Parcel 1, X redeems the shares of B, C, and D in exchange for Parcel 2. In this case, there are two taxable transfers. The first is the transfer by X of Parcel 2 to B, C, and D in exchange for consideration consisting of the X stock owned by B, C and D. The value of B, C, and D’s shares is $750,000. The amount of tax due is $19,687.50 (2.625% × $750,000). If the transaction occurred on or after June 9, 1994, the transfer of Parcel 2 to B, C, and D in exchange for consideration consisting of the X stock owned by B, C and D would be exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remained the same. Because B, C and D collectively had a 75% beneficial ownership interest in Parcel 2 before the redemption (25% each) and 100% afterwards, the distribution of Parcel 2 is exempt from tax as a mere change of identity or form of ownership or organization to the extent of 75%. Therefore, only 25% of the $750,000 consideration is subject to the tax. The tax due is calculated by multiplying the taxable consideration of $187,500 (25% × $750,000) by the applicable tax rate (2.625%) for a tax due of $4,921.88. See 19 RCNY § 23-05(b)(8). The second taxable transfer is the transfer by B, C, and D of a 75% interest in Parcel 1 to A, the remaining shareholder. Since this constitutes a transfer of a controlling economic interest in Parcel 1, it is also taxable. The consideration for the transfer is a proportionate part of Parcel 2 received by B, C, and D in exchange for their X stock. B, C, and D’s stock represented their 75% interest in all of the assets of X prior to the redemption. Since Parcel 1 constituted 25% of the assets of X, 25% of the consideration, or $187,500, must be apportioned to B, C, and D’s interest in Parcel 1. Thus, the tax due is $2,671.88 (1.425% × $187,500).
(6) A conveyance of realty in exchange for other realty. Each transfer of realty is subject to tax. The consideration for each transfer is the fair market value of the realty and other property received in exchange for the realty conveyed.
(1) Corporations.
(i) A conveyance of realty to a corporation in exchange for shares of its capital stock is subject to tax. The consideration for the realty is deemed to be equal in value to the greater of the fair market value of the realty conveyed or the amount of any mortgage, lien or other encumbrance on the realty.
(ii) A conveyance of realty to an existing corporation by a sole shareholder as a contribution to capital, where no additional shares of capital stock are issued in exchange, and no cash or other consideration is given, is deemed to be without consideration. However, where the realty is conveyed subject to an existing mortgage, lien or other encumbrance, there is consideration to the extent of the unpaid mortgage, lien or other encumbrance.
(iii) Notwithstanding subparagraph (ii) of this paragraph (1), a conveyance of realty to a corporation organized by the grantor for the purpose of holding or holding and operating the property is subject to tax, even where the conveyance is made some time after the issuance of the capital stock. In such event, the issuance of the stock and the conveyance of the realty are considered elements of a single transaction. The consideration for the realty is deemed to be equal in value to the greater of the fair market value of the realty conveyed or the amount of any mortgage, lien or other encumbrance on the realty.
(iv) On or after June 9, 1994, a conveyance of realty or an economic interest in realty to a corporation is exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remains the same, whether or not shares of stock are issued in exchange. See 19 RCNY § 23-05(b)(8).
(2) Corporate mergers. A transfer of real property in a statutory merger or consolidation from a constituent corporation to the continuing or new corporation is not subject to tax. However, the related transfer of shares of stock in a statutory merger or consolidation may be subject to tax. For statutory mergers or consolidations occurring on or after June 9, 1994, the related transfer of shares of stock is exempt from tax to the extent the beneficial ownership in the real property or economic interest in real property remains the same. See 19 RCNY § 23-05(b)(8). To illustrate:
Illustration (i): X Corporation owns real property in New York City with a fair market value of $300,000 and has cash of $100,000. X is to be merged into Y Corporation under Article 9 of the New York Business Corporation Law. Prior to the merger, Y Corporation owns no real property in New York City. Under the plan of merger, shareholders of X will receive consideration valued at $400,000 consisting of 25% of the stock of Y and cash. The shares of X exchanged or converted under the merger plan for the cash and stock of Y represent a controlling economic interest in real property and the transfer of such shares constitutes a taxable transfer. The shareholders of X, therefore, are subject to tax as a result of the statutory merger. If the transaction occurs prior to June 9, 1994, the tax would be measured by that portion of the value of X’s stock which is attributable to the real property ($300,000). A deed confirming title to property vested in the surviving Y Corporation pursuant to section 906(b)(2) of the New York Business Corporation Law will not be subject to the transfer tax. If the transaction occurs on or after June 9, 1994, the tax on the transfer of a controlling economic interest in X would be exempt to the extent that the beneficial ownership in the real property remains the same. In that event, because the X shareholders receive 25% of the stock of Y and therefore retain a 25% beneficial interest in the real property previously owned by X, the transaction would be exempt to the extent of 25% and the tax would be imposed on 75% of the value of the consideration attributable to the real property (75% of $300,000 or $225,000). See 19 RCNY § 23-05(b)(8).
Illustration (ii): X Corporation owns 100% of the stock of Y Corporation. Y owns real property in New York City. Pursuant to the statutory merger provisions of state law, Y is merged into X on January 1, 1995. Because X was the 100% beneficial owner of the property before the transaction and remains the 100% beneficial owner of the property afterwards, the transaction is exempt as a mere change of identity or form of ownership or organization. Because the issuance of shares of X in exchange for the Y shares would not affect X’s beneficial interest in Y’s real property, the result would be the same regardless of whether under applicable state law the Y shares are deemed exchanged for X shares pursuant to the merger.
Illustration (iii): X Corporation owns 100% of the stock of corporations Y and Z. Y owns real property in New York City. Pursuant to the statutory merger provisions of state law, Y is to be merged into Z on January 1, 1995. Because X was the 100% beneficial owner of the property before the transaction and remains the 100% beneficial owner of the property afterwards, the transaction is exempt as a mere change of identity or form of ownership or organization. Because the issuance of Z shares in exchange for the Y shares would not affect X’s beneficial interest in Y’s real property, the result would be the same regardless of whether under applicable state law the Y shares are deemed exchanged for Z shares pursuant to the merger.
Illustration (iv): X Corporation owns unencumbered real property in New York City with a fair market value of $300,000 and has cash of $150.000. Z Corporation owns real property in New York City with a fair market value of $450,000 and has no other assets. On January 1, 1995, X is merged into Z pursuant to the statutory merger provisions of state law. The shareholders of X Corporation will receive a 40% interest in Z and the $150,000 cash. Because the exchange or conversion of 100% of the X stock into shares of Z by the shareholders of X is effected pursuant to the plan of merger approved by them, the exchanges by the X shareholders are aggregated. Therefore, the merger results in a taxable transfer of a controlling economic interest in the real property owned by X. The tax will be measured by the consideration for that portion of X’s stock attributable to the real property ($300,000). The transfer is exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remains the same. Because the former shareholders of X will receive a 40% interest in Z Corporation, each receiving a proportionate share of Z stock and cash, the beneficial ownership of the property owned by X will remain the same to the extent of 40% Therefore, $180,000 (60% × $300,000) of the consideration is subject to tax. The tax due as a result of the merger is $2,565 (1.425% × $180,000). The transfer of the 40% interest in Z Corporation to the former shareholders of X Corporation is not a transfer of a controlling economic interest in Z Corporation and is not subject to tax. A deed confirming title to property vested in Z Corporation pursuant to the merger will not be subject to the transfer tax.
(3) Partnerships.
(i) A conveyance of realty to a partnership as a contribution of partnership assets in exchange for a partnership interest is subject to tax. The consideration is deemed to be equal in value to the greater of the fair market value of the realty conveyed or the amount of any mortgage, lien or other encumbrance on the realty.
(ii) A conveyance of realty by a partner to an existing partnership as a contribution of capital is deemed to be without consideration. However, where the realty is conveyed subject to an existing mortgage, lien or other encumbrance, there is consideration to the extent of the unpaid mortgage, lien or other encumbrance.
(iii) Notwithstanding subparagraph (ii) of this paragraph (3), a conveyance of realty to a partnership organized by the grantor(s) for the purpose of holding or holding and operating the property is subject to tax, even where the conveyance is made some time after the acquisition of the partnership interest. In such event, the acquisition of the partnership interest and the conveyance of the realty are considered elements of a single transaction. The consideration for the realty is deemed to be equal in value to the greater of the fair market value of the realty conveyed or the amount of any mortgage, lien or other encumbrance on the realty.
(iv) On or after June 9, 1994, a conveyance of realty or an economic interest in realty to a partnership, regardless of whether the partnership is an existing partnership or whether interests in the partnership are issued in exchange for the realty or economic interest therein, is exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remains the same. See 19 RCNY § 23-05(b)(8).
(v) The term “partnership” shall include a subchapter k limited liability company, as defined in § 11-126 of the Administrative Code and the term “partner” or the term “member” when used in relation to a limited liability company shall include a member of a subchapter k limited liability company, unless the context requires otherwise.
(4) Limited partnership mergers. A conveyance of real property or a transfer of a controlling economic interest in real property in a merger or consolidation of two or more limited partnerships from a constitutant limited partnership to the continuing or new limited partnership is not subject to tax if the merger or consolidation is pursuant to Article 8-A of the New York Partnership Law or pursuant to comparable provisions of the partnership laws of another state, territory, possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico. However, the related transfer of partnership interests in the merger or consolidation may be subject to tax.
To illustrate: A owns a 90% limited partnership interest in capital and profits in each of limited partnerships X and Y. B is a general partner of both partnerships and owns the remaining 10% partnership interest in capital and profits in each limited partnership. X owns real property in New York City. Pursuant to Article 8-A of the New York Partnership Law, X will merge into Y. Following the merger A will have a 90% limited partnership interest in capital and profits in Y, and B will be the general partner with a 10% partnership interest in capital and profits in Y. Because A and B were the 100% beneficial owners of the property before the transaction and retain the same beneficial ownership interests in the property afterwards, the transaction is exempt as a mere change of identity or form of ownership or organization. The vesting of X’s assets in Y, by operation of law, is also not subject to tax.
(1) the series of transfers under the plan has a fixed beginning and end;
(2) the final transfer under the plan is completed within thirty days of the first transfer under the plan;
(3) the plan will not result in a change in the respective percentage interests of the individuals or entities which were the owners of the network at the beginning of the plan (for this purpose, changes in the ownership of the owners themselves will not be taken into account, although such changes may be subject to tax on their own facts); and
(4) the plan requires each interim holder of the real property or economic interest therein to hold such interest solely to pass on to another individual or entity. Under such a plan, each of the interim transfers will be presumed to be transfers to or from conduits. The determination of whether a conveyance falls within this subdivision (e) will be made by the Commissioner of Finance on a case by case basis after a review of all the documentation supporting such treatment.
To illustrate: X Corporation owns unencumbered real property in New York City. X is owned 50% by A and 50% by B. Pursuant to a plan to be completed within 10 days, X is liquidated and its realty is distributed to A and B on January 1, 1990. The realty is then immediately conveyed to newly formed Y Partnership, in which A and B each take a 50% partnership interest. The two steps will be treated as a direct transfer of the realty from X to Y. The consideration for the realty (the partnership interests received by A and B) is presumed to be equal to the fair market value of the realty conveyed.
See § 23-05(b)(8) of these rules for rules governing the exemption from tax of transactions on or after June 9, 1994 qualifying as mere changes of identity or form of ownership or organization.
(1) General.
(i) A conveyance or transfer of real property or any economic interest therein in complete or partial liquidation of a corporation, partnership, association, trust or other entity prior to June 9, 1994, is subject to tax. (For liquidations on or after June 9, 1994, see subparagraph (iii) of this paragraph.) The tax imposed shall be measured by
(A) the consideration for each such conveyance or transfer, or
(B) the value of the real property or economic interest therein, whichever is greater. The consideration is the amount of any outstanding mortgage debt or other lien upon the realty conveyed (or upon the underlying realty if an economic interest is being transferred) and the amount of other liabilities assumed, canceled or forgiven as a result of the liquidation or dissolution which are attributable to the realty or economic interest therein. The value of the real property or economic interest therein is its fair market value at the time of the conveyance or transfer, without reduction due to any mortgage, lien or other encumbrance thereon.
(ii) Where the total of mortgages or other liens upon a parcel of realty plus other liabilities assumed, cancelled, or forgiven which are attributable to such parcel exceeds the fair market value of such parcel, that portion of other liabilities which when added to mortgages or liens on the realty exceeds the fair market value of the realty will not be attributed to the realty. Therefore, the tax imposed on the conveyance of each parcel of realty or economic interest therein will be measured by the fair market value of the realty unless there is an outstanding mortgage, lien or other encumbrance on the realty greater in amount than the fair market value of the realty. To illustrate:
Illustration A: X Corporation owns real property in New York City with a fair market value of $1,000,000, encumbered by a mortgage of $900,000. X also owns other assets having a fair market value of $500,000. X is in the process of complete liquidation and has transferred all of its assets to its stockholders in complete cancellation of its outstanding stock. The tax is measured by the fair market value of the realty transferred ($1,000,000). Illustration B: Assume the same facts as in illustration (A) above, except that the mortgage on the realty is $1,100,000. The tax is measured by consideration of $1,100,000. Illustration C: X Corporation owns two parcels of real property in New York City, Parcel A and Parcel B. Parcel A has a fair market value of $l,000,000 and is encumbered by a mortgage of $1,300,000. Parcel B has a fair market value of $700,000 and is encumbered by a mortgage of $600,000. X liquidates. The tax on the transfer of Parcel A is measured by consideration of $1,300,000. The tax on the transfer of Parcel B is measured by its fair market value of $700,000.
(iii) For liquidations on or after June 9, 1994, the tax is measured by the greater of the fair market value or the consideration as defined in subparagraph B of subparagraph (i) of this paragraph. However, the liquidation may be wholly or partially exempt as a mere change of identity or form of ownership or organization. See 19 RCNY § 23-05(b)(8).
Illustration A: X Corporation owns real property in New York City with a fair market value of $1,000,000, encumbered by a mortgage of $900,000. X has no other assets. X is owned equally by two stockholders, A and B. On January 1, 1995, X distributes all of its assets to its stockholders in complete liquidation. A and B each receive a 50% interest in the property. Because A and B each had a 50% beneficial ownership interest in the real property prior to the liquidation and have retained the same interest after the liquidation, the transfer is exempt from tax as a mere change of identity or form of ownership or organization.
Illustration B: X Corporation is owned 60% by A and 40% by B. X owns an office building in New York City with a value of $1,000,000 subject to a mortgage of $700,000 and has cash of $500,000. X distributes the real property, subject to the mortgage, and $180,000 of cash to A and $320,000 of cash to B in complete liquidation on January 1, 1995. The measure of tax for the distribution of the real property is $1,000,000. However, because A had a 60% interest in the real property prior to the distribution and a 100% interest in the real property following the distribution, the distribution is exempt from tax as a mere change of identity or form of ownership or organization to the extent of 60%. Therefore only 40% of the measure of tax, $400,000, is subject to tax. The tax is $10,500 . The higher tax rate applies because the total measure of tax for the distribution exceeded $500,000.
(2) Economic interests.
(i) When a liquidating entity transfers an economic interest in real property, the tax on the transfer of that portion of the interest representing a given parcel is measured by the greater of a proportionate share of the fair market value of the parcel or a proportionate share of the amount of any mortgage, lien or other encumbrance upon the parcel. This rule applies whether the total value of the economic interest in the entity owning the real property is greater or less than the value of the realty. (For liquidations on or after June 9, 1994, see subparagraph (ii) of this paragraph.) To illustrate:
Illustration A: X Corporation transfers all of its assets to its stockholders in complete liquidation. X owns 100% of the stock of Y Corporation. Y owns real property in New York City with a fair market value of $1,000,000. Y has other assets valued at $500,000. Y’s stock has a fair market value of $1,500,000. The measure of the tax on the transfer of the stock in Y is the fair market value of Y’s real property ($1,000,000).
Illustration B: Assume the same facts as in illustration (i) above, except that Y has liabilities of $850,000 and its stock has a fair market value of $650,000. The measure of the tax on the transfer of the stock in Y is $1,000,000.
Illustration C: Assume the same facts as in illustration (i) above, except that Y’s real property is encumbered by a mortgage of $1,200,000 and the stock in Y has a fair market value of $300,000. The measure of the tax on the transfer of the stock in Y is the consideration for the real property ($1,200,000).
Illustration D: X Corporation owns real property in New York City (Parcel A) with a fair market value of $1,000,000, encumbered by a mortgage of $1,200,000. X also owns 100% of the stock in Y Corporation. Y owns two parcels of realty in New York City, Parcel B and Parcel C. Parcel B has a fair market value of $1,000,000, and is encumbered by a mortgage of $900,000. Parcel C has a fair market value of $500,000 and is unencumbered. Y has other liabilities of $500,000. The fair market value of the stock in Y is $100,000. X liquidates. The tax on the transfer of Parcel A is measured by consideration of $1,200,000. The tax on the transfer of the stock in Y representing Parcel B is measured by the fair market value of Parcel B ($1,000,000). The tax on the transfer of the stock in Y representing Parcel C is measured by the fair market value of Parcel C ($500,000).
(ii) For liquidations on or after June 9, 1994, when a liquidating entity transfers an economic interest in real property, the tax on the transfer of that portion of the interest representing a given parcel is measured by the greater of a proportionate share of the fair market value of the parcel or a proportionate share of the amount of any mortgage, lien or other encumbrance upon the parcel, reduced to the extent the beneficial ownership of the real property remains the same after the liquidation. See 19 RCNY § 23-05(b)(8).
Illustration A: The sole asset of X Corporation is 100% of the stock of Y Corporation. Y owns unencumbered real property in New York City with a fair market value of $1,000,000. On January 1, 1995, X Corporation transfers all of its assets to its two stockholders, A and B, in complete liquidation. A and B each own 50% of X Corporation stock and receive equal shares of X’s assets upon liquidation. The measure of the tax on the distribution of the Y stock is the fair market value of Y’s real property ($1,000,000). However, because A and B each had a 50% beneficial interest in the Y stock prior to the liquidation and each retained that interest, the transfer of the stock is fully exempt from tax as a mere change of identity or form of ownership or organization.
Illustration B: Same facts as above except that X Corporation also has cash of $500,000 and A receives this cash and 25% of the Y stock in the liquidation. B receives the other 75% interest in Y stock. The distribution of 100% of the Y stock to A and B represents a transfer of a 100% economic interest in real property. The measure of tax for the distribution of 100% of the Y stock is $1,000,000. Because A owned a 50% interest in Y stock prior to the distribution and retains a 25% interest while B owned a 50% interest in the Y stock prior to the distribution and has a 75% interest following the distribution, the distribution of the Y stock is exempt from tax as a mere change of identity or form of ownership or organization to the extent of 75% (25% + 50%) and only 25% of the measure of tax for the distribution, or $250,000, is subject to tax. The tax due is $6,562.50 (2.625% × $250,000). The higher tax rate applies because the total measure of tax for the distribution exceeded $500,000.
(3) A distribution of realty or an economic interest therein within 12 months of the liquidation of the distributing entity will be presumed to be a distribution in liquidation.
(4) Credit. If a grantee(s) acquires a controlling economic interest in a corporation, partnership, association, trust or other entity owning real property in a transaction which is taxable under these regulations and, within 24 months of such acquisition, the entity owning the real property is liquidated and the real property is conveyed to the grantee(s) of the controlling economic interest, a credit is available against the transfer tax due on the liquidation in the amount of the transfer tax paid with respect to the original acquisition of the controlling economic interest. In no event shall this credit be greater than the tax payable upon the conveyance in liquidation. To illustrate :
Example 1: A owns 100% of the stock of X Corporation. X owns unencumbered New York City real property with a fair market value of $l,000,000. A sells all of the stock of X to C on January 1, 1992. A $26,250 transfer tax is paid. One year after the sale, C liquidates X and receives the real property. At that time, the fair market value of X’s real property is $1,200,000. The measure of the transfer tax will be based on the fair market value of the real property ($1,200,000). The transfer tax, therefore, is 2.625% of $1,200,000, or $31,500. Since this liquidation has occurred within 24 months of the transfer of the stock of X to C, a credit will be available against the $31,500 tax. The amount of the credit may not exceed the amount of tax paid upon the prior transfer of the economic interest in X’s real property. Accordingly, a credit of $26,250 will be available against the $31,500 transfer tax due on the liquidation of X. The transfer tax due is $31,500 minus $26,250, or $5,250.
Example 2: Assume the same facts as in illustration (1) above, except that C sells 40% of X to D prior to the liquidation of X. Upon X’s liquidation, C receives 60% of X’s realty and D receives the remaining 40%. The transfer tax due is $31,500. The amount of credit available, however, is limited to the percentage of X’s realty received by C (60%). Thus, the credit available is $15,750 (60% × $26,250), and the transfer tax due is $15,750 ($31,500 - $15,750).
Example 3: A owns 100% of the stock of X Corporation. X owns an unencumbered parcel of New York City real property with a fair market value of $1,000,000. A sells all of the stock of X to C on January 1, 1990. A $26,250 transfer tax is paid. One year after the sale to C, X acquires a second unencumbered parcel of New York City real property with a fair market value of $1,200,000. A $31,500 transfer tax is paid on this transfer. Eighteen months after the sale by A to C of X stock, C decides to liquidate X and receives both parcels of real property. At this time, X’s first parcel of property is worth $800,000. The measure of the tax on the transfer of each parcel will be based on the fair market value of each parcel. Since the fair market value of the first parcel is $800,000, the tax on the transfer of this parcel is $21,000. Since the fair market value of the second parcel is $1,200,000, the tax on the transfer of this parcel is $31,500. A $21,000 credit will be available against the tax on the transfer of the first parcel. The tax on the transfer of the second parcel must be paid in full. No credit is available for the prior tax of $31,500 paid when X acquired the second parcel.
Example 4: A Corporation owns an unencumbered office building in New York City with a value of $1,000,000. On January 15, 1993, X and Y each purchase 50% of the stock of A for $1,000,000. A transfer tax of $26,250 is paid. On July 1, 1994, A liquidates. At that time the building is worth $1,200,000 and is subject to a mortgage of $600,000 and A also has $400,000 of cash. A distributes a 25% interest in the building and $350,000 of cash to X and a 75% interest in the building and $50,000 in cash to Y. The measure of tax for the distribution of the building is $1,200,000. Because X had a 50% interest in the building before the distribution and retains a 25% interest afterwards while Y had a 50% interest in the building before the distribution and owns a 75% interest afterwards, the distribution of the building is exempt as a mere change of identity or form of ownership or organization to the extent of 75% (25% + 50%) of the measure of tax. The tax is $7,875 . A is entitled to a credit against that tax of $7,875.
(1) A conveyance of realty (or an economic interest therein) by a sponsor or other party to an entity formed for the purpose of cooperative ownership of real property (including a cooperative housing corporation) is subject to the tax. The consideration includes the amount of cash paid or required to be paid, the amount of any mortgages, liens or encumbrances on the realty and the fair market value of interests in the cooperative entity received by the sponsor. Consideration shall not be reduced by the amount of any expenses incurred by the sponsor, including payments made to a reserve fund or working capital fund.
(2) Notwithstanding the definition of “controlling interest” contained in 19 RCNY § 23-01 or anything to the contrary contained in these rules, the transfer of shares of stock in a cooperative housing corporation in connection with the grant or transfer of a proprietary leasehold is subject to tax in the following situations:
(i) In the case of the original transfer of cooperative housing corporation stock by the cooperative corporation or cooperative plan sponsor;
(ii) In the case of any subsequent transfer of the cooperative housing corporation stock by the owner thereof made before August 1, 1989, if the owner held these shares in connection with, incidental to or in furtherance of a trade, business, profession, occupation or commercial activity engaged in or conducted by the owner; and
(iii) In the case of any subsequent transfer of the cooperative corporation stock by the owner thereof made on or after August 1, 1989. Where such a transfer relates to an individual residential unit, the consideration for such a transfer shall not include any portion of the unpaid principal of any mortgage on the real property of the cooperative housing corporation. For the purposes of this paragraph (2), in the case of transfers made on or after August 1, 1989, the term “cooperative housing corporation” shall not include a housing company organized and operating pursuant to the provisions of Article 2, 4, 5 or 11 of the Private Housing Finance Law.
(3) Notwithstanding the definition of “controlling interest” contained in 19 RCNY § 23-01 or anything to the contrary contained in these rules, in the case of a corporation (other than a cooperative housing corporation), partnership, association, trust or other entity formed for the purpose of cooperative ownership of real property, the transfer tax shall apply to each transfer made on or after August 1, 1989 of shares of stock in such corporation, interests in such partnership, association or other entity or beneficial interests in such trust, in connection with the grant or transfer of a proprietary leasehold. Where such a transfer relates to an individual residential unit (other than the original transfer of such a unit by the cooperative entity or cooperative plan sponsor), the consideration for such transfer shall not include any portion of the unpaid principal of any mortgage on the real property of such corporation, partnership, association, trust or other entity.
(4) For purposes of paragraphs (2) and (3) of this subdivision, a transfer shall not be deemed made on or after August 1, 1989 if such a transfer was made pursuant to a written contract entered into before July 25, 1989, provided that the date of execution of such contract is confirmed by independent evidence, such as recording of the contract, payment of a deposit or other facts and circumstances as determined by the Commissioner of Finance.
(5) For purposes of paragraphs (2) and (3) of this subdivision, an individual unit that is used for residential purposes shall be presumed to be an individual residential unit, unless such residential use is de minimis.
(6) In the case of the original transfer of shares or interests in a corporation or other entity formed for the purpose of cooperative ownership of real property by the cooperative or the plan sponsor, or in the case of the subsequent transfer of such shares or interests that are not attributable to an individual residential unit, the proportionate amount of any underlying building mortgage attributable to the shares is includible in consid- eration.
(7) The following examples illustrate the application of paragraph (2) of this subdivision only to transfers made before August 1, 1989:
Example 1: An individual purchases stock from a cooperative housing corporation or cooperative plan sponsor which is allocated to an occupied apartment. Thereafter the individual sells this stock together with his proprietary leasehold. The transfer tax applies to each transfer. The initial transfer by the cooperative housing corporation or sponsor is subject to the transfer tax. In addition, the subsequent transfer by the individual who has subleased the apartment is a transfer of stock held in connection with a commercial activity and is, therefore, also subject to the transfer tax.
Example 2: An individual purchases stock from a cooperative housing cooperation or sponsor as an “insider” and occupies the apartment unit allocated to the stock for residential purposes. The individual then transfers the stock along with the proprietary leasehold to another. The initial transfer from the cooperative housing corporation or sponsor to the individual “insider” is subject to the transfer tax. The sale by the resident individual “insider” to another is not subject to the transfer tax.
Example 3: A commercial artist owns stock in a cooperative housing corporation and holds a proprietary leasehold on an apartment therein. The artist both resides and maintains a studio in this apartment. The sale of this stock is subject to the transfer tax. Although the artist resides in the apartment, the stock was nevertheless held in connection with his business. The tax is based on the total amount paid for the stock. No apportionment of the consideration for the portion of the apartment used for residential purposes is permitted.
For transfers made before August 1, 1989, in determining whether a cooperative apartment used for residential purposes is also used for business purposes, the Commissioner of Finance will consider, among other factors, whether a home office expense deduction has been claimed for federal income tax purposes and whether the premises have been held out to clients or customers as a place of business within the 24 months preceding the sale.
Example 4:
Example 5: A subleased his residential cooperative apartment for 3 weeks while he was on vacation. Later that same year the apartment was sold. The transfer tax is applicable to the sale of this cooperative apartment. Temporary rentals for 15 days or more during any 12 month period within the 24 months preceding the transfer will be deemed to be a commercial activity.
Example 6: A wishes to sell his cooperative apartment. A subleases the apartment for 6 months until a sale is made. This sale is subject to the transfer tax. Since the apartment has been rented for 15 or more days, this rental constitutes commercial activity.
Example 7: A allows B, a family member, to reside in his cooperative apartment. B pays all of the maintenance charges attributable to the apartment but does not pay any additional amounts to A. The sale of this apartment is subject to the transfer tax. B’s occupancy of the apartment in return for payment of the maintenance charges constitutes a rental of the apartment. Therefore, the stock representing the apartment is held in connection with a commercial activity.
Example 8: A sells his stock in a cooperative housing corporation on December 21, 1988. A had subleased his apartment until December 20, 1986. A has not subleased his cooperative apartment nor has A conducted any business activity in his apartment within the 24 months preceding the sale. This sale of stock is not subject to the transfer tax. A cooperative residential apartment which had in the past been subleased by the current owner-tenant loses its commercial status after 24 months have passed during which the apartment has not been subleased for 15 or more days. Similarly, a cooperative apartment in which business activity has been conducted by the current owner-tenant loses its commercial status after 24 months have passed during which no commercial activity has been conducted in the apartment. Accordingly, the transfer would not be subject to the transfer tax.
Example 9: A, B, C and D each own 25% of the stock of X Corporation, a cooperative housing corporation with four apartments. These four individuals each use their apartments solely for residential purposes. E purchases from A and B 50% of the cooperative housing corporation stock representing two of these apartments. The sales by A and B are not subject to the transfer tax. Cooperative apartment sales are to be taxed only in the case of original sales by the cooperative corporation or sponsor or in the case of resales of apartments which had been used or held in connection with a commercial activity. Thus, even though a controlling interest in real property has been transferred, the transfer tax does not apply to these sales.
Example 10: A misrepresents to B that A’s cooperative apartment had not been held or used in connection with a commercial activity. B purchases A’s cooperative apartment believing it is not subject to the transfer tax based on A’s misrepresentations. A prescribed affidavit of non commercial use is filed with the Department of Finance. As the grantee, B will be liable for the appropriate transfer tax if A does not pay it.
Example 11: A purchases stock from a cooperative housing corporation incorrectly believing that a transfer tax credit would be available against the transfer tax due. A return is filed claiming such credit. As the grantee, A will be liable for the appropriate transfer tax if the cooperative housing corporation does not pay it.
Example 12: A corporation owns stock in a cooperative housing corporation and holds the proprietary lease for a residential apartment in the building. The apartment is used solely as the residence of its chief executive officer. The sale of this stock by the corporation is subject to the transfer tax. The corporation is deemed to maintain the apartment in the City in connection with, incidental to or in furtherance of its business or commercial activity. The result would be the same if the apartment was used to house out-of-town employees or customers of the corporation.
Example 13: B, an attorney, owns stock in a cooperative housing corporation and resides in his cooperative apartment. B does not hold himself out as doing business in his apartment, does not meet with clients in his apartment and takes no business deductions relating to his apartment. B occasionally brings work home on weekends for his own convenience. B’s occasional work at home will not render the sale of his apartment subject to tax.
(8) The application of paragraphs (2), (5) and (6) of this subdivision to transfers made on or after August 1, 1989 is illustrated by the following examples:
Example 1: A, as an “insider,” purchases 2% of the stock of a cooperative housing corporation that is allocated to one of fifty apartments in the building. The sales price is $200,000, and there is an unpaid mortgage principal balance of $5,000,000 on the real property. The transfer is taxable and a proportionate share of the mortgage is included in the consideration for the transfer, regardless of the use of the apartment. The tax is calculated as follows:
| Amount paid for the apartment | $200,000 |
|---|---|
| 2% of the $5,000,000 mortgage | $100.000 |
| Total consideration | $300,000 |
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Compute 1% of $300,000, for a tax due of $3,000. A then subleases the apartment to B, who uses the apartment as a residence. Subsequently, A transfers the stock to C for $600,000. Since the apartment was used as a residence, no portion of the underlying mortgage on the real property is included in the consideration for the subsequent transfer to C. The tax is calculated as follows: 1.425% of $600,000, for a tax due of $8,550.
Example 2: An accountant owns stock in a cooperative housing corporation and holds a proprietary leasehold on one of the fifty apartments located on the real property of the housing corporation. The apartment is used both as the accountant’s residence and as an office for an accounting practice, and the accountant is eligible for a home office deduction for federal income tax purposes. There is an unpaid mortgage balance of $2,000,000 on the real property. If the accountant sells the stock for $800,000, the tax will be calculated as follows: 1.425% of $800,000, for a tax due of $11,400. Since the apartment is used for residential purposes, it is deemed an individual residential unit and no portion of the unpaid principal of any mortgage on the real property of the housing corporation is included in the consideration for the transfer.
Example 3: A owns 80 shares in a cooperative housing corporation attributable to four separate apartments in the building. The apartments are leased to tenants for residential use. A’s 80 shares constitute 20% of the cooperative housing corporation stock, and the building is encumbered by a $1,000,000 mortgage. If A sells the 80 shares in the cooperative housing corporation to B for $800,000, the tax is calculated as follows:
| Cash consideration received for shares | $800,000 |
|---|---|
| 20% of $l,000,000 mortgage | $200,000 |
| Total consideration | $1,000,000 |
| Tax rate = 2.625%; tax is | $26,250 |
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The consideration received for the transfer of stock attributable to each of the four apartments is combined to determine the tax base. Because the consideration exceeded $500,000 and the transaction does not constitute the sale of an individual cooperative apartment, the underlying mortgage is included in the consideration, and the tax rate is 2.625%. Example 4: Assume the same facts as in example 3 except that A owns 100% of the stock of X Corporation whose sole asset is the 80 shares of co-op stock. X Corp. has no liabilities. A sells the X Corp. stock to B for $800,000. The tax is the same as in example 3 and is calculated in the same manner. Example 5: Assume the same facts as in example 4 except that the 80 shares are attributable to one apartment. If A sells the X Corp. stock to B for $800,000, the tax is calculated as follows:
| Cash consideration received for stock | $800,000 |
|---|---|
| Total consideration | $800,000 |
| Tax rate = 1.425%; tax is | $11,400 |
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The tax is calculated at the rate applicable to a sale of an individual cooperative apartment for consideration in excess of $500,000. The underlying mortgage is not included in the consideration. Example 6: Assume the same facts as in example 5 except that A does not sell the X stock to B. Instead, X Corp. sells the 80 shares in the cooperative corporation to B. The tax is the same as in example 5 and is calculated in the same manner.
(9) Credit. In the case of the original transfer of cooperative housing corporation stock by a cooperative corporation or cooperative plan sponsor in connection with the grant or transfer of a proprietary leasehold, a credit is allowed for a proportionate part of the amount of any tax paid upon the conveyance to the cooperative housing corporation of the land and building or buildings comprising the cooperative dwelling or dwellings. This credit is calculated as follows:
Credit = A × N T
Where:
A = Amount of tax paid upon the conveyance to the cooperative housing corporation.
N = Number of shares transferred in this transaction.
T = Total number of outstanding shares of the cooperative housing corporation, as well as any shares held by the corporation.
To illustrate: X, the owner of a ten unit apartment building, sells the property to Y Cooperative Corporation for $1,000,000. A transfer tax of $20,000 is paid in connection with this transfer. Y is authorized to issue 100 shares of stock. Each of the 10 apartments is allocated 10 shares. Y sells 10 shares to Z for $300,000 within 24 months of payment by X of the $20,000 transfer tax. A credit is allowed against the $3,000 transfer tax due on this subsequent sale from Y to Z, computed as follows:
Credit = $20,000 × 10= $2,000 100
This credit shall not reduce the transfer tax due on the stock sale from the cooperative housing corporation or sponsor below zero. This credit applies only for original transfers of stock by the cooperative housing corporation or cooperative plan sponsor. It does not apply to taxable resales of cooperative housing corporation stock. No credit is allowed for any tax paid more than 24 months prior to the date on which occurs the first in a series of transfers of shares of stock in the offering of cooperative housing corporation shares. Thus, if the first of the original transfers of shares from the cooperative housing corporation or sponsor is made within 24 months of the payment of the tax imposed on the conveyance of the property to the cooperative housing corporation, then all original transfers from the cooperative housing corporation or plan sponsor, regardless of when made, will be entitled to an appropriate credit. If the first transfer is made more than 24 months after payment of the tax imposed on the conveyance of the property to the cooperative housing corporation, then no credit is allowed.
(1) After February 1, 1982, the granting of a leasehold interest in exchange for a consideration which is not rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the New York City Administrative Code) is subject to tax. The granting of a leasehold interest solely for a consideration which is considered rent for purposes of the New York City Commercial Rent or Occupancy Tax is not subject to tax.
(2) After February 1, 1982, the surrender or assignment of a leasehold interest by a lessee before the end of the term in exchange for the payment of a sum of money or other consideration other than the release of the lessee from the lease obligation is subject to tax. However, the surrender or assignment of a leasehold interest by the lessee solely in exchange for a release of the lessee from the lease obligation is not subject to tax. To illustrate:
Illustration (i): A, a lessee, assigns to B in exchange for $20,000 a five-year commercial leasehold with $100,000 in rent to be paid over the remaining lease term. No transfer tax is imposed because the consideration is less than $25,000.
Illustration (ii): A, a lessee, surrenders to B, a lessor, in exchange for $75,000 a two-year rent-stabilized residential leasehold with $10,000 in rent to be paid over the remaining lease. A transfer tax of $750 (1% of $75,000) applies to the surrender.
(1) A conveyance of realty without consideration, as defined in 19 RCNY § 23-02 “Consideration”, and otherwise than in connection with a liquidation. This includes a deed conveying realty as a bona fide gift. A conveyance of realty subject to any indebtedness is not a gift to the extent of the indebtedness.
(2) A deed to confirm title already vested in the grantee, such as a quitclaim deed to correct a flaw in title.
(3) An option for the purchase of real property or a contract for the sale of real property, if the contract does not vest legal or equitable title. For this purpose equitable title will be deemed to vest where the benefits and burdens of ownership have shifted to the optionee or vendee including, for example, where possession or the right to receive rent or depreciate the realty is given to the contract vendee or optionee. (See, however, 19 RCNY § 23-02 “Consideration” for calculation of consideration when option rights are exercised.)
(4) Partition deeds, unless, for a consideration, some of the parties take shares greater in value than their undivided interests, in which event the tax attaches to each deed conveying such greater share, computed upon the consideration for the excess.
(5) A deed executed by a debtor conveying real property to an assignee for the benefit of his creditors; however, when the assignee conveys such property to a creditor or sells it to any other person, the deed by him is taxable if the consideration exceeds $25,000.
(6) Conveyance to a receiver of realty included in the receivership assets, and reconveyance of such realty upon termination of the receivership.
(7) New stock certificates issued to replace old stock certificates because of a mere change of name under section 801(b)(1) of the New York Business Corporation Law (or under comparable provisions of the laws of the United States or other states).
(8) Transfers made pursuant to a confirmed plan of reorganization as provided under 11 U.S.C. § 1146(c).
(9) [Repealed.]
(1) In the case of a deed, instrument or transaction conveying or transferring on or after August 28, 1997, a one, two, or three family house, an individual residential condominium unit, or an individual residential cooperative apartment, or an economic interest in any such property, the consideration for the conveyance or transfer shall not include the amount of any excludible lien on the property conveyed or interest transferred, as defined in paragraph (3) below, to the extent otherwise included in the consideration for the conveyance or transfer.
(2) Paragraph (1) shall not apply to a conveyance or transfer:
(i) to a mortgagee, lienor, or encumbrancer, whether or not (A) the grantor or transferor is or was liable for the indebtedness secured by the mortgage lien or encumbrance or (B) the mortgage, lien, or encumbrance is canceled of record; or
(ii) that qualifies as a “real estate investment trust transfer” as defined in subdivision E of § 11-2102 of the New York City Administrative Code.
(3) For purposes of this subdivision (k), the term “excludible lien” means a mortgage, lien, or other encumbrance that was placed on the real property or economic interest before the delivery of the deed or the transfer and remains thereon after the date of the delivery of the deed or the transfer, unless any of the following applies:
(i) The mortgage, lien, or other encumbrance was originally placed on the real property or interest therein in connection with, or in anticipation of, the conveyance or transfer, or was increased in amount in connection with, or in anticipation of, the conveyance or transfer, to the extent of that increase in amount. A mortgage, lien, or other encumbrance will be considered to have been originally placed on the property, or increased in amount, in connection with or in anticipation of the conveyance or transfer if: (A) the documents relating to the mortgage, lien, encumbrance, the underlying indebtedness, or the conveyance or transfer indicate that the mortgage, lien, encumbrance or underlying indebtedness is part of a plan to eventually transfer or convey the property or interest therein, or (B) in the case of a mortgage, lien or other encumbrance placed on the property within six months prior to the conveyance or transfer, if all of the relevant facts and circumstances indicate that the mortgage, lien, or other encumbrance has been placed on the property in connection with, or in anticipation of, the conveyance or transfer.
(ii) The mortgage, lien, or other encumbrance was placed on the real property or interest therein by reason of deferred payments of the purchase price whether represented by notes or otherwise.
(iii) The mortgage, lien, or other encumbrance is discharged, canceled, or reduced in amount, to the extent of the reduction in amount, in connection with the conveyance or transfer following delivery of the deed or transfer. A mortgage, lien, or other encumbrance will be considered to be discharged, canceled, or reduced in amount in connection with the conveyance or transfer if: (A) the documents relating to the mortgage, lien, encumbrance, the underlying indebtedness or the conveyance or transfer indicated that the discharge, cancellation, or reduction in amount is in connection with the conveyance or transfer, or (B) in the case of a discharge, cancellation, or reduction in amount within three months following delivery of the deed or the transfer, all of the relevant facts and circumstances indicate that the discharge, cancellation, or reduction in amount is in connection with the conveyance or transfer.
(iv) The terms of the mortgage, lien, or other encumbrance are materially altered in connection with, or in anticipation of, the conveyance or transfer.
(A) For purposes of this subparagraph (iv), the terms of a mortgage, lien, or other encumbrance on the property or interest therein will be considered to be materially altered in connection with, or in anticipation of, the conveyance or transfer if within six months prior to, or within three months following, the conveyance or transfer (a) the identity of the mortgagee or holder of the lien or encumbrance has changed, and (b) there has been a change of ten percent or more in the interest rate, or repayment term remaining as of the date of the alteration with respect to the mortgage, lien, or other encumbrance, and the facts and circumstances indicate that the alteration is in connection with, or in anticipation of, the conveyance or transfer.
(B) For purposes of this subparagraph (iv), any alteration in the terms of a mortgage, lien, or other encumbrance more than six months prior to or more than three months following the delivery of the deed or the transfer will be conclusively presumed not to be in connection with, or in anticipation of, the conveyance or transfer.
(C) This subparagraph (iv) will not apply to a conveyance or transfer from one spouse to the other pursuant to the terms of a separation agreement or divorce decree or to a conveyance or transfer that would qualify as a bona fide gift under 19 RCNY § 23-03(j)(1) but for the presence of a mortgage, lien, or other encumbrance that qualifies as an “excludible lien” without regard to this subparagraph (iv).
(D) Increases and decreases in the amount of a mortgage, lien, or other encumbrance will not be considered material alterations. Subparagraphs (i) and (iii) of this paragraph (3) apply to increases and decreases, respectively, in the amount of any mortgage, lien, or other encumbrance.
(4) This subdivision (k) will apply to any portion of any unpaid principal of any mortgage on real property of a cooperative housing corporation that otherwise would be included in consideration in the case of an original transfer of shares in the corporation by the cooperative corporation or cooperative plan sponsor under § 11-2102.b(2)(i) of the New York City Administrative Code.
(5) The taxpayer shall bear the burden of proving that a lien or encumbrance qualifies as an excludible lien under paragraph (3) of these rules, and shall bear the burden of proving the amount of such lien or encumbrance at the time of the transfer or other conveyance. Section 11-2103 of the New York City Administrative Code.
(6) To illustrate:
Illustration (i): Individual A owns a one-family house subject to a mortgage held by Bank X that is due and payable upon the sale of the house. The mortgage loan has a remaining principal balance of $250,000, bears interest at seven percent and has a remaining repayment term of ten years. A sells the house to individual B for $350,000. B pays $100,000 in cash and obtains a mortgage loan from Bank Y for $250,000. At the closing, Bank X assigns the mortgage on the property to Bank Y. The interest rate on the mortgage loan from Bank Y is nine percent and the repayment term is ten years. The terms of the mortgage on the property after the conveyance have been materially altered from the terms on the mortgage on the property before the conveyance; the mortgagee is different and the increase in the interest rate, from seven percent to nine percent, represents a greater than ten percent change. Based on the facts and circumstances, the material alteration of the mortgage is considered to be in connection with the transfer and the mortgage is not an excludible lien under 19 RCNY § 23-03(k)(3)(iv). The taxable consideration for the conveyance is $350,000.
Illustration (ii): The facts are the same as illustration (i) except that the interest on the mortgage loan remains at seven percent after the assignment but the term is increased from ten to 15 years. The mortgage is not an excludible lien because the increase in the repayment term is greater than ten percent. If the interest rate and repayment term remain unchanged, or those changes are less than ten percent, the terms will not be considered to be materially altered and the mortgage will be an excludible lien.
Illustration (iii): The facts are the same as in illustration (i) except that individual A is the father of individual B and gives the house to B as a gift. B does not make a cash payment and refinances the mortgage loan with Bank Y. The mortgage is assigned as in illustration (i). The conveyance is a bona fide gift under 19 RCNY § 23-03(j)(1) but for the presence of the mortgage. None of the exceptions in subparagraphs (i), (ii) and (iii) of paragraph (3) of this subdivision (k) applies to the mortgage. Subparagraph (iv) of paragraph (3) of this subdivision does not apply to bona fide gift transfers. Therefore the mortgage is an excludible lien and there is no taxable consideration for the conveyance.
Illustration (iv): The facts are the same as illustration (i) except that the deed is delivered in January of 1998 and B acquires the house subject to the existing mortgage. B refinances the Bank X loan with Bank Y in June, 1998 and the assignment of the mortgage takes place at that time. Under subparagraph (iv)(B) of paragraph (3) of this subdivision, any alterations in the terms of the mortgage more than three months following the conveyance are conclusively presumed not to be in connection with, or in anticipation, of the conveyance. Thus, the mortgage is an excludible lien regardless of alterations to its terms. The taxable consideration for the conveyance is $100,000.
Illustration (v): Individual A is the sole owner of a cooperative apartment valued at $400,000 and subject to a cooperative loan secured by the stock and proprietary lease and held by Bank X. The loan has a remaining principal balance of $250,000, bears interest at seven percent and has a remaining repayment term of ten years. Pursuant to a divorce decree, A transfers the apartment to his spouse, B. Two months after the transfer of the apartment, B refinances the loan with Bank Y with no change in the principal amount. The cooperative loan from Bank Y bears interest at seven percent and has a repayment term of 30 years. Subparagraph (iv) of paragraph (3) of this subdivision does not apply to transfers between spouses pursuant to a divorce decree. Therefore, the lien securing the loan is an excludible lien. The taxable consideration for the transfer is $150,000, the excess of the value of the apartment over the amount of the excludible lien.
Illustration (vi): The facts are the same as in illustration (v) except that A refinances the loan two months prior to the transfer but after the issuance of the divorce decree and A borrows an additional $50,000. Subparagraph (iv) of paragraph (3) of this subdivision does not apply to increases or decreases in the amount of any mortgage, lien, or other encumbrance. Because the facts and circumstances indicate that increase of $50,000 in the amount of the loan is in connection with or in anticipation of the transfer, $50,000 of the amount of the lien securing the loan is not an excludible lien.
Illustration (vii): XYZ Corporation purchases a one-family house in poor condition in 1998 for $50,000 intending to renovate the house and offer it for sale. To pay for the renovation expenses, XYZ obtains a loan of $300,000 secured by a mortgage on the house. The mortgage loan agreement requires XYZ Corporation to use its best efforts to sell the house following its renovation. In 2002, XYZ Corporation sells the house for $500,000 to B, and B assumes the mortgage loan obligation at the same interest rate and for the same repayment term. Because the documents relating to the conveyance indicate that the mortgage is placed on the property as part of a plan to eventually transfer the property, the mortgage is considered to have been placed on the property in anticipation of the conveyance and is not excludible from consideration as an excludible lien. The taxable consideration for the conveyance is $500,000.
Illustration (viii): Individual A owns a one-family house subject to a $300,000 mortgage held by Bank X. The mortgage loan bears interest at seven percent with a remaining term of 15 years. A agrees to sell the house to individual B for $400,000. A’s contract of sale with B provides for a cash payment at closing of $100,000 and installment payments over 15 years totaling $300,000 plus seven percent interest secured by a mortgage on the property. A repays Bank X in full and the mortgage held by Bank X is removed from the property and A records a new mortgage on the property. The $300,000 mortgage held by A is not excludible from taxable consideration as an excludible lien because it did not exist on the property prior to the conveyance.
Illustration (ix): Individuals A and B own a three-family house as tenants in common subject to a $300,000 mortgage held by Bank X. The mortgage loan bears interest at 13 percent. In January, 1998 A sells his interest in the house to B for a cash payment of $125,000 and subject to the existing mortgage. A and B also enter into a written agreement that requires B to have the mortgage discharged by June, 1998. In June, 1998, B pays Bank X the remaining amount due on the mortgage loan and the mortgage is discharged. Because the documents relating to the conveyance indicate that the discharge of the mortgage is part of a plan to convey the property, under subparagraph (iii) of paragraph (3) of this subdivision, the mortgage is considered to have been discharged in connection with the conveyance and is not excludible from consideration as an excludible lien. The taxable consideration for the conveyance is $275,000.
Illustration (x): The facts are the same as in illustration (ix) except that A and B have no agreement regarding the discharge of the mortgage. Five months following the sale, B inherits $1,000,000 and B decides to repay the balance due on the mortgage loan. Under the facts and circumstances, the mortgage is not considered to have been discharged in connection with the conveyance and, therefore, is considered to be an excludible lien.
Illustration (xi): Individual A owns a one-family house subject to a mortgage held by Bank X. The mortgage loan has a principal amount of $300,000 and bears interest at seven percent with a remaining term of 20 years. A sells the house to B for $500,000. Bank X agrees to let B assume the $300,000 mortgage on the house with no changes to the repayment term or interest rate. Bank X also agrees to lend B an additional $100,000 for the same 20 year term and at the same seven percent interest rate. Bank X increases the amount secured by its mortgage to $400,000. The total consideration for the sale is $500,000. The original $300,000 mortgage is excluded from the taxable consideration as an excludible lien. The additional $100,000 mortgage is not excludible from taxable consideration as an excludible lien because it did not exist on the property prior to the transfer. The taxable consideration for the conveyance is $200,000.
Illustration (xii): The facts are the same as in illustration (xi) except that Bank X does not lend B additional funds. Instead, five months prior to the sale, Bank X agrees to lend A an additional $100,000. A uses the funds to make improvements to the house that make it more marketable and the house is listed for sale immediately following completion of the improvements. The facts and circumstances indicate that the additional mortgage was placed on the property in anticipation of the sale. Therefore, the taxable consideration is $200,000 consisting of the $500,000 purchase price less all but $100,000 of the mortgage.
Illustration (xiii): XYZ Corp. acquires a residential apartment building in 1998 for $2 million cash. In 2002, XYZ obtains a mortgage loan from Bank A for $1,750,000 to renovate the apartments pending a conversion of the building to cooperative ownership. The terms of the $1,750,000 loan agreement require XYZ to use its best efforts to file an offering plan by the end of 2003. XYZ transfers the building to a cooperative housing corporation, C, and the offering plan becomes effective December 1, 2003. On January 15, 2004, pursuant to the offering, XYZ sells the stock and proprietary lease representing an apartment in the building for $120,000. The proportionate amount of the $1,750,000 mortgage on the building attributable to that apartment is $70,000. The $70,000 is not excludible from the consideration for the apartment because the documents relating to the loan indicate that the loan was placed on the property in anticipation of the conversion of the building to cooperative ownership and the sale of apartments.
§ 23-04 Real Property Situated Only Partly Within the City.
Where real property is situated partly within and partly without the boundaries of the City of New York the consideration subject to tax shall be such part of the total consideration as is attributable to the portion of such real property situated within the City of New York or to the economic interest in such portion. For the purpose of determining the consideration attributable to property situated within the City of New York, that part of the consideration shall be deemed subject to tax which the assessed valuation of the property situated within the territorial limits of the City of New York bears to the total assessed valuation of the entire property conveyed situated within and without the City. The assessed valuations to be used shall be those in effect at the time of the conveyance of the property. In lieu of the foregoing, the equalized assessed valuation based on the state equalization tables may be used, provided they are applied to the property situated both within and without the City of New York.
To illustrate: A parcel of land situated partly within Westchester County and partly within Bronx County is conveyed by deed, dated July 15, 1983. The purchase price of the property is $200,000, subject to a first mortgage of $90,000. The assessed valuations of the property in effect at the time of the conveyance are as follows:
| Property situated within Bronx County | $120,000 |
|---|---|
| Property situated in Westchester County | $40,000 |
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The following shows the computation of the consideration subject to tax:
| Item No. | ||
|---|---|---|
| Assessed valuation of property partly situated in Westchester County | $40,000 | |
| Assessed valuation of property partly situated in Bronx County | $120,000 | |
| Total assessed valuation | $160,000 | |
| Ratio of assessed valuation of property partly situated in Bronx County to total assessed valuation of property situated within and without the City of New York (Item 2 ÷ Item 3) | 75% | |
| Total consideration | $200,000 | |
| Total consideration subject to tax (Item 5 × Item 4) | $150,000 |
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§ 23-05 Exemptions.
(a) The following persons are exempt from the payment of tax and from filing a return:
(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, and any of its agencies and instrumentalities insofar as they are immune from taxation.
(3) A foreign government, a person acting on behalf of a foreign government, or the head of a foreign government’s diplomatic mission, with respect to premises used exclusively for diplomatic or consular purposes, or as the residence of the head of the diplomatic mission or consular post, to the extent exempt from the payment of tax pursuant to the Vienna Convention on Consular Relations or the Vienna Convention on Diplomatic Relations .
(4) A foreign government or a person acting on behalf of a foreign government to the extent exempt from the payment of tax pursuant to a treaty or convention to which the United States and the foreign government are parties, other than as provided under paragraph (3), above. The exemption of such governmental bodies or persons shall not, however, relieve a grantee from them of liability for the tax or from filing a return.
(2) A deed, instrument, or transaction conveying or transferring real property or an economic interest therein by or to 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 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 paragraph.
(3) A deed, instrument, or transaction conveying or transferring real property or an economic interest therein to any governmental body or person exempt from payment of the tax pursuant to paragraph (1) or (2) of subdivision (a) of 19 RCNY § 23-05.
(4) A deed delivered pursuant to a contract made prior to May 1, 1959.
(5) A deed delivered by any governmental body or person exempt from payment of the tax pursuant to 19 RCNY § 23-05(a) as a result of a sale at a public auction held in accordance with the provisions of a contract made prior to May 1, 1959.
(6) A deed or instrument given solely as security for, or a transaction the sole purpose of which is to secure, a debt or obligation or a deed or instrument given, or a transaction entered into, solely for the purpose of returning such security.
(7) A deed, instrument, or transaction conveying or transferring real property or an economic interest therein from a mere agent, dummy, straw man or conduit to a principal, or a deed, instrument or transaction conveying or transferring real property or an economic interest therein from the principal to his agent, dummy, straw man or conduit. The following are examples of deeds, instruments and transactions in which this exemption applies:
(i) The conveyance of realty by an individual to a corporation solely for the purpose of obtaining mortgage financing, followed by the immediate reconveyance of the realty by the corporation to the individual after such mortgage financing is obtained.
(ii) A deed transferring real property to an existing corporation solely for the purpose of effectuating the terms of a mortgage spreader agreement. The deed returning the mortgaged realty to its true owner is also exempt from the tax.
(iii) A conveyance between a principal and its agent where
(A) a written agreement is entered into at the time of the transaction establishing such a relationship with respect to the realty or economic interest therein,
(B) the purported agent functions as an agent with respect to the realty or economic interest therein for all purposes, and
(C) the purported agent is held out as the agent and not the principal in all dealings with third parties relating to the realty or economic interest therein. Since the tax does not apply to any deed, instrument, or transaction described in 19 RCNY § 23-05(b), neither the grantor nor the grantee is required to pay the tax. However, a return relating to the deed, instrument, or transaction must be filed.
(8) A deed, instrument or transaction conveying or transferring real property or an economic interest in real property to another person or entity, otherwise subject to tax, that effects a mere change of identity or form of ownership or organization to the extent the beneficial ownership of such real property or economic interest remains the same. A sale of real property or an economic interest therein for cash or other valuable consideration will be exempt to the extent the beneficial ownership remains the same, provided the transaction represents a mere change of identity or form of ownership or organization.
(i) Applicable tax rate. Where this exemption applies, the consideration subject to tax is reduced proportionately to the extent the beneficial ownership of the real property or economic interest in the real property remains the same. However, for transfers or transactions occurring on or after January 1, 1999, the determination of the applicable tax rate will be made prior to the application of this exemption. The tax rate applicable to transfers for consideration of more than $500,000 will apply even though the portion of the consideration taxable after applying the exemption provided for in this paragraph is $500,000 or less.
(ii) Controlling interests. For transactions involving economic interests, the determination of whether a controlling economic interest has been transferred is made prior to the application of this exemption. Thus, the transfer of a controlling economic interest will be taxable to the extent the beneficial ownership does not remain the same, even though the portion of the interest subject to tax represents, in the case of a corporation, less than 50 percent of the total combined voting power of all classes of stock of such corporation; and, in the case of a partnership, association, trust or other entity, less than 50 percent of the capital, profits, or beneficial interest in such partnership, association, trust or other entity. The exemption is not applicable to a conveyance to a cooperative housing corporation of the land and building or buildings comprising the cooperative dwelling or dwellings. For purpose of this paragraph a cooperative housing corporation does not include a housing company organized and operating pursuant to the provision of article two, four, five or eleven of the private housing finance law. To illustrate:
Example A: A and B, two equal tenants-in-common of Parcel 1, transfer their interests in Parcel 1 to X Corporation on January 1, 1995, each receiving 50% of the outstanding stock of X. The transfer is wholly exempt from tax as a mere change in identity or form of ownership or organization because the beneficial ownership of the real property remains 100%, the same as before the transfer.
Example B: A and B are equal partners in AB Partnership. AB Partnership owns two properties. Parcel 1 is unencumbered commercial real property with a fair market value of $1,000,000. Parcel 2 is unencumbered commercial real property with a fair market value of $2,000,000. AB has other assets valued at $1,000,000. On January 1, 1995, AB Partnership distributes all of its assets to A and B in complete liquidation. B receives Parcel 2. A receives Parcel 1 and all the other assets. The tax on the distribution of Parcel 1 to A is measured by the fair market value of Parcel 1 of $1,000,000 reduced by 50% because A had a 50% beneficial interest in the parcel prior to the liquidation and has retained that interest after the distribution. Therefore, $500,000 (50% × $1,000,000) of the measure of the tax is subject to tax. The tax due on the distribution is $13,125 (2.625% × $500,000). Similarly, the distribution of Parcel 2 to B is exempt from tax as a mere change of identity or form of ownership or organization to the extent of 50% because B owned a 50% beneficial interest in the property prior to the liquidation and has retained that beneficial interest. Therefore, the taxable amount is $1,000,000 (50% × $2,000,000) and the tax due on the distribution of Parcel 2 is $26,250 (2.625% × $1,000,000).
Example C: X Company is a New York general partnership composed of two equal partners, A and B. X Company owns unencumbered real property located in New York City with a fair market value of $1,000,000. On January 1, 1995, X Company is converted to a limited liability company through the filing of articles of organization under applicable state law. After the conversion, B sells a 49% interest in X Company to A so that A owns a 99% interest and B owns a 1% interest. If under the applicable state law, X Company is considered to be the same entity as before the conversion, the conversion will not be considered a transfer of real property or an economic interest in real property. Immediately after the conversion, the beneficial ownership of X Company is deemed identical to the beneficial ownership of the old general partnership and no transfer of an economic interest has occurred. B’s transfer of a 49% interest in X Company to A will not constitute a controlling economic interest transfer subject to tax. However, the transfer of the 49% interest may be aggregated with a subsequent related transfer within three years so as to constitute a transfer of a controlling economic interest. See 19 RCNY § 23-02(2) definition of “Controlling interest” governing aggregation of related transfers.
Example D: Limited Partnership X has four equal limited partners A, B, C, and D, each with a 24% interest and one general partner, E with a 4% partnership interest. X owns an unencumbered office building with a fair market value of $1,000,000 and $100,000 of other assets. A, B, C, D and E form a new limited partnership, Y, in which A, B, C, and D have respective interests in capital and profits as follows: A owns 29%, B owns 29%, C owns 24% and D owns 14%. E is the general partner and has a 4% interest in capital and profits. Pursuant to an agreement of merger approved on January 4, 1999, under Article 8-A of the New York Partnership Law, the partners merge Limited Partnership X into Y. The transfer of the assets of X to Y is not a taxable transfer of real property, however, the resulting transfers of interests in X may be. See 19 RCNY § 23-03(e)(4). Pursuant to the merger, 100% of the interests in X are deemed exchanged for interests in Y. The transaction is exempt as a mere change of identity or form of ownership or organization to the extent the partners retain the same beneficial interest in the property following the merger as they held before the merger. In this case, A, B and C each retain a 24% interest in the property, D retains a 14% interest in the property and E retains a 4% interest in the property. Therefore, the merger is exempt as a mere change of identity or form of ownership or organization to the extent of 90%. The tax is imposed on $100,000 (10% × $1,000,000). The tax due is $2,625 ($100,000 × 2.625%). The tax rate is based on the full value of the consideration, $560,000, rather than the amount subject to tax.
Example E: Corporation X has five shareholders (col. 1 of table below) and owns real property in New York City. Pursuant to a plan of merger agreed upon and adopted by shareholders of Corporation X on January 4, 1999, Corporation X is to be merged under Article 9 of the New York Business Corporation Law into Corporation Y, which owns no real property in New York City. Four of the five shareholders of Corporation X also own stock in Corporation Y prior to the merger (col. 3 of table below). Corporation Y has 30,000 outstanding shares but will increase that number to 50,000. Pursuant to the merger, the Corporation X shares will be converted into Corporation Y shares in a ratio of four Corporation Y shares for every five Corporation X shares. The mere change exemption is computed as follows:
|
|
|
|
|
|
|
|
|---|---|---|---|---|---|---|---|
| A | 4,000 shares | 16% | 10,000 shares | 3,200 shares | 13,200 shares | 26.4% | 16% |
| B | 2,000 shares | 8% | 1,000 shares | 1,600 shares | 2,600 shares | 5.2% | 5.2% |
| C | 3,000 shares | 12% | 1,000 shares | 2,400 shares | 3,400 shares | 6.8% | 6.8% |
| D | 5,000 shares | 20% | 3,000 shares | 4,000 shares | 7,000 shares | 14% | 14% |
| E | 11,000 shares | 44% | 0 shares | 8,800 shares | 8,800 shares | 17.6% | 17.6% |
| Total | 25,000 shares | 100% | 15,000 shares (out of 30,000) | 20,000 shares | 35,000 shares (out of 50,000) | 70% | 59.6% |
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The transfer of the City real property from Corporation X to Corporation Y pursuant to the merger would be exempt from tax. See 19 RCNY § 23-03(e)(2). Pursuant to the merger, 100 percent of the Corporation X shares are deemed exchanged for Corporation Y stock, which constitutes a transfer of a controlling economic interest in New York City real property. Because the transfers by the shareholders were made pursuant to the approved plan of merger they are aggregated in determining whether the transaction constitutes a transfer of a controlling economic interest. However, the transaction is exempt to the extent that each of the Corporation X shareholders retains its beneficial interest in the real property formerly held by Corporation X. Column 7 reflects the percentage interest in the property retained by each shareholder, which is the lesser of the amounts in Columns 2 and 6. The transfer is exempt as a mere change of identity or form of ownership or organization to that extent, i.e., 59.6 percent. Shareholders A, B, C, D and E are the grantors and pursuant to the merger, are considered to have transferred their shares in X to Corporation Y in exchange for Y shares.
Example F: T, an individual, owns 20 shares in a cooperative housing corporation attributable to an apartment in the building. The apartment is leased to a tenant for residential use. T transfers the shares attributable to the apartment to Y Corporation, her wholly owned corporation. Because T retains a 100% beneficial ownership of the apartment, the transfer is exempt from tax as a mere change of identity or form of ownership or organization.
Example G: J owns 70% of the stock of X Corp., whose sole asset is 80% of the stock of Y Corp. Y Corp.’s sole asset is an unencumbered parcel of commercial real property in New York City with a fair market value of $1,000,000. On February 1, 1999, J transfers all of her stock in X Corp. to a newly formed corporation, Z Corp. in return for 60% of Z Corp.’s stock. (The other 40% of Z Corp.’s stock is owned by shareholders who have no independent interest in X Corp., Y Corp. or Y Corp.’s parcel of real property.) J’s transfer of the X stock is a transfer of a 56% interest (70% × 80%) in the real property and is, therefore, subject to tax as a transfer of a controlling economic interest. The value of the consideration received in exchange, the Z Corp. stock, is $560,000 ($1,000,000 × 56%). The transaction is exempt as a mere change of identity or form of ownership or organization to the extent that A retains a beneficial interest in the property following the merger. In this case, J retains a 33.6% interest in the property (56% × 60%). Therefore, the merger is exempt as a mere change of identity or form of ownership or organization to that extent. The tax is imposed on $224,000 (.224/.56 × $560,000). The tax due is $5,936 ($224,000 × 2.625%). The tax rate is based on the full value of the consideration, $560,000, rather than the amount subject to tax.
(iii) Transfers to and from trusts. [Reserved.]
(iv) For purposes of determining whether and to what extent the mere change of identity or form of ownership or organization exemption applies, the determination of the beneficial ownership of the real property or economic interest therein prior to a transaction and the extent to which the beneficial interest therein remains the same following the transaction will be based on the facts and circumstances.
§ 23-06 Applications for Exemptions.
A person or organization claiming exemption from the tax under 19 RCNY § 23-05(b)(2) is required to submit a properly executed application for exemption and in connection therewith to submit such information to the Commissioner of Finance as will enable him to rule upon its status. The application is required to be submitted in the form of affidavit setting forth:
§ 23-07 Presumptions and Burden of Proof.
The law presumes that all deeds and transfers of controlling economic interests in real property are taxable. Where the consideration includes property other than money, it is presumed that the consideration is the value of the real property or interest therein. Where the consideration is measured by the fair market value of realty, it is presumed that the fair market value is not less than twice the assessed valuation of the realty on the assessment roll of the City at the time of delivery of the deed, or the transfer of the controlling economic interest. These presumptions prevail until the contrary is established and the burden of proving the contrary is on the party seeking to rebut the presumption. The burden of proving that a lien or encumbrance existed on the real property or interest therein before the deed was delivered and remained thereon thereafter and the amount of such lien or encumbrance at the time of delivery of the deed is on the taxpayer.
§ 23-08 Payment of Tax.
(a) The tax shall be paid by the grantor to the Commissioner of Finance at the office of the Register in the county where the deed is or would be recorded within thirty days after the delivery of the deed by the grantor to the grantee but before the recording of such deed or, in the case of a tax on the transfer of a controlling economic interest in real property, within thirty days after such transfer by the grantor at Department of Finance, Operations Division, Real Property Transfer Tax Group, at the address provided on the return. In the absence of satisfactory proof as to the date of delivery of a deed, the date of the deed shall be deemed to be the date of delivery thereof. In case the tax due is not paid by the grantor, or if the grantor is exempt from tax under 19 RCNY § 23-05(a), the grantee shall also be liable for payment of the tax to the Commissioner of Finance. Payment of the tax may be made in cash, or by certified check, money order or draft drawn to the order of the Commissioner of Finance.
§ 23-09 Filing of Returns.
(a) A joint return shall be filed by both the grantor and the grantee, both electronically and in paper format for each deed, instrument, or transaction, whether or not a tax is due thereon. Thus, a return must be filed although the consideration for the deed, instrument, or transaction is $25,000 or less. The actual amount of the consideration for each deed, instrument, or transaction must be set forth on the return at the place provided therefor, regardless of the amount of the consideration. Where the consideration is $400,000 or more, a copy of the contract of sale or closing statement, if any, must be attached to the paper return. A return need not be filed for the grant of a leasehold interest in a 1, 2 or 3 family house or an individual dwelling unit except where tax is owed or the lease is to be recorded. In the case of a transfer of stock in a cooperative housing corporation made before August 1, 1989, other than the initial transfer of stock by the corporation or sponsor, if the owner did not hold the shares in connection with, incidental to or in furtherance of a trade, business, profession, occupation or commercial activity, the grantor and grantee may jointly file an affidavit of non-commercial use in lieu of a return. The return must be filed with the Commissioner of Finance, both electronically and by delivering a paper form of the return with an original signature as prescribed by this chapter to the Register for transmittal to the Commissioner of Finance, except as provided in subdivision (c) of this section with respect to transfers of property in Staten Island. The return must be so filed at the time of payment of the tax, or, in the case of a deed not subject to tax, before the recording of such deed. In the case where a transfer of an economic interest in real property is not subject to tax or the tax is zero (because of available credits), the return must be filed within 30 days after such transfer. The form of return shall be prescribed by the Commissioner of Finance and shall contain such information as the Commissioner deems necessary for the proper administration of the law. The electronic return shall be submitted in the format prepared by the Department of Finance and located on the Department of Finance Internet website. A confirmation will be issued by the Commissioner of Finance upon receipt of an electronic return. The paper return must be signed under oath by both the grantor or his agent and the grantee or his agent. Upon the filing of such return in the case of a deed, evidence thereof shall be affixed to the deed by the Register to indicate that a tax return has been filed. The Commissioner of Finance may provide for the use of stamps as evidence of payment and that they shall be affixed to the deed before it is recorded. If no tax is paid at the time of the recording of the deed, the Register may indicate on the deed that no tax was paid. Where no return is filed at the time of the recording of the deed, the Register may indicate on the deed that no return was filed. Where a deed, instrument, or transaction has more than one grantor or more than one grantee, the paper return may be signed by any one of the grantors and by any one of the grantees provided, however, that those not signing shall not be relieved of any liability for the tax imposed by the law.
(2) The Commissioner shall prescribe such forms as are necessary for the information return. Information regarding the transfer of stock in the cooperative housing corporation required to be provided on the return shall include but not be limited to the names, addresses and employer identification numbers or social security numbers of the grantor and the grantee, the number of shares transferred, the date of the transfer and the consideration paid for such transfer.
The electronic return is required to be filed electronically, and the paper return is required to be filed at the office of the Register in the county where the deed is or would be recorded, except that with respect to a transfer relating to a property in Staten Island, (i) the paper return must be filed in the office of the Richmond County Clerk, or (ii) where a return is not filed at the time of the recording of a deed, or the deed is not recorded, the paper return may instead be filed in any office of the City Register. In the case of transfers of controlling economic interests in real property or transfers of shares or interests in a corporation or other entity formed for the purpose of cooperative ownership of real property, returns or affidavits, whichever are applicable, must be filed electronically, and the paper return must be filed at the office of the City Register in the county in which the affected property is located, except that for such a transfer relating to property in Staten Island, the paper return must be filed in any office of the City Register. The locations of the Register’s offices are as follows:
| Manhattan | (New York County)66 John Street, 13th Floor,New York, NY 10038 |
|---|---|
| Bronx | Bronx Business Center3030 Third Avenue, 2nd Floor,Bronx, NY 10455 |
| Brooklyn | (Kings County) Municipal Building210 Joralemon Street, Room 2,Brooklyn, NY 11201 |
| Queens | (Queens County)144-06 94th StreetJamaica, NY 11435 |
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§ 23-10 Extension of Time for Filing of Returns.
(a) For good cause shown, the Commissioner of Finance may grant an extension of time not exceeding thirty days within which to file a return. An application for such extension must be made in writing prior to the due date of the 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 and such tax 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 the law and the regulations of the Commissioner of Finance must be paid at the time of the filing of the final return.
§ 23-11 Records To Be Kept.
Every grantor and grantee is required to keep complete records of conveyances of real property or economic interests therein. Such records shall include copies of the contract of sale, the title report, if any, the paper return filed, and confirmation of electronic return filed, waiver of the electronic filing requirement pursuant to 19 RCNY § 23-09(d), if applicable, or affidavit filed, records showing the amount of liens and encumbrances on the realty at the time of delivery of the deed, the closing statement, and the general books of account of a person which would reflect the sale or purchase of real property or economic interests therein. Such records shall be made available for inspection and examination at any time upon demand by the Commissioner of Finance or his duly authorized agent or employee and shall 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. Evidence of payment of tax to the Commissioner of Finance such as a cancelled check, a receipt, or a receipted return, must be preserved. If no records are maintained as required by this section, or if the records which are maintained are inadequate, the Commissioner of Finance will determine the amount of the tax due from such information as may be obtainable.
§ 23-12 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 Register or any officer or employee of the Department of Finance or Register to divulge or make known in any manner any information contained in or relating to any return or affidavit provided for by law. The officers charged with the custody of such returns or affidavits 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 Commissioner of Finance in an action or proceeding under the provisions of the law, or on behalf of any party to an action or proceeding, in either of which events the court may require the production of, and may admit in evidence, so much of said returns or affidavits or of the facts shown thereby, as are pertinent to the action or proceeding and no more. A certified copy of any return or affidavit or of any information contained in or relating thereto may be furnished 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 the same is requested for official business. Returns or affidavits may be inspected for official business by the Register, the Corporation Counsel or other legal representative of the City or by the district attorney of any county within the City. A grantor or grantee of a deed or any subsequent owner of the real property conveyed by such deed, and the grantor or grantee of an economic interest in real property, or the duly authorized representative of any of them, may obtain a certified copy of any return or affidavit filed in connection with the tax on such conveyance or transfer, upon application in writing therefor to the Commissioner of Finance. Where a representative applies for a certified copy of such returns or affidavits, he must file a power of attorney with the application. Nothing herein shall be construed to prohibit the publication of statistics so classified as to prevent the identification of particular returns or items thereof.
§ 23-13 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 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) 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 of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent 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 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) In the case of the failure of a cooperative housing corporation to file an information return on or before the date prescribed for filing by subdivision (g) of § 11-2105 of the Administrative Code and 19 RCNY § 23-09(b) (determined with regard to any extension of time for filing), unless it is shown that such failure was due to reasonable cause and not due to willful neglect, there shall be imposed on such cooperative housing corporation a penalty of $100 for each such failure.
(iv) For purposes of subparagraphs (i) and (ii), the amount of 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 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 of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent 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 upon 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 § 23-16), within ten 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 of such tax for each month or fraction thereof during which such failure continues, not exceeding twenty-five percent 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) 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 tax will be four and one-half percent under paragraph (1) and one-half of one percent under paragraph (2) for each month up to and including the first five months. After the first five months, the addition of one-half of one percent per month pursuant to paragraph (2) will apply for the next forty-five months for a maximum aggregate of forty-seven and one-half percent 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).
(B) If paragraphs (1) and (3) of this subdivision are both applicable, 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 days of such notice and demand.
(ii) The provisions of subparagraph (i) may be illustrated by the following examples:
Example A(a): Assume the grantor filed the tax return in connection with a transfer occurring on June 30, 1983 (due within 30 days after delivery of the deed by the grantor to the grantee but before the recording of such deed) on November 10, 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 as due on the return of $800 is paid on December 6, 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 July 30 to November 30, and 0.5% for the fractional part of the month from December 1 through December 6) of the amount shown due on the return of $800. There will also be imposed an additional amount under paragraph (1) of $138, determined as follows:
| 20 percent (5% per month for the 3 months from July 30 through October 30 and 5% for the fractional part of the month from November 1 through November 10) of the amount due of $1,000 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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Example A(b): A notice and demand for the $200 deficiency is issued on January 8, 1984, but the grantor or grantee does not pay the deficiency until December 23, 1984. In addition to interest there will be imposed an additional amount under paragraph (3) of $10.00, 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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Example B: Grantor or grantee files the tax return in connection with a transfer occurring on September 30, 1983, upon recordation on May 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 May 2, 1984. In addition to interest and the addition for failure to pay under paragraph (2) of $20.00 (8 months at .05% 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 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 October 30 through March 30 of the net amount due ($500) | $12.50 |
| Addition 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. Grounds for reasonable cause, where clearly established, may include the following:
(i) inability to obtain and assemble essential information required for the preparation of a complete return despite reasonable efforts;
(ii) 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. 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 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 19 RCNY § 23-13 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 an 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 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 19 RCNY § 23-13 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 penalty due to willful neglect for failure to file a return, five percent penalty due to negligence and the additional one-half of one percent 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 affidavit, or to supply any information, within the required time, with fraudulent intent, shall be liable for a penalty of not more than $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.
(2) Whenever a penalty is assessed for failure to file the return or affidavit or 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) 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, affidavit or report to pay the tax. Any person required to pay any tax or make any return, affidavit 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.
(5) Any person willfully simulating, altering, defacing, destroying or removing any evidence of the filing of a return or the payment of the tax shall be guilty of a misde- meanor.
§ 23-14 Refund.
The Commissioner of Finance will refund or credit, without interest, any tax, penalty, or interest erroneously, illegally or unconstitutionally collected or paid if application to the Commissioner of Finance for such refund shall be made within one year from the payment thereof.
(1) The grantor, if he has paid the tax to the Commissioner of Finance;
(2) The grantee, if he has paid the tax to the Commissioner of Finance;
(3) Any other person who has actually paid the tax to the Commissioner of Finance.
(1) The application must set forth the ground upon which the claim for refund or credit is made.
(2) 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:
(i) A cancelled check or other evidence of payment of the tax by the applicant to the Commissioner of Finance;
(ii) Such other additional information as the Commissioner of Finance may require. The Commissioner of Finance may require general releases to the City from both the grantor and the grantee before authorizing a refund or granting a credit. Where the 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, in lieu of any refund required to be made, may allow credit therefor on payments due from the applicant. The Commissioner of Finance reserves the right to audit the taxpayer’s books and records prior to the granting of 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 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’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 four months 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 under the law of a tax, interest or penalty which had been determined to be due pursuant to the provisions of the law where he has had a hearing or an opportunity for a hearing, as provided in said law, or has failed to avail himself of the remedies therein provided. No refund or credit shall be made of a tax, interest or penalty paid after a determination by the Commissioner of Finance made pursuant to the law unless it be found that such determination was erroneous, illegal or unconstitutional or otherwise improper, by the Commissioner of Finance after hearing or on his own motion, or in a proceeding under Article 78 of the Civil Practice Law and Rules, pursuant to the provisions of said law, in which event refund or credit without interest shall be made of the tax, interest or penalty found to have been overpaid.
§ 23-15 Proceedings to Recover Tax.
Whenever any grantor or grantee shall fail to pay any tax or penalty imposed by the law, 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 any such grantor or grantee subject to the provisions of the law is about to cease business, leave the State or remove or dissipate the assets 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. 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 the grantor, grantee or other person liable for the tax 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 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 judgments 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 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 therefore and execution thereon had been returned unsatisfied.
§ 23-16 Determination of Tax Deficiency.
If a return or affidavit required by the law is not filed, or if a return or affidavit 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, including the assessed valuation of the real property or interest therein and/or 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 giving of notice of such determination, shall apply 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 proceeding under Article 78 of the Civil Practice Law and Rules if application therefor is made to the Supreme Court within four months after the giving of the notice of such determination. A proceeding under Article 78 of the Civil Practice Law and Rules shall not be instituted unless:
§ 23-17 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 or affidavit 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 of a return or affidavit; provided, however, that where no return or affidavit has been filed 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 taxpayer 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.
§ 23-18 Notices.
Any notice authorized or required by the law may be given by mailing it to the person for whom it is intended in a postpaid envelope addressed to such person at the address given in the last return or affidavit filed by him pursuant to the law, or in any application made by him, or in any deed or instrument which is the subject of the notice, or if no return or affidavit has been filed or application made or address stated in the deed or instrument, then to such address as may be obtainable. The mailing of such notice 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.
§ 24-01 Definitions.
Unless the context requires otherwise, as used in these rules:
Assessment. “Assessment” means charges other than real property taxes, water charges and sewer rents, that are imposed on real property in the City of New York and which remain a lien on such real property until paid.
Beneficial owner. “Beneficial owner” means an individual or entity that has an ownership interest in excess of fifty percent of either (i) the real property or (ii) the entity that is the record owner of the property.
Department. “Department” means the New York City Department of Finance.
Ordinary overpayment. “Ordinary overpayment” means an overpayment, as defined herein, that resulted from means other than real property assessment review proceedings.
Overpayment. “Overpayment” means a payment that exceeds the amount of the real property taxes, water and sewer charges or assessments for which the payment was intended.
Record owner. “Record owner” means the owner of a property as it appears on the records of the New York City Department of Finance.
Taxpayer. “Taxpayer” means the payor of a tax, water and sewer charge or assessment, whether or not such party is the owner of the property to which the payment was applied.
Tax year. “Tax year” means the fiscal year of the City of New York, which commences July 1 and ends June 30.
Transfer of overpayment. “Transfer of overpayment” means the application of a credit to an unpaid tax, charge or assessment.
§ 24-02 Ordinary Overpayments and Double Payments.
Any application required by the Commissioner of Finance for refunds (or transfers) of over and double payments of real property taxes, assessments, water charges and sewers rents may be made by filing an application on a form or in a format established by the Commissioner of Finance, plus any documentation requested by the Department in order to evidence that the applicant is entitled to the refund or transfer of the overpayment, within six years after the date of the over or double payment. Any such documentation required may include, but is not limited to, copies of both sides of cancelled checks, receipted bills, a printout of the confirmation of payment of taxes by electronic means, statements or other documentation from the taxpayer’s bank or an affidavit setting forth facts alleged by the applicant.
§ 24-03 Real Property Assessment Review Proceedings.
(a) Application for refund. Refunds (or transfers) of overpayments of real property taxes resulting from a Tax Commission remission order or a Supreme Court order or judgment entered after trial or pursuant to settlement in a real property assessment review proceeding may be obtained in accordance with § 726 of the Real Property Tax Law only by filing an application on a form or in a format established by the Commissioner of Finance, plus any other documentation requested by the Department in order to evidence that the applicant is entitled to the refund or transfer of the overpayment, within three (3) years of the entry of the Supreme Court order or judgment, or within six (6) years of the date of the Tax Commission order, as the case may be. Other documentation required may include, but is not limited to, a copy of the Supreme Court order or judgment, if any, copies of both sides of cancelled checks, a printout of the confirmation of payment of taxes by electronaic means, statements or other documentation from the taxpayer's bank or an affidavit setting forth facts alleged by the applicant.
§ 24-04 Department of Finance Application of Overpayments to Arrears in Real Property Taxes and Property-Related Charges.
With respect to an overpayment of real property taxes or property-related charges on a property for which there are unpaid taxes or charges, the Department of Finance may apply the overpayment to satisfy such unpaid taxes and charges and refund only the balance of the overpayment, if any, that remains after the Department has so applied the overpayment.
§ 24-05 Transfer of Overpayment.
A taxpayer may transfer an overpayment from one property to another under the following conditions:
Example 1: In January, 2007, X made an overpayment of real property taxes on property A in the amount of $1,000. Property B has an outstanding balance of real estate taxes and interest from July, 2008, in the amount of $1,000. There are no other outstanding charges on either of the two properties. X is the record owner of both property A and property B and desires to transfer the overpayment from property A to property B. X must submit to the Department a request for transfer of the overpayment pursuant to 19 RCNY § 24-02. The $1,000 overpayment will be transferred from property A to property B to be applied to the outstanding balance on property B.
Example 2: The facts are the same as in Example 1 except that Y made the overpayment on property A. If X wishes to transfer the overpayment from property A to property B, X must submit to the Department an application pursuant to 19 RCNY § 24-02 certifying that X is entitled to the refund.
Example 3: In January, 2007, X made an overpayment of real property taxes on property A in the amount of $1,000. Property B has an outstanding balance of real estate taxes and interest in the amount of $2,000 from July, 2008. There are no other outstanding charges on either of the two properties. X owns 75% of the stock of X Corp. which is the record owner of property A. X also owns 75% of Y Corp. which is the record owner of property B. X desires to transfer the overpayment from property A to property B. X must submit to the Department an application pursuant to 19 RCNY § 24-02 together with any documentation requested by the Department to establish that X is the beneficial owner of both property A and property B. The $1,000 overpayment will be transferred from property A to property B to reduce the outstanding balance on property B by $1,000.
Example 4: The facts are the same as in Example 3 except that X Corp. made the overpayment on property A. If X wishes to transfer the overpayment from property A to property B, X must submit to the Department an application pursuant to 19 RCNY § 24-02 certifying that X is entitled to the refund and any documentation requested by the Department to establish that X is the beneficial owner of both property A and property B.
§ 26-01 Purpose.
The purpose of these rules is to define the requirements imposed on taxpayers for the maintenance and retention of books, records, and other sources of information under §§ 11-518, 11-687, 11-707, 11-805, 11-902, 11-1103, 11-1307 and 11-2503 of the Administrative Code of the City of New York and to address these requirements where all or a part of the taxpayer’s records are received, created, maintained or generated through various computer, electronic and imaging processes and systems.
§ 26-02 Definitions.
Unless the context requires otherwise, the following definitions apply in these rules:
Database Management System. The term “Database Management System” or DMS means a software system that controls, relates, retrieves, and provides accessibility to data stored in a database.
Department. The term “Department” means the Department of Finance of the City of New York.
Electronic Data Interchange. The term “Electronic Data Interchange” or “EDI” means the computer-to-computer exchange of business transactions in a standardized structured electronic format.
Hard copy. The term “Hard copy” means any documents, records, reports or other data printed on paper.
Machine-sensible record. The term “Machine-sensible record” means a collection of related information in an electronic format. Machine-sensible records do not include hard copy records that are created or recorded on paper or stored in or by an imaging system such as microfilm, microfiche, or storage-only imaging systems.
Storage-only imaging system. The term “Storage-only imaging system” means a system of computer hardware and software that provides for the storage, retention and retrieval of documents originally created on paper. It does not include any system, or part of a system, that manipulates or processes any information or data contained on the document in any manner other than to reproduce the document in hard copy or as an optical image.
Taxpayer. The term “Taxpayer” as used in these rules means any individual or entity subject to the provisions of Chapters 5, 6, 7, 8, 9, 11, 13 and 25 of Title 11 of the Administrative Code of the City of New York.
§ 26-03 General.
(a) A taxpayer shall maintain all records that are necessary to a determination of the correct tax liability under Chapters 5, 6, 7, 8, 9, 11, 13 and 25 of Title 11 of the Administrative Code of the City of New York. All required records must be made available on request by the Department or its authorized representatives as provided for in §§ 11-518, 11-687, 11-707, 11-805, 11-902, 11-1103, 11-1307 and 11-2503 of the Administrative Code of the City of New York. Such records shall include, but not be necessarily limited to permanent books of account or record, including inventories where applicable, as are sufficient to establish the amount of gross income, deductions, credits and other matters required to be shown by the taxpayer in any tax return required under the above chapters of the Administrative Code.
§ 26-04 Recordkeeping Requirements – Machine-Sensible Records.
(a) General.
(1) Machine-sensible records used to establish tax compliance shall contain sufficient transaction-level detail information so that the details underlying the machine-sensible records can be identified and made available to the Department upon request. A taxpayer has discretion to discard duplicated records and redundant information provided its responsibilities under these rules are met.
(2) At the time of an examination, the retained records must be capable of being retrieved and converted to a standard record format as specified by the Department.
(3) Taxpayers are not required to construct machine-sensible records other than those created in the ordinary course of business. A taxpayer who does not create the electronic equivalent of a traditional paper document in the ordinary course of business is not required to construct such a record for tax purposes.
(4) Any system for creating, maintaining and retrieving machine-sensible records must be able to accept date information input, provide date output, and store and perform calculations on dates before, on and after January 1, 2000 correctly and without ambiguity.
(1) Where a taxpayer uses electronic data interchange processes and technology, the level of record detail, in combination with other records related to the transaction, must be equivalent to that contained in an acceptable paper record. The retained records should contain such information as vendor name, invoice date, product description, quantity purchased, price, amount of tax and indication of tax status (where applicable), shipping detail, etc. Codes may be used to identify some or all of the data elements, provided that the taxpayer provides a method which allows the Department to interpret the coded information.
(2) The taxpayer may capture the information necessary to satisfy paragraph (1) of this subdivision at any level within the accounting system and need not retain the original EDI transaction records provided the audit trail, authenticity, and integrity of the retained records can be established.
Example: A taxpayer using electronic data interchange technology receives electronic invoices from its suppliers. The taxpayer decides to retain the invoice data from completed and verified EDI transactions in its accounts payable system rather than to retain the EDI transactions themselves. Since neither the EDI transaction nor the accounts payable system captures information from the invoice pertaining to product description and vendor name (i.e., they contain only codes for that information), the taxpayer also retains other records, such as its vendor master file and product code description lists and makes them available to the Department. In this example, the taxpayer need not retain its EDI transaction for tax purposes.
(1) Upon the request of the Department, the taxpayer shall provide a description of the business process that created the retained records. Such description shall include the relationship between the records and the tax documents prepared by the taxpayer and the measures employed to ensure the integrity of the records.
(2) The taxpayer must be capable of demonstrating:
(i) the functions being performed as they relate to the flow of data through the system;
(ii) the internal controls used to ensure accurate and reliable processing; and
(iii) the internal controls used to prevent unauthorized addition, alteration, or deletion of retained records.
(3) The following specific documentation for all retained files must also be kept:
(i) record formats (including the meaning of all “codes” used to represent information);
(ii) flowcharts for a system and a program;
(iii) label descriptions;
(iv) source program listings of programs that created the retained files;
(v) detailed charts of accounts (for specific periods);
(vi) evidence that periodic checks that are prescribed in 19 RCNY § 26-03(h) were performed; and
(vii) evidence that the retained records reconcile to the books and the tax report or return. This reconciliation must establish the relationship between the total of the amounts in the retained records by account to the account totals in the books and to the tax report or return.
(4) Any change to a data processing system that affects the accounting system and/or subsystems, together with their effective dates, must be documented in order to preserve an accurate chronological record. This record should include any changes to software or systems and any changes to the formats of files.
(5) Every taxpayer must be able to process the retained records at the time of a Department examination. Processing must include the ability to print a hard copy of any record. When the data processing system that created the records is being replaced by a system with which the records would be incompatible, the taxpayer must convert pre-existing records to a format that is compatible with the new system.
(6) At the time of an examination, every taxpayer must provide the Department with computer resources (e.g., terminal access, computer time and personnel) that are necessary for the processing of the retained records.
(7) Every taxpayer that utilizes a Database Management System must create a sequential file(s) that contains all the detail necessary to identify the underlying source documents. In addition to the documentation described in paragraphs (2), (3) and (4) of this subdivision the following documentation must be retained:
(i) data base description including vendor, name and version;
(ii) record layouts of each segment with respect to the fields in the segment;
(iii) systems control language; and
(iv) programs associated with the DMS including a description of what each program does.
(8) The manner in which the Department is provided access to machine-sensible records as required in 19 RCNY § 26-03(b) may be satisfied through a variety of means that must take into account a taxpayer’s facts and circumstances through consultation with the taxpayer.
(9) Such access must be provided in one or more of the following manners unless the taxpayer and the Department agree on another means of providing access to the machine-sensible records:
(i) The taxpayer may arrange to provide the Department with the hardware, software and personnel resources to access the machine-sensible records.
(ii) The taxpayer may arrange for a third party to provide the hardware, software and personnel resources necessary to access the machine-sensible records.
(iii) The taxpayer may convert the machine-sensible records to a standard record format specified by the Department, including copies of files, on a magnetic medium that is agreed to by the Department.
§ 26-05 Taxpayer Responsibility and Discretionary Authority.
(a) In conjunction with meeting the requirements of 19 RCNY § 26-04, a taxpayer may create files solely for the use of the Department. For example, if a database management system is used, it is consistent with these rules for the taxpayer to create and retain a file that contains the transaction-level detail from the database management system and that meets the requirements of 19 RCNY § 26-04. The taxpayer should document the process that created the separate file to show the relationship between that file and the original records.
§ 26-06 Alternative Storage Media for Hard Copy Documents.
(a) For purposes of storage and retention, taxpayers may convert hard copy documents received or produced in the normal course of business and required to be retained under this rule to microfilm, microfiche or another storage-only imaging system and may discard the original hard copy documents, provided the conditions of this section are met. Documents that may be stored on these media include, but are not limited to general books of account, journals, voucher registers, general and subsidiary ledgers, and supporting records of details, such as sales invoices, purchase invoices, exemption certificates and credit memoranda.
(1) Documentation establishing the procedures for converting the hard copy documents to microfilm, microfiche or another storage-only imaging system must be maintained and made available on request. Such documentation must, at a minimum, contain a sufficient description to allow an original document to be followed through the conversion system as well as internal procedures established for inspection and quality assurance. There must be no substantial evidence that the microfilm, microfiche or other storage-only imaging system lacks authenticity or integrity.
(2) Procedures must be established for the effective identification, storage, and preservation of the stored documents and for making them available for the period they are required to be retained under 19 RCNY § 26-07.
(3) Upon request by the Department, a taxpayer must provide facilities and equipment for reading, locating, and reproducing any documents maintained on microfilm, microfiche or other storage-only imaging system.
(4) When displayed on such equipment or reproduced on paper, the documents must exhibit a high degree of legibility and readability. For this purpose, legibility is defined as the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals. Readability is defined as the quality of a group of letters or numerals being recognizable as words or complete numbers.
(5) All data stored on microfilm, microfiche or other storage-only imaging system must be maintained and arranged in a manner that permits the location of any particular record.
§ 26-07 Records Retention – Time Period.
All records required to be retained under these rules must be preserved pursuant to §§ 11-518, 11-687, 11-707, 11-805, 11-902, 11-1103, 11-1307 and 11-2503 of the Administrative Code of the City of New York unless the Department has provided in writing that the records are no longer required.
§ 25-01 Definitions.
When used in these regulations the following terms shall mean or include:
City. “City” shall mean the City of New York.
Commissioner. “Commissioner” shall mean the Commissioner of Finance of the City of New York.
License. “License” shall mean a license issued pursuant to the Alcoholic Beverage Control Law.
License fees payable. “Licenses fees payable” shall mean:
(1) The annual license fees payable under the New York State Alcoholic Beverage Control Law, including the fees payable under § 122 of such law relating to the continuance of business by a receiver or representative, whether or not a lesser sum is paid thereunder.
(2) In the case of summer and winter licenses issued under the New York State Alcoholic Beverage Control Law, the license fees payable for the period of time for which a summer or winter license may be issued under such law, whether or not a lesser sum is paid thereunder.
(3) “License fees payable” do not include:
(i) Amounts paid as filing fees on an initial or renewal application under § 56-a of the New York State Alcoholic Beverage Control Law;
(ii) Amounts paid to defray administrative expenses under section 101-bbb of the New York State Alcoholic Beverage Control Law relating to the prohibition against retail sales at less than cost; and
(iii) Amounts paid to defray administrative expenses under section 101-bbb of the New York State Alcoholic Beverage Control Law relating to the enforcement of minimum consumer resale prices of wine.
Person. “Person” shall mean an individual, partnership, society, association, joint stock company, corporation, estate, receiver, lessee, 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 licensee. “Retail licensee” shall mean any person to whom a license has been issued by the State Liquor Authority under the New York State Alcoholic Beverage Control Law who sells at retail in the City, for on or off premises consumption, any liquor, wine or beer for the sale of which such license is required.
Return. “Return” shall mean any return required to be filed as herein provided.
State. “State” shall mean the state of New York.
Tax year. “Tax year” shall mean June first of any calendar year through May thirty-first of the following calendar year.
§ 25-02 Imposition of the Tax.
(a) The law imposes a tax for the privilege of selling liquor, wine or beer at retail, for on or off premises consumption, within the City of New York, to be paid annually for each tax year, commencing with the tax year beginning on June 1, 1980, by each retail licensee in an amount equal to 25% of the annual license fees payable under the New York State Alcoholic Beverage Control Law by such retail licensee for the license year in effect at the commencement of the tax year under the law. A retail licensee who obtains a license subsequent to the commencement of a tax year is required to pay the tax based upon the fees payable under the New York State Alcoholic Beverage Control Law by such licensee for the license year in effect at the time such license is issued. The tax imposed is in addition to any and all other taxes paid by such retail licensee.
Illustration 1: A retail licensee obtains a license on March 1, 1980, for the license year commencing March 1, 1980, and expiring February 28, 1981, and pays the annual license fee of $1,200, the amount payable under the New York State Alcoholic Beverage Control Law. He continues in business as a retail licensee to or beyond June 1, 1980. Since the license fee payable for the license year in effect on June 1, 1980 (the date of the commencement of the tax year) is $1,200, the tax payable to the City is 25% thereof, or $300.
Illustration 2: Assume that the amount of the annual license fee payable under the New York State Alcoholic Beverage Control Law by the retail licensee for the license year in effect at the time such license is issued is $1,200, and the retail licensee obtains the license on April 1, 1981.
Where: $1,200 = annual license fee payable under the New York State Alcoholic Beverage Control Law.
Where: 61 = remaining number of days in tax year-April 1st to May 31st, 1981.
365 = total number of days in tax year.
Since the tax of $50.14 in item (ii) is less than one-half of $300, the tax required to be paid to the City is $150.
Illustration 3: Assume the same facts as in illustration (2) above except that the retail license was obtained August 1, 1981.
Where: $1,200 = annual license fee payable under the New York State Beverage Control Law.
Where: 304 = remaining number of days in tax year-August 1, 1981 to May 31, 1982.
365 = total number of days in tax year
Since the tax in item (ii) $249.86 is more than $150, the tax required to be paid to the City is $249.86.
Illustration 4: X obtains a summer liquor license under the New York State Alcoholic Beverage Control Law on April 1, 1980 covering the period April 1, 1980 to October 31, 1980 for which he is required to pay $700, although the annual license fee for a yearly liquor license is $1,200. Since the license fee payable for a summer liquor licensee for the license year in effect on June, 1, 1980 (the date of the commencement of the tax year) is $700, the tax payable to the City for such tax year is 25% thereof, or $175. In this illustration it is assumed that the retail licensee intends to and actually obtains another license in 1981 for the period from April 1, 1981 to October 31, 1981. If such retail licensee does not obtain a license forthe months of April and May, 1981, he will be deemed to have ceased doing business as a retail licensee not later than October 31, 1980. In such event, he may avail himself of the provisions for refund of the tax paid as prescribed in 19 RCNY § 25-08.
Illustration 5: A obtains a summer liquor license under the New York State Alcoholic Beverage Control Law on April 1, 1981 covering the period April 1, 1981 to October 31, 1981 for which he is required to pay $700, although the annual license fee for a yearly liquor license is $1,200.
Where: $700 = the summer liquor license fee payable under the New York State Alcoholic Beverage Control Law.
Where: 61 = remaining number of days in remaining calendar months of tax year – April 1, 1981 to May 31, 1981.
214 = number of days in total calendar months of tax year for which summer license may be issued – June 1, 1980 to October 31, 1980 and April 1, 1981 to May 31, 1981.
Where: $600 = minimum license fee payable under the New York State Alcoholic Beverage Control Law.
$1,200 = the maximum license fee payable under the New York State Alcoholic Beverage Control Law.
Since the tax of $49.88 in item (ii) is less than one-half of $175, the minimum tax required to be paid for the tax year ending May 31, 1981 is $87.50 (item (iii)). For the tax year commencing June 1, 1981, A is required to pay a tax of $175 ; provided, however, if A does not obtain another summer liquor license for the months of April and May, 1982 he will be deemed to have ceased doing business as a retail licensee not later than October 31, 1981, in which event he may avail himself of the provisions for refund of the tax so paid as prescribed in 19 RCNY § 25-08 as amended.
§ 25-03 Exemptions.
(a) The tax does not apply to:
(1) The State of New York, or any of its agencies, instrumentalities, public corporations (including a public corporation created pursuant to agreement or compact with another State or Canada) or political subdivisions;
(2) The United States of America, and any of its agencies and instrumentalities insofar as it is immune from taxation;
(3) The United Nations or other international organizations of which the United States of America is a member;
(4) Any corporation, 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, 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 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 paragraph.
(1) The type of organization,
(2) The purpose 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. The affidavit must be supplemented by a copy of the articles 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 photostatic copy of the letter, if any, from the United States Treasury Department granting the organization exemption from Federal income taxation.
§ 25-04 Returns.
(a) Every person subject to the tax for the tax year beginning June 1, 1980 must file a return on or before August 25th, 1980 and annually thereafter on or before the 25th day of June of each year for each tax year during which such person is a retail licensee. Thus, a retail licensee who is in business on or before June 1, 1980 is required to file a return on or before August 25, 1980, and on or before June 25th of each tax year thereafter during which such person is a retail licensee.
§ 25-05 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 identifying numbers in the form of his federal employer identification number or, if no such number has been assigned, his social security account number, and his New York State Liquor Authority license serial number, for purposes of proper identification.
§ 25-06 Payment of Tax.
(a) Each person subject to the tax imposed by the law is required to pay the tax to the Commissioner of Finance at the time of the filing of a return. The tax is due and payable on the last day on which such return is required to be filed, regardless of whether a return is filed or whether the return which is filed correctly indicates the amount of tax due. 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. The duplicate copy will be receipted, indicating that payment has been made, and returned to the taxpayer. Cash payments will be accepted only at the Bureau of Tax Operations, 151 West Broadway, New York, N.Y. 10013, 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 the Bureau of Tax Operations, 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.
§ 25-07 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 be given to the person liable for the payment of the tax. 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 motion 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 therefor 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 in such amount 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 the 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.
§ 25-08 Refunds.
(a) The Commissioner of Finance shall refund or credit, without interest, any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid, provided:
(1) A written application for refund or credit was made to the Commissioner of Finance within one year from the payment of the tax, penalty or interest, and
(2) The application is made by the retail licensee or other person who actually paid the tax.
(2) It must be signed by the applicant or his duly authorized agent. If signed by an agent, the application must be accompanied by a power of attorney acceptable to the Commissioner of Finance.
(3) It must demonstrate that the refund provisions of the law have been complied with.
(4) It must be accompanied by the cancelled check or a photostatic copy thereof, showing both the front and back of the check; or, if paid by cash or money order, by evidence of such payment.
For example: A summer (liquor) retail licensee who obtained a license for the period from April 1, 1981 to October 31,1981 and paid the tax to the City as provided by the law and regulations, and who did not obtain a new license for the period from April 1, 1982 to October 31, 1982, and who meets the requirements of the refund provisions of the law and regulations, would be entitled to a refund on the basis of two-sevenths of the tax paid to the City, said fraction being the ratio that the unexpired term of the tax year bears to the seven months of the tax year for which summer licenses may be issued.
§ 25-09 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 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.
§ 25-10 Bulk Sales; Liability of Purchaser.
The law provides that whenever there is made a sale, transfer or assignment in bulk of any part or the whole stock of merchandising or of fixtures, or merchandise and of fixtures pertaining to the conducting of the business of the seller, transferor 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, transferor or assignor, has represented to, or informed the purchaser, transferee or assignee that it owes any tax pursuant to said 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, transferor or assignor shall be subject to a first priority right and lien for any such taxes therefore or thereafter determined to be due from the seller, transferor or assignor to the City, and the purchaser, transferee or assignee is forbidden to transfer to the seller, transferor 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 subdivision, 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, transferor or assignor, and such liability may be assessed and enforced in the same manner as the liability for tax under said law.
§ 25-11 Records.
Every retail licensee must keep records of the date he commenced doing business as a retail licensee, the date of the issuance of a license to him by the State Liquor Authority under the New York State Alcoholic Beverage Control Law, the amount of license fees paid and/or payable for each license, and the period for which such license was issued. Every such retail licensee is also required to keep records of the date, if any, when he discontinued doing business, and of any refund received from the State Liquor Authority, together with the amount thereof and the date received. The Commissioner of Finance may require every retail licensee to keep such other records of his business and in such form as the Commissioner of Finance may from time to time require. 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 shall 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 may be kept longer.
§ 25-12 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. 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 the return of any taxpayer who shall bring action to set aside or review the tax based thereon, or against whom an action or proceeding under this title may be instituted. Nothing herein shall be construed to prohibit the publication of statistics so classified as to prevent the identification of particular returns or items thereof.
§ 25-13 Interest.
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 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.
§ 25-14 Penalties.
(a) Civil penalties. Any person failing to file a return or to pay over any tax due prior to February 24, 1983, within the time required by law shall be subject to a penalty of five per cent 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 (a)) 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 return of tax 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) of this paragraph (1), the amount of 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 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 (a)) 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 § 25-07), 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 (a)) 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 (a) are both applicable, the addition under paragraph (1) is reduced by the addition under paragraph (2). Thus, the addition to tax 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 (l/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 the 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:
Example A(a): Assume the taxpayer filed his tax return for the tax year beginning June 1, 1983 on September 30, 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 31, 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 26 through October 25, and 0.5% for the fractional part of the month from October 26 through October 31) 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 the 3 months from June 26 through September 25 and 5% for the fractional part of the month from September 26 through September 30) of the amount due of $1,000 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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Example A(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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Example B: A taxpayer files his tax return for the tax year beginning June 1, 1983, on February 14, 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 14, 1984. In addition to interest and the addition for failure to pay under paragraph (2) of $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% for maximum of 5 months, 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 percent for the 5 months June 26 through November 29 of the net amount due ($500) | $12.50 |
| Addition 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) timely prepared reports misplaced by a responsible employee and discovered after the due date;
(iv) inability to obtain and assemble essential information required for the preparation of a complete return despite reasonable efforts;
(v) any other cause or 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 19 RCNY § 25-13 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 19 RCNY § 25-13 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, (paragraph (1)), the additional one-half of one percent (1/2%) per month for failure to pay tax shown on a return (paragraph (2)), the additional one-half of one percent (1/2%) per month for failure to pay tax required to be shown on a return (paragraph (3)), and the five percent (5%) penalty due to negligence (paragraph (6)).
(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.
(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 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.
(5) 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, that information has not been supplied or that records have not been retained shall be prima facie evidence thereof.
§ 25-15 Notices, Limitations of Time, Mailing Rules.
(a) Any notice authorized or required under the provisions of the law may be given by mailing the same to the person for whom it is intended in a postpaid envelope addressed to such person at the address given in the last return filed by him pursuant to the provisions of 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 such notice 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.
§ 27-01 Representation of Taxpayers.
(a) Scope. This rule concerns representation of taxpayers before the Commissioner of Finance with respect to matters arising under Chapters 5, 6, 7, 8, 9, 11, 12, 13, 14, 21, 24, and 25 of Title 11 of the New York City Administrative Code. A New York City Department of Finance POA-2 Form or power of attorney qualifying under Title 15 of Article 5 of the General Obligations Law must be filed in order to represent principals with respect to matters administered by the Commissioner of Finance and not arising under the aforementioned chapters. This rule does not apply to proceedings before the New York City Tax Appeals Tribunal or before the Conciliation Bureau of the New York City Department of Finance.
Commissioner. The term “commissioner” means the New York City Commissioner of Finance.
Department. The term “department” means the New York City Department of Finance.
Power of attorney. The term “power of attorney” means a document meeting the requirements of subdivision (e) of this section.
Practice before the commissioner. The term “practice before the commissioner” means all activities connected with presentation to the department or any of its personnel relating to a taxpayer’s rights, privileges, or liabilities with respect to matters falling within the scope of this rule (see subdivision (a) of this section). Such presentation includes the preparation and filing of necessary documents, correspondence with and communications to the department, and the representation of a taxpayer at conferences and meetings. Practice before the commissioner does not include merely furnishing information to the department or preparing a report or return as a preparer for the taxpayer.
Principal. The term “principal” means an individual authorized to sign a power of attorney on behalf of a taxpayer (see paragraph (2) of subdivision (e) of this section).
Represent and representative. The term “represent” means to act on behalf of a taxpayer with the authority to bind or obligate the taxpayer. A “representative” is an individual, other than a principal, able to act with that authority.
(1) Practice before the commissioner, unless the taxpayer is accompanied by a principal or another individual permitted, under this rule, to act as a representative in the same matter;
(2) Offer and/or execution of either (A) a waiver of restriction on assessment or collection of a deficiency in tax; or (B) a waiver of notice of disallowance of a claim for credit or refund;
(3) Execution of a consent to extend the statutory period for assessment or collection of a tax;
(4) Execution of an agreement to settle or adjust claims under § 1504.2 of the Charter of the City of New York;
(5) The receipt (but not endorsement or collection) of a check drawn on the department (see subparagraph (4)(ii) of subdivision (e) of this section);
(6) Signing tax returns. A tax return may be signed by a representative only if the taxpayer, or the taxpayer’s court appointed representative, requests permission in writing and the commissioner or his or her delegate determines that good cause exists for granting such permission and a properly executed power of attorney specifically granting such authority is submitted (see subparagraph (4)(ii) of subdivision (e) of this section);
(7) Discussing or receiving information that is subject to applicable federal, state, or city confidentiality or secrecy laws, unless subdivision (f) of this section applies; and
(8) Such other acts where the department deems it necessary to protect the interests of the city or a taxpayer.
(1) an attorney-at-law licensed to practice in any jurisdiction in the United States;
(2) a certified public accountant duly qualified to practice in any jurisdiction in the United States;
(3) a public accountant duly qualified in any jurisdiction in the United States;
(4) an agent enrolled to practice before the Internal Revenue Service;
(5) the taxpayer’s husband, wife, adult child or parent;
(6) an officer or a regular full-time employee of the taxpayer;
(7) the taxpayer’s court appointed representative; and
(8) any other individual with the special permission of the commissioner, or his designee.
(1) Information required. A taxpayer may file a power of attorney in a form prescribed by the commissioner. However, a taxpayer may also elect to submit a power of attorney in a different form but such power of attorney shall include the following information:
(i) the name and mailing address of the taxpayer;
(ii) the taxpayer’s social security or taxpayer identification number;
(iii) the name and mailing address of the representative(s);
(iv) a description of the matters as to which the representative is authorized to act, including the type of tax or taxes and taxable period or periods; and
(v) if applicable, a clear expression of the taxpayer’s intent to limit the authority conveyed.
(2) Signing. A power of attorney must be signed as follows:
(i) In the case of an individual taxpayer, by the individual.
(ii) In the case of a joint return, by both husband and wife, except that either spouse may sign for the other if such signature is duly authorized in writing.
(iii) In the case of a sole proprietorship, by the proprietor.
(iv) In the case of a partnership, either by all members or in the name of the partnership by one of the partners duly authorized to act.
(v) In the case of a dissolved partnership, by each of the former partners or, in case some of the partners are dead, by their legal representatives. If, however, the surviving partners at the time of the execution of the power of attorney have exclusive right to the control and possession of the firm’s assets for the purpose of winding up its affairs, their signatures alone will be sufficient.
(vi) In the case of a deceased taxpayer, by the executor or administrator. A power of attorney submitted by an administrator or executor must be accompanied by proof of his authority.
(vii) In the case of guardians and other fiduciaries appointed by a court of record, by the fiduciary. In such instance the power of attorney must be accompanied by a court certificate or court order showing that such fiduciary has been appointed and that his appointment has not been terminated.
(viii) In the case of a trustee under an agreement or declaration, by the trustee. In such instance the power of attorney must be accompanied by documentary evidence of the authority of the trustee to act.
(ix) In the case of a corporation, by an officer duly authorized by the board of directors to act.
(x) In the case of a limited liability company, by all the members or by a member or manager duly authorized to act on behalf of the company.
(xi) Under subparagraphs (vi) to (viii) of this paragraph (2), inclusive, proof of authority will be waived if the person signing the power of attorney is the same person who signed the tax return involved.
(3) [Repealed.]
(4) Scope of authority.
(i) If a power of attorney designates only a specific tax or taxes and no specific period, then the power of attorney may be accepted by the department as including representation for the specified tax or taxes for all periods. If a power of attorney designates only a specified period or periods and no particular tax, then the power of attorney may be accepted as including representation for the specified period or periods for all taxes. If a power of attorney does not designate any specific tax or tax period, then the power of attorney may be accepted as including representation for all taxes and all periods.
(ii) A representative may sign tax returns only if the power of attorney expressly authorizes the representative to sign tax returns and only where written permission to do so has been granted by the commissioner or his or her delegate.
(iii) Any recognized representative appointed in a power of attorney may substitute or delegate authority under the power of attorney to another representative if substitution or delegation is specifically permitted under the power of attorney and the recognized representative files with the department in the manner provided in subparagraph 5(i) of this subdivision a statement signed by the recognized representative appointed under the power of attorney containing the name and mailing address of the new representative.
(5) Filing.
(i) A power of attorney must be filed and received in the office of the department in which the matter is pending or in such other manner as the department may designate. The power of attorney must be filed with the department in a conspicuous manner. Accordingly, a power of attorney should not be attached to, or incorporated in, any return, report or other document that is routinely filed with the department, unless the return, report, or other document specifically provides for such attachment or incorporation.
(ii) The department may, in its discretion, accept a copy or facsimile transmission (FAX) of a power of attorney. The department may also require proof of the existence and validity of the original power of attorney.
(6) Modification and revocation.
(i) In any case in which a power of attorney has been filed and thereafter the taxpayer desires to authorize an additional or a different representative in the same matter, except as provided in subparagraph (4)(iii) of this subdivision, a new power of attorney must be filed in the office of the department in which the previous power of attorney is filed.
(ii) A taxpayer may revoke a power of attorney by filing a statement of revocation with the office of the department in which the taxpayer has filed the power of attorney to be revoked. The statement must indicate that the authority of the first power was revoked and be signed by a principal, and a copy of the power to be revoked must be attached.
(iii) A representative may withdraw from representation in a matter in which a power of attorney has been filed by filing a statement with the office of the department in which the power of attorney has been filed. The statement must be signed by the representative and must identify the name and address of the taxpayer and the matter from which the representative is withdrawing.
(1) The department may establish a procedure under which a taxpayer may authorize in writing an individual to discuss and receive confidential tax information relating to the taxpayer’s tax return without submitting a power of attorney. The tax information authorization shall apply only to inquiries relating to information contained in the tax return with which such authorization is filed. The individual designated must be an employee of the taxpayer or the person, or an employee of the person, signing the return as a paid preparer. The authorization statement must be filed with the taxpayer’s tax return and signed by the taxpayer or an individual permitted to sign a tax return on behalf of the taxpayer.
(2) Any such procedure may provide that a tax authorization statement will go into effect immediately upon receipt by the department.
(3) Any such procedure may provide that receipt of a new tax authorization statement revokes all previous designations with respect to the tax and period to which it relates. The taxpayer may also revoke an authorization statement without submitting a new statement by notifying the department in writing of the revocation.
(4) Any such procedure may provide that an individual designated in a tax authorization form does not have the authority to represent the taxpayer, except as provided in paragraph (1).
(1) The department may refuse to accept a power of attorney where there is doubt about the ability or right of the appointed representative to act for the taxpayer.
(2) The commissioner may modify or waive any of the requirements of this section for good cause and may prescribe special limited powers of attorney as may be necessary for the proper administration by the department of title 11 of the New York City Administrative Code and other tax statutes, and regulations adopted thereunder.
§ 28-01 Meaning of Terms.
(a) General. (Administrative Code § 11-501(a)). Any term used in Chapter 5 of Title 11 of the Administrative Code and in these regulations which is not otherwise defined in that chapter or in this chapter of these regulations shall, unless a different meaning is clearly required, have the same meaning as when used in a comparable context in the laws of the United States relating to Federal income taxes and the Federal tax regulations promulgated thereunder. Any reference herein to the laws of the United States shall mean the provisions of the Internal Revenue Code of 1954, and amendments thereto, and other provisions of the laws of the United States relating to Federal income taxes, as the same may be or become effective at any time or from time to time for the taxable year. (See: 19 RCNY § 28-02(d).)
§ 28-02 Unincorporated Business Defined.
(a) General. (Administrative Code § 11-502(a)).
(1) Except as otherwise specifically provided in this chapter of these rules, an unincorporated business means any trade, business, profession or occupation conducted, engaged in or being liquidated by an individual or by an unincorporated entity, including a partnership or fiduciary, a corporation in liquidation, or an unincorporated entity that has elected under § 11-602(1)(b) of the Administrative Code to continue to be subject to the tax imposed by Chapter 5 of Title 11 of the Administrative Code for the period during which such election is in effect, but not including any entity subject to any city corporate business tax imposed pursuant to Chapter 6 of Title 11 of the Administrative Code.
(2) For all taxable years beginning on or after January 1, 1978, the term “unincorporated business” shall not include any entity conducting an insurance business as a member of the New York Insurance Exchange as described in Article 62 of the State Insurance Law.
(3) (i) An unincorporated business which is a utility business subject to the supervision of the State Department of Public Service and which is subject to the tax on utilities pursuant to Chapter 11 of Title 11 of the Administrative Code shall not be subject to tax under Chapter 5 of Title 11 of the Administrative Code.
(ii) An incorporated business which is subject to the tax on vendors of utility services under Chapter 11 of Title 11 of the Administrative Code shall be subject to the Unincorporated Business Tax under Chapter 5 of Title 11 of the Administrative Code on a portion of its entire net income allocable to the city under § 11-508 of the Administrative Code (see: 19 RCNY § 28-07). Entire net income is the unincorporated business gross income as defined by § 11-506 of the Administrative Code (see: 19 RCNY § 28-05) less the unincorporated business deductions allowed by § 11-507 of the Administrative Code (see: 19 RCNY § 28-06). The portion of the unincorporated business entire net income subject to the unincorporated business tax shall be calculated by multiplying the entire net income allocable to the City by a fraction the numerator of which shall be the total receipts of the unincorporated business less those receipts subject to the tax imposed by Chapter 11 of Title 11 and the denominator of which shall be the total receipts of the unincorporated business.
Example: An unincorporated business has total receipts of $1,000,000. $300,000 of these receipts is subject to the tax imposed by Chapter 11 of Title 11 of the Administrative Code. The entire net income of the business which is allocable to the City is $500,000. $350,000 will be subject to the Unincorporated Business Tax
($700,000 × $500,000 = $350,000) $1,000,000
(4) (i) Where an individual or other unincorporated entity carries on in whole or in part in the City, two or more distinct unincorporated businesses, all such businesses carried on in whole or in part in the City shall be treated as one unincorporated business for the purposes of Chapter 5 of Title 11 of the Administrative Code. The gross business income and the unincorporated business deductions of all such businesses must be reported in one return. The deductions for the compensation for services of the proprietor or the active partners and the unincorporated business exemptions must be computed without regard to the fact that more than one business activity is carried on by the entity.
(ii) An individual or other unincorporated entity carrying on a number of separate and distinct unincorporated businesses, some located (in whole or in part) in the City and others located entirely outside the City, must treat all the New York City businesses as a single business in computing its tax. The businesses carried on entirely outside the City are not taxable and, therefore, items of income, gain, loss or deduction from such businesses are not included in computing the unincorporated business taxable income of the City business. In addition, these distinct businesses carried on entirely without the City may not serve as a regular place of business for allocation purposes of the business carried on within the City (see: 19 RCNY § 28-07).
(iii) Where a husband and wife each carry on a separate and independent business, each must file a separate and independent tax return even if they file jointly for purposes of the Federal, State or City personal income taxes. Losses incurred in one spouse’s business may not be used to reduce the taxable income of the other spouse’s business.
(5) In general, the trades, businesses, professions or occupations which constitute an unincorporated business when conducted, engaged in or being liquidated by an individual or an unincorporated entity include, without limitation, all phases of activities such as manufacturing and processing, merchandising, at wholesale or retail, banking and financing, the practice of law, medicine, accounting and other professions, trucking and other transportation services, brokerage services of all types and any other activity which involves the leasing of or trading or dealing in real or personal property or the performing of services of any kind. Where a doubt as to the status of an activity exists, all the relevant facts and circumstances must be considered in determining whether the activity or the transactions involved constitute a trade, business, profession or occupation for the purposes of this section. Generally, the continuity, frequency and regularity of activities, as distinguished from casual or isolated transactions, and the amount of time and resources devoted to the activity or transactions are the factors which are to be taken into consideration.
Example: The composition of a single song by an individual who is not a songwriter by profession does not constitute carrying on an unincorporated business so as to subject his royalty income to the tax.
(6) Ordinarily, an individual or other unincorporated entity, not otherwise subject to tax, engaging in activities relating to the investment and reinvestment of his or its own funds and the receipt or collection of income therefrom, or the sale, purchase or writing of stock options for his or its own account or the consummation of isolated or incidental transactions connected with such investment activities will not be considered to be the carrying on of a trade, business or occupation. See 19 RCNY § 28-02(g). However, a taxpayer who or which invests funds in the purchase of an operating unincorporated business, such as a manufacturing plant, mercantile organization, hotel or other unincorporated activity of the type where the carrying on of business is necessary to realizing on the investment, will be deemed to be engaged in the conduct of a taxable trade, business, profession or occupation, even though only a limited amount of time, thought and energy may be devoted to the activity by the individual taxpayer, or by the members of a partnership or other unincorporated entity.
(7) (i) An individual will not be treated as engaged in any trade, business, profession or occupation carried on within or without the City by an unincorporated entity in which such individual owns an interest.
(ii) For taxable years beginning on or after January 1, 1996, and for purposes of Chapter 5 of Title 11 of the Administrative Code, if an unincorporated entity owns an interest in another unincorporated entity that is carrying on any trade, business, profession or occupation in whole or in part in the City, the first unincorporated entity will be treated as carrying on that same trade, business, profession or occupation in whole or in part in the City, regardless of whether that trade, business, profession or occupation constitutes an unincorporated business for purposes of Chapter 5 of Title 11 of the Administrative Code. If an unincorporated entity owns an interest in another unincorporated entity that is not carrying on any trade, business, profession or occupation in whole or in part in the City, the first unincorporated entity will not be considered engaged in an unincorporated business based solely on such ownership. The provisions of this subparagraph (ii) may be illustrated by the following examples:
Example 1: Partnership A is engaged in the purchase and sale of stocks and securities for its own account in the City. In 1997, Partnership A is a limited partner in Partnership B that operates a hotel located outside the City and is not engaged in any other trade, business, profession or occupation in whole or in part in the City. Partnership A will not be considered to be carrying on a business in the City by reason of its ownership of an interest in B.
Example 2: The facts are the same as in Example 1 except that the hotel is located in the City. Because Partnership B is engaged in a business in the City, under the provisions of paragraph (7) above, Partnership A will be considered engaged in the business carried on in the City by Partnership B.
(1) General. The persons and entities which are subject to the unincorporated business income tax when they engage in the carrying on of or the liquidation of a taxable trade, business, profession or occupation, as defined in 19 RCNY § 28-02(a), are any
(i) individual,
(ii) partnership (whether a general, limited or special partnership),
(iii) society,
(iv) association,
(v) estate,
(vi) statutory or common law trust,
(vii) individual carrying on a taxable trade, business, profession or occupation in a fiduciary capacity or relationship, including
(A) an executor,
(B) administrator,
(C) receiver,
(D) trustee,
(E) liquidator,
(F) referee and
(G) assignee,
(viii) a corporation in liquidation, or
(ix) any other entity which is not taxable as a corporation under Chapter 6 of Title 11 of the Administrative Code.
(2) Executor or administrator. Where an executor or administrator, in his or its fiduciary capacity, continues to carry on or liquidate an unincorporated business of a decedent, the estate of such decedent is an entity subject to the provisions of the unincorporated business tax law. The unincorporated business tax law also applies where a receiver, trustee, liquidator, assignee, referee, or other fiduciary carries on or liquidates an unincorporated business activity of an individual, partnership or other unincorporated entity. The tax likewise applies to the activities of a fiduciary in connection with the liquidation of the business of a corporation, unless such liquidating activities are subject to corporation taxes under Chapter 6 of Title 11 of the Administrative Code. Furthermore, a guardian, trustee, executor, administrator, receiver, conservator, referee, assignee, or any person acting in any fiduciary capacity for any person who carries on or liquidates a business of an individual, partnership or other unincorporated entity, or a corporation in liquidation not subject to Chapter 6 of Title 11 of the Administrative Code, who pays, in whole or in part, any debt due by the party for which he acts before he satisfies and pays the tax due under Chapter 5 of Title 11 of the Administrative Code from such party, shall become answerable in his own person and estate to the extent of such payments for so much thereof as may remain due and unpaid.
(1) Partnership defined. The word “partnership” as used in these rules, includes, in addition to its ordinary meaning, a syndicate, group, pool, joint venture or other unincorporated organization, including a subchapter K limited liability company as defined in § 11-126 of the Administrative Code, through or by means of which any business, financial operation, or venture is carried on and which is not a trust, estate, corporation, or other entity subject to the tax imposed by Chapter 6 of Title 11 of the Administrative Code. See 19 RCNY § 28-02(a)(1) for the treatment of unincorporated entities that elected to be subject to the unincorporated business tax under Administrative Code § 11-602(1)(b).
(2) Additional criteria for partnerships to be deemed unincorporated businesses. For purposes of determining whether the activities of any partnership (including one which has made an election under Section 761 of the Internal Revenue Code; see: subdivision (d) of this section) constitute the carrying on of an unincorporated business, there shall, in addition to the other provisions of these regulations, be taken into account such factors as
(i) the form or type of ownership of any property involved in or connected with the activity,
(ii) whether the participants reserve the right separately to take in kind or to dispose of their shares of any property acquired, retained, produced, extracted or used by the partnership or other venture, and
(iii) whether the participants jointly or as a unit sell services or jointly sell any property produced or extracted by the partnership or other unincorporated organization. For example, if one or more individuals as “co-owners,” either in fee or under a lease, undertake the development of “oil property” by agreeing to share in the costs and expenses of the development and in the production of the oil, the resulting partnership or joint venture will not be deemed to be engaged in the conduct of an unincorporated business as an entity if it is established that the participants reserved the right separately to take in kind and to dispose of their individual shares of the oil and if it is shown that the individuals or participants did not sell jointly or as a unit the oil produced by the property. In such a case, the individual member or participant in the operation of the property will be deemed to be engaged in an unincorporated business with respect to his participation in the group operation pertaining to the development of the property and the production of the oil and with respect to the individual or separate sales of the oil for his own account. If, in the example given above, the participants did not have the right to take their individual shares of the oil or if a joint sale of the oil has been made, the activities of the partnership or joint venture would constitute the carrying on of a taxable business by the partnership or venture as an entity.
(1) General. Notwithstanding the provisions of subdivision (a) of this section of these regulations (regarding the meaning of the terms used in the laws of the United States relating to Federal income taxes), an election made for Federal income tax purposes by an individual proprietor, a partner, a partnership or other unincorporated entity or a corporation under Sections 761, 1361 or 1362 of the Internal Revenue Code will not be determinative of the status of the electing individual, partnership, corporation or other entity for unincorporated business tax purposes.
(2) Election under Section 761 of the Internal Revenue Code. Where an exclusion of a partnership or an unincorporated enterprise from application of the provisions of subchapter K of subtitle A of the Internal Revenue Code has resulted from an election made under section 761 of the Internal Revenue Code, there shall, upon request, be furnished to the Commissioner of Finance such information as the Commissioner of Finance may require regarding the names, addresses and proportionate interests in the partnership of the member partners, the nature and amount of income and deductions of the partnership and details of its business or financial operations or activities.
(3) Election under Section 1361 of the Internal Revenue Code. For taxable years ending prior to January 1, 1969, an election made by an unincorporated business enterprise owned by an individual or partnership (as defined herein) under Section 1361 of the 1954 Internal Revenue Code to be taxed as a domestic corporation for Federal income tax purposes will not in any way affect the liability of such unincorporated business enterprise provided for in Chapter 5 of Title 11 of the New York City Administrative Code unless, by reason of such election, the enterprise becomes subject to tax under Chapter 6 of Title 11 of the New York City Administrative Code, in which case its activities will not constitute the carrying on of an unincorporated business as defined in 19 RCNY § 28-02(a)(1).
(4) Election under Section 1362 of the Internal Revenue Code. An election by a small business corporation under Section 1362 of the Internal Revenue Code, to be an S corporation (or for taxable years beginning prior to January 1, 1983 the comparable election under former Section 1372 of the Internal Revenue Code), does not alter the corporate status for other than Federal income tax purposes and does not make the electing corporation or its shareholders subject to the provisions of Chapter 5 of Title 11 of the New York City Administrative Code.
(1) General. Where an individual is
(i) an employee, or
(ii) an officer or director of a corporation, society, association or a political entity such as the United States, a State, a municipality or other political subdivision of a State, or
(iii) a fiduciary, such as an executor, administrator, trustee, liquidator, referee, or assignee, The performance of services as such employee, officer, director or fiduciary will not be deemed to be the carrying on of an unincorporated business by such individual unless the services so performed constitute part of a business regularly carried on by such individual. If the fiduciary is engaged in the carrying on of or the liquidation of a taxable trade, business, profession or occupation, see 19 RCNY § 28-02(b)(2).
(2) Employee defined.
(i) The term “employee” as used in this subdivision (e) means an individual performing services for an employer under an employer-employee relationship. Generally, the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished, but also as to the details and means by which that result is to be accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but as to how it shall be done. He will usually be required to work during stated days and hours and be subject to company-established production standards. Other factors characteristic of employment, but not necessarily required or present in every case, are the providing of equipment and the furnishing of a place to work to the individual who performs the services.
(ii) If an individual is subject to the control or direction of another merely as to the result to be accomplished by the services and not as to the means and methods for accomplishing the result, he usually is an independent contractor or an independent agent rather than an employee. An individual who performs services for only one person or entity may, nevertheless, be an independent contractor or independent agent. Where he, however, performs services for two or more persons or entities, without a clear division of time, such an individual would ordinarily not be an employee but rather an independent contractor or agent with respect to both such persons or entities, since neither person or entity could be said to actually direct or control such individual to the extent necessary in an employer-employee relationship. With respect to certain sales representatives, however, this rule has been modified so that the sole fact of performance of services for two or more persons or entities without a clear division of time, does not, in itself, mean that such individual must be considered a self-employed independent contractor or agent. (See: 19 RCNY § 28-02(i)). Nevertheless, a sales representative will not be considered an employee unless such principals otherwise direct and control such individual to the extent necessary in an employer-employee relationship. Generally, agents, auctioneers, brokers, contractors and other individuals engaged in performing services who are independent and who offer their services to the general public are not employees. Likewise, where an individual makes an investment of capital which is a material income producing factor or maintains an inventory, whether or not title to such inventory is in his own name, such an individual would ordinarily be considered engaged in his own business.
(3) Employer-employee relationship determined. Whether there is sufficient direction and control which results in the relationship of employer and employee will be determined upon an examination of all the pertinent facts and circumstances of each case. The designation and description of the relationship by the parties, whether by contract or otherwise, is not necessarily determinative of the status of the individual for unincorporated business tax purposes. Other factors to be considered in determining if there is a sufficient exercise of direction and control resulting in an employer-employee relationship are whether the individual performing the services maintains his own office, engages his own assistants or hires his own employees, or incurs expenses without reimbursement. For a more detailed discussion of such factors, see 19 RCNY § 28-02(i). Still other factors which may have some bearing are whether or not
(i) personal income taxes or Federal insurance contributions are deducted from compensation to be paid to the individual,
(ii) whether or not the person or entity for whom the services are performed pays unemployment insurance,
(iii) whether or not the individual is a member of an employee pension plan, profit sharing, or other employee fringe benefit plan maintained by the entity for which the services are performed, and
(iv) whether or not the individual is a member of an employee union or association. The fact that the individual has been determined to be an employee or independent contractor by a court or administrative tribunal under any state, local or Federal law, is not determinative of the individual’s status for the purposes of this subdivision (e). The weight, if any, to be given to such fact will depend upon the law under which the status was determined and the nature and purpose of such law.
(4) Services which constitute business activity. Personal services rendered by an individual as an employee, officer, director or fiduciary will ordinarily be deemed part of a business regularly carried on by such individual if such services are performed in furtherance of or for the direct benefit of other business activities, professional activities, or occupational activities the conduct of which constitutes an unincorporated business under the provisions of 19 RCNY § 28-02(a)(1). For purposes of the preceding sentence, services as an employee, officer, director or fiduciary performed by an individual will not be deemed to be performed in furtherance of or for the direct benefit of other business, professional or occupational activities of the individual
(i) if the individual does not maintain an office or employ assistants in connection with such services and his services as an employee, officer, director or fiduciary are performed on a full-time basis for one employer or principal and constitute the primary or chief occupational activity of the individual, or
(ii) if the services as an employee, officer, director or fiduciary are contracted for or undertaken and performed entirely independent of any other business, professional or occupational activity engaged in by the individual. Where an individual maintains an office or employs assistants in connection with the performance of services as an employee, officer, director or fiduciary for one or more employers or other principals, the services so performed will be deemed part of a business regularly carried on if the individual regularly performs or offers to perform similar services to the general public on an independent basis. Where the individual rendering personal services as an employee, officer, director or fiduciary is also actively engaged in his own independent business, without a clear division of time, or where the compensation received bears no reasonable relationship to the services performed for such employer or principal, but includes compensation for services performed in the individual’s independent business, such services will be deemed to constitute part of an unincorporated business regularly carried on by the individual.
(1) General. For all taxable years beginning on or after January 1, 1971, the practice of a profession is deemed to constitute an unincorporated business. For prior periods, the practice of law, medicine, dentistry or architecture, and the practice of any other profession in which capital was not a material income producing factor and in which more than eighty percent of the unincorporated business gross income for the taxable year was derived from personal services actually rendered by the individual or the members of the partnership or other entity, was not deemed an unincorporated business.
(2) Profession defined. For purposes of these regulations, the term “profession” includes any occupation or vocation in which a professed knowledge of some department of science or learning, gained by a prolonged course of specialized instruction and study, is used by its practical application to the affairs of others, either advising, guiding or teaching them, and in serving their interests or welfare in the practice of an art or science founded on it. The word profession implies attainments in professional knowledge, as distinguished from mere skill and the application of knowledge to uses for others as a vocation.
(1) Full self-trading exemption.
(i) Taxable years beginning before July 1, 1994. Notwithstanding the provisions of 19 RCNY § 28-02(a), for taxable years beginning before July 1, 1994, an individual or unincorporated entity, other than a dealer holding property primarily for sale to customers in the ordinary course of his, her, or its trade or business, shall not be deemed engaged in an unincorporated business solely by reason of the purchase and sale of property (real or personal), and, for taxable years beginning after 1976, the purchase, writing or sale of stock option contracts, for his, her, or its own account. Where the purchase and sale of real or personal property is connected with an unincorporated business otherwise regularly carried by the individual or entity, the profits and income from such purchases and sales will ordinarily be includible in the unincorporated business gross income of the individual or entity.
Example: For taxable years beginning before July 1, 1994, a partnership holding a stock exchange seat, which buys and sells securities for its own account and executes orders on the floor of the exchange for other securities brokers for which it receives commissions, must include in its unincorporated business income both its trading profits and its commissions.
(ii) Taxable years beginning after June 30, 1994 and before 1996. Notwithstanding the provisions of 19 RCNY § 28-02(a), for taxable years beginning after June 30, 1994, and before 1996, an individual or unincorporated entity, other than a dealer holding property primarily for sale to customers in the ordinary course of a trade or business, shall not be deemed engaged in an unincorporated business if the individual’s or entity’s activities consist exclusively of the purchase and sale of property, or the purchase, writing or sale of stock option contracts, for his, her, or its own account or consist exclusively of such activities and the conduct of any other activity or activities not otherwise subject to the tax imposed by Chapter 5 of Title 11 of the Administrative Code. See subparagraph (iv) of this paragraph for the treatment of individuals and entities receiving $25,000 or less of gross receipts from an unincorporated business in addition to the purchase and sale of property.
(iii) “Dealer” defined for taxable years beginning before January 1, 1996. For purposes of subparagraphs (i), (ii) and (iv) of this paragraph for taxable years beginning before January 1, 1996, a dealer in real or personal property is an individual or an unincorporated entity with an established place of business, regularly engaged in the purchase of property and its resale to customers; that is, one who (as a merchant) buys property and sells it to customers with a view to the gains and profits that may be derived therefrom. A builder or real estate developer who regularly subdivides real property and sells it as improved or unimproved lots likewise is considered to be a dealer for such purposes.
(iv) $25,000 test. Notwithstanding anything to the contrary, for taxable years beginning after June 30, 1994, if an individual or unincorporated entity is engaged in the purchase and sale of real or personal property, or the purchase, writing and sale of stock option contracts, other than as a dealer, for his, her, or its own account, and that individual or unincorporated entity also is engaged in one or more unincorporated businesses carried on in whole or in part in the City, such individual or entity will continue to be treated as engaged solely in the purchase and sale of property for the individual’s or entity’s own account and, therefore, eligible for the full exemption, provided such individual or entity does not receive more than $25,000 of gross receipts during the taxable year (determined without regard to any deductions) from all such unincorporated businesses wholly or partly carried on within the City.
(v) Taxable years beginning after 1995. For taxable years beginning on or after January 1, 1996, an individual or unincorporated entity, other than a dealer as defined in paragraph (2) of this subdivision (g), shall not be considered engaged in an unincorporated business solely by reason of:
(A) the purchase, holding, and sale for his, her, or its own account of property as defined in paragraph (3) of this subdivision (g);
(B) the entry into, assumption, offset, assignment, or other termination of a position in any property as defined in paragraph (3) of this subdivision (g);
(C) the acquisition, holding or disposition, other than in the ordinary course of a trade or business, of interests in unincorporated entities engaged solely in the activities described in subparagraphs (v)(A) through (v)(D) of this paragraph (1); or
(D) any combination of the activities described in subparagraphs (v)(A) through (v)(C) of this paragraph and any other activity not constituting an unincorporated business subject to the tax imposed by Chapter 5 of Title 11 of the Administrative Code.
(vi) Self-trading activities of individuals. An individual, other than a dealer as defined in paragraph (2) of this subdivision (g), engaged in the purchase and sale of real or personal property for his or her own account, including, for taxable years beginning after December 31, 1976, the purchase, sale or writing of stock option contracts, and, for taxable years beginning after December 31, 1995, the activities described in subparagraphs (v)(A) and (v)(B) of this paragraph, will not be deemed to be engaged in an unincorporated business wholly or partly in the City for purposes of this paragraph (1) unless (A) such transactions and activities are connected with a business regularly carried on wholly or partly in the City by the individual himself or herself and (B) for taxable years beginning after June 30, 1994, the individual receives more than $25,000 in gross receipts during the taxable year from such business regularly carried on. See 19 RCNY § 28-02(a)(7)(i) and (g)(1)(iv) of these rules. For purposes of this paragraph (1), such transactions and activities will be considered to be connected with a business regularly carried on wholly or partly in the City if such transactions are effected in the name of the business, are effected using funds held in banks or other financial institutions in the name of the business or if the assets resulting from such transactions are held in the name, or for the account, of the business. Where the purchase and sale of real or personal property or, for taxable years beginning after December 31, 1995, the activities described in subparagraphs (v)(A) and (v)(B) of this paragraph, are connected with an unincorporated business otherwise regularly carried on by the individual, the profits and income from such transactions will be includible in the unincorporated business gross income of the individual.
(2) “Dealer” defined for taxable years beginning on or after January 1, 1996. For purposes of this subdivision (g) for taxable years beginning on or after January 1, 1996, a dealer in real or personal property is an individual or an unincorporated entity that (A) purchases, holds, or disposes of property that is stock in trade of the individual or entity, inventory or is otherwise held for sale to customers in the ordinary course of the individual’s or the entity’s trade or business, or (B) regularly offers to enter into, assume, offset, assign or otherwise terminate positions in property with customers in the ordinary course of the individual’s or entity’s trade or business. For taxable years beginning on or after January 1, 1996, an individual or unincorporated entity shall not be treated as a dealer for purposes of Chapter 5 of Title 11 of the Administrative Code based exclusively on the fact that such individual or unincorporated entity owns an interest in an entity that is a dealer, as defined above, and an unincorporated entity shall not be treated as a dealer based exclusively on the fact that an individual or other entity that is a dealer, as defined above, owns an interest in such unincorporated entity. This paragraph is illustrated below:
Example 1: In 1996, Partnership A is a securities dealer in the City. Partnership A also is a limited partner in Partnership B that is engaged directly in the purchase and sale of stocks and securities for its own account in the City. Partnership B is not treated as a dealer based solely on the ownership by Partnership A of an interest in Partnership B.
Example 2: The facts are the same as in Example 1 except that Partnership A is the sole general partner in Partnership B and causes Partnership B to regularly take positions in stocks and securities with respect to which Partnership A is a dealer and Partnership B regularly engages in stock lending transactions with Partnership A. Based on the facts and circumstances, a portion of Partnership B’s activities is engaged in wholly or partly to further the dealer activities of Partnership A and, therefore, Partnership B is considered a dealer.
(3) “Property” defined for taxable years beginning on or after January 1, 1996. For taxable years beginning on or after January 1, 1996, and for purposes of paragraphs (2) and (4) of this subdivision g, “property” shall mean:
(i) real and personal property, including but not limited to, property qualifying as investment capital as defined in subdivision (h) of § 11-501 of the Administrative Code of these rules, other stocks, notes, bonds, debentures, or other evidences of indebtedness, interest rate, currency, or equity notional principal contracts and foreign currencies,
(ii) interests in, or derivative financial instruments (including options, forward or futures contracts, short positions, and similar financial instruments) in, any property described in subparagraph (i), and
(iii) any commodity traded on, or subject to the rules of, a board of trade or commodity exchange, provided, however, “property” shall not include:
(iv) debt instruments issued by the taxpayer,
(v) accounts receivable held by the taxpayer as a factor,
(vi) stock in trade, inventory or property otherwise held for sale to customers in the ordinary course of the taxpayer’s trade or business,
(vii) debt instruments acquired in exchange for funds loaned, services rendered, or for the sale, rental or other transfer of property by the taxpayer in the ordinary course of the taxpayer’s trade or business,
(viii) interests in unincorporated entities, or
(ix) positions in any item described in subparagraphs (i) through (viii) entered into, assumed, offset, assigned or terminated by the taxpayer as a dealer in such positions or item.
(4) Partial exemption for entities for taxable years beginning on or after January 1, 1996.
(i) General. For taxable years beginning on or after January 1, 1996, if an unincorporated entity is primarily engaged in either activities that would qualify the entity for the full self-trading exemption provided in paragraph (1) of this subdivision (g), or holding certain passive investments in other unincorporated entities as described below, or both, the self-trading activities of the taxpayer, and of any unincorporated entity separately eligible for this partial exemption in which the taxpayer holds an interest, will not be considered an unincorporated business carried on by the taxpayer and, therefore, the income, gains, losses and deductions from such self-trading activities will be excluded from the unincorporated business gross income of the taxpayer. Specifically, if an unincorporated entity is primarily engaged in:
(A) activities described in subparagraphs (v)(A) through (v)(D) of paragraph (1) of this subdivision (g);
(B) the acquisition, holding or disposition, other than in the ordinary course of a trade or business, of interests as an investor, as defined in subparagraph (iii) of this paragraph (4), in unincorporated entities carrying on one or more unincorporated businesses in whole or in part in the City; or
(C) any combination of the activities described in subparagraphs (i)(A) and (i)(B) of this paragraph (4); the activities described in subparagraph (i)(A) of this paragraph (4), (i.e., the self-trading activities), carried on either by the taxpayer, or by any unincorporated entity that separately qualifies for the full exemption provided in paragraph (1) of this subdivision (g) or for the partial exemption under this subparagraph in which the taxpayer owns an interest, shall not be considered an unincorporated business carried on by the taxpayer and, therefore, the income, gains, losses, and deductions from those activities will be excluded from the unincorporated business gross income of the taxpayer. The income, gains, losses, and deductions from activities described in subparagraph (i)(B) of this paragraph (4) will not be excluded from the unincorporated business gross income of the taxpayer.
(ii) “Primarily engaged” defined. For purposes of subparagraph (i), a taxpayer that is an unincorporated entity shall be treated as primarily engaged in activities described in subparagraphs (i)(A), (i)(B) and (i)(C) of this paragraph if at least 90 percent of the total value of the taxpayer’s assets is represented by assets described in subparagraphs (ii)(A) through (ii)(C) below:
(A) “property” as defined in paragraph (3) of this subdivision (g);
(B) interests in unincorporated entities not engaged in the conduct of any unincorporated business in whole or in part in the City; and
(C) interests held by the taxpayer as an investor, as defined in subparagraph (iii) of this paragraph, in unincorporated entities engaged in the conduct of one or more unincorporated businesses in whole or in part in the City.
(iii) “Investor” defined. For purposes of this paragraph (4), a taxpayer that is an unincorporated entity shall be considered to acquire, hold or dispose of an interest in another unincorporated entity as an investor if:
(A) that other unincorporated entity meets the requirements of subparagraph (i) of this paragraph (i.e., that other unincorporated entity qualifies for the partial self-trading exemption under this paragraph) and the taxpayer does not receive a distributive share of that other unincorporated entity’s income, gain, loss, deductions, credits or basis from a business carried on in whole or in part in the City that is materially greater than its distributive share of any other item of income, gain, loss deduction, credit or basis of such unincorporated entity; or
(B) with respect to any other unincorporated entity not meeting the requirements of subparagraph (i) of this paragraph, i.e., not qualifying for the partial self-trading exemption, the taxpayer is not a general partner, is not authorized under the governing instrument to manage or participate in the day-to-day business of such unincorporated entity, and is not managing or participating in the day-to-day business of such unincorporated entity. For purposes of this subparagraph (iii)(B), the fact that the taxpayer is represented on a general oversight body, or is authorized to review or reject periodic budgets or veto major management decisions such as a major refinancing or sale of the unincorporated entity’s assets other than in the ordinary course of business and exercises such authority, will not cause the taxpayer to be considered to be participating in day-to-day management. In addition, if a taxpayer is authorized to participate in day-to-day management only upon the occurrence of a particular event, or after the occurrence of such an event only upon the election by the taxpayer to so participate, the taxpayer will be considered to participate in day-to-day management only upon the occurrence of the event and, where applicable, after the taxpayer elects to so participate. Management activities of employees, officers and partners of the taxpayer will be imputed to the taxpayer for purposes of this subparagraph (iii)(B) only if such activities are performed by such persons in their capacity as employees, officers or partners of the taxpayer. For purposes of the preceding sentence, a determination as to whether management activities of an individual employee, officer or partner of the taxpayer, or of an employee, officer, partner or shareholder of a partner of the taxpayer, will be imputed to the taxpayer will be based on the facts and circumstances of each case, including but not limited to, whether the individual receives reasonable compensation for management services from the unincorporated business.
(iv) For purposes of subparagraph (ii) of this paragraph, the value of the assets of the taxpayer will be the average monthly gross value of the taxpayer’s assets, unless the Commissioner determines that the use of gross values results in an improper or inaccurate reflection of the primary activities of the taxpayer. In that event, the Commissioner may exercise his or her discretion, in such manner as he or she may determine, to reduce the gross value of the taxpayer’s assets by liabilities attributable thereto or to exclude assets so as to properly and accurately reflect the primary activities of the taxpayer. See examples 4 and 5 of subparagraph (vi) of this paragraph. The value of the assets of the taxpayer consisting of real property or marketable securities is the fair market value thereof and the value of assets other than real property or marketable securities is the value shown on the books and records of the taxpayer in accordance with generally accepted accounting principles, provided, however, that such values will be adjusted, if necessary, so as to produce the gross value thereof. In addition, where the use of monthly values is impractical or inappropriate, for example in the case of real property, the Commissioner may permit the use of less frequent valuations, but not less than annual.
(v) For purposes of subparagraph (iii)(A) of this paragraph, a taxpayer will be considered to receive a distributive share of another unincorporated entity’s income, gain, loss, deduction, credit or basis that is materially greater than its share of any other item if it appears that the taxpayer has received a special allocation of one or more items of income, gain, loss, deduction, credit, or basis under an arrangement designed to avoid the tax.
(vi) The provisions of this paragraph (4) are illustrated below:
Example 1: In 1996, Partnership A is engaged directly in the purchase and sale of stocks and securities for its own account in the City. Partnership A also is a limited partner in Partnership B, which is engaged in the purchase and sale of securities for its own account in the City. Partnership A also is a non-managing member of Limited Liability Company C (a subchapter K limited liability company as defined in Administrative Code § 11-126), which is a securities dealer in the City. C is subject to tax on all of its income. Partnership B is wholly exempt from tax. Partnership A is not eligible for the full self-trading exemption under paragraph (1); however, Partnership A qualifies as primarily engaged in activities described in subparagraphs (i)(A), (i)(B) or (i)(C) of this paragraph (4). Therefore, A is not taxable on its own self-trading activity or on its share of B’s income from self-trading. A is taxable on its share of C’s income, gains, losses and deductions, including any income, etc. from C’s own self-trading activity. Partnership A is not treated as a dealer solely by reason of its membership in C.
Example 2: The facts are the same as in Example 1 except that C is also a limited partner in Partnership D which is engaged solely in the purchase and sale of securities for its own account in the City. C’s interest in Partnership D represents less than 90 percent of C’s gross assets. Partnership D is exempt from tax because it is solely trading for its own account. C is taxable on its share of D’s self-trading income because C does not qualify as primarily engaged in the activities described in subparagraphs (i)(A), (i)(B) or (i)(C) of this paragraph 4. A is taxable on its share of C’s income, gains, losses and deductions, including C’s share of D’s self-trading income, etc.
Example 3: The facts are the same as in Example 2 except that C’s interest in Partnership D represents 95 percent of C’s gross assets. C qualifies as primarily engaged in the activities described in subparagraphs (i)(A), (i)(B) or (i)(C) of this paragraph, i.e., C qualifies for the partial self-trading exemption. Therefore, C is not taxable on its share of D’s self-trading income, gains, losses and deductions. A is taxable on its share of C’s income, gains, losses and deductions, other than C’s share of D’s self-trading income, etc.
Example 4: In 1996, Partnership A is a general partner in Partnerships B, C and D, each of which engages in an unincorporated business in the City. Partnership A also purchases and sells stocks and securities for its own account. The gross value of A’s partnership interests in Partnerships B, C and D is $1,000,000. Partnership A enters into a number of repurchase agreements and reverse repurchase agreements. The gross value of A’s securities portfolio excluding the reverse repurchase agreements is $1,000,000. The repurchase agreements represent liabilities on Partnership A’s balance sheet of $8,500,000 while the reverse repurchase agreements have a gross value of $8,500,000. Based on the gross value of Partnership A’s assets, including the reverse repurchase agreements but excluding the repurchase agreements, it is primarily engaged in activities described in subparagraphs (i)(A), (i)(B) or (i)(C) of this paragraph; however, the Commissioner may exercise his or her discretion to either offset the value of the reverse repurchase agreements by the amount of the repurchase agreements or to exclude the value of the reverse repurchase agreements from the determination as to whether A meets the 90-percent-of-assets requirement of subparagraph (ii) because the use of gross values does not accurately represent the activity of Partnership A in the City.
Example 5: Partnership A manufactures machine parts in the City at a factory building that it owns. The building has a gross value of $30x and is subject to a mortgage of $10x. Partnership A also has inventory worth $2x and a portfolio of stocks and securities worth $1x. Because the building is property as defined in paragraph (3) of subdivision (g) of this section, 90% of A’s assets are assets described in subparagraphs (ii)(A) through (ii)(C) of this paragraph (4) ($30x (building) + $1x (stocks and securities).) However, because the building is used principally in A’s business, the Commissioner may determine that including the value of the building in the calculation does not accurately reflect A’s primary activities and may exercise his or her discretion to exclude the value of the building.
Example 6: Partnership A is a 60% general partner in Partnership B, which is engaged in the operation of a business in the City. Partnership B also owns a portfolio of stocks that it trades for its own account. The value of B’s portfolio is $30x. The gross value of B’s other assets, none of which is described in subparagraphs (ii)(A) through (ii)(C) of this paragraph (4), is $20x. Therefore the value of B’s portfolio assets is only 60% of the value of B’s assets and B does not qualify for the partial exemption. Because A is a general partner in B, A does not qualify as an investor with respect to its interest in B and is subject to the UBT on its share of the self-trading income of B. Partnership A also owns a 90% limited partnership interest in Partnership C, which is engaged solely in trading stocks and securities for its own account in the City. The value of A’s interest in C is $175x. Partnership A contributes its interest in C to Partnership B to enable Partnership B to qualify for the partial exemption. However, following the contribution, the partnership agreement for Partnership B is amended to allocate to A all of the income, gains, losses and deductions from the interest in Partnership C. After the contribution, the value of B’s assets described in subparagraphs (ii)(A) through (ii)(C) of paragraph (4) will be $205 or 91% of B’s total assets. As a result, B will qualify for the partial exemption and A would qualify as an investor with respect to Partnership B and would not be taxed on its share of B’s self-trading income. However, A’s distributive share of the income, etc. from Partnership C is materially greater than its distributive share of all other items of income, etc. of Partnership B. Because A contributed its interest in C to Partnership B solely to permit A to avoid tax on its share of B’s self trading income, A is not considered to hold its interest in Partnership B as an investor and, consequently, A does not qualify for the partial self-trading exemption with respect to its distributive share of the self-trading income of B.
(vii) The provisions of this paragraph (4) do not apply to individuals. See 19 RCNY § 28-02(a)(7)(i), which provides that an individual is not considered to be engaged in activities carried on by unincorporated entities in which the individual holds an interest.
(5) The provisions of this subdivision (g) do not apply where an unincorporated entity is taxable as a corporation for Federal income tax purposes. Where such an entity is not taxable under Chapter 6 of Title 11 of the Administrative Code, its status as an unincorporated business under Chapter 5 of Title 11 of the Administrative Code will be determined under other subdivisions of this section without regard to the provisions of this subdivision (g).
(2) Application of this subdivision.
(i) For taxable years beginning before July 1, 1994, where the holding, leasing or managing of real property relates to property used in or connected with an unincorporated business otherwise regularly carried on by an individual or unincorporated entity, any gains, profits, rents and other income from the property will be includible in the unincorporated business gross income of the individual or entity.
(ii) For taxable years beginning on or after July 1, 1994, if an owner of real property or lessee or fiduciary who is holding, leasing or managing real property, other than as a dealer, is also carrying on an unincorporated business in whole or in part in the City, the holding, leasing or managing of the real property will not be considered an unincorporated business if, and only to the extent that, the real property is held, leased or managed for the purpose of producing rental income or gain on the sale of such property other than in the ordinary course of a trade or business. For purposes of this subparagraph (ii), the operation at such real property of a trade, business, profession or occupation, including, but not limited to, a garage, restaurant, laundry or health club, shall be considered incidental to the holding, leasing or managing of such real property and shall not be considered an unincorporated business, provided such trade, business, profession or occupation is conducted solely for the benefit of, and as an incidental service to, tenants at such real property, and such trade, business, profession or occupation is not open or available to the general public.
(iii) For taxable years beginning on or after January 1, 1996, if an owner, lessee or fiduciary that is holding, owning or leasing or managing real property operates a garage, parking lot or other similar facility at such real property that is open or available to the general public, the provision of parking, garaging or motor vehicle storage services on a monthly or longer term basis at such garage or other facility shall not be considered an unincorporated business carried on by the taxpayer if, and only to the extent that, such services are provided to tenants at such real property as an incidental service to such tenants. See paragraphs (8) and (9) of 19 RCNY § 28-06(d) regarding the exclusion of income and the disallowance of expenses relating to the provision of parking services to tenants. Notwithstanding the foregoing provisions of this subparagraph (iii), if an owner, lessee or fiduciary holding leasing or managing real property who operates a garage or other similar facility at the property that is open to the public, does not satisfy the reporting requirements of 19 RCNY § 28-18(j), the provision of monthly or longer term parking services to tenants at the property will be considered the conduct of an unincorporated business subject to tax and will not be considered incidental to the holding, leasing or managing of the property.
(iv) For purposes of subparagraphs (ii) and (iii) above, a determination of whether a trade, business, profession or occupation carried on at real property is open to the general public shall be based on all of the facts and circumstances. Among the facts and circumstances indicating that a business is open to or available to the general public is the presence of a sign identifying, or signifying the presence of, such business of sufficient size and location as to be readily visible to the public, unless such sign clearly indicates that such business is private and not open to the public. However, if the business is in fact open to the public, the absence of a sign is not relevant.
Example (1): An individual, not otherwise engaged in an unincorporated business, who owns an apartment house leased unfurnished to 150 tenants and who, in consideration of the payment of rent received from tenants, supplies janitor service, elevator service and such other services as are generally incident to the operation of an apartment house in addition to the usual rights of occupancy, is not deemed to be engaged in an unincorporated business by reason of his activities relating to the ownership and management of the apartment house. On the other hand, the operation of a hotel open to the public for accommodations of short duration is not the holding, leasing or management of real property and would constitute an unincorporated business activity the income from which would be subject to the unincorporated business tax. In taxable years beginning before July 1, 1994, rents from store properties located in the hotel building are includible in the unincorporated business gross income of the individual where such individual is in the business of hotel keeping in such building. However, in taxable years beginning on or after July 1, 1994, while the operation of the hotel will constitute the conduct of an unincorporated business, rents from store properties located in the hotel would not be includible in the unincorporated business gross income from that unincorporated business.
Example (2): In a taxable year beginning before July 1, 1994, an individual is engaged in a manufacturing business carried on in a building owned by him. His business requires the use of one-half of the building, and the unused portion of the building is rented to tenants. The rental income is subject to the unincorporated business income tax since such income results from the use of an asset connected with the taxpayer’s business. In taxable years beginning on or after July 1, 1994, the rental income would not be subject to tax; however, the income from the manufacturing business would be taxable and not excluded as part of the rental activity because it is not carried as an incidental service to the tenants in the property even though the manufacturing business is not generally open to or available to the general public. No deduction would be allowed for one-half of the expenses relating to the property and, on a sale of the building, one-half of the gain would be taxable. See 19 RCNY § 28-05(b)(12) and (c)(11) and 19 RCNY § 28-06(d)(8) of these rules.
Example (3): Partnership A owns a rental office building in the City. Partnership A operates a garage adjacent to the building that is intended solely for the use of tenants in the building and not open to the general public. There is a sign, clearly visible from the street reading “Private Garage” at the door to the garage, which is kept open during the day. Tenants are assigned a prearranged number of parking spots at no additional rent. The operation of the garage at the building is not considered an unincorporated business because it is operated as an incidental service to the tenants in the building and is not considered to be open to the public. The result would be the same if the tenants paid additional rent for the parking spaces or if the number of, and amount paid for, parking spaces were separately negotiated with the landlord.
Example (4): The facts are the same as in example 3 except that the sign at the garage door reads “Park,” the door is open and inside the garage are posted parking rates for public and tenant parking. The garage is considered to be open to the general public. Certain tenants receive a fixed number of parking spaces for a term coextensive with their lease in the building at no additional rent. Other tenants are not given parking spaces pursuant to their leases but may separately contract for monthly or longer term parking spaces. Tenants who do not receive or contract for monthly or longer term parking spaces may enter the garage and park on an hourly, daily, weekly or monthly basis. Employees of tenants may also individually enter the garage and park on an hourly, daily, weekly or monthly basis. Income from parking services rendered on a monthly or longer term basis received from tenants is excluded from unincorporated business gross income provided the reporting requirements of Administrative Code § 11-502(d) and 19 RCNY § 28-18(j) are met. See 19 RCNY § 28-05(c)(11). Income from parking services rendered on a less than monthly basis rendered to tenants and income from all parking services rendered to tenants’ employees and the public on any basis is included in unincorporated business gross income. If garage space is provided to tenants either as part of their lease or under separate long-term contracts, the fact that the tenant permits the spaces to be used by its employees does not render the parking income taxable; however, parking services provided under long-term contracts with persons who are not tenants will be taxable notwithstanding that those persons are employees of tenants.
(1) General. Notwithstanding the provisions of 19 RCNY § 28-02(a) through (e), an individual, other than one who maintains an office or employs one or more assistants or otherwise regularly carries on a business, shall not be deemed engaged in an unincorporated business solely by reason of selling goods, wares or merchandise for more than one enterprise. The employment of clerical and secretarial assistance shall not be deemed the employment of assistants. In addition, office space or similar business space utilized solely for the display of merchandise and/or for the maintenance and storage of records normally used in the course of business, shall not be deemed an office for purposes of this section.
(2) Maintenance of an office.
(i) An individual maintains an office within the meaning of this subdivision (i) when, in connection with his selling activities, he occupies, has, uses or operates an office or desk room the expenses of which are borne by the individual without substantial reimbursement by any of his principals. Ordinarily, the use of general space in an individual’s home for such limited purposes as receiving mail, preparing reports or performing clerical work relating to the selling activities will not, of itself, constitute the maintaining of an office.
(ii) Although reimbursement for office expenses need not be exactly 100 percent to be substantial, the repayment must be sufficiently large to indicate that such items are being absorbed by the principal. Generally, reimbursement of 80 percent or more of such expenses, will be deemed to be substantial. The receipt by an individual of an expense allowance not bearing a clear relationship to the actual office expenses incurred by the individual or the receipt of a higher rate of commission or an extra commission allowance measured by the amount or volume of business done by the individual will not be deemed to be reimbursement for purposes of this subdivision (i).
(3) Employment of assistants. An individual, who engages assistants in connection with his selling activities, employs one or more assistants for the purpose of this subdivision (i) when
(i) he is the employer of the assistant or assistants in an employer and employee relationship within the meaning of 19 RCNY § 28-02(e), or
(ii) he engages the services of an assistant or assistants on a permanent or regular basis (as distinguished from a temporary or occasional basis) without regard to whether the relationship of employer and employee exists, or
(iii) under any arrangement with a principal, he directly or indirectly pays the compensation of an assistant or assistants employed by the principal. Where an individual is specifically reimbursed by a principal for compensation paid to assistants, he will not be deemed to be employing assistants if the principal has the right to hire or terminate the services of the assistant or to fix the terms of the employment. The receipt by the individual of a flat allowance not bearing a clear relationship to compensation paid to assistants, or the receipt of a higher rate of commission or an extra commission or allowance measured by the amount or volume of business done by the individual, will not be deemed to be reimbursement for the purpose of this section.
(4) Selling activities of broker, independent agent or contractor.
(i) A sales representative, selling goods, wares, merchandise or insurance, other than one who maintains an office or employs one or more assistants or otherwise regularly carries on a business, may not be deemed engaged in an unincorporated business solely by reason of selling for more than one enterprise, but the fact that he is selling for more than one enterprise will nevertheless be considered together with other indicia of self-employment to determine whether the sales representative is engaged in an unincorporated business. Furthermore, a sales representative whose principals do not exercise the direction and control over his activities to the extent necessary in an employer-employee relationship, will be considered an independent contractor and subject to the unincorporated business tax even though he does not maintain an office or employ assistants.
(ii) Where it is determined that an individual is engaged in an unincorporated business by reason of maintaining an office or employing assistants or selling goods, wares, merchandise or insurance as an independent contractor or agent, such determination will apply to other services as a salesman or sales representative performed by the individual as an employee or corporate officer unless such services as an employee or corporate officer do not constitute part of the taxable unincorporated business otherwise engaged in by the individual. The question of whether selling services performed as an employee or corporate officer are part of a business regularly carried on by the individual or are connected with an unincorporated business conducted by the individual shall be determined in accordance with the provisions of 19 RCNY § 28-02(e)(4).
§ 28-03 Imposition of Tax.
(a) Rate of tax. (Administrative Code § 11-503(a)). The unincorporated business tax imposed by Chapter 5 of Title 11 of the Administrative Code for each taxable year is imposed at the rate of four percent on the unincorporated business taxable income. (See: 19 RCNY § 28-04).
(i) If the tax computed under such section is $600 or less, the amount of the credit is the entire amount of such tax.
(ii) If the tax computed under such section exceeds $600 but is less than $800, the credit is an amount determined by multiplying the tax by a fraction the numerator of which is $800 less the amount of the tax and the denominator of which is $200.
(iii) If the tax computed under such section is $800 or more, no credit is allowed.
(2) A credit is allowed against the tax computed under 19 RCNY § 28-03(a) for taxable years beginning in 1996 determined in the following manner:
(i) If the tax computed under such section is $800 or less, the amount of the credit is the entire amount of the tax.
(ii) If the tax computed under such section exceeds $800 but is less than $1,000, the credit is an amount determined by multiplying the tax by a fraction the numerator of which is $1,000 less the amount of the tax and the denominator of which is $200.
(iii) If the tax computed under such section is $1,000 or more, no credit is allowed.
(3) A credit is allowed against the tax computed under 19 RCNY § 28-03(a) for taxable years beginning after 1996 determined in the following manner:
(i) If the tax computed under such section is $1,800 or less, the amount of the credit is the entire amount of the tax.
(ii) If the tax computed under such section exceeds $1,800 but is less than $3,200, the credit is an amount determined by multiplying the tax by a fraction the numerator of which is $3,200 less the amount of the tax and the denominator of which is $1,400.
(iii) If the tax computed under such section is $3,200 or more, no credit is allowed.
(1) General. In addition to the credit referred to in 19 RCNY § 28-03(b) above, credits relating to stock transfer taxes, certain sales and compensating use taxes, and certain expenses connected with the relocation of employment opportunities to New York City are also allowed.
(2) Credit relating to the stock transfer tax. The law allows a credit against the tax in an amount equal to 50% of the New York State stock transfer taxes paid by a taxpayer who incurred such taxes as a dealer, registered under Section 15(b) of the Securities Exchange Act of 1934, in “market making transactions” which took place on and after August 1, 1976 and before October 1, 1981. For definitions, limitations, modifications and procedures applicable to this credit, see §§ 11-503(c) and 11-506 of the Administrative Code.
(3) Credits relating to certain sales and compensating use taxes.
(i) Production machinery or equipment; telephone station apparatus. A taxpayer shall be allowed a credit for payment of certain sales and compensating use taxes in the manner hereinafter provided in this paragraph (3). The amount of such credit shall be
(A) the amount of sales and compensating use taxes paid which are imposed by Section 1107 of the State Tax Law during the taxpayer’s taxable year with respect to the purchase or use by the taxpayer of machinery or equipment for use or consumption directly and predominantly in the production of tangible personal property, gas, electricity, refrigeration or steam for sale, by manufacturing, processing, generating, assembling, refining, mining or extracting, or telephone central office equipment or station apparatus or comparable telegraph equipment for use directly and predominantly in receiving at destination or initiating and switching telephone or telegraph communication, but not including parts with a useful life of one year or less or tools or supplies used in connection with such machinery, equipment or apparatus, less
(B) the amount of any credit for such sales and compensating use taxes allowed or allowable against the taxes imposed by Chapter 11 of Title 11 of the Administrative Code (Utility Tax), for any periods embraced within the taxable year of the taxpayer under this section. The machinery, equipment and apparatus referred to herein is that which is subject to the New York City sales and use tax but exempt from the New York State sales and use tax. The credit applies only to such sales and use taxes which become legally due on or after, and were paid on or after, July 1, 1977.
(ii) Electricity or electric service. In addition to the credit referred to in paragraph (3)(i) above, a taxpayer shall also be allowed a credit equal to the amount of sales and compensating use taxes imposed by Section 1107 of the State Tax Law during the taxpayer’s taxable year which became legally due on or after, and were paid on or after, July 1, 1984, with respect to the purchase or use by the taxpayer of electricity or electric service of whatever nature for use or compensation directly and exclusively in the production of tangible personal property for sale by manufacturing, processing or assembling. The electricity and electric service referred to herein is that which is subject to the New York City sales and use tax but exempt from the New York State sales and use tax. When electricity is purchased for consumption for both purposes qualifying for the credit and not qualifying for the credit, and the use of the electricity is recorded on a single meter, the purchaser must allocate the use of the electricity according to its qualifying or non-qualifying consumption. At such time when variations occur affecting the use of electricity (e.g. the addition of new equipment) a new allocation must be computed. An electrical engineer’s survey, showing computations, may be submitted in substantiation of the allocation made for use of electricity for both qualifying and non-qualifying purposes. In lieu of an electrical engineer’s survey, computations using guidelines prescribed by the Commissioner of Finance may be submitted.
(iii) The credits allowed under this subdivision for any taxable year shall be deemed to be an overpayment of tax by the taxpayer to be credited or refunded, without interest, in accordance with the provisions of § 11-526 of the Administrative Code.
(iv) (A) The amount of sales and use taxes paid during the tax period for which credit is claimed must be reduced by the amount of any credit or refund of such taxes received during the tax period from either a vendor or the New York State Department of Taxation and Finance.
(B) Where the taxpayer receives a refund or credit of any tax imposed under section 1107 of the State Tax Law for which the taxpayer had claimed a credit under the provisions of this paragraph (3) in a prior taxable year, the amount of such tax refund or credit shall be added to the tax under this section, and such amount shall be subtracted in computing unincorporated business taxable income for the taxable year.
(v) For modifications to unincorporated business gross income resulting from the taxpayer’s use of these credits, see 19 RCNY § 28-05(b)(5).
(vi) A taxpayer who has paid, as a result of an audit and determination made by the New York State Department of Taxation and Finance, or the filing of an amended sales and use tax return, a sales and use tax which would give rise to a credit under subparagraphs (i) or (ii) above is entitled to claim the sales and use tax credit for that payment for the year to which the sales or use tax was originally due. No credit will be allowed for interest or penalties paid in connection with the state determination or amended return. (See: 19 RCNY § 28-20(b) relating to reports required when taxpayer’s sales and use tax liability is changed or corrected.)
(4) Credits relating to the cost of relocating industrial and commercial employment oppor- tunities.
(i) Credit relating to the annual increase in certain payments to a landlord by a taxpayer relocating industrial and commercial employment opportunities.
(A) Where a taxpayer shall have relocated to the city from a location outside the state, and by such relocation shall have created a minimum of one hundred industrial or commercial employment opportunities, and where such taxpayer shall have entered into a written lease for the relocation premises, the terms of which lease provide for increased additional payments to the landlord which are based solely and directly upon any increase or addition in real estate taxes imposed on the leased premises, the taxpayer, upon approval and certification by the Industrial and Commercial Incentive Board, as hereinafter provided, shall be entitled to a credit against the tax. The amount of such credit shall be an amount equal to the annual increased payments actually made by the taxpayer to the landlord which are solely and directly attributable to an increase or addition to the real estate tax imposed upon the leased premises. Such credit shall be allowed only to the extent that the taxpayer has not otherwise claimed said amount as a deduction against the tax. For modifications to unincorporated business gross income resulting from taxpayer’s use of the credit, see: 19 RCNY § 28-05(b)(6). The Industrial and Commercial Incentive Board in approving and certifying to the qualifications of the taxpayer to receive the tax credit provided for herein shall first determine that the applicant has met the requirements under this subparagraph (i), and further, that the granting of the tax credit to the applicant is in the “public interest.” In determining that the granting of the tax credit is in the public interest, the board shall make affirmative findings that: the granting of the tax credit to the applicant will not effect an undue hardship on similar taxpayers already located within the City; the existence on this tax incentive has been instrumental in bringing about the relocation of the applicant to the City; and the granting of the tax credit will foster the economic recovery and economic development of the City.
(B) The tax credit, if approved and certified by the Industrial and Commercial Incentive Board, must be utilized annually by the taxpayer for the length of the term of the lease, or, for a period not to exceed ten years from the date of relocation, whichever period is shorter.
(ii) Credit relating to certain expenses involved in the cost of relocating industrial and commercial employment opportunities.
(A) A taxpayer shall be allowed an employment opportunity relocation costs credit against the tax. The amount of such credit shall be a maximum of three hundred dollars for each commercial employment opportunity and a maximum of five hundred dollars for each industrial employment opportunity relocated to the City from an area outside the state. Such credit shall be allowed to a taxpayer who relocates a minimum of ten employment opportunities. The relocation costs for which the credit may be claimed are those incurred on or after September 26, 1977 in connection with employment opportunities relocated to the City on or after that date. Such credit shall be allowed only to the extent that the taxpayer has not claimed a deduction for allowable employment opportunity relocation costs. For modifications to unincorporated business gross income resulting from taxpayer’s use of the credit, see: 19 RCNY § 28-05(b)(7).
(B) The credit allowed hereunder may be taken by the taxpayer in whole or in part in the year in which the employment opportunity is relocated by such taxpayer or in either of the two years succeeding such event.
(iii) The credits allowed under this paragraph for any taxable year shall be deemed to be an overpayment of tax by the taxpayer to be credited or refunded, without interest, in accordance with the provisions of § 11-526 of the Administrative Code.
(iv) Definitions: When used in this paragraph:
Commercial employee. “Commercial employee” means one engaged in the buying, selling or otherwise providing of goods or services other than on a retail basis.
Employment opportunity. “Employment opportunity” means the creation of a full time position of gainful employment for an industrial or commercial employee and the actual hiring of such employee for the said position.
Employment opportunity relocation costs. “Employment opportunity relocation costs” means the costs incurred by the taxpayer in moving furniture, files, papers and office equipment into the city from a location outside the state; the costs incurred by the taxpayer in the moving from a location outside the state; the costs of installation of telephones and other communications equipment required as a result of the relocation to the city from a location outside the state; the cost incurred in the purchase of office furniture and fixtures required as a result of the relocation to the city from a location outside the state; and the cost of renovation of the premises to be occupied as a result of the relocation, provided, however, that such renovation costs shall be allowable only to the extent that they do not exceed seventy-five cents per square foot of the total area utilized by the taxpayer in the occupied premises.
Full time position. “Full time position” means the hiring of an industrial or commercial employee in a position of gainful employment where the number of hours worked by such employee is not less than thirty hours during any given week.
Industrial and Commercial Incentive Board. “Industrial and Commercial Incentive Board” means the Board created pursuant to Part 3 of Subchapter 2 of Chapter 2 of the Administrative Code.
Industrial employee. “Industrial employee” means one engaged in the manufacture or assembling of tangible goods or the processing of raw materials.
Retail. “Retail” means the selling or otherwise disposing or furnishing of tangible goods or services directly to the ultimate user or consumer.
(1) General. The additional exemption available to an unincorporated business pursuant to Administrative Code § 11-510(2) is repealed for taxable years of the unincorporated business beginning after June 30, 1994. For taxable years beginning on or after July 1, 1994, if an individual or unincorporated entity 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 the partner’s own unincorporated business gross income, or receives a guaranteed payment from the partnership includible in the partner’s own unincorporated business gross income, the partner is allowed a credit against the partner’s own unincorporated business tax liability for the partner’s 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 partner owning an interest in a partnership for any unincorporated business tax paid by the partnership with respect to any taxable year of the partnership beginning before July 1, 1994. For taxable years of a partner beginning after 1995, the UBT Paid Credit allowed to a partner may exceed the amount of UBT Paid Credit that the partner may take in that year. In that event, the excess may be carried forward for up to seven years subject to certain limitations. However, for taxable years of a partner beginning on or after July 1, 1994 but before 1996, the amount of UBT Paid Credit allowed to the partner for a taxable year is the same as the amount of UBT Paid Credit that the partner may take against the partner’s unincorporated business tax liability that year and no carryover is available. A corporation subject to the general corporation tax or the banking corporation tax that is a partner in a partnership carrying on an unincorporated business in the City is allowed a comparable credit against those taxes. See Administrative Code §§ 11-604.18 and 11-643.8 and 19 RCNY § 11-50.
(2) Calculation of the UBT Paid Credit.
(i) General. The partner’s UBT Paid Credit allowed with respect to a specific partnership is the lesser of the amounts calculated in subparagraphs (ii)(A) (“Measure 1”) and (ii)(B) (“Measure 2”) of this paragraph (2), subject to the limitation in subparagraph (ii)(C) of this paragraph (2). Measure 1 is based on the partner’s share of the unincorporated business tax liability of the partnership for its taxable year ending within or with the partner’s taxable year. Measure 2 is based on the incremental effect on the unincorporated business tax liability of the partner attributable to partnership items entering into the calculation of the partner’s unincorporated business tax liability. If a taxpayer is a partner in more than one partnership, Measures 1 and 2 must be determined and compared separately with respect to each partnership. Subparagraph (ii)(C) limits the total amount of the UBT Paid Credit that a partner may take in a taxable year to the partner’s unincorporated business tax liability for that year. Unlike Measures 1 and 2, in the case of a partner that is a partner in more than one partnership, this measure is not applied separately to each partnership but rather to the sum of all of the UBT Paid Credits calculated with respect to all partnerships in which the partner is a partner.
(ii) Measures of the UBT Paid Credit and limitations.
(A) Measure 1. Partner’s share of the partnership’s unincorporated business tax liability plus certain credits. Measure 1 is the product of the amount determined in subparagraph (ii)(A)(a) and the partner’s distributive share percentage determined in subparagraph (ii)(A)(b) below:
(a) Partnership’s unincorporated business tax liability plus certain credits. The amount determined in this subparagraph (ii)(A)(a) is the sum of:
(1) the unincorporated business tax imposed on, and paid by, the partnership for its taxable year ending within or with the taxable year of the partner, and
(2) (i) for taxable years of the 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 partner, or
(ii) for taxable years of the 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 partner, but only to the extent that those credits do not reduce the partnership’s unincorpor- ated business tax below zero. The amount determined under this subparagraph (ii)(A)(a)(2)(ii) does not include the amount of any credit refundable to the partnership.
(b) Partner’s distributive share percentage.
(i) The partner’s distributive share percentage is the sum of the partner’s distributive shares of income, gain, loss and deductions of the partnership and any guaranteed payment received from the partnership (the 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 partner’s net distributive share is less than zero, it is deemed to be zero and the partner is not allowed a UBT Paid Credit for the taxable year with respect to that partnership. See example 1 of paragraph (8) of this subdivision.
(ii) 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.
(iii) For purposes of this calculation, the net distributive share of each corporate partner is determined 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. See example 2 of paragraph (8) of this subdivision.
(iv) If a 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.
(B) Measure 2. Incremental tax effect of distributive share and guaranteed payments. Measure 2 is the excess of the amount determined in subparagraph (ii)(B)(a) over the amount determined in subparagraph (ii)(B)(b) below, modified as provided in subparagraph (ii)(B)(c) below.
(a) Partner’s tax liability. The amount determined in this subparagraph (ii)(B)(a) is the tax liability of the partner determined under this 19 RCNY § 28-03 without allowance of any of the credits allowed under § 11-503 of the Administrative Code.
(b) Partner’s tax liability without distributive share. The amount determined in this subparagraph (ii)(B)(b) is the tax liability of the partner determined under this 19 RCNY § 28-03, excluding any partnership items entering into the calculation of the partner’s unincorporated business taxable income such as the partner’s distributive share of the partnership’s income, gain, loss and deductions, any guarantee payments from the partnership, and excluding partnership allocation factors, if taken into account in calculating the partner’s allocation to the City (See 19 RCNY § 28-07(j)(2)(i)(C)(a)) and determined without allowance of any of the credits allowed under § 11-503 of the Administrative Code.
(c) Partner’s modified tax liability. For taxable years of the partner beginning after 1995, the amounts computed 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 unincorporated business taxable income of the partner is less than zero, the partner’s unincorporated business taxable 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.
(C) Credit limited to partner’s unincorporated business tax. For taxable years of the partner beginning before 1996, the sum of the UBT Paid Credits that a partner is allowed and may take against its tax liability in any given taxable year under this subdivision (d) with respect to all unincorporated businesses in which the partner is a partner shall not exceed the tax on the partner’s unincorporated business taxable income determined under this 19 RCNY § 28-03 without allowance of any of the credits allowed under § 11-503 of the Administrative Code. For taxable years of the partner beginning after 1995, the sum of the UBT Paid Credits that a partner may take for the taxable year under this subdivision (d) with respect to all unincorporated businesses in which the partner is a partner shall not exceed the tax on the partner’s unincorporated business taxable income determined under this 19 RCNY § 28-03, reduced by the credit allowed under subdivision (b) of § 11-503 of the Administrative Code, but without the allowance of any of the other credits allowed under such § 11-503.
(3) Carryover of UBT Paid Credit after 1995.
(i) For taxable years beginning after 1995, if the amount of UBT Paid Credit or Credits allowed to a partner with respect to one or more partnerships as determined under paragraph (2) of this subdivision (d) exceeds the amount of credit or credits that may be taken as determined under subparagraph (ii)(C) of paragraph (2) of this subdivision (d), the partner may carry the excess forward to each of the seven immediately succeeding taxable years of the partner subject to certain limitations as provided in subparagraph (3)(ii) infra. In applying the provisions of the preceding sentence, for each taxable year of a partner, the UBT Paid Credit or Credits determined under paragraph (2) of this subdivision (d) for the current taxable year shall be taken before taking any credit carryforward pursuant to this paragraph (3), and the amount of any credit carryforward available under this paragraph (3) attributable to the earliest taxable year shall be taken before a credit carryfoward attributable to a subsequent taxable year.
(ii) Notwithstanding anything to the contrary in subparagraph (i) of this paragraph, supra, in the case of a partner that is a partnership, no credit carryforward shall be allowed to any taxable year pursuant to this paragraph (3) unless one or more of the partners therein during the taxable year to which the credit would be carried also owned at least an 80 percent interest in the unincorporated business gross income and unincorporated business deductions of the partnership during the taxable year of the partnership in which the credit was originally allowed. The carryforward allowable pursuant to this subparagraph (ii) shall not exceed the portion of the amount of the credit carryforward determined under subparagraph (i) of this paragraph determined by multiplying such credit carryforward by the sum of the proportionate interests in the unincorporated business gross income and unincorporated business deductions of the partnership for the year to which the credit is to be carried belonging to such partners. The amount by which the credit carryforward determined under subparagraph (i) of this paragraph exceeds the amount determined pursuant to the preceding sentence cannot be carried forward to any other taxable year.
(iii) Credits from multiple partnerships. If, in a taxable year, a partner is allowed a UBT Paid Credit with respect to more than one partnership and the total amount of UBT Paid Credits allowed exceeds the amount that may be taken under subparagraph (ii)(C) of paragraph (2) of this subdivision (d), the amount of the UBT Paid Credit with respect to each partnership that may be taken is an amount that bears the same ratio to the total UBT Paid Credit allowed for the current year with respect to that partnership as the total amount of UBT Paid Credits that may be taken in the current year under subparagraph (ii)(C) of paragraph (2) of this subdivision bears to the total UBT Paid Credit allowed for the current year with respect to all partnerships. The remainder of the UBT Paid Credit allowed with respect to that partnership is available as a carryover.
(4) Multiple tiers of partnerships. A partner may only take a credit with respect to distributive shares from partnerships in which it is a direct owner, i.e., the partner is identified as a partner in the partnership agreement and on Schedule K-1 of IRS Form 1065 filed by the partnership.
Example: Partnership C is a partner in Partnership B, which, in turn, is a partner in Partnership A. Partnership 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 Partnership C with respect to Partnership B reflects credits claimed by Partnership B, including its UBT Paid Credit with respect to Partnership A (see subparagraph (d)(2)(ii)(a), supra), Partnership 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. (See example 7 infra.)
(5) The UBT Paid Credit allowed under this provision shall not be allowed to a partner in a partnership with respect to any unincorporated business tax paid by the partnership for any taxable year beginning before July 1, 1994.
(6) The UBT Paid Credit shall be taken after the credit allowed by subdivision (b) of § 11-503 of the Administrative Code is taken, but before any other credit allowed by such section is taken.
(7) Reporting requirements for partnerships. In order for a partner to calculate the UBT Paid Credit with respect to a distributive share or guaranteed payment from a specific partnership, certain information is necessary from the partnership. To facilitate this calculation, each partnership having partners that are subject to the taxes imposed under Chapter 5 or subchapter 2 or part 4 of subchapter 3 of Chapter 6 of Title 11 of the Administrative Code of the City of New York should complete a schedule on a form specified by the Commissioner of Finance in which the following information is provided:
(i) the names and taxpayer identification numbers of all partners in the partnership;
(ii) the net distributive share, as defined in subparagraph (2)(ii)(A)(b) of this subdivision (d), for each partner, provided, however, that if a partner’s net distributive share is less than zero, it should be treated and reported as zero for purposes of this subparagraph (ii) and subparagraph (iii), infra;
(iii) the total of all net distributive shares of all partners; and
(iv) the distributive share percentage as defined in subparagraph (2)(ii)(A)(b) of this subdivision (d) calculated for each partner by dividing the amount in subparagraph (ii) above by the amount in subparagraph (iii) supra.
(8) The provisions of paragraphs (1) through (7) of this subdivision (d) are illustrated by the following examples. The facts of the examples have been simplified and do not reflect the deduction allowed by Administrative Code § 11-509(a) or the exemption allowed by Administrative Code § 11-510(a)(1). The effect of other credits allowed under § 11-503 of the Administrative Code is not reflected except as specifically noted. All of the examples below involve entities having business allocation percentages of 100 percent and no investment income. For examples of the calculation of the credit with respect to entities that allocate business or investment income outside the City, see subdivision (j) of 19 RCNY § 28-07.
Example 1: Calculation of distributive share percentage (“DSP”). Partnership ABCD has four partners. Partners A,B,C and D share equally in income of $800x from ABCD. Partner D also has a special allocation of a loss of ($300x) from ABCD.
| I Distributive Share (DS) | II DS – Modified for Calculation of DSP | III Distributive Share Percentage (DSP)(col. II ÷ col. II total) | |
|---|---|---|---|
| A | $200x | $200x | 33.33% |
| B | $200x | $200x | 33.33% |
| C | $200x | $200x | 33.33% |
| D | ($100x) | $0 | 0% |
| Total | $500x | $600x | 100% |
~
Example 2: DSP for members of a combined group. Assume the same facts as in example 1, above, except that B, C, and D are corporations that file a combined return for purposes of the general corporation tax as group CG. The membership of B, C, and D in the combined group does not affect the reporting by Partnership ABCD of the distributive share information required by these rules. CG’s distributive share percentage is the sum of the distributive share percentages of B, C, and D or 66.67% (33.33% + 33.33% + 0%).
Example 3: Basic credit calculation. AB is a partnership doing business in New York City. AB has two partners, A and B. Partner A is a partnership doing business in New York City with a 100% business allocation percentage. Partner B is an individual who does not independently do business in New York City. AB’s unincorporated business taxable income (“UBTI”) for calendar year 1995 is $400x. AB pays unincorporated business tax of $16x. AB’s Form NYC-204 for 1995 indicates that A’s distributive share from AB is $300x and that B’s distributive share is $100x. (B is not entitled to a UBT Paid Credit with respect to AB because B does not include any portion of his distributive share from AB in any unincorporated business gross income reported by him. See 19 RCNY § 28-05(a)(1).) A has UBTI of $200x without regard to its distributive share of income, gain, loss or deduction from AB (“Separate UBTI”). A is subject to the unincorporated business tax and is entitled to a UBT Paid Credit with respect to tax paid by AB. A’s UBT Paid Credit is determined as follows:
| Separate UBTI | DS | DSP | Total UBTI | TAX w/o credit | |
|---|---|---|---|---|---|
| AB | NA | NA | NA | $400x | $16x |
| A | $200x | $300x | 75% | $500x | $20x |
| B | NA | $100x | 25% | NA | NA |
~
Measure 1: A’s distributive share percentage is 75%. ($300x/$400x.) Measure 1 is $12x determined by multiplying AB’s tax of $16x by A’s distributive share percentage (75%).
Measure 2: A’s total UBTI is $500x, on which the tax would be $20x before any UBT Paid Credit. The tax on A’s separate UBTI of $200x would be $8x. Thus the incremental tax effect on A’s total UBTI of A’s distributive share from AB is $12x ($20x - $8x = $12x). Therefore, A’s UBT Paid Credit is $12x. Example 4: Treatment of partner’s losses and carryover of credit. The facts are the same as in example 3 except that for A’s taxable year beginning January 1, 1995. A also has an operating loss of ($100x) without regard to its distributive share from AB. For the taxable year beginning January 1, 1996, the facts are the same as for 1995. For the taxable year beginning January 1, 1997, AB’s UBTI is $400x. A’s distributive share from AB is $300x. A’s separate UBTI is $50x. A’s UBT Paid Credits for 1995, 1996, and 1997 are calculated as follows:
1995
| Separate UBTI | DS | DSP | Total UBTI | UBT Liability w/o credit | |
|---|---|---|---|---|---|
| AB | NA | NA | NA | $400x | $16x |
| A | ($100x) | $300x | 75% | $200x | $8x |
~
Measure 1: A’s distributive share percentage of AB’s tax liability is the same as in Example 3 above, $12x (75% × $16x).
Measure 2: A’s total UBTI is $200x, on which the tax liability would be $8x. A’s separate UBTI is a loss of ($100x) resulting in no tax. The incremental tax effect on A’s total UBTI of A’s distributive share from AB is $8x ($8x - 0 = $8x). Therefore, A’s UBT Paid Credit allowed for 1995 is $8x. No part of the unused credit may be carried forward from years beginning before January 1, 1996.
1996
| Separate UBTI | DS | DSP | Total UBTI | UBT Liability w/o credit | |
|---|---|---|---|---|---|
| AB | NA | NA | NA | $400x | $16x |
| A | ($100x) | $300x | 75% | $200x | $8x |
~
Measure 1: For 1996, Measure 1 for Partner A is the same as for 1995, $12x.
Measure 2: A’s total UBTI is $200x, on which the tax liability would be $8x. However, for taxable years beginning after 1995 for purposes of this calculation, A’s separate UBTI as modified is treated as $0 rather than ($100x). There would be no tax liability on its separate UBTI as modified. A’s total UBTI as modified is treated as $300x (separate modified UBTI of $0 + $300x of A’s distributive share). A’s tax liability on this amount would be $12x. Thus, the incremental tax effect of the inclusion in A’s total modified UBTI of its distributive share from AB is $12x ($12x - 0).
A is allowed a credit of $12x. However, because A’s actual tax liability for 1996 would be $8x before any UBT Paid Credit, A can only take a credit of $8x in 1996. The remaining credit allowed of $4x is eligible to be carried over by A to the next seven taxable years.
1997
| Separate UBTI | DS | DSP | Total UBTI | UBT Liability w/o credit | |
|---|---|---|---|---|---|
| AB | $400x | NA | NA | $400x | $16x |
| A | $50x | $300x | 75% | $350x | $14x |
~
Measure 1: For 1997, Measure 1 for Partner A is the same as for 1995, $12x.
Measure 2: A’s total UBTI is $350x, on which the tax liability would be $14x. A’s separate UBTI would be $50x on which the tax would be $2x. Thus, the incremental tax effect on A’s total UBTI of its distributive share from AB is $12x ($14x - $2x).
Therefore, A is allowed a credit of $12x in 1997. Assuming that there were no changes in the ownership of A in 1997, A may also carry over to 1997 the excess credit allowed in 1996 of $4x that it could not take. Therefore, the total credit available to A in 1997 is $16x. However, because A’s tax liability in 1997 is $14x, the total credit that A may take in 1997 is $14x. A must first take its $12x credit from 1997, thereby reducing its tax liability to $2x. A may then take $2x of its credit from 1996 to reduce its liability to $0. The remaining credit of $2x from 1996 is eligible to be carried over by A to the next six taxable years.
Example 5: The facts are the same as in example 4 except that on January 1, 1997, one of the two 50% partners in A sells his interest in A to a third party. Because the partners in A in 1997 only owned 50% of A in 1996, A is not entitled to use any portion of the $4x credit carryover from 1996 in 1997. See subdivision (d)(3)(ii) of this § 28-03.
Example 6: Partners in multiple partnerships.
AB and BC are partnerships doing business in New York City. B is a partner in both AB and BC. B is a partnership doing business in New York City with a 100% business allocation percentage. For each of its taxable years 1995 and 1996, B’s separate UBTI is a loss of ($400x). For each of the taxable years 1995 and 1996, AB’s UBTI is $400x. AB pays tax of $16x on that income each year. AB’s unincorporated business tax return for each of those years indicates that B’s distributive share from AB is $300x and that B’s distributive share percentage is 75%. For each of the taxable years 1995 and 1996, BC’s UBTI is $1000x. BC pays tax of $40x on that income each year. BC’s unincorporated business tax return for each of those years indicates that B’s distributive share from BC is $500x and that B’s distributive share percentage is 50%. B is subject to the unincorporated business tax and is entitled to a UBT Paid Credit for 1995 and 1996 related to its distributive shares from AB and BC determined as follows:
1995
| Separate UBTI | DS from AB | DS from BC | Total UBTI | UBT Liability w/o credit | |
|---|---|---|---|---|---|
| AB | NA | NA | NA | $400x | $16x |
| AC | NA | NA | NA | $1000x | $40x |
| B | ($400x) | $300x | $500x | $400x | $16x |
~
B’s credit with respect to AB:
Measure 1: B’s distributive share percentage of AB’s tax is $12x, determined by multiplying AB’s tax of $16x by B’s distributive share percentage, 75%
Measure 2: B’s tax liability on its total UBTI is $16x before any UBT Paid Credit. B’s tax liability on its UBTI of $100x without its distributive share from AB ($400x - $300x), would be $4x. The incremental tax effect on B’s total UBTI of its distributive share from AB is $12x ($16x - $4x).
Therefore, B’s UBT Paid Credit allowed with respect to AB is $12x.
B’s credit with respect to BC:
Measure 1: B’s distributive share percentage of BC’s tax liability is $20x, determined by multiplying BC’s tax liability of $40x by B’s distributive share percentage of 50%.
Measure 2: B’s tax liability on its total UBTI of $400x would be $16x. Without its distributive share from BC, B would have a loss of ($100x) on which there would be no tax. The incremental tax effect on B’s total UBTI of its distributive share from BC is $16x ($16x - 0).
Thus, B’s UBT Paid Credit allowed with respect to BC is $16x.
Total Credit for 1995: B’s total UBT Paid Credit with respect to AB and BC is $28x. However, because B’s tax liability on its total UBTI without the credit would be only $16x, the total UBT Paid Credit allowed to B in 1995 is limited to $16x. There is no carryover of the remaining $12x credit to any subsequent year.
1996
| Separate UBTI | DS – DSP AB | DS – DSP BC | Total UBTI | UBT Liability w/o credit | |
|---|---|---|---|---|---|
| AB | NA | NA | NA | $400x | $16x |
| BC | NA | NA | NA | $1000x | $40x |
| B | ($400x) | $300x - 75% | $500x - 50% | $400x | $16x |
~
B’s credit with respect to AB:
Measure 1: For 1996, Measure 1 for B is the same as for 1995, $12x.
Measure 2: B’s total UBTI is $400x, on which the tax liability would be $16x. For purposes of calculating Measure 2 in 1996, B’s operating loss of ($400x) is treated as zero so that its total modified UBTI is treated as $800x, on which the tax would be $32x. Without its distributive share of $300x from AB, B’s modified UBTI would be $500x on which the tax would be $20x. The incremental tax effect on B’s modified UBTI of B’s distributive share from AB is $12x ($32x - $20x).
Therefore, B’s UBT Paid Credit allowed with respect to AB is $12x.
Calculation of B’s credit with respect to BC:
Measure 1: For 1996, Measure 1 for B is the same as for 1995, $20x.
Measure 2: B’s total UBTI is $400x, on which the tax would be $16x. For purposes of calculating Measure 2 in 1996, B’s operating loss of ($400x) treated as zero so that its total modified UBTI is treated as $800x, on which the tax would be $32x. Without its distributive share of $500x from BC, B’s UBTI would be $300x, on which the tax would be $12x. Thus, the incremental tax effect of B’s distributive share from BC is $20x ($32x - $12x).
Thus, B’s UBT Paid Credit allowed with respect to BC is $20x.
Total Credits for 1996:
B’s total UBT Paid Credit allowed with respect to AB and BC is $32x ($12x + $20x). However, because B’s tax liability without the credits would be only $16x, the credit that B can take in the taxable year 1996 is limited to $16x, B’s tax liability. The $16x of credits taken in 1996 is deemed to be composed of $6x of the UBT Paid Credit allowed with respect to AB ($16x × $12x/$32x) and $10x of the UBT Paid Credit allowed with respect to BC ($16x × $20x/$32x). See subparagraph (3)(iii) of this subdivision (d). B can carry the $16x excess of the amount of credit allowed over the amount that may be taken to the succeeding seven years. The credit carryover is deemed to be composed of $6x of the UBT Paid Credit allowed with respect to AB and $10x of the UBT Paid Credit allowed with respect to BC.
Example 7: Multiple tiers of partnerships and flow through of credits.
Partnership C is a partner in Partnership B. B is a partner in partnership A. For each of the years 1995, 1996, 1997 and 1998, A’s UBTI is $1000x, and A’s tax liability is $40x, before a credit of $10x allowed to A pursuant to 11-503(i) (the REAP credit). The following chart summarizes the information relevant to A for the four taxable years.
| A | 1995 | 1996 | 1997 | 1998 |
|---|---|---|---|---|
| UBTI | $1000x | $1000x | $1000x | $1000x |
| Tax after REAP credit | $30x | $30x | $30x | $30x |
~
For each year, B’s distributive share from A is $400x. Its distributive share percentage with respect to A is 40%. In 1995 and 1996 B has separate UBTI of $200x. In 1997 B has separate UBTI loss of ($300x). In 1998 B has separate UBTI of $600x. The following chart summarizes the information relevant to B for the four taxable years:
| B | 1995 | 1996 | 1997 | 1998 |
|---|---|---|---|---|
| Separate UBTI | $200x | $200x | ($300x) | $600x |
| DSP in A | 40% | 40% | 40% | 40% |
| DS from A | $400x | $400x | $400x | $400x |
| Total UBTI | $600x | $600x | $100x | $1000x |
| Tax w/o UBT Paid Credit | $24x | $24x | $4x | $40x |
~
For each year, C’s distributive share percentage in B is 50% and C has separate UBTI of $400x. The following chart summarizes the information relevant to C for the four taxable years:
| C | 1995 | 1996 | 1997 | 1998 |
|---|---|---|---|---|
| Separate UBTI | $400x | $400x | $400x | $400x |
| DSP in B | 50% | 50% | 50% | 50% |
| DS from B | $300x | $300x | $50x | $500x |
| Total UBTI | $700x | $700x | $450x | $900x |
| Tax w/o UBT Paid Credit | $28x | $28x | $18x | $36x |
~
Calculation of the Credit for 1995:
B’s Credit:
Measure 1: B’s distributive share percentage of the sum of A’s tax and applicable credits is $12x (B’s distributive share percentage of 40% multiplied by A’s tax liability after the REAP credit ($30x)). (Note: A’s REAP credit is not added to A’s tax liability in 1995 for purposes of this calculation. The effect of this is that B does not get the benefit of A’s REAP credit in 1995. In 1996 and later years, B will get the benefit of A’s REAP credit.)
Measure 2: B’s tax liability on its total UBTI of $600x would be $24x. The tax on B’s separate UBTI of $200x would be $8x.
Thus, the incremental tax effect on B’s total UBTI of its distributive share of $400x from A is $16x ($24x - $8x).
Therefore, B’s UBT Paid Credit allowed is $12x. B’s tax liability after the credit is $12x.
C’s Credit:
Measure 1: C’s distributive share percentage of the sum of B’s tax and UBT Paid Credit is $12x (C’s distributive share percentage of 50% multiplied by the sum of B’s tax liability ($12x) and B’s UBT Paid Credit with respect to A ($12x).
Measure 2: C’s tax liability on its total UBTI of $700x would be $28x. The tax on C’s separate UBTI of $400x would be $16x.
Thus, the incremental tax effect on C’s total UBTI of its distributive share of $300x from B is $12x ($28x - $16x).
Therefore, C’s UBT Paid Credit allowed with respect to B is $12x.
Calculation of the Credit for 1996:
B’s Credit:
Measure 1: B’s distributive share percentage of the sum of A’s tax and applicable credits is $16x (B’s distributive share percentage of 40% multiplied by the sum of A’s tax liability and A’s REAP credit ($40x)). (Note: the REAP credit is added here to A’s tax liability for purposes of calculating B’s credit. The effect of this is that A’s REAP credit will flow through to B.)
Measure 2: B’s tax liability on its total UBTI of $600x would be $24x. The tax on B’s separate UBTI of $200x would be $8x.
Thus, the incremental tax effect on B’s total UBTI of its distributive share of $400x from A is $16x ($24x - $8x).
Therefore, B’s UBT Paid Credit allowed is $16x. B’s tax liability after the credit is $8x.
C’s Credit:
Measure 1: C’s distributive share percentage of the sum of B’s tax and applicable credits is $12x (C’s distributive share percentage of 50% multiplied by the sum of B’s tax liability ($8x) and B’s UBT Paid Credit with respect to A ($16x).)
Measure 2: C’s tax liability on its total UBTI of $700x would be $28x. The tax on C’s separate UBTI of $400x would be $16x.
Thus, the incremental tax effect on C’s total UBTI of its distributive share of $300x from B is $12x ($28x - $16x).
Therefore, C’s UBT Paid Credit allowed with respect to B is $12x.
Calculation of the Credit for 1997:
B’s Credit:
Measure 1: B’s distributive share percentage of the sum of A’s tax and applicable credits is $16x (B’s distributive share percentage of 40% multiplied by A’s tax liability plus A’s REAP credit ($40x)).
Measure 2: B’s separate loss is ignored and B’s separate UBTI is treated as $0 on which there would be no tax. B’s tax liability on its total modified UBTI of $400x would be $16x.
Thus, the incremental tax effect on B’s total modified UBTI of its distributive share of $400x from A is $16x ($16x - $0x).
Therefore, B’s UBT Paid Credit allowed for 1997 is $16x. However, because B’s pre-credit tax liability is only $4x, B may only take a UBT Paid Credit of $4x in 1997. B may carry forward $12x, the excess of the $16x credit allowed over the $4x credit taken, to the next seven years subject to the applicable limitations.
C’s Credit:
Measure 1: C’s distributive share percentage of the sum of B’s tax and applicable credits is $2x (C’s distributive share percentage of 50% multiplied by B’s tax liability ($0x) plus B’s UBT Paid Credit taken ($4x)). (Note: for purposes of calculating C’s UBT Paid Credit, only the credit taken by B is included, not the total credit allowed. See the discussion of C’s credit for 1998 below in this example.)
Measure 2: C’s tax liability on its total UBTI of $450x would be $18x. The tax on C’s separate UBTI of $400x would be $16x.
Thus, the incremental tax effect on C’s total UBTI of its distributive share of $50x from B is $2x ($18x - $16x).
Therefore, C’s UBT Paid Credit allowed with respect to B for 1997 is $2x.
Calculation of the Credit for 1998:
B’s Credit:
Measure 1: B’s distributive share percentage of the sum of A’s tax and applicable credits is $16x (B’s distributive share percentage of 40% multiplied by A’s tax liability plus A’s REAP credit ($40x).
Measure 2: B’s tax liability on its total UBTI of $1000x would be $40x. The tax on B’s separate UBTI of $600x would be $24x.
Thus, the incremental tax effect on B’s total UBTI of its distributive share of $400x from A is $16x ($40x - $24x).
Therefore, B’s UBT Paid Credit allowed for 1998 is $16x. It may also carry over to 1998 the excess credit allowed in 1997 of $12x that it could not take. Therefore, the total credit that is available to B in 1998 and that B may take is $28x. B’s tax liability after the credit is $12x.
C’s Credit:
Measure 1: C’s distributive share percentage of the sum of B’s tax and applicable credits is $20x (C’s distributive share percentage of 50% multiplied by B’s tax liability ($12x) plus B’s UBT Paid Credit taken ($28x)). The credit taken includes the amount of $12x allowed to B in 1997 but carried forward and taken by B in 1998.
Measure 2: C’s tax liability on its total UBTI of $900x would be $36x. The tax on C’s separate UBTI of $400x would be $16x.
Thus, the incremental tax effect on C’s total UBTI of its distributive share of $500x from B is $20x ($36x - $16x).
Therefore, C’s UBT Paid Credit allowed with respect to B for 1998 is $20x.
§ 28-04 Unincorporated Business Taxable Income.
(a) Unincorporated business entire net income (Administrative Code § 11-501(g)). For taxable years beginning on or after July 1, 1994, the unincorporated business entire net income of a taxpayer means its unincorporated business gross income, as computed under 19 RCNY § 28-05, over the unincorporated business deductions allowable under Administrative Code § 11-507 and 19 RCNY § 28-06.
(1) its deductions allowable, without allocation, under 19 RCNY § 28-08 and;
(2) its unincorporated business exemption permitted under 19 RCNY § 28-09(a).
§ 28-05 Unincorporated Business Gross Income.
(a) (1) General. (Administrative Code § 11-506(a)). Subject to the modifications prescribed below in 19 RCNY § 28-05(b) and (c), the unincorporated business gross income of an unincorporated business engaged in or being liquidated by an individual or unincorporated entity means the sum of the items of income and gain (of whatever kind and in whatever form paid) that are includible in the gross income of the individual or unincorporated entity for Federal income tax purposes for the taxable year and that are derived from the carrying on or liquidation of the business or from any source whatever connected therewith, including, without limitation, income and gain
(A) from any property of the individual or unincorporated entity, or a member thereof, employed in the business,
(B) from liquidation of the business or disposition of the assets thereof,
(C) from collection or other disposition of installment obligations of the business without regard to when such obligations were acquired, or
(D) in the case of an unincorporated entity, from the sale or other disposition of an interest in another unincorporated entity if and to the extent such income or gain is attributable to a trade, business, profession or occupation carried on in whole or in part in the City by such other unincorporated entity. An individual member of a partnership who also carries on his or her own separate and independent unincorporated business is not required or permitted to include his distributive share of partnership income or his or her gain or loss on the sale or other disposition of his or her interest in the partnership in computing his or her separate unincorporated business gross income.
Example: Doctor A is a member of a medical partnership which provides medical services to members of a group health plan. In addition, Doctor A carries on his own separate and independent medical practice. Doctor A may not include his distributive share of partnership income in his computation of his own unincorporated business gross income. (Furthermore, the medical partnership may not claim the statutory additional exemption described in 19 RCNY § 28-09(b) for the amount distributed to Doctor A and Doctor A is not entitled to a credit against his unincorporated business tax liability for any unincorporated business tax paid by the medical partnership for its taxable years beginning on or after July 1, 1994. See 19 RCNY § 28-09(b)(1) and 19 RCNY § 28-03(d).
(2) For taxable years beginning on or after January 1, 1996, the character of a partner’s distributive share of gross income, gains, losses and deductions of an unincorporated entity shall be determined as if such gross income, gains, losses and deductions were realized directly by such partner to the extent permitted for federal income tax purposes regardless of how the interest in the unincorporated entity was acquired and regardless of whether the distributive share is proportionate to the partner’s capital interest in the unincorporated entity, provided, however, this paragraph (2) shall not apply to payments to a partner treated as occurring between the unincorporated entity and one who is not a partner under Internal Revenue Code § 707, and provided, further, this paragraph (2) shall not affect the determination of whether gross income, gains, losses, or deductions of an unincorporated entity are subject to the tax imposed under Chapter 5 of Title 11 of the Administrative Code. This paragraph (2) is illustrated by the following:
Example: Partnership X is the sole general partner in Partnership A. X contributed one percent of the capital of Partnership A. X is responsible for the day to day management of the business of Partnership A, which is the purchase and sale of stocks and securities for the account of Partnership A. X is paid a fee each year of $100,000 qualifying as a guaranteed payment under Internal Revenue Code § 707. In addition, X is entitled to receive 20 percent of the income, gains, losses, and deductions of Partnership A. X’s entire distributive share of the income, gains, losses, and deductions of Partnership A retains its character in X’s hands, i.e., as dividends, interest and gains and losses from stocks and securities. X’s $100,000 fee is compensation for services rendered and X’s performance of those services may be considered an unincorporated business under the provisions of 19 RCNY § 28-02 without regard to this paragraph (2).
(1) Interest income on obligations of any State of the United States, other than New York State, or of a political subdivision of any such other State, unless created by an agreement or compact to which the State of New York is a party;
(2) Interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States, which the laws of the United States exempt from Federal income tax, but not from State or local income taxes;
(3) The amount determined under 19 RCNY § 28-08(b) in respect of certain property sold or otherwise disposed of during the year, which was subject to an election exercised by the taxpayer with regard to a special deduction for depreciation or for an expenditure for property used for research or development purposes in accordance with said section;
(4) For taxable years commencing on or after August 1, 1977, the entire amount allowable as an exclusion or deduction for stock transfer taxes imposed by Article 12 of the State Tax Law in determining Federal gross income, but only to the extent that such taxes are incurred and paid in market making transactions as defined in § 11-503(c) of the Administrative Code;
(5) The amount allowed as an exclusion or deduction for sales and use taxes imposed by § 1107 of the State Tax Law in determining Federal gross income, but only such portion of such exclusion or deduction which is not in excess of the amount of credits allowed under 19 RCNY § 28-03(c)(3);
(6) The amount allowed as an exclusion or deduction for rent in determining Federal gross income but only such portion of such exclusion or deduction which is not in excess of the amount of credit allowed under 19 RCNY § 28-03(c)(4);
(7) The amount allowed as an exclusion or deduction for relocation expenses in determining Federal gross income, but only such portion of such exclusion or deduction which is not in excess of the amount of the credit allowed under 19 RCNY § 28-03(c)(4);
(8) For taxable years beginning after December 31, 1981, any amount which would properly be includible in federal gross income had the taxpayer 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 § 163(f)(8)(D) of the Internal Revenue Code;
(9) Upon the disposition of recovery property to which 19 RCNY § 28-06(n) applies, the amount, if any, by which the aggregate of the deductions for depreciation attributable to such property allowable pursuant to such 19 RCNY § 28-06(n) exceeds the aggregate accelerated cost recovery system deduction attributable to such property, described in 19 RCNY § 28-06(m);
(10) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount allowed as an exclusion or deduction in determining federal gross income or any loss, including but not limited to, losses from notional principal contracts, losses, other than losses realized by the taxpayer as a dealer as defined in 19 RCNY § 28-02(g)(2), from the holding, sale or disposition, assumption, offset or termination of a position in, property, as defined in 19 RCNY § 28-02(g)(3), or other substantially similar losses from ordinary and routine trading or investment activity to the extent determined by the Commissioner of Finance, realized in connection with activities described in 19 RCNY § 28-02(g)(1)(v) if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g);
(11) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, in the case of a taxpayer that is an unin- corporated entity eligible for the partial self-trading exemption described in 19 RCNY § 28-02(g)(4), the amount allowed as an exclusion or deduction in determining federal gross income or any loss realized from the sale or other disposition of an interest in another unincorporated entity if, and to the extent that, such loss is attributable to activities of such other unincorporated entity not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g);
(12) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after July 1, 1994, the amount allowed as an exclusion or deduction in determining federal gross income or any loss realized from the holding, leasing or managing of real property if, and to the extent that, such holding, leasing or managing of real property is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(h)(2)(ii); and
(13) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount allowed as an exclusion or deduction in determining federal gross income or any loss realized from the provision by an owner, lessee or fiduciary holding, leasing or managing real property of the service of parking, garaging or storing of motor vehicles on a monthly or longer term basis to tenants at such real property if, and to the extent that, the provision of such services to such tenants is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(h)(2)(iii).
(1) Interest income on obligations of the United States and its possessions, to the extent includible in gross income for Federal income tax purposes;
(2) Interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States, to the extent includible in gross income for Federal income tax purposes, but exempt from State or local income taxes under the laws of the United States;
(3) Interest or dividend income on obligations or securities, to the extent exempt from income tax under the laws of the City or State of New York authorizing the issuance of such obligations or securities, but includible in gross income for Federal income tax purposes;
(4) The amount of any refund or credit for overpayment of income taxes imposed by the City or State of New York or any other taxing jurisdiction, to the extent properly included in gross income for Federal income tax purposes. This modification does not apply to interest paid or allowed on any refund or credit for overpayment of income taxes includible in gross income for Federal income tax purposes;
(5) With respect to gain derived from the sale or other disposition of any property acquired prior to January 1, 1966, except property described in subsections 1 and 4 of § 1221 of the Internal Revenue Code, the difference between:
(i) the amount of gain included in Federal gross income with respect to each such property, and
(ii) the amount of gain (if smaller than the amount described in (i)) that would be included in Federal gross income with respect to each such property if the Federal adjusted basis of such property on the date of the sale or other disposition had been equal to 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; provided, however, that the total modification under this paragraph shall not exceed the taxpayer’s net gain from the sale or other disposition of all such property.
(6) For taxable years beginning after December 31, 1981, any amount properly includible in federal gross 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 § 168(f)(8)(d) of the Internal Revenue Code;
(7) Upon the disposition of recovery property to which 19 RCNY § 28-06(n) applies, the amount, if any, by which the aggregate accelerated cost recovery system deduction attributable to such property, described in 19 RCNY § 28-06(m), exceeds the aggregate of the deductions for depreciation attributable to such property allowable pursuant to such 19 RCNY § 28-06(n);
(8) For taxable years beginning on or after July 1, 1994, 50 percent of the amount of dividends (to the extent includible in gross income for federal income tax purposes and not subtracted under paragraph (2) or (3) of this subdivision (c)), other than
(i) the amounts described in subparagraph 13 or 15 of paragraph (b) of Administrative Code § 11-602.8, and
(ii) dividends from stock described in paragraph (b) or (c) of Administrative Code § 11-602.3, provided, however, no portion of a dividend from stock with respect to which a dividend deduction would be disallowed by § 246(c) of the Internal Revenue Code if the unincorporated business were subject to federal income tax as a corporation shall be subtracted under this paragraph (8). For purposes of subparagraphs (i) and (ii) of this paragraph (8), references in Administrative Code § 11-602 to “acquiring person” or “acquiring corporation” are deemed to refer to the unincorporated business;
(9) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes), including but not limited to, dividends, interest, payments with respect to securities loans, income from notional principal contracts, income and gains, other than as a dealer, from the holding, sale or disposition, assumption, offset or termination of a position in, property as defined in 19 RCNY § 28-02(g)(3), or other substantially similar income from ordinary and routine trading or investment activity to the extent determined by the Commissioner of Finance, realized in connection with activities described in 19 RCNY § 28-02(g)(1)(v) if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g);
(10) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, in the case of a taxpayer that is an unincorporated entity eligible for the partial self-trading exemption described in 19 RCNY § 28-02(g)(4), the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized from the sale or other disposition of an interest in another unincorporated entity if, and to the extent that, such income or gain is attributable to activities of such other unincorporated entity not demed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g);
(11) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after July 1, 1994, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized from the holding, leasing or managing of real property if, and to the extent that, such holding, leasing or managing of real property is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(h)(ii); and
(12) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized by an owner, lessee or fiduciary holding, leasing or managing real property from providing parking, garaging or motor vehicle storage services on a monthly or longer term basis to tenants at such real property if, and to the extent that, the provision of such services to such tenants is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(h)(iii).
§ 28-06 Unincorporated Business Deductions.
(a) General. (Administrative Code § 11-507). Except as otherwise provided in this section, the unincorporated business deductions of an unincorporated business engaged in or being liquidated by an individual or unincorporated entity mean the items of loss and deduction of the individual or unincorporated entity which are allowable for Federal income tax purposes for the taxable year and which are directly connected with or incurred in the conduct or the liquidation of the business, including losses and deductions connected with any property of the individual or unincorporated entity employed in the business. The deductions of the unincorporated business for Federal income tax purposes determined under this section shall be subject to the modifications and limitations hereinafter set forth.
(1) General. A deduction shall be allowed for charitable contributions of the unincorporated business to the extent that such contributions would be deductible for Federal income tax purposes if made by a corporation. The amount of this deduction, however, shall not be greater than five percent of the amount by which the unincorporated gross income of the unincorporated business exceeds the sum of
(i) the unincorporated business deductions computed without the benefit of any deduction of charitable contributions, and
(ii) the deduction allowed under 19 RCNY § 28-08(b) where the election permitted by such Section has been exercised with respect to the claiming of a special depreciation deduction or a research or development expenditure deduction for certain qualified property. Personal charitable contributions, that is, contributions not made by the unincorporated business itself, are not deductible for unincorporated business tax purposes even if they are of the type which would be deductible for Federal income tax purposes if made by a corporation. To be deductible for unincorporated business tax purposes, the charitable contribution must be directly connected with, or incurred in, the conduct of the unincorporated business, an entity separate and distinct from the owners or operators of the business.
(2) Applicable rules. For purposes of applying the foregoing, the following rules shall apply:
(i) Charitable contributions defined. The term “charitable contributions” means a contribution or gift of the type which is allowable to a corporation under § 170 of the Internal Revenue Code and the applicable regulations thereunder.
(ii) Limitations. For purposes of determining whether the charitable contributions of an unincorporated business are in excess of five percent of the amount by which the unincorporated business gross income exceeds the unincorporated business deductions, the unincorporated business deductions shall be determined without regard to
(A) any amount allowable under this subdivision (b),
(B) any deduction for services of the proprietor or active partners allowable under 19 RCNY § 28-08(a),
(C) any deduction allowed under 19 RCNY § 28-08(b) (pertaining to special depreciation and research and development expenditures), and
(D) any net operating loss carryback (as distinguished from a carry over) to the taxable year allowed under 19 RCNY § 28-06(c).
(iii) Charitable contributions carryover. Except as otherwise provided in subparagraph (2)(iv) below, any contributions made by an unincorporated business in a taxable year (hereinafter in this subparagraph (iii) referred to as the contribution year), in excess of the amount deductible in such contribution year under the prescribed five percent limitation are deductible, in accordance with the provisions of the Internal Revenue Code each of the five succeeding taxable years in order of time, but only to the extent of the lesser of the following amounts:
(A) the excess of the maximum amount deductible for such succeeding taxable year under the prescribed five percent limitation, over the sum of the contributions made in that year, plus the aggregate of the excess contributions which were made in taxable years before the contribution year and which are deductible under this subparagraph (iii) in such succeeding taxable year; or
(B) in the case of the first taxable year succeeding the contribution year, the amount of the excess contributions, and in the case of the second, third, fourth, or fifth taxable year succeeding the contribution year, the portion of the excess contributions not deductible under this subparagraph for any taxable year intervening between the contribution year and such succeeding taxable year.
Example: A partnership which is engaged in carrying on an unincorporated business wholly within New York City and which reports its income on a calendar year basis, makes charitable contributions amounting to $3,000 in each of the years 1968 through 1977. Its taxable net income for limitation purposes was $40,000 for 1968 and also for each of the years 1970 through 1976. Its taxable net income for limitation purposes in 1969 and 1977 was $100,000. The maximum amount of deductible contributions which may be permitted is, accordingly, $2,000 for each of the calendar years 1968 and 1970 through 1976 (five percent of $40,000) and $5,000 for the years 1969 and 1977 (five percent of $100,000). For the year 1968 the amount allowed as a deduction is $2,000, the maximum amount allowable for such year. The excess contribution of $1,000 ($3,000 actually contributed in 1968, less $2,000 the maximum allowable amount) is allowable as a carryover. For the year 1969 the amount allowed as a deduction is $4,000 , since the amount of $4,000 allowed as a deduction is less than $5,000 maximum amount which is permitted as a deduction for the year 1969. For each of the years 1970 through 1976 the amount allowed as a deduction is $2,000, resulting in a carryover of $1,000 for each of such years. For the year 1977 the amount allowed as a deduction is $5,000, which is the maximum amount allowable as a deduction for such year. This amount includes $3,000 actually contributed in 1977, plus the $1,000 contribution carryover for the year 1972, plus the $1,000 contribution carryover for the year 1973. The carryover for the years 1970 and 1971 are no longer permitted as deductions since more than five succeeding taxable years have elapsed since such years. Since the maximum amount which may be taken as a deduction in 1977 is $5,000, there remain outstanding carryovers for the years 1974, 1975 and 1976 in amounts of $1,000 for each year.
(iv) Special rule for unincorporated business having net operating loss carryover. In determining the extent to which a charitable contributions carryover under subparagraph (iii) above may be permitted, the amount by which
(A) the charitable contributions made by the unincorporated business in a taxable year to which this subdivision applies exceeds
(B) the maximum amount deductible in such year under the limitation prescribed by subparagraph (ii) above shall be reduced to the extent that such excess decreases the unincorporated business taxable income (as computed for purposes of 19 RCNY § 28-06(c) pertaining to net operating loss carryover and carryback computations) and increases a net operating loss carryover under 19 RCNY § 28-06(c) to a succeeding taxable year.
Example: An unincorporated business which began operations on January 1, 1971 sustained a net operating loss of $25,000 for the calendar year 1971. In 1972, the excess of the unincorporated business gross income over the unincorporated business deductions (without reference to a deduction for contributions or any net operating loss carryover) was $25,000. The contributions made by the business in 1972 amounted to $1,250. By reason of the carryover of the 1971 net operating loss of $25,000 to 1972, and because of the five percent limitation applicable to the deduction for contributions, no deduction for contributions is allowable for the year 1972. The $1,250 of contributions made in that year accordingly represents an “excess of contributions” within the meaning of subparagraph (iii) of this paragraph (2). This excess, however, is subject to a reduction of $1,250 because it has both (a) decreased the amount of the “applicable income” (under 19 RCNY § 28-06(c)) for 1972 ($25,000 minus $1,250 of contributions or $23,750) and (b) increased the net operating loss carryover available to 1973 (1971 loss of $25,000 minus the 1972 “applicable income” of $23,750 instead of minus the $25,000 of taxable 1972 income). The amount of the reduction of the excess of contributions based on the foregoing is $1,250 because that is the amount of both the decrease and increase computed above. $1,250 of the 1971 net operating loss remains as a carryover to 1973.
(v) Election by unincorporated business on an accrual method. An unincorporated business reporting its unincorporated business taxable income on an accrual method may elect to have a charitable contribution considered as paid during the taxable year provided payment is actually made on or before the 15th day of the third month following the close of the taxable year and if the contribution was pledged or made under a commitment made in writing by the unincorporated business during the taxable year. An election under this subparagraph (v) must be made at the time the return for the taxable year is filed. The election shall be made by including the contribution in the deduction claimed for contributions for the taxable year and by filing with the return a written declaration signed by the proprietor or an active partner showing
(A) the name and address of the recipient of the contribution or gift,
(B) the date the contribution was pledged and the amount of the pledge, and
(C) the amount deducted on account of the pledge and the date of actual payment of the amount so deducted.
(1) General. In lieu of any other deductions for net operating losses allowable under the Internal Revenue Code, a deduction shall (except as otherwise provided in paragraph (3) of this subdivision pertaining to partnerships) be allowed for net operating losses incurred by the unincorporated business in an amount computed in the same manner as the net operating loss deduction which would be allowable for the taxable year for Federal income tax purposes if the unincorporated business were an individual taxpayer (but determined solely by reference to the unincorporated business gross income and unincorporated business deductions, allocated to New York City, of the unincorporated business). Allowable deductions under this subdivision (c) shall not include any net operating loss sustained during any taxable year beginning prior to January 1, 1966.
(2) Applicable rules. For purposes of applying the foregoing, the following rules shall apply:
(i) Net operating loss deduction defined. The net operating loss deduction allowable for a taxable year under this subdivision (c) shall be an amount equal to the aggregate of
(A) the net operating loss carrybacks to such year, plus
(B) the net operating loss carryovers to such year, as determined under subparagraph (ii) below.
(ii) Amount of carryback or carryover.
(A) A net operating loss sustained for any taxable year beginning on or after January 1, 1966 shall be (a) a net operating loss carryback to each of the three taxable years preceding the taxable year of such loss, and (b) a net operating loss carryover to each of the five taxable years following the taxable year of such loss. A net operating loss for any taxable year ending after December 31, 1975, shall be a net operating loss carryover to each of the fifteen taxable years following the taxable year of such loss.
(B) The entire amount of the net operating loss sustained in any taxable year beginning on or after January 1, 1966 (referred to herein as the “loss year”) may be carried back three years. The loss is first carried to the earliest of the three taxable years. If it is not entirely used to offset income in that year, it is carried to the second taxable year preceding the loss year, and any remaining amount is carried to the taxable year immediately preceding the loss year. Any unused amount of loss then remaining may be carried forward for as many as fifteen taxable years following the loss year . If the unincorporated business taxable income for the three years preceding the loss year is smaller than the entire loss, the remaining loss is carried forward first to the taxable year immediately following the loss year, then to the second taxable year following the loss year, and so on for fifteen years , or until the loss is used up. For purposes of the preceding sentence, the unincorporated business taxable income shall be computed without regard to: (a) any deduction permitted under 19 RCNY § 28-08(a) for compensation for services of the proprietor or active partners, (b) any deduction allowed under 19 RCNY § 28-08(b), (c) the unincorporated business exemptions allowable under 19 RCNY § 28-09, and (d) the net operating loss for the loss year or for any subsequent taxable year. The taxable income so computed shall not be considered to be less than zero for any year. Any taxpayer entitled to a carryback period under this subdivision (c) may elect to relinquish the entire carryback period with respect to a net operating loss for any taxable year ending after December 31, 1975. Such election shall be made by the due date (including extensions of time) for filing the taxpayer’s return for the taxable year of the net operating loss for which the election is to be in effect. Such election, once made for any taxable year, shall be irrevocable for that taxable year.
(iii) Net operating loss defined. The term net operating loss as used in this subdivision (c) means the excess of the unincorporated business deductions (other than the deductions specified in 19 RCNY § 28-08(a) and (b)) of the unincorporated business over the unincorporated business gross income computed under 19 RCNY § 28-05 allocated to New York City in accordance with the provisions of 19 RCNY § 28-07, subject to the following modifications and exceptions:
(A) No net operating loss deduction shall be allowed.
(B) No deduction shall be allowed under 19 RCNY § 28-09 relating to unincorporated business exemptions.
Example 1: The computation of a net operating loss under subparagraph (iii) above the net operating loss deductions and carrybacks and carryovers under subparagraphs (i) and (ii) above are illustrated below: The unincorporated business tax returns of an unincorporated business conducted by an individual wholly within New York City show the following:
| 1970 | 1971 | 1972 | 1973(Loss Year) | |
|---|---|---|---|---|
| U.B. gross income | $50,000 | $50,000 | $62,000 | $25,000 |
| U.B. deductions | $35,000 | $40,000 | $62,000 | $60,000 |
| Balance (for the purpose of this section, called applicable income or loss) | $15,000 | $10,000 | $ -0- | ($35,000) |
| Compensation for services of proprietor | $3,000 | $2,000 | $ -0- | -0- |
| Balance | $12,000 | $8,000 | $ -0- | ($35,000) |
| Statutory exemption | $5,000 | $5,000 | $5,000 | $5,000 |
| Taxable income or (loss) | $7,000 | $3,000 | ($5,000) | ($40,000) |
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The net operating loss for the year 1973 is $35,000, the applicable loss for such year, since no allowance may be made for either a deduction for compensation for services of a proprietor or active partner under 19 RCNY § 28-08 or for the $5,000 exemption allowable under 19 RCNY § 28-09. The 1973 operating loss is carried back to 1970, and, since this is the only carryback possible to that year, it represents the “net operating loss deduction” for that year. Since the taxable income reported on the return filed for 1970, against which the net operating loss deduction can be applied, is $7,000, less than the available net operating loss deduction, allowance of this deduction on a timely application for refund will result in a refund of the entire amount of unincorporated business income tax paid for that year. The carryback to 1971 is the carryback to 1970 arrived at above ($35,000), less the applicable income for 1970 ($15,000), which applicable income was computed without regard to the 19 RCNY § 28-08 deduction for compensation for services of a proprietor or active partners, or the $5,000 exemption allowable under 19 RCNY § 28-09. This balance of $20,000 ($35,000 - $15,000) is the carry back to the year 1971 and the net operating loss deduction for that year. Since this exceeds the taxable income for such year, the filing of a timely application for refund will result in a refund of the entire amount of unincorporated business income tax paid for that year. The carryback to 1972 is the 1971 carryback ($20,000) less the applicable income for 1971 ($10,000). The balance of $10,000 ($20,000 – $10,000) is the carryback to 1972, but cannot be applied since there was no income in that year. This amount of $10,000 is therefore available as a net operating loss carryover to 1974. This amount is the carryback to 1972 ($10,000) less the applicable income for 1972 ($0), resulting in a subtraction of “zero dollars” from the $10,000 carryback to the year 1972. The balance remaining, $10,000 ($10,000 - 0), is therefore, the carryover to 1974. The net operating loss deduction in any year is equal to the sum of all carrybacks and carryforwards from subsequent or prior years to such year. Since only one net operating loss, i.e., for the year 1973, is involved, there is only one carryback or carryforward to each of the years herein. Accordingly, such carryback or carryforward represents the net operating loss deduction for each of such years.
The following example illustrates the application of more than one net operating loss:
Example 2: Assume the facts in the foregoing example and assume further that there was applicable income (without regard to 19 RCNY § 28-08 or 19 RCNY § 28-09 deductions or exemptions) of $2,000 for the years 1974 and 1976, $7,500 for the year 1977, and a net operating loss of $5,000 (without regard to deductions or exemptions) for the year 1975. As found in Example 1, the 1973 carryover to 1974 is $10,000. The 1973 carryover to 1975 is $8,000 ($10,000, carryover to 1974 minus $2,000, applicable 1974 income). The 1973 carryover to 1976 is also $8,000 ($8,000 carryover to 1975 minus $0, there being a loss in 1975 and the applicable income to which the net operating loss is applied cannot be less than “zero”). The 1973 carryover to 1977 is accordingly $6,000 ($8,000 - $2,000). The 1975 net operating loss of $5,000 is a carryback to 1972 in that amount. Because of the lack of income in the years 1972 and 1973, the 1975 carrybacks to 1973 and 1974 are also $5,000 each. The 1975 carryover to 1976 is also $5,000 ($5,000 carryback to 1974 minus $0, since the 1973 carryover to 1974 of $10,000 exceeded the applicable income for 1974 of $2,000). Similarly, the 1975 carryover to 1977 is $5,000 ($5,000 carryover to 1976 minus $0, since the 1973 carryover to 1976 of $8,000 exceeded the applicable income for 1976 of $2,000). The carryover from 1975 to 1978 is $3,500 ($5,000 carryover to 1977 less the $1,500 of applicable income which remained after the 1973 carryover of $6,000 was applied against the $7,500 of 1977 applicable income). The net operating loss eduction for 1972 would then be $15,000 . Similarly, by adding the 1973 and 1975 carryback. or carryovers, the net operating loss deductions for 1974, 1976 and 1977 would be $15,000, $13,000 and $11,000, respectively.
(iv) Entity entitled to deduction. A net operating loss deduction under this subdivision (c) may be allowed only to the individual or unincorporated entity who or which actually was engaged in the carrying on or the liquidation of the unincorporated business activity from which the loss was sustained or incurred. Thus, an individual who purchases a going unincorporated business from another individual will not be allowed a net operating loss deduction for any net operating loss (or any portion of a net operating loss) sustained by the vendor or transferor and the vendor or transferor will not be allowed any deduction under this subdivision based on a net operating loss sustained by the purchaser or transferee of the business. See paragraph (3) of this subdivision (c) for net operating loss deduction rules for partnerships where partner interest differ for the loss year and deduction year. However, where no material change in beneficial interest of the beneficiaries results, a change in the identity of the trustee, administrator, executor or other fiduciary of an estate or trust which is subject to the unincorporated business tax will not be deemed to result in the formation of a new or different unincorporated business tax entity for purposes of this subdivision (c).
(v) Effect of allocation. Where the unincorporated business was carried on both within and without New York City during the loss year, the net operating loss with respect to which a deduction is permitted under this subdivision shall be the amount or portion of the loss computed under subparagraph (iii) of this paragraph (2) which is allocable to New York City in accordance with the provisions of 19 RCNY § 28-07. If the business was carried on both within and without New York City during a taxable year to which a net operating loss may be carried under subparagraph (ii) of this paragraph (2), the net operating loss deduction allowable for such year shall be treated as a deduction not subject to allocation in computing the unincorporated business taxable income under 19 RCNY § 28-04. Such deduction shall, however, be taken into account, to the extent applicable, in determining the amount of
(A) any deduction for compensation for services of the proprietor or active partners under 19 RCNY § 28-08,
(B) any additional exemption allowable under 19 RCNY § 28-09, and
(C) any allocable deduction for charitable contributions in any case where the net operating loss deduction represents a carryover to the taxable year (as distinguished from a carryback) for which such net operating loss deduction is to be allowed.
Example 1: Partnership A & B, which is engaged in the carrying on of an unincorporated business both within and without New York City, sustained a net loss of $10,000 for the year 1976. Assuming that no modifications under subparagraph (iii) of this paragraph (2) are required and assuming that 80 percent of the loss is attributable to New York City sources in accordance with 19 RCNY § 28-07, the “net operating loss” for 1976 (the loss year) is $8,000 (80 percent of $10,000). Assuming further that the partnership began business on January 1, 1975 and that 75 percent of its 1975 unincorporated business taxable income (as shown below) was allocable to New York City under 19 RCNY § 28-07, the net operating loss deduction and the other adjustments required with respect to the 1975 return will be as follows:
1975 partnership unincorporated business income tax original return.
| Net income from business (before deductions for contributions and service of partners) | $25,000.00 |
|---|---|
| Deduction for contributions (total contributions $2,000 – limited to 5% of $25,000) | $1,250.00 |
| Balance | $23,750.00 |
| Allocated to New York City (75%) | $17,812.50 |
| Deductions for partners’ services (20%) | $3,562.50 |
| Net income from business | $14,250.00 |
| Specific exemption | $5,000.00 |
| Unincorporated business taxable income | $9,250.00 |
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Recomputation to allow net operating loss deduction for 1975.
| Net income of business allocated to New York City per return (before deduction for partners’ services) | $17,812.50 |
|---|---|
| Net operating loss deduction allowed (80% of $10,000) | $8,000.00 |
| Balance | $9,812.50 |
| Deduction for partners’ services (20%) | $1,962.50 |
| Net income from business | $7,850.00 |
| Specific exemption | $5,000.00 |
| Unincorporated business taxable income-revised | $2,850.00 |
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In connection with the foregoing recomputation for 1975 the following points are to be noted:
Example 2: If, in Example 1 above, the partnership had not engaged in business prior to 1976, the loss year, and if the partnership income, deductions and allocation percentage were the same for 1977 as those used for 1975 in Example 1, the $8,000 net operating loss would be a carryover to 1977 and the allowable net operating loss deduction would be reflected in the 1977 liability in the following manner:
| Net income from business (before net operating loss deduction, contributions and partners’ service allowance) | $25,000 |
|---|---|
| Net operating loss | $8,000 |
| Balance (before contributions deduction) | $17,000 |
| Contributions ($2,000 – limited to 5% of $17,000) | $850 |
| Balance (after contributions deduction) | $16,150 |
| Deduction for partners’ services | $3,230 |
| Net income | $12,920 |
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Allocation Schedule
| Balance (after contributions deduction) | $16,150.00 |
|---|---|
| Add back net operating loss deduction | $8,000.00 |
| Allocation base | $24,150.00 |
| Amount allocated to New York City (75% of base) | $18,112.50 |
| Net operating loss deduction | $8,000.00 |
| Balance | $10,112.50 |
| Deduction for partners’ services | $2,022.50 |
| Balance | $8,090.00 |
| Specific exemption | $5,000.00 |
| Unincorporated business taxable income | $3,090.00 |
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The computation in this example differs from Example 1 in that the deduction for contributions in Example 2 is computed by reference to an income base which reflects allowance of the net operating loss deduction for limitation purposes. The contributions deduction is determined in this way because the provision of 19 RCNY § 28-06(b) which eliminates the recomputation of contributions based on a net operating loss carryback does not apply where the situation involves the allowance of a deduction based on a net operating loss carryover. This difference requires some variation in the application of the New York City allocation percentage for the year of deduction in order to arrive at the revised income base for limitation purposes applicable respectively to deductions for contributions and services of the partners.
(vi) Tax law applicable to computation. In determining the amount of any net operating loss carryback or carryover to any taxable year, the necessary computations involving any other taxable year shall be made under the law applicable to such other taxable year.
(vii) Methods of claiming net operating loss deduction.
(A) Where the amount of a net operating loss deduction for a taxable year can be ascertained at the time the unincorporated business tax return for the taxable year is due, the deduction shall be claimed in the return and there shall be filed with the return a concise statement setting forth the amount of the deduction and all material and pertinent facts relative thereto including a detailed schedule showing the computation of the amount deducted.
(B) Where a taxpayer is entitled to a net operating loss deduction for a taxable year and the amount thereof (or a portion of such amount) cannot be ascertained at the time the unincorporated business tax return for the taxable year is due, the return shall be filed without regard to the unascertainable amount of the deduction. If the amount of such deduction (or portion thereof) is subsequently established, the taxpayer may, within the applicable period of limitations, file a claim for refund based on such deductions.
(C) Notwithstanding any other provision of law (including § 11-527(a) and § 11-514 of the Administrative Code), a claim for refund under this subparagraph (vii) may be filed with the Commissioner of Finance at any time within three years from the time the return was due for the taxable year in which a net operating loss is sustained plus the period of any extension of time to file the tax return due for the loss year.
(viii) Periods of less than 12 months. A fractional part of a year which is a taxable year under 19 RCNY § 28-17 is a taxable year for all purposes of this subdivision (c) pertaining to net operating loss deductions.
(ix) In computing a net operating loss for a taxable year beginning in 1981, no accelerated cost recovery system deduction shall be allowed with respect to recovery property under § 168 of the Internal Revenue Code. In lieu of such deduction, a taxpayer shall be allowed for such recovery property the depreciation deduction allowable under § 167 of the Internal Revenue Code as such section was in full force and effect on December 31, 1980.
(3) Partnership net operating loss. In the case of a partnership, no net operating loss carryback or carryover to any taxable year shall be allowed unless one or more of the partners during each such taxable year for which a deduction is claimed (deduction year) were persons having a proportionate interest, or interests, during the loss year, amounting in the aggregate to at least 80 percent of all such interests in the unincorporated business gross income and deductions of the partnership which sustained the loss for which a carryback or carryover is claimed. Where a partnership qualifies for a net operating loss deduction under the preceding sentence the carryback or carryover allowable on account of such loss shall be limited to a percentage of the net operating loss deduction otherwise allowable. Such percentage shall be determined by dividing,
(i) the sum of the proportionate interests in the unincorporated business gross income and deductions of the partnership for the deduction year attributable to persons who were partners in both the year of the deduction and the loss year, by
(ii) 100. This percentage shall be applied against the lesser of
(A) the carryover or carryback allowable for the taxable year or
(B) the unincorporated business taxable income for the taxable year as computed in paragraph (2)(ii) of this subdivision (c). The amount by which the carryback or carryover otherwise allowable exceeds the amount allowable pursuant to the foregoing ];imitation shall not be a carryback or carryover to any other taxable year. The rules for determining the amount of a net operating loss, the deductibility thereof as a carryover and/or carryback and the related provisions of this subdi vision (c) are applicable to net operating losses of partnerships to the extent they are not inconsistent with the provisions of this paragraph (3).
Example: Y Co. partnership operated by individuals A, B, C, E and G sustained a net operating loss of $90,000 in 1976. The first partnership return filed in the name of Y Co. to cover business activities of any of the individual partners was for the year 1974. The partners in Y Co. for the years 1974, 1975, 1976, and 1977 and their percentages of interest in the partnership income and deductions were as follows:
| Name of Partner | 1974 | 1975 | 1976 | 1977 |
|---|---|---|---|---|
| *A | 15% | X | 15% | 25% |
| *B | 20% | 35% | 15% | 20% |
| *C | 15% | 20% | 15% | 20% |
| *D | 40% | 35% | X | X |
| *E | 10% | 5% | 35% | 10% |
| *F | X | 5% | X | 25% |
| *G | X | X | 20% | X |
| 100% | 100% | 100% | 100% |
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* Denotes partner was member in firm in both “loss year” and “deduction year.”
The pertinent items of income and deduction were as follows:
| 1974 | 1975 | 1976 | 1977 | |
|---|---|---|---|---|
| Applicable income | $81,250 | $56,250 | ($90,000) | $68,750 |
| Partners’ service allowance | $16,250 | $11,250 | -0- | $13,750 |
| Net income | $65,000 | $45,000 | ($90,000) | $55,000 |
| Exemption | $5,000 | $5,000 | -0- | $5,000 |
| Taxable income | $60,000 | $40,000 | ($90,000) | $50,000 |
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On the foregoing information, the unincorporated business net operating loss deductions would be follows: The 1976 loss of $90,000 is available as a carryback to 1974 because the interests of A, B, C and E and (who were partners in both the 1974 and 1976 entities) constituted 80 percent of the total ownership for 1976.
1974 Computation
| New operating loss as computed for 1976Limitation on loss for 1974-Sum of proportionate interests of A, B, C and E per partnership returns in the 1974 deduction year is 60 percent. | $90,000 |
|---|---|
| Loss recognized for deduction purposes 60 percent of $81,250 (the lesser of the amount of carryback or taxable income for 1974 as computed under paragraph (2)(ii) of this subdivision (c) = | $48,750 |
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1975 Computation
No carryback allowable because the partners for 1975 who also held interests in the 1976 entity owned only 65 percent of the total in 1976. In other words, the 80 percent common ownership test was not satisfied.
1977 Computation
This entity qualifies for a carryover because the interests of A, B, C and E in the 1976 (loss year) partnership amounted to 80 percent of the total interests for the 1977 deduction year. The calculation of the 1977 carryover will be:
| Net operating loss per 1976 return | $90,000 | |
|---|---|---|
| Amount of loss absorbed by 1974 carryback | $81,250 | |
| Amount absorbed by 1975 computation | 0 | |
| Total prior allowance | $81,250 | |
| Loss to be taken into account for 1977 | $8,750 | |
| Limited to 75 percent, representing the sum of the interests of A, B, C and E in 1977 = | $6,562.50 |
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(1) Proprietor’s services or use of capital.
(i) General.
(A) No deduction shall be allowed, except as provided in 19 RCNY § 28-08, for amounts paid or incurred to a proprietor or partner for services or for use of capital.
(B) In addition to all other amounts otherwise included, amounts paid or incurred to a proprietor or partner for services or for use of capital shall include any amount paid to any person if, and to the extent that, the payment was consideration for services or capital provided by a proprietor or partner.
(C) Examples:
Example a: A sole proprietor who does his own bookkeeping, billing and other administrative services may not deduct the cost of his time and skill in providing such services.
Example b: Salaries, commissions, consultant fees or professional fees paid to a general or limited partner for personal services rendered by the partner, either as an employee or an independent contractor of the unincorporated business, may not be deducted by the partnership.
Example c: Fixed annual payments made to retired partners under the terms of the partnership agreement, although deductible as “guaranteed payments” for Federal income tax purposes, may not be deducted.
Example d: Interest paid to a general or limited partner for monies contributed or loaned to the partnership may not be deducted by the partnership.
Example e: A sole proprietor may not claim a rental expense deduction for the use of real or personal property owned by him.
Example f: Partner A of Partnership ABC performs services for the partnership for which she is entitled to receive $500,000. As part of a divorce settlement, Partner A instructs the partnership to pay this amount directly to her ex-spouse. The $500,000 amount is considered to have been paid to Partner A for services and is not deductible.
(ii) Services.
(A) Amounts paid or incurred to an individual partner of the unincorporated business for services provided the unincorporated business by such an individual shall not be allowed as a deduction under paragraph (1)(i) above. The fact that the individual is providing such services not in his capacity as a partner within provisions of § 707 of the Federal Internal Revenue Code will not change the result.
(B) Amounts paid or incurred to a corporate partner for services provided the unincorporated business by the corporate partner’s officers shall not be allowed as a deduction under paragraph (1)(i) above. For purposes of this paragraph, corporate officers include the chairman, president, vice-president, secretary, assistant secretary, treasurer, assistant treasurer, comptroller or any other individual charged with performing executive duties of the corporation. Payments made or incurred by the unincorporated business for services performed by an individual who is both an officer and an employee of the corporate partner may not be deducted by the unincorporated business.
(C) Amounts paid or incurred to a partnership which is a member partner in an unincorporated business for services provided the unincorporated business by a partner of the member partnership shall not be allowed as a deduction under paragraph (1)(i) above. The fact that the partner is providing such services not in his capacity as a partner within the provisions of § 707 of the Federal Internal Revenue Code will not change the result.
(D) For purpose of paragraph (1)(i) of this subdivision (d), payments to partners for services do not include amounts paid or incurred by an unincorporated business to a partner of such business which reasonably represent the value of services provided the unincorporated business by the employees of such partner, and which, if not for the provisions of paragraph (1)(i) of this subdivision (d), would constitute allowable business deductions under 19 RCNY § 28-06(a). The amounts paid or incurred for such employee services must be actually disbursed by the unincorpo rated business and included in that partner’s gross income for Federal income tax purposes.
Example: Partnership AB, Corporation C and the individual Mr. D form a joint venture called the ABCD Construction Company to construct a building in Staten Island. Each member of the Company contributes an equal amount of capital to the venture. In addition, Mr. A, a partner in Partnership AB will serve as engineering supervisor for the construction. Ms. E, the president of Corporation C, will serve as work site supervisor. Mr. D, an attorney, will handle all the legal affairs of the Company. The office staff of partnership AB will provide all the office services needed by the Company. The in-house accounting staff of Corporation C will handle all of the Company’s accounting matters. Payments made by the Company for the services of Mr. A, Ms. E and Mr. D are not allowed as deductions in the calculation of the Company’s unincorporated business taxable in come. Payments made by the Company for the office and accounting services provided by the members of the joint venture will be allowed as deductions if such payments are included in the respective member’s gross income for Federal income tax purposes.
(iii) Capital.
(A) Amounts paid or incurred by an unincorporated business to a partner or owner of such business for the use of monies, notes, bank deposits, shares of stock, bonds, and other securities given, loaned, advanced, pledged or otherwise made available by a partner or member of the unincorporated business to the business or on behalf of the business shall not be allowed as a deduction to the unincorporated business in the calculation of its unincorporated business taxable income.
(B) For purposes of paragraph (1)(i) of this subdivision (d) amounts paid or incurred to a partner for use of capital do not include amounts paid or incurred by an unincorporated business to a partner of such business which reasonably represent the value of the use of real or personal property (other than the property described in subparagraph (i)(A) above) of such partner by the unincorporated business and which, if not for the provisions of paragraph (1)(i) of this subdivision (d), would constitute allowable business deductions under 19 RCNY § 28-06(a). The amounts paid or incurred for such use of property must be actually disbursed by the unincorporated business and included in that partner’s gross income for Federal income tax purposes. The ownership of the property must be clearly retained by the partner or member.
(C) Examples:
Example a: F and G form a partnership to engage in the construction business. F contributes $100,000 in cash to the partnership. G contributes machinery worth $100,000 to the partnership. No deduction shall be allowed to the partnership for payments made to G for use of the machinery nor to F for the use of the cash. G has not retained title to the machinery and, therefore, payments to G are not-deductible partnership distributions.
Example b: Partnership AB maintains an office in a building owned by B, a partner in AB. The partnership pays B a reasonable rental for the use of the office space. Such rental payments will be allowed as a deduction to the partnership.
Example c: X and Y form a partnership to engage in the construction business. Each contributes $100,000 in cash to the partnership. In addition, X agrees to loan the partnership $100,000. The partnership will pay X the prevailing market rate for this loan. Y agrees to lease to the partnership $100,000 worth of equipment. Under the lease, the partnership will pay Y the prevailing market rate for its leasing of the equipment. Although X will include in its gross income for Federal income tax purposes the interest income it receives on its loan to the partnership, the partnership may not deduct from its unincorporated business gross income the interest payments made to X. If Y includes in its gross income for Federal income tax purposes the rental income it receives on its leasing of the equipment to the partnership, the partnership may deduct from its unincorporated business gross income the rental payments made to Y for the equipment.
(iv) Partner. For purposes of this paragraph (1) and subdivision (a) of 19 RCNY § 28-08, a person will be considered a partner in an entity for any tax year for which that person meets the requirements of clause (A), (B), (C) or (D) below. Any person who does not meet the requirements of at least one of such clauses will not be considered to be a partner in the entity.
(A) The entity files a Federal Form 1065, Schedule K-1, with respect to that person.
(B) The person is a party to the governing document of the entity (e.g., the partnership agreement);
(C) the person is liable for all or a portion of the debts or obligations of the entity;
(D) or the person has an interest in the capital or assets of the entity.
(2) Income taxes. No deductions shall be allowed for any income taxes imposed by the City or State of New York or any other taxing jurisdiction.
(3) Certain interest, amortizable bond premiums and expense. No deductions shall be allowed for
(i) interest on indebtedness incurred or continued to purchase or carry obligations or securities, the interest on which is exempt from tax under Chapter 5 of Title 11 of the Administrative Code,
(ii) expenses paid or incurred for the production or collection of such tax-exempt income or for the management, conservation or maintenance of property held for the production of such tax exempt income, or
(iii) the amortizable bond premium on any bond, the interest income on which is so exempt. For rules regarding attribution and allocation of interest income and expenses see 19 RCNY § 28-06(h).
(4) Certain capital loss items. No deduction shall be allowed in respect of the excess of net long-term capital gain over net short-term capital loss, as these terms are defined in § 1222 of the Internal Revenue Code of 1954, but capital losses incurred in the unincorporated business shall be treated as ordinary losses and shall be allowed in full. No distinction shall be made for unincorporated business income tax purposes between long-term and short-term capital gains and losses incurred in the unincorporated business. All gains and losses, whether pertaining to capital assets or otherwise are reportable at 100%, except where otherwise provided in these regulations. In addition, no consideration shall be given to any net capital loss carryover permitted under any section or provision of the Internal Revenue Code for Federal income tax purposes.
(5) Certain special depreciation and research and development expenditures. Where an election has been made under 19 RCNY § 28-08(b), no deduction shall be allowed for expenditures with reference to the property to which such election relates, or for depreciation of such property except as permitted by said section.
(6) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, no deduction shall be allowed for any expenses directly or indirectly attributable to activities described in 19 RCNY § 28-02(g)(1)(v) if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g).
(7) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, in the case of a taxpayer that is an unincorporated entity eligible for the partial self trading exemption described in 19 RCNY § 28-02(g)(4), no deduction shall be allowed for any losses or expenses directly or indirectly attributable to the sale or other disposition of an interest in another unincorporated entity if, and to the extent that, the activities of such other unincorporated entity are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g).
(8) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after July 1, 1994, no deduction shall be allowed for interest, depreciation or any other expense directly or indirectly attributable to the holding, leasing or managing of real property if, and to the extent that, such holding, leasing or managing of real property is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(h)(2)(ii).
(9) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, no deduction shall be allowed for interest, depreciation or any other expense of an owner, lessee or fiduciary holding, leasing or managing real property that are directly or indirectly attributable to parking, garaging or motor vehicle storage services provided on a monthly or longer term basis to tenants at such real property if, and to the extent that, the provision of such services to such tenants is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(h)(2)(iii).
(1) A deduction shall be allowed (to the extent not allowable for federal income tax purposes) for:
(i) interest on indebtedness incurred or continued to purchase or carry obligations or securities, the interest on which is subject to tax under Chapter 5 of Title 11 of the Administrative Code, but exempt from federal income tax,
(ii) ordinary and necessary expenses paid or incurred for the production or collection of such taxable income or for the management, conservation or maintenance of property held for the production of such taxable income, and
(iii) the amortizable bond premium for the taxable year on any bond, the interest on which is subject to tax under Chapter 5 of Title 11 of the Administrative Code, but exempt from federal income tax.
(2) Expenses (including interest expense) otherwise allowable which are directly attributable to any class of income (either taxable or exempt for New York City purposes) shall be allocated to the class to which they relate, and if an item is attributable to both taxable and exempt income, a reasonable portion thereof, determined in the light of all facts and circumstances, shall be allocated to each class. This paragraph does not apply to any item for which a deduction for unincorporated business tax purposes is allowable by reason of the fact that such item is allowable for Federal income tax purposes.
(3) For taxable years beginning on or after July 1, 1994, notwithstanding the provisions of paragraph (2), deductions allowable for federal income tax purposes that are directly or indirectly attributable to investment income or investment capital as defined in Administrative Code § 11-501 subdivisions (h) and (i) must be subtracted from income, gains and losses from investment capital in determining investment income.
(1) General.
(i) An unincorporated business may, under conditions prescribed by this subdivision (i), elect to subtract from its unincorporated business gross income any expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or improvement of industrial waste treatment facilities. For purposes of this paragraph such facilities consist only of qualifying property as defined in paragraph (2) of this subdivision (i), which is used for the treatment, neutralization or stabilization of industrial waste (as the term “industrial waste” is defined in § 17-0105 of the State Environmental Conservation Law) from a point immediately preceding the point of such treatment, neutralization or stabilization, to the point of disposal, including the necessary pumping and transmitting facilities, but excluding such facilities installed for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable.
(ii) An unincorporated business may, under conditions prescribed by this subdivision (i), elect to subtract from its unincorporated business gross income any expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or improvement of air pollution control facilities. For purposes of this subparagraph such facilities consist only of qualifying property as defined in paragraph (2) of this subdivision (i), which remove, reduce or render less noxious air contaminants emitted from an air contamination source (as the terms “air contaminant” and “air contamination source” are defined in § 19-0107 of the State Environmental Conservation Law) from a point immediately preceding the point of such removal, reduction, or rendering to the point of discharge of air, meeting emission standards as established by the State Department of Environmental Conservation, but excluding such facilities installed for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable and excluding those facilities which rely for their efficacy on dilution, dispersion or assimilation of air contaminants in the ambient air after emission.
(iii) An election made with respect to a specific item of property or expenditure is binding for all subsequent tax years unless the Commissioner of Finance consents to a change with respect thereto upon such terms and conditions as he may fix. An election with respect to qualifying property of a partnership must be made by the partnership. An election with respect to qualifying property of an estate or trust shall be made by the fiduciary.
(2) Qualifying property. The term “qualifying property” means tangible property which
(i) is depreciable pursuant to § 167 of the Internal Revenue Code, and
(ii) has a situs in New York City, and
(iii) is used in the taxpayer’s trade or business, and
(iv) is property, the construction, erection, reconstruction or improvement of which was initiated on or after January 1, 1966. In the case of industrial waste treatment facilities the deduction is allowed only for expenditures paid or incurred prior to January 1, 1972.
(3) Conditions for allowance. The optional deduction permitted by this subdivision (i) shall be allowed only
(i) on the condition that the facilities have been certified by the State Commissioner of Environmental Conservation or his designated representative, pursuant to §§ 17-0707 or 19-0309 of the State Environmental Conservation Law, as complying with the provisions of the State Public Health Law, the State Sanitary Code, the State Environmental Conservation Law and regulations, permits or orders promulgated pursuant thereto, and
(ii) on condition that for the taxable year and all succeeding taxable years, no deduction for such expenditures or for depreciation or amortization of the same property allowed for Federal income tax purposes shall be allowed under Chapter 5 of Title 11 of the Administrative Code, except to the extent that the basis of the property may be attributable to factors other than such expenditures, or in case a deduction is allowable pursuant to this subdivision (i) for only a part of such expenditures, on condition that any deduction allowed for Federal income tax purposes for such expenditures or for depreciation or amortization of the same property be proportionately reduced in computing unincorporated business deductions for the taxable year and all succeeding taxable years, and
(iii) on condition that no election under 19 RCNY § 28-08(b) (pertaining to special depreciation and research and development expenditures) has been exercised in respect of the property for which the deduction under this subdivision (i) is claimed.
(4) Reporting change in use of facilities. If expenditures in respect of an industrial waste treatment facility or an air pollution facility have been allowed as a deduction as provided in this subdivision (i) and if within 10 years from the end of the taxable year in which such deduction was allowed such property or any part thereof is used for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable, the taxpayer shall report such change of use in its return for the first taxable year during which it occurs, and the Commissioner of Finance may compute the tax for the year or years for which such deduction was allowed (and for any carryback or carryover year) and may assess any additional tax resulting from such recomputation within the time fixed by § 11-523(c)(8) of the Administrative Code.
(5) Reporting failure to obtain a permanent certificate of compliance. If a deduction is allowed as provided in this subdivision (i) for expenditures paid or incurred during any taxable year on the basis of a temporary certificate of compliance issued pursuant to the State Environmental Conservation Law, and if the taxpayer fails to obtain a permanent certificate of compliance upon completion of the facilities with respect to which such temporary certificate was issued, the taxpayer shall report such failure in its return for the taxable year during which such facilities are completed, and the Commissioner of Finance may recompute the tax for the year or years for which such deduction was allowed (and for any carryback or carryover year), and may assess any additional tax resulting from such recomputation within the time fixed by § 11-523(c)(8) of the Administrative Code.
(6) Trade or business. For purposes of this subdivision (i), qualifying property is used in the trade or business only when it is utilized in the actual course of the regular business operations of the taxpayer. The holding of property for investment purposes does not constitute the use of property in a trade or business within the meaning of this subdivision (i).
(7) Limitation on amount of deduction. The deduction allowed pursuant to this subdivision in respect of an item of property shall not exceed the cost or other basis of the property for Federal income tax purposes. When property subject to an election under this subdivision (i) is to be used as an industrial waste treatment facility only in part, the allowable deduction shall be limited to a proportionate part of the expenditures relating thereto.
(8) Sale or other disposition. In any taxable year when property subject to an election under this subdivision (i) is sold or otherwise disposed of, any modification made pursuant to this subdivision (i) with respect to such property shall be disregarded in computing gain or loss and the gain or loss on the sale or other disposition shall be the full gain or loss reportable by the business for Federal income tax purposes for such taxable year without regard to any provisions of the Internal Revenue Code characterizing the amount as ordinary income or loss or as a capital gain or loss.
(9) Rule for making election. An election to claim the optional deduction under this subdivision (i) shall be made by filing with the unincorporated business income tax return in which the deduction is claimed a statement evidencing such election and containing
(i) complete details of the qualifying property involved,
(ii) the computation of the deduction claimed, and
(iii) the related Federal deductions allowed in respect of such property. The return should also be accompanied by the State Department of Environmental Conservation certificate of compliance required by paragraph (3) of this subdivision (i).
(1) In the cases of mines, oil and gas wells and other natural deposits, no deduction of any allowance for percentage depletion pursuant to § 613 or § 613A of the Internal Revenue Code of 1954, as amended, shall be allowed for taxable years beginning on or after January 1, 1972. However, an allowance for depletion with respect to such property shall be deductible in the amount which would be allowable under § 611 of such Code if such deduction were computed without reference to § 613 or § 613A of such Code.
(2) With respect to the computation of depletion pursuant to this section the basis for such computation for taxable years beginning in 1972 shall be the Federal basis. For subsequent taxable years, the basis of such computation shall be reduced only by the deduction for the allowance for depletion deductible pursuant to this section.
(3) In any taxable year when any such property is sold or otherwise disposed of, with respect to which a deduction has been allowed pursuant to this subdivision (i), the gain or loss thereon entering into the computation of Federal taxable income shall be disregarded in computing unincorporated business taxable income. There shall be added to or subtracted from Federal gross income, so modified, the gain or loss upon such sale or other disposition. In computing such gain or loss, the basis of the property sold or disposed of shall be adjusted to reflect the deduction allowed with respect to such property pursuant to this subdivision (i).
(1) Allowed. (Administrative Code, § 11-507(12)). For taxable years beginning after December 31, 1981, a deduction shall be allowed for any amount which the taxpayer could have excluded from unincorporated business gross 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 § 168(f)(8)(D) of the Internal Revenue Code as it was then in effect.
(2) Disallowed. (Administrative Code § 11-507(13)). For taxable years beginning after December 31, 1981, no deduction shall be allowed for any amount deductible for Federal income tax purposes 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 agreement entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in § 168(f)(8)(D) of the Internal Revenue Code.
§ 28-07 Allocation to New York City.
(a) General. (Administrative Code § 11-508(a)). If an unincorporated business is carried on both within and without New York City, for taxable years beginning before July 1, 1994 there shall be allocated to the City a fair and equitable portion of the excess of its unincorporated business gross income as determined under 19 RCNY § 28-05 over its unincorporated business deductions subject to allocation as determined under 19 RCNY § 28-06, and, for taxable years beginning after June 30, 1994, there shall be allocated to the City a fair and equitable portion of the taxpayer's business income. If, for taxable years beginning before July 1, 1996, the unincorporated business has no regular place of business outside the City, all of such amounts shall be allocated to the City. The deductions under 19 RCNY § 28-08 and the unincorporated business exemptions allowable under 19 RCNY § 28-09 are not subject to allocation.
(1) A regular place of business is any bona fide office, factory, warehouse or other place which is systematically and regularly used by the unincorporated business entity in carrying on its business. Where, as a regular course of business, property of an unincorporated business is stored by it in a public warehouse until it is shipped to customers, such warehouse is considered a regular place of business, and where, as a regular course of business, raw material or partially finished goods are delivered to an independent contractor to be converted, finished or improved, and the finished goods remain in the possession of the independent contractor until shipped to customers, the plant of such independent contractor is considered a regular place of business of the unincorporated business entity. However, a taxpayer does not have a regular place of business outside the City solely by consigning goods to an independent factor outside the City for sale at the consignee’s discretion.
(2) If, for taxable years beginning before July 1, 1996, the unincorporated business has no regular place of business outside New York City, all of the excess of its unincorporated business gross income over its allocable unincorporated business deductions shall be allocated to the City. An unincorporated business does not have a regular place of business outside the City merely because sales may be made to, or services performed for or on behalf of, persons or corporations located without the City, or because such sales or services are made by or performed by an independent factor, agent or contractor having a regular place of business without New York City.
Example 1: An accountant whose only office is in New York City cannot allocate his income for unincorporated business tax purposes because some of his services are performed at his clients’ places of business outside the City. Similarly, the accountant’s residence outside the City will not be considered a regular place of business for allocation purposes, even though the accountant has for his own convenience set aside some space in his home to maintain business records, prepare reports or perform incidental business activities.
Example 2: A broker, all of whose income is derived from commissions on orders executed on the floor of the New York Stock Exchange, may not allocate any part of that income outside the City, despite the fact that he maintains his business records and performs other incidental business activities at his home outside the City.
Example 3: A freelance journalist whose only office is in the City, may not allocate his income for unincorporated business tax purposes, despite the fact that part of his working time is spent traveling to gather material for his articles.
(3) The foregoing provisions of this subdivision (b) are not exclusive in determining whether an unincorporated business has a regular place of business outside New York City or in determining whether the business is carried on both within and without New York City. Where any question on these points exists, consideration should be given to all of the facts pertaining to the conduct and operation of the business, including
(i) the nature of the business,
(ii) the type and location of each place of business used in the activity,
(iii) the nature of the activity engaged in at each place of business, and
(iv) the regularity, continuity and permanency of the activity at each location.
(1) Except as otherwise provided in paragraph (3) of subdivision (d) of this 19 RCNY § 28-07, the portion of the excess of the unincorporated business gross income over the deductions allocable to New York 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) The fact that the taxpayer has failed to file a return or filed an incorrect return, or that on such return items of income were understated, or items of deduction were overstated, or items of income were not properly allocated, does not preclude the use of such allocation method.
(3) Except as otherwise provided in paragraph (3) of subdivision (d) of this 19 RCNY § 28-07, where upon audit of the books and records of the taxpayer, the sources of the unincorporated business gross income within and without New York City, and the sources of the deductions, are ascertainable from such books and records, the proper tax due, or determined to be due, shall be arrived at by allocating items of income and deduction to the source of such items within and without the City. Thus, for example, for taxable years beginning before July 1, 1996, income from sales of tangible personal property is allocable to the office from which the sales arose (see: 19 RCNY § 28-07(d)). Items of expense (except for items of expense under 19 RCNY § 28-08 for which no allocation is allowed) will, like items of income, also be allocated in accordance with the place of business to which such expenses are attributable. Thus, payroll and office expenses are attributable to the office to which the employee was assigned or where the expenses were incurred. Certain indirect items, however, which are not attributable to any one office or place of business will be apportioned among the various offices. For example, legal and auditing expenses, which are attributable to the unincorporated business entity in its entirety, will be apportioned among the various places of business in accordance with the gross income allocable to each such place of business.
(1) Computation. If the Commissioner of Finance determines that the methods used in keeping the books of the unincorporated business do not fairly and equitably reflect the taxpayer’s income from the City for taxable years beginning before July 1, 1994, the portion of the excess of the unincorporated business gross income (computed under 19 RCNY § 28-05) over the unincorporated business deductions (allowable under 19 RCNY § 28-06) and for taxable years beginning after June 30, 1994, the portion of the taxpayer’s business income defined in Administrative Code § 11-501.1(k), allocable to the City is determined by multiplying such amount by a business allocation percentage determined by adding the following percentages and dividing the total by the number of percentages, unless the taxpayer elects to use a double-weighted gross income percentage as provided in paragraph (2) of this subdivision (d), in which event the taxpayer’s business allocation percentage is determined as provided in paragraph (2) of this subdivision (d):
(i) Property percentage. The percentage computed by dividing
(A) the average of the values, at the beginning and end of the taxable year, of real and tangible personal property connected with the unincorporated business and located within New York City, by
(B) the average of the values, at the beginning and end of the taxable year, of real and tangible personal property connected with the unincorporated business and located both within and without New York City. For this purpose, real property shall include real property rented to the unincorporated business (See: 19 RCNY § 28-07(f)).
(ii) 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 New York 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 New York City.
(C) For purposes of this subparagraph (ii), employees within New York City include all employees regularly connected with or working out of an office or place of business 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 that, because of the fact that a substantial part of its payroll was paid to employees attached to a New York City office who performed a substantial part of their services outside New York City, the computation of the payroll factor according to the general rule stated above would not produce an equitable result, the Commissioner of Finance may, in his or her discretion, permit the payroll factor to be computed on the basis of the amount of compensation paid for services actually rendered within and without the City. Moreover, wherever it appears that, because a substantial part of the taxpayer’s payroll was paid to employees attached to offices outside the City who performed a substantial part of their services within the City, the computation of the payroll factor according to the general rule would not properly reflect the amount of the taxpayer’s business done within New York City by its employees, the Commissioner of Finance may require the payroll factor to be computed on the basis of the amount of compensation paid for services performed within and without the City. In any case, where the payroll factor is permitted or required to be computed on the basis of the amount of compensation paid for services performed within and without the City, the amount treated as compensation for services performed within the 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 or her, such as a salesman on a commission basis, the amount received by him by her for the business attributable to his or her 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 or her services within New York City bears to the value of all his or her services; and (c) in the case of an employee compensated on a time basis, the proportion of the total amount received by him or her which the working time employed within New York City bears to the total working time.
(iii) Gross income percentage.
(A) The percentage computed by dividing
(1) the gross sales or charges for services performed by or through an agency located within New York City, by
(2) the total of all gross sales or charges for services performed within and without New York City. The sales or charges to be allocated to New York 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 New York City. For taxable years beginning on or after July 1, 1996, the foregoing sentence shall not apply to the allocation of gross income from sales of tangible personal property. For taxable years beginning on or after July 1, 1996, sales of tangible personal property to be allocated to New York City shall include only sales where shipment is made to points within New York City.
(B) For taxable years beginning on or after January 1, 1996, in the case of a taxpayer engaged in publishing newspapers or periodicals, the sales or charges for services arising from sales of subscriptions to, and advertising contained in, such newspapers and periodicals will be allocated to New York City to the extent such newspapers or periodicals are delivered to points within the City.
(C) For taxable years beginning on or after January 1, 1996, in the case of a taxpayer engaged in broadcasting radio or television programs, whether through the public airwaves, by cable, direct or indirect satellite transmission or other means of transmission, the sales and 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, will be allocated to New York City according to the ratio of the number of listeners or viewers within the City to the total number of such listeners or viewers within and outside the City.
(2) Double-weighted gross income percentage for manufacturing businesses.
(i) For taxable years beginning on or after July 1, 1996, a taxpayer that is a manufacturing business as defined below may elect to determine its business allocation percentage by adding together the percentages determined under subparagraphs (i), (ii), and (iii) of paragraph (1) of this subdivision (d) and adding to that sum an additional percentage equal to the percentage determined in subparagraph (iii) of paragraph (1) and dividing the total by the number of percentages. See paragraph (5) of this subdivision (d) for the determination of the business allocation percentage where one or more factors is missing.
(ii) Manufacturing business. For purposes of this paragraph, a “manufacturing business” is defined as an unincorporated business engaged primarily in the manufacturing and sale of tangible personal property.
(A) Manufacturing.
(1)Manufacturing means the process, including assembly, of working raw materials into wares suitable for use or that, by the use of machinery, tools, appliances or other similar equipment, gives new shapes, new qualities or new combinations to matter that has already been subjected to some artificial process.
(2)To qualify as manufacturing, a process, including assembly, must result in a significant change in the raw materials or component parts such that the end product of the process is substantially different in nature or form from the raw materials or component parts.
(3)Manufacturing includes finishing partially finished goods only if the partially finished goods are not usable for their intended purpose in their unfinished state and does not include the mere packaging or labeling of goods.
(4)Manufacturing includes printing in circumstances under which the taxpayer receives any combination of graphic or textual content from a customer, the taxpayer produces a tangible representation of that content, whether in print or other tangible form, through a series of processes using raw materials owned by the taxpayer and the taxpayer delivers that tangible product to the customer or one or more designees of the customer. Manufacturing also includes printing in circumstances under which the taxpayer uses any combination of graphic or textual content prepared by its own employees to produce a tangible representation of the content in print or other tangible form using raw materials owned by the taxpayer and the taxpayer delivers that tangible product to its customers or subscribers.
(5)Manufacturing does not include furnishing information services subject to the tax imposed by § 1105(c)(1) of the tax law regardless of whether the information is provided in tangible form.
(6)Manufacturing includes the design and development of pre-written computer software as defined in § 1101(b)(14) of the tax law to the extent that such pre-written computer software constitutes tangible personal property under § 1101(b)(6) of the tax law.
(7)A taxpayer that performs services for a customer, including manufacturing services, on property or raw materials belonging to the customer will not be considered a manufacturing business.
(8)A business that engages in pre-production activities, but not in the creation of the final product, will be considered to be engaged in manufacturing only if the pre-production activities are extensive and constitute an integral part of the manufacturing process.
(B) To qualify as a manufacturing business, a taxpayer must be engaged in both the manufacture of tangible personal property and the sale of such property that it manufactures. Therefore, a taxpayer that manufactures tangible personal property but does not engage in the sale of such tangible personal property will not be considered a manufacturing business. Similarly, a taxpayer that sells tangible personal property but does not engage in the manufacture of tangible personal property will not be considered a manufacturing business. For purposes of this paragraph, the lease of tangible personal property will be considered a sale of tangible personal property.
(C) For purposes of this paragraph, an unincorporated business engaged in the manufacture and sale of tangible personal property shall be considered to be primarily engaged in manufacturing if more than 50 percent of its gross receipts for the taxable year are derived from the sale of tangible personal property manufactured by the taxpayer. If an unincorporated entity is engaged in more than one unincorporated business, all such businesses shall be treated as a single business for purposes of determining whether more than 50 percent of the gross receipts for the taxable year of that business are from manufacturing. See 19 RCNY § 28-02(a)(4)(ii).
(1)For purposes of this subparagraph (ii)(C), gross receipts include only amounts treated as gross income for purposes of subparagraph (iii) of paragraph (1) of this subdivision earned in the ordinary course of the taxpayer’s trade or business.
(2)For purposes of this subparagraph (ii)(C), gross receipts derived from the sale of tangible personal property shall mean the sale price of such tangible personal property valued in money, whether received in money or otherwise, without any deduction for expenses or early payment discounts, and including;
(i)any amount for which credit is allowed to the purchaser,
(ii)any charges to the purchaser for shipping or delivery regardless of whether such charges are separately stated in the written contract, if any, or on the bill rendered to such purchaser and regardless of whether such shipping or delivery is provided by the taxpayer or a third party, and
(iii)any charges for services provided by the taxpayer relating to the sale of the tangible personal property provided that such services are subordinate to the sale of the tangible property and provided that such charges are not separately stated in a written contract or bill.
(iii) An election to use the double-weighted gross income percentage must be made on a timely-filed original return (including extensions) for the taxable year. A separate election must be made for each taxable year. The election is irrevocable and cannot be made on an amended return except with the permission of the Commissioner of Finance upon such terms and as the Commissioner may specify where the Commissioner concludes that such permission should be granted in the interests of fairness and equity due to changes in circumstances resulting from an audit adjustment. If a taxpayer fails to make an election to use the double-weighted gross income percentage, its business allocation percentage, where applicable, must be determined under the provisions of paragraph (1) of this subdivision (d).
(iv) The provisions of this paragraph are illustrated by the following examples:
Example 1: Partnership X is engaged in printing pamphlets, brochures, catalogues and business reports. Under an agreement with customer A, X receives graphic material and text from customer A that X uses to produce print plates, which are used to print multiple copies of a catalogue. X uses its own raw materials, including paper and ink, and its own equipment to produce the plates and the catalogue. X employees advise A with regard to the layout and typeface of the catalogue. In the course of performing the contract, X delivers a master print to A for its review and final approval. In addition, under the agreement with A, X prepares an electronic version of the catalogue for incorporation into a Web page maintained by A. X mails the print version of the catalogue to A’s customers and delivers the electronic version of the catalogue to A on a disk. X receives $500X under the agreement with no breakdown of the price among the various services and products provided. Under an agreement with customer B, Partnership X receives the text of an annual financial statement required to be filed electronically with the SEC by B. B also requires print copies of the statement. X prints the report in hard copy, using its own ink and equipment but using paper belonging to the customer, delivers the hard copies to B and transmits the statement electronically to the SEC. X receives $200X under the agreement with B with no breakdown of the price among the various services and products provided. X’s activities under the agreement with A are considered the manufacture and sale of tangible personal property. (Note: if X delivers the electronic version of the catalogue to A by means of the Internet the result would not change. The $500X received by X under the contract with A would be considered receipts from the manufacture and sale of tangible personal property provided that the provision of the electronic version is subordinate to the sale of the print version of the catalogue.) No part of X’s activities under the agreement with B are considered the manufacture and sale of tangible personal property because under the agreement with B, X is merely performing services on property owned by B. (Note: if X used its own paper for the print copies, X’s activities under the agreement with B would be considered the manufacture and sale of tangible personal property.) Of X’s total business receipts of $700X, $500X are from the manufacture and sale of tangible personal property. Therefore, X is considered to be a manufacturing business.
Example 2: Partnership X is engaged in compiling, printing and distributing a daily newspaper using material received from news services, its own reporters and editorial staff, its own paper and ink and printing equipment and its own technicians. Partnership X is considered engaged in manufacturing. Partnership X receives $100X in receipts from the sale of newspapers and $400X in receipts from the sale of advertising. Because less than 50 percent of partnership X’s receipts are from the manufacture and sale of tangible personal property, X is not considered a manufacturing business.
Example 3: Partnership A is engaged in film processing whereby it receives undeveloped film from its customers and, using its own chemicals, paper and equipment, develops the film and makes print or slide copies for customers. Partnership A is engaged in manufacturing. If instead of using its own materials and equipment, Partnership A contracts with Corporation B to develop the film and make prints, Partnership A is not engaged in manufacturing.
Example 4: Partnership Y contracts with A, an unrelated entity, to produce a line of art supplies, crayons, paper, markers, glue, etc. from raw materials purchased by Y. The finished goods are delivered to Y. Y packages two or more of those products together with paper purchased from another unrelated supplier into kits that Y sells to toy and art supply retailers. A’s receipts under the contract with Y are not receipts from the manufacture and sale of tangible personal property because Y provides and owns the raw materials. Y’s receipts from the sale of the kits are not receipts from the manufacture and sale of tangible personal property because Y does not manufacture the component parts itself and the packaged kits do not differ substantially in nature or form from the various component parts.
Example 5: Partnership W washes, cuts, cooks, freezes and packages vegetables for wholesale and retail sale to customers. Partnership W is considered to be engaged in manufacturing.
Example 6: Partnership M collects, sorts, shreds and compresses scrap metal into blocks that are convenient for handling, storage and shipping and sells the scrap metal blocks to companies that manufacture finished goods from them. Partnership M is considered to be engaged in manufacturing because the scrap metal sold differs substantially in nature from the components collected by M, which were not suitable for convenient handling, storage, shipping and sale in their original form.
Example 7: Partnership C purchases fabric, cuts and sews clothing for sale to a wholesale distributor, Partnership E. Partnership C is engaged in the manufacture and sale of tangible personal property. Partnership E packages and labels the clothing for resale to its retail outlet customers. Partnership E is not considered to be engaged in manufacturing. If Partnership C cuts and sews fabric provided by Partnership D where Partnership D retains title to the fabric and D sells the finished clothing, neither Partnership C nor Partnership D would be considered to be engaged in the manufacture and sale of tangible personal property. Partnership C is providing manufacturing services and Partnership D is not conducting the manufacturing activities itself.
Example 8: Partnership T purchases finished articles of clothing and using its own equipment and raw materials, imprints or embroiders its logo on each article. Partnership T sells the clothing under its own label. Partnership T is not considered engaged in manufacturing. While the presence of the logo on the clothing may increase its marketability, it does not substantially alter the nature or form of the clothing itself and the clothing is useable as such without the logo.
Example 9: Partnership P purchases fabric from a mill and, using its own equipment, dyes, and other materials, puts a pattern on the fabric through a variety of processes and sells the fabric to clothing manufacturers. Partnership P is considered to be engaged in the manufacture and sale of tangible personal property because it substantially alters the nature of the material.
Example 10: Partnership CS is exclusively engaged in the bottling and sale of soft drinks. CS maintains a factory where it mixes syrup then combines the syrup with carbonated water, places the mixture in bottles, labels the bottles and places them in cartons, then sells the cartons to retailers and wholesalers. CS is a manufacturing business.
Example 11: Partnership X is engaged in the design, development and sale of computer software. X’s employees use computers, programming languages and a library of “pre-written” functions and routines to develop software for use by financial institutions to manage accounts. X sells the same software to several customers although the software is enhanced or modified to meet the specific needs of each customer. Some customers receive the software on a disk, others receive it electronically over the Internet. More than 50% of X’s gross receipts derive from both types of sales. The software is taxable as “pre-written computer software” under § 1101(b)(14) of the tax law. Sales of the software are treated as sales of tangible personal property for purposes of § 1101 of the tax law and, therefore, for purposes of subparagraph (ii)(C) of this paragraph. X is a manufacturing business.
Example 12: Partnership X publishes and sells a magazine. X maintains a large staff of reporters, writers, editors, photographers, photo-editors, and graphic artists. This staff produces and assembles stories and photographs for the magazine using a variety of equipment including computers, photographic equipment, printers, scanners and file servers. Each week the staff culls through and edits a large number of stories and photographs and selects a number for inclusion in the magazine. The staff explores various layouts for the components of the magazine. As part of the process the layouts are examined in print form. The staff then finally produces a completed prototype of the magazine in electronic form. The prototype is delivered electronically to an unrelated printer who prints the magazine following Partnership X’s detailed specifications, using raw materials including paper and ink supplied by Partnership X. The printer receives a fee for printing the magazine. The magazine is distributed by the printer to X’s customers.
Partnership X’s extensive preprinting activities leading to the production of the final product are considered an integral part of the manufacturing process. As a result X is considered to be engaged in the manufacture and sale of tangible personal property. If more than 50% of Partnership X’s receipts are from the subscription and newsstand sales of the magazine, X will be considered a manufacturing business.
Example (14): Partnership X produces and sells apparel. X maintains a large staff including designers, graphic artists, pattern makers, computer operators, cutters, sewers and drapers. X’s staff develops original ideas for garments, produces illustrations with the aid of computer systems, and selects certain of these ideas to be converted into finished samples. The creation of the samples involves selection of fabrics, cutting, sewing, testing of fabric quality and color and fitting the prototype garments. X then uses the computer systems to make style patterns, which it transfers electronically along with detailed instructions to third-party contractors to whom it also specifies or furnishes the fabrics and other raw materials used to produce the garments. The contractors, whose operations are overseen by X’s employees, assemble the garments using the patterns and materials supplied by X. X then sells the garments to its wholesale customers. X’s extensive pre-production activities are considered an integral part of the manufacturing process. As a result X is considered to be engaged in the manufacture and sale of tangible personal property. If more than 50% of Partnership X’s receipts are from the sale of garments produced as described above, X will be considered a manufacturing business.
(3) Formula allocation required. For taxable years beginning on or after January 1, 1996, in the case of a taxpayer that is substantially engaged in the business of publishing newspapers or periodicals, substantially engaged in the business of broadcasting radio or television programs, or substantially engaged in any combination of such businesses and such taxpayer is also engaged in any other unincorporated business, 19 RCNY § 28-07(c) shall not apply and the portion of the taxpayer’s unincorporated business taxable income from all such businesses shall be determined using the allocation formula provided in this subdivision (d) unless the Commissioner of Finance determines that the income of the taxpayer from all unincorporated businesses carried on in whole or in part in the City is not fairly and equitably reflected, in which event the provisions of subdivision (e) shall apply. For purposes of this paragraph (3), a taxpayer shall be deemed to be substantially engaged in the business of publishing newspapers or periodicals or broadcasting radio or television programs, or any combination of such businesses, if more than ten percent of the taxpayer’s gross receipts from all businesses are attributable to publishing newspapers or periodicals or broadcasting radio or television programs.
(4) Examples.
Example (i): Individual A is a manufacturer whose plant is located in Connecticut. The bulk of his sales are made in New York City through a rented sales office in New York City from which traveling salesmen cover the states of New York, New Jersey and Pennsylvania. For the purpose of expediting deliveries to customers, a warehouse is owned and maintained in New York City. In addition, independent consultants are employed in furtherance of the manufacturer’s business. The following illustrates the application of the “allocation formula” for 1995: For the allocation of sales of tangible personal property for taxable years beginning on or after July 1, 1996, see 19 RCNY § 28-07(d)(1)(iii)(A)(2) and (d)(2).
| A Description of items used as factors | B Total factors within and without New York City | C New York City Factors | D Percent Column C is of Column B |
|---|---|---|---|
| 1. Value of the real and tangible personal property of the business (average of values at beginning and end of year) | $500,000 | $35,000 | 7% |
| 2. Wages, salaries and other personal service compensation paid during the year | $400,000 | $140,000 | 35% |
| 3. Gross sales or charges for services during the year | $1,200,000 | $972,000 | 81% |
| 4. Total of percentages in Column D | 123% | ||
| 5. Average of percentages (divide total percentages, item 4, by 3) | 41% |
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The figures in Column B are the totals for the business both within and without New York City. The figures in Column C represent the following:
Example (ii): The facts are the same as in example (i) except that the figures represent the results for 1997 and Item 3 represents solely receipts from sales of tangible personal property manufactured by the taxpayer and the amount of such receipts for sales shipped to points within the City (item 3 column C) is $600,000. The figure in column D of item 3 is therefore 50 percent. If the taxpayer elects to use the double-weighted gross income percentage as provided in paragraph (2) of this subdivision (d), items 4 and 5 would be determined as follows:
| 4. Total of percentages in Column D adding Item 3 twice | 142% |
|---|---|
| 5. Average of percentages (divide total percentages, Item 4, by 4) | 35.5% |
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Example (iii): Partnership A is substantially engaged in providing cable television service both inside and outside the City. All of Partnership A’s gross receipts are attributable to its cable television service business. Therefore Partnership A is required to use formula allocation unless the Commissioner determines that the formula in paragraph (3) of this subdivision does not fairly and equitably reflect the business income in the City. Partnership A receives income from sales of advertising on its programs as well as income from subscriptions. Subscription prices are not uniform throughout Partnership A’s service area; some subscribers pay a higher price than others do. Partnership A can identify the source of the subscription receipts directly by the location of the subscriber. In this case, the Commissioner may determine that the use of audience data for allocating subscription receipts does not fairly and equitably reflect Partnership A’s subscription receipts from the City and, under subdivision (e) of this section, may require subscription receipts to be sourced according to subscriber location while advertising receipts must be sourced according to audience data.
(5) Missing factors.
(i) The allocation percentage is computed by adding together the percentages of the taxpayer’s real and tangible personal property, payroll and gross income within New York City during the period covered by the return, and dividing the total of such percentages by three unless the taxpayer is a manufacturing business and elects to use a double weighted gross income percentage for a taxable year beginning on or after July 1, 1996, in which event the total of such percentages is divided by four. However, if one of the factors, for example, the payroll factor is missing, the other percentages are added and the sum is divided by the number of percentages, and if two of the factors are missing, the remaining factor percentage is the allocation percentage. (A factor is not missing merely because its numerator is zero, but it is missing if both its numerator and its denominator are zero.)
Example: A taxpayer has no employees either within or without the City. The payroll factor being missing, the allocation percentage may be computed by adding the percentage derived from the allocation of gross income and property, and dividing the total by two.
(ii) In the event that any of the percentages to be determined under subparagraphs (i), (iii) or (iii) of paragraph (1) of this subdivision (d) cannot be determined because the taxpayer has either no property, no payroll or no gross income from sales or services within or without the City, then the computation to be made under subdivision (i) of § 11-508 of the Administrative Code shall be made by taking the sum of the products that are determined under such subdivision (i) 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 subdivision (i). 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).
(iii) Weight factor defined. For purposes of subparagraph (ii) of this paragraph, “weight factor” is the percentage used in the allocation computation in subdivision (i) of § 11-508 of the Administrative Code, by which the percentage derived from paragraph (1) of this subdivision is multiplied in such allocation computation. For example, in subparagraph (A) of paragraph (1) of subdivision (i) of § 11-508 of the Administrative Code, the weight factor is 30%; in subparagraph (A) of paragraph (9) of subdivision (i) of § 11-508 of the Administrative Code, the weight factor is 1/2%.
(iv) Example: For the tax year 2009, a taxpayer has no employees either within or without the City. The property factor percentage determined under (d)(1)(i) of this section is 10%, and the gross income factor percentage determined under (d)(1)(iii) of this section is 25%. As the payroll factor is missing, the allocation percentage may be computed by taking the sum of
(A) the product of 30% and 10%, and
(B) the product of 40% and 25%,
which is .03 + .1 = .13,
then dividing that sum by the sum of the weight factors for property and gross income, which are .30 and .40, respectively: .13 = .13 = .18571, rounded to four decimal places = .1857 .30 + .40 .70
(6) Short period.
(i) A taxpayer which is subject to tax for a period less than its taxable period for Federal income tax purposes computes its allocation percentage only for the period it is subject to tax in New York City.
(ii) The short period allocation percentage is determined by a three factor formula consisting of:
(A) real and tangible personal property for the period for which it is subject to tax in New York City; however, the taxpayer may compute its property values by placing them on an annual basis and by prorating these values for the period for which it is subject to tax in New York City;
(B) gross income for the period for which it is subject to tax in New York City; and
(C) payroll for the period for which it is subject to tax in New York City.
(iii) The short period allocation percentage must be applied to the excess of the unincorporated business gross income over the unincorporated business deductions which has been prorated to represent gross income and deductions for the period for which the taxpayer is subject to tax in New York City. The prorated excess of income over deductions is computed as follows:
(A) divide the excess of income over deductions before allocation by the number of months covered by the taxpayer’s Federal return,
(B) multiply the figure determined in subparagraph (iii)(A) of this paragraph by the number of months for which the taxpayer is subject to tax in New York City.
Example: A partnership became subject to tax in New York City on July 2, 1982. The taxpayer reports on a fiscal year ending November 30th. The short period allocation percentage, computed as described in subparagraph (ii) of this paragraph (4), is 20%. It had an excess of gross income over deductions of $24,000 for the 12 month period covered by the Federal return. The taxpayer’s allocated income is $2,000, computed as follows:
$24,000 ÷ 12 (months) = $ 2,000 $ 2,000 × 5 (months) = $10,000 $10,000 × 20% = $ 2,000
(iv) A taxpayer must submit complete details with its return showing how it computed each factor of the allocation percentage for the period it is subject to tax in New York City if less than one full year. If, in the opinion of the Commissioner of Finance, the prorated gross income and deductions for the period for which the taxpayer is subject to tax in New York City does not property reflect such gross income and deductions for such period, the Commissioner may determine the amounts of gross income and deductions properly attributable to such period.
(1) General. If the allocation methods permitted or prescribed by 19 RCNY § 28-07 (c) and (d) do not allocate a fair and equitable portion of the income to New York City the methods of paragraphs (2), (3) or (4) of this subdivision (E) shall be used where applicable, or any other alternative method may be adopted by the Commissioner of Finance, either on his own initiative or on request of a taxpayer.
(2) Direct allocation where three-factor formula is not applicable. Although the methods used in keeping the books of the business do not fairly and equitably reflect the income from New York City, allocation by formula provided for in 19 RCNY § 28-07(d) shall not be made where such allocation by formula does not also fairly and equitably reflect the income from the City. In such case, the Commissioner of Finance may specifically allocate items of income and expense to the various places of business to which such items of income and expense are attributable in accordance with the provisions of 19 RCNY § 28-07(c), as if the methods used in keeping such books were approved by the Commissioner of Finance as fairly and equitably reflecting income from New York City. Generally, this will apply where, unlike the example set forth in 19 RCNY § 28-07(d) with respect to allocation by formula, the business within and without New York City is not a unitary business for which the formula was designed.
(3) Allocation for taxpayers with a regular place of business without the City and no regular place of business within the City. If an unincorporated business has a regular place of business without the City and no regular place of business within the City and the income and expenses of an unincorporated business attributable to sales made or services performed within the City are not fairly and equitably allocated under the allocation methods of 19 RCNY § 28-07(c) and (d), the Commissioner of Finance or the taxpayer may allocate under an alternate method. Such alternate method of allocation shall consist of multiplying the excess of the unincorporated business gross income over unincorporated business deductions by a fraction. The numerator of such fraction shall be the gross receipts received by the unincorporated business from all its clients or customers located within the City. The denominator of such fraction shall be the total gross receipts received by the unincorporated business from all its clients or customers.
(4) Request by taxpayer for alternative method or allocation. A taxpayer entitled under this section to allocate the excess of its unincorporated business gross income over unincorporated business deductions may not employ a method other than one described in 19 RCNY § 28-07(c), (d) or paragraph (3) of this subdivision (e) without the prior consent of the Commissioner of Finance. A taxpayer wishing to use an alternate method of allocation may make such a request at the time of the filing of the return to which it relates. The taxpayer must file its return and compute and pay its tax in accordance with the allocation methods described in 19 RCNY § 28-07(c), (d) or paragraph (3) of this subdivision (e). A request to vary the allocation method must be attached in a rider to the return. This request shall contain a detailed tax computation using the proposed alternative allocation method. In addition to the tax computation, the alternative allocation method must be fully explained in the rider. This explanation must provide full information regarding the nature and scope of the business activities carried on within and without New York City and provide complete details of how the method proposed by the taxpayer allocates income on a more equitable basis than the method of 19 RCNY § 28-07(c), (d) or paragraph (3) above.
Example:A lump sum payment is received by the taxpayer for services performed within and without the City. The taxpayer may request to have the amount attributable to services performed within the City determined on the basis of relative values of, or amounts of time spent in performance of, such services within and without the City, or by some other reasonable method.
(1) Income and deductions from rental of real property of the unincorporated business and gain or loss from the sale, exchange or other disposition thereof are not subject to allocation under any of the provisions of these rules but are considered as entirely derived from or connected with the State, other than this State, in which the real property is located, or if such property is located within this State, the political subdivision in which the property is located. Where a building or a parcel of real property is held partly for occupancy and use by the unincorporated business and partly for the production of rental income, the value thereof should be apportioned on a fair and equitable basis and only the portion of such value attributable to occupancy and use by the unincorporated business should be included in the property percentage of the allocation formula under 19 RCNY § 28-07(d). Nothing in this subdivision (f) of this 19 RCNY § 28-07 is to be construed to treat income, gain, loss or deductions from real property as derived from an unincorporated business carried on in whole or in part in New York City in contradiction of the provisions of 19 RCNY § 28-02(h) for taxable years beginning on or after July 1, 1994.
(2) (i) For the purpose of computing the property percentage of the allocation formula under 19 RCNY § 28-07(d), real property connected with the unincorporated business includes real property rented to the unincorporated business. The average value of such rented real property, therefore, must be considered in the computation of the property percentage. In order to avoid unnecessary hardship on taxpayers and for ease of administration, 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 rents payable during the taxable year by eight.
(ii) “Gross rent,” as used in this subdivision (f) is the actual sum of money or other consideration payable directly or indirectly by the taxpayer, or for his or its benefit, for the use or possession of the property. It includes:
(A) Any amount payable for the use or possession of real property, or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise.
Example 1: A taxpayer, pursuant to the terms of a lease, pays the lessor $1,000 per month and at the end of the year pays the lessor one percent of its gross sales of $400,000. Its gross rent is $16,000.
(B) Any amount payable as additional rent or in lieu of rent, such as interest, taxes, water and sewer charges, insurance, repairs or any other amount required to be paid by the terms of a lease or other arrangement.
Example 2: A taxpayer, pursuant to the terms of lease, pays the lessor $24,000 per annum and also pays real estate taxes in the amount of $4,000 and interest on a mortgage in the amount of $2,000. Its gross rent is $30,000.
(C) A proportionate part of the cost of any improvement to real property made by or on behalf of the taxpayer which reverts to the owner or lessor upon termination of a lease or other arrangement. The period over which the cost shall be apportioned shall be based on the unexpired term of the lease, commencing with the date the improvement is completed or the life of the improvement, if its life expectancy is less than the unexpired term of the lease. Where a building is erected on leased land by or on behalf of the taxpayer, the value of the land is determined by multiplying the gross rent of the land by eight. The value of the building is determined in the same manner as if owned by the taxpayer. The proportionate part of the cost of an improvement (other than a building on leased land) is generally equal to the amount of amortization allowed in computing unincorporated business taxable income, whether the lease does or does not contain an option of renewal.
Example 3: A taxpayer entered into a 21-year lease of certain premises at a rental of $20,000 per annum, and, after the expiration of one year, installs a new store front at a cost of $10,000 which reverts to the owner upon expiration of the lease. Its gross rent for the first year is $20,000. However, for subsequent years its gross rent is $20,500 ($20,000 annual rent plus 1/20th of $10,000, the cost of the improvement apportioned on the basis of the unexpired term of the lease). Example 4: The taxpayer leases a parcel of vacant land for 40 years at an annual rent of $5,000 and erects thereon a building which costs $600,000. The value of the land is determined by multiplying the annual rent of $5,000 by eight, and the value of the building is determined in the same manner as if owned by the taxpayer.
(D) Any portion of a payment to a partner for the use of real property.
Example 5: A member partner in a partnership engaged in an unincorporated business who leases land and a factory building to the partnership is, for each year, paid an amount which is the rental value of the property. The amount so paid is treated as an expense of the partnership and multiplied by eight to determine the value to be included in the property percentage.
(iii) Gross rent does not include:
(A) Amounts payable for storage where no designated space under the control of the taxpayer as a tenant is rented for storage purposes.
(B) That portion of any rental payment which, in the discretion of the Commissioner of Finance, is applicable to property subleased by the taxpayer and not used by him or it in the carrying on of the business.
Example 6: A taxpayer leases certain premises, all of which are assumed to be of equal rental value, at a rental of $20,000 per annum, and sub-leases 50 percent of such premises to one or more subtenants. Since 50 percent of the rent paid by the taxpayer is applicable to the portion of the premises subleased, 50 percent thereof may, in the discretion of the Commissioner of Finance, be excluded in computing the taxpayer’s gross rent for purposes of this section.
If the general method outlined herein results in valuations which are inaccurate or which are not fair and equitable, any other method which will fairly and equitably reflect the value of the rented property may be adopted by the Commissioner of Finance, either on his own motion or on request of a taxpayer. A request by a taxpayer for an alternative method may be made at the time of the filing of the return to which it relates by using the proposed method in the return provided the method is fully explained in the return or in a rider thereto. This explanation must contain a computation of the value of the rented real property in accordance with the provisions of this subdivision (f) as well as set forth full information with respect to the property together with the basis for the valuation proposed by the taxpayer. A request for an alternate method of valuation not made at the time of filing a return must also contain the explanation and information listed above. Such basis or such other method, once approved by the Commissioner of Finance, may be used without specific approval for subsequent years until the facts upon which it is based are materially changed.
(1) Alternate method of allocation. Security and commodity brokers doing business within and without New York City may elect to allocate the excess of the unincorporated business gross income, as determined under 19 RCNY § 28-05, over the unincorporated business deductions subject to allocation, as determined under 19 RCNY § 28-06, in accordance with the provisions of 19 RCNY § 28-07(d). The election must be made by the due date, including any extensions of the time to file a return. A taxpayer who fails to make a timely election under this subdivision must use the allocation method prescribed by 19 RCNY § 28-07(c). Once the taxpayer uses the method pre scribed by 19 RCNY § 28-07(c), or elects to allocate in accordance with 19 RCNY § 28-07(d), the taxpayer must continue to use the allocation method implemented unless, after application in writing to the Commissioner of Finance, the Commissioner determines that the method of allocation used no longer reflects income which is fairly applicable to the City of New York. If the Commissioner of Finance permits the taxpayer to revoke the method of allocation of income under this section, a copy of such permission for revocation of election must be attached to the return for the first taxable period to which such revocation of election is applicable.
(2) Allocation of commissions. In any method of allocation permitted or required in the case of security and commodity brokers doing business within and without New York City, the commissions derived from the execution of purchase or sales orders for the account of customers shall be allocated on the following basis:
(i) If an ordered is received at the New York City place of business of a broker for execution on an exchange located within New York City, and originates at a bona fide established office of the broker located within New York City, 100 percent of the commission in the case of stocks, bonds and commodities shall be allocated to the City of New York and included in gross income attributable to New York City in the taxable period in which such order is executed.
(ii) If the order is received at the New York City place of business of a broker for execution on an exchange located within New York City, and originates at a bona fide established office of the broker located without New York City, 20 percent of the commission in the case of stocks, bonds and commodities shall be allocated to the City of New York and included in gross income attributable to New York City in the taxable period in which such order is executed.
(iii) If the order originates at the New York City place of business of a broker and is transmitted to a bona fide established office of the broker without the City for execution on an exchanged located without New York City, 80 percent of the commission in the case of stocks, bonds and commodities shall be allocated to the City of New York and included in gross income attributable to New York City in the taxable period in which such order is executed.
(iv) The taxpayer may allocate commission income on the basis of actual experience if he can demonstrate to the satisfaction of the Commissioner of Finance that the allocation pursuant to subparagraphs (ii) and (iii) of this paragraph (h) does not fairly reflect the amount of commission income attributable to New York City.
(v) Commission income from over-the-counter transactions must be allocated in the following manner:
(A) If the order originates at or through a New York City place of business of the taxpayer, 100 percent of the commission income must be allocated to New York City.
(B) If the order originates at or through a bona fide established office of the taxpayer located outside New York City, no portion of the commission income is allocable to New York City.
(3) Allocation of manager’s fee. When a security and commodity broker manages an underwriting syndicate, the fees received from such activity must be allocated as follows: The manager’s fee must be allocated 100 percent to New York City when the services for which such fees are paid are performed wholly at or through a regular place of business of the taxpayer located within New York City. (See: 19 RCNY § 28-07(b) for the meaning of “regular place of business.”) If a portion of the compensation representing management fees is attributable to services performed at or through a regular place of business of the taxpayer located outside New York City, the portion of such compensation for management services shall be allocated based on the actual percentage of New York City direct net costs to total direct net costs. The term “direct net costs” includes costs directly connected with the management activity, such as research, investigation, syndication expense, accounting, legal, market surveys, compensation and underwriting overhead, less any reimbursements received from the issuing corporation.
(4) Allocation of primary spread. Security and commodity brokers participating in an underwriting syndicate must allocate gross income attributable to the primary spread in the following manner:
(i) Retained securities. One hundred percent of the gross income attributable to the primary spread must be allocated to New York City when such income is attributable to the underwritten securities which are retained and sold wholly at or through a regular place of business of the taxpayer located within New York City. If a portion of the securities retained by the taxpayer is sold at or through a regular place of business of the taxpayer located outside New York City, the gross income attrib utable to the primary spread must be allocated by the percentage which the number of underwritten shares sold at or through a regular place of business of the taxpayer located within New York City bears to the total number of underwritten shares sold by such taxpayer. The terms “primary spread” means the difference between the price paid by the underwriters to the issuers for the securities being marketed and the price received from the subsequent sale of the underwritten securities at the initial public offering price less the manager’s fee and selling concession. The term “initial public offering price” means the price agreed upon by the managing underwriter and the issuer at which the securities are to be offered to the public (including any change thereof which is required to be reported to the Federal Securities and Exchange Commission) during the term or length of the agreement among the underwriters.
(ii) Group sales. Gross income attributable to the primary spread, from the sale of securities, purchased or committed to be purchased from an issuer, which are reserved by the managing underwriter and sold on behalf of the account of participating underwriters, including the manager, to persons selected by such manager, must be allocated 100 percent to New York City when the principal office of the managing underwriter is located in New York City. In the case of co-managers, if the principal office of one or more of such co-managers is located within New York City and the principal office of one or more of such co-managers is located outside the City, the gross income attributable to the primary spread, from the group sale of underwritten securities, must be allocated in accordance with the ratio that the number of managing underwriters whose principal office is located in New York City bears to the total number of managing underwriters.
(iii) Directed or designated sales. Gross income attributable to the primary spread received by a member of the underwriting syndicate, from the sale of securities directly from the managing underwriter to persons who have directed such manager that the sale be made on behalf of the account of such member, must be allocated to New York City when the regular place of business of such member, which is responsible for the sale, is located within New York City.
(5) Allocation of selling concession. Security and commodity brokers participating in an underwriting syndicate must allocate the gross income attributable to the selling concession (secondary fees) in the following manner:
(i) Retained securities. Where a taxpayer is a member of the selling group and participates for a fee in the marketing of the underwritten securities, the gross income representing the selling concession must be allocated 100 percent to New York City where the underwritten securities which have been retained by the taxpayer are sold wholly at or through a regular place of business of the taxpayer located within New York City. If a portion of the securities is sold at or through a regular place of business of the taxpayer located outside New York City, the gross income representing the selling concession shall be allocated by the percentage which the number of underwritten shares sold at or through a regular place of business of the taxpayer located within New York City bears to the total number of underwritten shares sold by such taxpayer.
(ii) Group sales. Gross income attributable to the selling concession, from the sale of securities, purchased or committed to be purchased from an issuer, which are reserved by the managing underwriter and sold on behalf of the account of the participating underwriters, including the manager, to persons selected by such manager, must be allocated 100 percent to New York City when the principal office of the managing underwriter is located in New York City. In the case of the co-managers, if the principal office of one or more of such co-managers is located within New York City and the principal office of one or more of such co-managers is located outside the City, the gross income attributable to the selling concession, from a group sale of underwritten securities, must be allo cated in accordance with the ratio that the number of managing under writers whose principal office is located in New York City bears to the total number of managing underwriters.
(iii) Directed or designated sales. Gross income attributable to the selling concession received by a member of the underwriting syndicate, from the sale of securities directly from the managing underwriter to persons who have directed such manager that the sale be made on behalf of the account of such member, must be allocated to New York City when the regular place of business of such member, which is responsible for the sale, is located within New York City.
(6) Allocation schedule required. A securities and commodity broker allocating gross income pursuant to the provisions of this subdivision (h) must submit a schedule setting forth the basis and computation of each category of gross income within and without New York City.
(1) General. If an unincorporated entity (the “partner”) is a partner in another unincorporated entity (the “partnership”), carrying on an unincorporated business wholly or partly in New York City and either the partner or the partnership allocates a portion of its unincorporated business entire net income outside New York City, the partner must allocate its business income, if any, as provided in paragraph (2) of this subdivision, and its investment income, if any, as provided in paragraph (3) of this subdivision. If the partner’s distributive shares of the business and investment income of the partnership are not separately stated on the partnership’s Internal Revenue Service Form 1065, Schedule K-1, with respect to the partner, the proportion of business and investment income in the partner’s distributive share will be deemed to be the same as the proportion of business and investment income in the unincorporated business entire net income of the partnership before allocation. Except as provided in subparagraph (ii) of paragraph (2) of this subdivision (j) (rental real estate), a partner must use the same method to allocate its distributive share of each item of business income, gain, loss or deduction from a given partnership, other than deductions not subject to allocation as provided in 19 RCNY § 28-08.
(2) Allocation of business income.
(i) A) Except as otherwise provided in subparagraph (i)(B) of this paragraph, a partner must allocate to the City the same percentage of its distributive share of each item of a particular partnership’s business income, gain, loss and deduction as the partnership allocated to the City for purposes of determining its own business income allocated to the City for the partnership’s taxable year ending with or within the partner’s taxable year.
(B) Discretionary use of other methods. The Commissioner of Finance in his or her discretion may permit or require a taxpayer partner to use another method to allocate its business income if the Commissioner determines that the method provided in subparagraph (i)(A) of this paragraph (2) does not result in a fair and equitable allocation to the City of the taxpayer partner’s income.
(C) Alternative methods that may be permitted or required by the Commissioner of Finance include, but are not limited to, the following:
(a) a formula method whereby the partner calculates a single business allocation percentage that it applies to its own business income and to its distributive shares of business income from partnerships. In computing this business allocation percentage, the partner must include its percentage interest in the property, gross income and payroll within and without the City of the partnerships from which it receives a distributive share. For purposes of this subparagraph, a partner’s percentage interest in a partnership’s property, gross income and payroll will be deemed to be the same as the partner’s percentage interest in the profits, losses and capital of the partnership as reflected on the partnership’s Internal Revenue Service Form 1065, Schedule K-1, with respect to the partner for the partnership’s taxable year ending within or with the partner’s taxable year.
(b) a method whereby the partner’s distributive share of income, gain, loss and deduction from a partnership is allocated by the partner’s business allocation percentage determined without regard to the business allocation factors or books and records of the partnership. This method may be appropriate where all diligent efforts by the partner to obtain the necessary information from the partnership have failed and the use of this method is not otherwise distortive.
(ii) Notwithstanding anything contained in subparagraph (i) of this paragraph (2) to the contrary, a partner must allocate its distributive share from a partnership of each item of income and deduction attributable to rental real estate and each item of gain or loss from the sale, exchange or other disposition of real estate in accordance with subdivision (f) of this section.
(3) Allocation of investment income.
(i) Except as otherwise provided in subparagraphs (ii) and (iii) of this paragraph, in computing its allocated investment income, the partner must allocate to the City its separate investment income, determined without regard to its distributive shares from partnerships, using an investment allocation percentage determined without regard to its percentage interest in the investment capital of any partnership. The partner must separately allocate to the City the same percentage of its distributive share of investment income of a particular partnership as the partnership allocated to the City for purposes of determining its own investment income allocated to the City for the partnership’s taxable year ending with or within the partner’s taxable year.
(ii) Discretionary use of other methods. The Commissioner of Finance in his or her discretion may permit or require the taxpayer to use another method to allocate its distributive share of investment income of the partnership if the Commissioner determines that the method provided in subparagraph (i) of this paragraph (3) does not result in a fair and equitable allocation to the City of the taxpayer’s income.
(iii) Alternative methods that may be permitted or required by the Commissioner of Finance include, but are not limited to, a method whereby, in computing its investment allocation percentage, the partner includes its percentage interest of the items of investment capital that are used in computing the investment allocation percentages of the partnerships from which it receives distributive shares. In this method, the partner must then allocate the sum of its separate investment income and its distributive shares of investment income from other partnerships by the investment allocation percentage so computed.
(4) Examples. The following examples illustrate methods of allocation of business and investment income for entities that receive distributive shares. Because an entity that receives a distributive share from another entity subject to the UBT will generally be eligible for the UBT Paid Credit, these examples also illustrate the calculation of the credit where the entities allocate a portion of their income outside the City. The facts of the following examples have been simplified and do not reflect the deduction allowed by Administrative Code § 11-509(a) or the exemption allowed by Administrative Code § 11-510(1). The effect of other credits allowed under Administrative Code § 11-503 also is not reflected. For further information about the UBT Paid Credit see 19 RCNY § 28-03(d)s.
Example 1: Allocation of Business Income – Books and Records. AB is a partnership doing business inside and outside New York City. AB has two partners, A and B, both of which are also partnerships doing business inside and outside New York City. A’s partnership interest in AB is 60% and B’s is 40%. None of the partnerships have any investment income. AB, A and B all allocate on the basis of books and records and A and B allocate their distributive shares from AB pursuant to 19 RCNY § 28-07(j)(2)(i)(A). AB has unallocated unincorporated business entire net income (“UBENI”) of $1000x of which $700x is allocable by its books and records to its business location in the City and $300x is allocable to its business location outside the City. A’s separate unallocated UBENI is $1000x of which $500x is allocable to its business location in the City and $500x is allocable to its business location outside of the City. B’s separate unallocated UBENI is $100x of which $90x is allocable to its business location in the City and $10x is allocable to its business location outside of the City.
A’s Allocated Unincorporated Business Taxable Income (“UBTI”):
A’s allocated UBTI is $920x, composed of A’s separate allocated UBTI of $500x and A’s 60% distributive share of AB’s allocated UBTI of $700x allocated to the City.
Calculation of A’s UBT Paid Credit and Tax Liability:
Measure 1: A’s distributive share percentage of AB’s UBT is $16.8x (A’s distributive share percentage of 60% multiplied by AB’s UBT liability of $28x).
Measure 2: A’s UBT liability on its allocated UBTI of $920x would be $36.8x. Without its distributive share of $420x from AB, A’s allocated UBTI would be $500x on which the tax would be $20x. The incremental tax effect of the distributive share is $16.8x ($36.8x - $20x = $16.8x).
Therefore, A’s UBT paid credit is $16.8x, reducing its UBT liability to $20x.
B’s Allocated UBTI:
B’s allocated UBTI is $370x, composed of B’s separate allocated UBTI of $90x and B’s 40% distributive share of AB’s allocated UBTI of $700x.
Calculation of B’s Credit:
Measure 1: B’s distributive share percentage of AB’s UBT is $11.2x (B’s distributive share percentage of 40% multiplied by AB’s UBT liability of $28x).
Measure 2: B’s UBT liability on its allocated UBTI of $370x would be $14.8x. Without its distributive share of $280x from AB, B’s allocated UBTI would be $90x on which the tax would be $3.6x. The incremental tax effect of the distributive share is $11.2x ($14.8x - $3.6x = $11.2x).
Therefore, B’s UBT paid credit is $11.2x, reducing its tax liability to $3.6x.
Example 2: Allocation of Business Income – Formula Allocation with a Flow Through of Factors. The facts are the same as in Example 1 except that it has been determined by the Commissioner of Finance that the method used in example 1 is distortive and that the taxpayer must use the method described in 19 RCNY § 28-07(j)(2)(i)(C)(a). (This example is provided to illustrate the calculation of the allocation percentages and applicable UBT paid credit and is not intended to illustrate the circumstances under which the Commissioner will find the use of an allocation method to be distortive.) All three partnerships allocate their income pursuant to 19 RCNY § 28-07(d) (the formula method). AB, A and B are not manufacturing firms eligible to elect to use a double-weighted gross income factor. AB’s business allocation percentage is 70% computed as follows:
| AB | Total win & w/o the City | NYC | % in NYC |
|---|---|---|---|
| Property | $10,000 | $7,000 | 70% |
| Wages | $1,000 | $600 | 60% |
| Gross Income | $5,000 | $4,000 | 80% |
| Total | 210% | ||
| Average | 70% |
~
Without taking into account its distributive share from AB, A has a 50% business allocation percentage computed as follows:
| A | Total win & w/o the City | NYC | % in NYC |
|---|---|---|---|
| Property | $10,000 | $5,000 | 50% |
| Wages | $1,000 | $600 | 60% |
| Gross Income | $5,000 | $2,000 | 40% |
| Total | 150% | ||
| Average | 50% |
~
Without taking into account its distributive share from AB, B has a 90% business allocation percentage computed as follows:
| B | Total win & w/o the City | NYC | % in NYC |
|---|---|---|---|
| Property | $10,000 | $9,000 | 90% |
| Wages | $1,000 | $850 | 85% |
| Gross Income | $5,000 | $4,750 | 95% |
| Total | 270% | ||
| Average | 90% |
~
AB’s UBENI is $1000x. AB’s allocated UBTI is $700x. AB pays UBT of $28x. AB’s Form NYC-204 indicates that A’s distributive share from AB is $600x and that B’s distributive share is $400x. A and B are subject to the UBT and are entitled to UBT Paid Credits based upon their distributive shares from AB. A’s separate UBENI is $1000x. B’s separate UBENI is $100x.
AB, A and B all allocate business income using formula allocation and compute their business allocation percentage pursuant to 19 RCNY § 28-07(j)(2)(i)(C)(a).
Calculation of A’s Allocation Percentage
| A | Total win & w/o the City | NYC | % in NYC |
|---|---|---|---|
| A’s Property | $10,000 | $5,000 | |
| 60% of AB’s Property | $6,000 | $4,200 | |
| Total Property | $16,000 | $9,200 | 57.50% |
| Wages A | $1,000 | $600 | |
| 60% of AB’s Wages | $600 | $360 | |
| Total Wages | $1,600 | $960 | 60% |
| A’s Gross Income | $5,000 | $2,000 | |
| 60% of AB’s G.I. | $3,000 | $2,400 | |
| Total G.I. | $8,000 | $4,400 | 55% |
| Total | 172.50% | ||
| Average | 57.50% |
~
A’s Allocated UBTI:
A’s total unallocated UBENI is $1600x (separate UBENI of $1000x + distributive share of AB’s UBENI ($600x)). A’s allocated UBTI is $920x (57.5% of $1600x = $920x).
Calculation of A’s UBT Paid Credit:
Measure 1: A’s distributive share percentage of AB’s UBT is $16.8x as in example 1 above.
Measure 2: A’s UBT liability on its allocated UBTI of $920x would be $36.8x. Without its distributive share of $600x from AB and without taking into account its share of AB’s allocation factors, A’s allocated UBTI would be $500x (50% of $1000x) on which the tax would be 20x. The incremental tax effect of the distributive share is $16.8x ($36.8x - $20x = $16.8x).
Therefore, A’s UBT paid credit is $16.8x, reducing its UBT liability to $20x.
Calculation of B’s Allocation Percentage:
| B | Total win & w/o the City | NYC | % in NYC |
|---|---|---|---|
| B’s Property | $10,000 | $9,000 | |
| 40% of AB’s Property | $4,000 | $2,800 | |
| Total Property | $14,000 | $11,800 | 84.29% |
| B’s Wages | $1,000 | $850 | |
| 40% of AB’s Wages | $400 | $240 | |
| Total Wages | $1,400 | $1,090 | 77.86% |
| B’s Gross Income | $5,000 | $4,750 | |
| 40% of AB’s G.I. | $2,000 | $1,600 | |
| Total G.I. | $7,000 | $6,350 | 90.71% |
| Total | 252.86% | ||
| Average | 84.29% |
~
B’s Allocated UBTI:
B’s total unallocated UBENI is $500x (separate UBENI of $100x + distributive share of AB’s UBENI ($400x)). B’s allocated UBTI is $421 x (84.29% of $500x = $421x).
Calculation of B’s UBT Paid Credit:
Measure 1: B’s distributive share percentage of AB’s UBT is $11.2x, as in example 1 above.
Measure 2: B’s UBT liability on its allocated UBTI of $421x would be $16.86x. Without its distributive share of $400x from AB and without taking into account its share of AB’s allocation factors, B’s allocated UBTI would be $90x (90% of $100x) on which the tax would be $3.6x. The incremental tax effect of the distributive share is $13.26x ($16.86x - $3.6x = $13.26x).
Therefore, B’s UBT paid credit is $11.2x reducing its tax liability to $5.66x.
Example 3: Allocation of Business Income – Formula Allocation without a Flow-Through of Factors. All facts are the same as in Example 2 except that pursuant to 19 RCNY § 28-07(j)(2)(i)(B), A and B receive written permission from the Commissioner of Finance to use the method specified in 19 RCNY § 28-07(j)(2)(i)(C)(b) under which they allocate their distributive shares of income, gain, loss and deductions from AB using their own business allocation percentages without regard to the business allocation percentage of AB. (This example is provided to illustrate the calculation of the allocation percentages and applicable UBT paid credit and is not intended to illustrate the circumstances under which the use of an alternative allocation method will be allowed.)
A’s Allocated UBTI:
A’s total unallocated UBENI is $1600x (separate UBENI of $1000x + distributive share of AB’s UBENI ($600x)). A’s allocated UBTI is 800x (50% of $1600x = $800x).
Calculation of A’s Credit:
Measure 1: A’s distributive share percentage of AB’s UBT is $16.8x as in example 1 above.
Measure 2: A’s UBT liability on its allocated UBTI of $800x, would be $32x. Without its distributive share of $600x from AB, A’s allocated UBTI would be $500x (50% of $1000x) on which the tax would be $20x. The incremental tax effect of the distributive share is $12x ($32x - $20x = $12x).
Therefore, A’s UBT paid credit is $12x reducing its tax liability to $20x.
B’s Allocated UBTI:
B’s total unallocated UBENI is $500x (separate UBENI of $100x + distributive share of AB’s UBENI ($400x)). B’s allocated UBTI is $450x (90% of $500x = $450x).
Calculation of B’s Credit:
Measure 1: B’s distributive share percentage of AB’s UBT is $11.2x as in example 1.
Measure 2: B’s UBT liability on its allocated UBTI of $450x would be $18x. Without its distributive share of 400x from AB, B’s allocated UBTI would be $90x (90% of $100x) on which the tax would be $3.6x. The incremental tax effect of the distributive share is $14.2x ($18x - $3.6x = $14.2x).
Therefore, B’s UBT paid credit is $11.2x reducing its tax liability to $6.8x.
§ 28-08 Deductions Not Subject to Allocation.
(a) Compensation for services of proprietor and acting partners. (Administrative Code, § 11-509(a)).
(1) General. In addition to amounts paid to employees as salaries, wages or other personal service compensation, which are allowable as unincorporated business deductions under 19 RCNY § 28-06, deductions are also allowed for reasonable compensation for personal services of a proprietor and for personal services of each partner actively engaged in the conduct of the unincorporated business, including a corporate partner which, through its officers, actively engages in the business of the partnership. It is not necessary that the amount deducted on account of the services by the proprietor or a partner be credited to the account of or actually withdrawn by such person. The reasonableness of any deduction under this subdivision (a) shall be subject to determination by the Commissioner of Finance. An administrator, executor, trustee, receiver or other fiduciary who, in his fiduciary capacity, carries on the unincorporated business of an estate, trust or entity for which he acts is not a proprietor or partner for purposes of this subdivision (a). Amounts paid to retired partners are not deductible. Deductions allowable for services of a proprietor or a partner described above are not subject to allocation even though the unincorporated business is carried on both within and without New York City.
(2) Limitations on deduction for compensation. Any deduction allowable under paragraph (a)(1) of this subdivision (a) shall not exceed $5,000 for a proprietor or for each active partner and the aggregate of such deductions shall not exceed 20 percent of the unincorporated business taxable income computed without the benefit of this deduction or the unincorporated business exemptions permitted under 19 RCNY § 28-09. Where the business is carried on both within and without New York City, these limitations apply to and are computed with reference to the excess of the allocable unincorporated business gross income over the allocable unincorporated business deductions apportioned to New York City.
Example 1: A, an individual, has unincorporated business taxable income (computed without deductions for compensation for his services or the unincorporated business exemptions) of $15,000. He actually with drew from the business a salary of $6,000. Assuming the amount drawn would not exceed a reasonable allowance, the allowable deduction for A’s services is $3,000, (20% of the $15,000) which in this case is the maximum deduction allowable. The $5,000 limitation is not applicable because it exceeds the 20% of income limitation on the aggregate of allowable deductions for compensation of a proprietor and active partners under the foregoing subdivision.
Example 2: If, in Example 1 above, A withdrew no salary, the $3,000 would be allowable as a deduction for his services, assuming such amount would not exceed a reasonable allowance under the circumstances.
Example 3: A, an individual, has unincorporated business taxable income (computed without deductions for compensation for his services or the unincorporated business exemptions) of $30,000. He did not charge or withdraw any salary from the business. Assuming the amount would not exceed a reasonable allowance, the maximum allowable deduction for A’s services is $5,000. The 20% of income limitation has no application here because the amount thereof, $6,000 (20% of $30,000), exceeds the limitation of $5,000 for each individual.
Example 4: Partnership XYZ has unincorporated business taxable income (computed without benefit of deduction for compensation for services of partners or the unincorporated business exemptions) of $40,000. No salaries are paid or credited to any of the partners. The firm has two active partners, X and Y, and one inactive partner, Z. Assuming the amount would not exceed a reasonable allowance, the maximum allowable deduction for the services of the two active partners, X and Y, is $8,000 (20% of $40,000). No deduction under this subdivision (a) is allowable with respect to the inactive partner, Z. The limitation of $5,000 for each active partner is not applicable here because the amount thereof, $10,000 ($5,000 each for X and Y), would exceed the 20% of income limitation on the aggregate of allowable deductions under this subdivision (a).
Example 5: Assuming the same facts as those in Example 4, except that the unincorporated business income (computed without deduction for compensation for partners’ services or the unincorporated business exemptions) is $60,000, then the deductions under this subdivision (a) representing a reasonable allowance for services of the active partners cannot exceed $10,000 ($5,000 for each partner). Here again, no deduction is allowable with respect to the inactive partner, Z. The 20% of income limitation has no application here because the amount thereof, $12,000 (20% of $60,000), exceeds the aggregate of the maximum allowable individual deductions of $5,000 per active partner.
Example 6: Assuming the same facts presented in Example 5, except that the business was carried on both within and without New York City, with 80% of the income allocable to New York City, the maximum deduction for reasonable compensation for the services of the active partners is $9,600, computed as follows:
| Total taxable income (without deduction for services of partners or unincorporated business exemptions) | $60,000 |
|---|---|
| Portion allocated to New York City (80%) | $48,000 |
| Aggregate deduction for active partners, X and Y, limited to 20 percent of amount allocated to New York City | $9,600 |
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Example 7: XYZ Partnership is engaged in the business of making commercial loans. The partnership consists of 2 individuals, X and Y and one corporation, Z Corporation. The officers of Z Corporation have a background in investments and real estate. They advise the partnership regarding loans under consideration, attend meetings of the partnership and consult with the other partners relating to accepting or rejecting loan applications. XYZ Partnership is entitled to a deduction for reasonable compensation paid to its three active partners, not to exceed the lesser of $15,000 or 20% of the unincorporated business taxable income.
(3) For purposes of this subdivision, a person will be considered a partner of an entity if that person would be considered to be a partner under 19 RCNY § 28-06(d)(1)(iv).
(1) General.
(i) At the election of the taxpayer, special optional modifications for depreciation of certain property and for certain expenditures for property used for research or development purposes are permitted, without allocation under 19 RCNY § 28-07, upon the terms and conditions prescribed by this subdivision (b). Either or both of the deductions set forth in subparagraphs (1)(ii) and (1)(iii) of this paragraph (1) shall be allowed, except that only one of these deductions shall be allowed with respect to any one item of property.
(ii) Where an individual, partnership, estate or trust constructs, reconstructs, erects or acquires qualifying property as defined in paragraph (2) of this subdivision (b), there shall, subject to the terms and conditions prescribed by this subdivision (b), at the election of the taxpayer, be allowed in respect of such qualifying property a deduction for depreciation not exceeding twice the depreciation allowed with respect to the same property for Federal income tax purposes. A deduction pursuant to this subparagraph (ii) is allowed only upon the condition that no other deduction for depreciation of such property shall be permitted for the taxable year.
(iii) Subject to limitations prescribed in this subdivision (b), a taxpayer likewise may, in lieu of any deduction (as an expenditure or as depreciation) otherwise allowable for Federal income tax purposes, elect to deduct any amount expended during the taxable year for the construction, reconstruction, erection or acquisition of qualifying property, as defined in paragraph (2) of this subdivision (b) which is used for purposes of research or development in the experimental or laboratory sense. Such purposes do not include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects.
(iv) Any amount allowed for Federal income tax purposes as depreciation or as an expenditure with respect to the property which is the subject of an election under subparagraphs (ii) or (iii) of this paragraph (b) shall be added to the taxpayers Federal adjusted gross income for the taxable year.
(v) An election made with respect to a specific item of property or expenditure is binding for all subsequent taxable years unless the Commissioner of Finance consents to a change with respect thereto upon such terms and conditions as he may fix.
(vi) An election with respect to qualifying property of a partnership must be made by the partnership and shall apply to all partnership members. An election with respect to qualifying property of an estate or trust shall be made by the fiduciary and shall be binding on all beneficiaries of the estate or trust.
(2) Qualifying property. The term “qualifying property” means tangible personal property which
(i) is depreciable pursuant to § 167 of the Internal Revenue Code, and
(ii) has a situs in New York City, and
(iii) is used in the taxpayer’s trade or business, and
(iv) (A) the construction, reconstruction or erection of which is completed after December 31, 1967, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after December 31, 1963, or
(3) Limitations.
(i) The total of all deductions allowed pursuant to this subdivision (b) in any taxable year or years with respect to an item of property shall not exceed the cost or other basis of the property for Federal income tax purposes. Only one election, either to claim additional depreciation, or to claim a deduction as an expenditure for property used for research or development, may be made in connection with any one item of property which qualifies for election under subparagraphs (i) and (ii) of paragraph (1) of this subdivision (b). When property subject to an election under this subdivision (b) is used or to be used for research or development only in part, or during only part of its useful life, the allowable special deduction shall be limited to a proportionate part of the expenditures relating thereto.
(ii) With respect to the depreciation deduction allowed under subparagraph (1)(ii) of paragraph (1), such deduction shall be allowed with respect to property described in this paragraph (2) only on condition that such property shall be principally used by the taxpayer in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing. For purposes of the preceding sentence, manufacturing shall mean the process of working raw materials into wares suitable for use or 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. Property used in the production of goods shall include machinery, equipment or other tangible property which is principally used in the repair and service of other machinery, equipment or other tangible property used principally in the production of goods, and shall include all facilities used in the manufacturing operation, including storage of material to be used in the manufacturing, and of the products that are manufactured.
(iii) At the option of the taxpayer, air and water pollution control facilities which qualify for elective deductions under 19 RCNY § 28-06(i), may be treated, for purposes of this paragraph (2), as tangible property principally used in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing, in which event, a deduction shall not be allowed under such 19 RCNY § 28-06(i).
(iv) No deduction shall be permitted under this subdivision (b) for research and experimental expenditures treated as deductible expenses under § 174(a) of the Internal Revenue Code or as amortizable deferred expenses under § 174(b) of the Internal Revenue Code (such expenditures will be reflected in the computation of New York City taxable income through the use of Federal amounts in accordance with the general provisions of these regulations).
(v) With respect to the depreciation deduction under subparagraph (1)(ii) of this subdivision (b), for any taxable year beginning on or after January 1, 1968, no deduction is allowed for tangible personal property leased to any other person or corporation. Any contract or agreement to lease or rent or for a license to use such property is considered a lease; provided, however, that with respect to property which a taxpayer uses for purposes other than leasing for part of a taxable year and leases for another part of a taxable year, a deduction may be taken in proportion to the part of the year such property is used by the taxpayer.
(vi) The special depreciation and expenditure deduction is only allowed with respect to property which has not been the subject of a depreciation deduction pursuant to 19 RCNY § 28-06. With respect to the expenditure deductions allowed by subparagraph (1)(iii) of this subdivision (b), such expenditure deduction shall be allowed only if for the taxable year and all succeeding taxable years, no deduction shall be allowed pursuant to 19 RCNY § 28-06 on account of such expenditures or on account of depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, or in case a deduction is allowable pursuant to this paragraph for only a part of such expenditures, on condition that any deduction allowable for federal income tax purposes on account of such expenditures or on account of depreciation of the same property shall be proportionately reduced in determining the deductions allowable pursuant to 19 RCNY § 28-06 for the taxable year and all succeeding taxable years.
(vii) In the case of an unincorporated business carried on both within and without New York City, the total of the deduction for depreciation or the deduction for expenditures shall not exceed
(A) such expenditures, and in the case of depreciation, its costs or other basis,
(B) multiplied by the allocation percentage determined under 19 RCNY § 28-07, which is used in allocating the excess of the taxpayer’s unincorporated business gross income over its unincorporated business deductions to New York City for the first year such depreciation is deducted or the first year such expenditure is paid or incurred, whichever is applicable.
(4) A similar special depreciation or expenditure deduction applies with respect to tangible personal property, having a situs in the City, used in the taxpayer’s trade or business, and acquired, constructed, erected or recon structed between January 1, 1966 and December 31, 1969. For definitions, limitations and requirements, see § 11-509(b) of the Administrative Code.
(5) Adjustment of basis upon sale or other disposition.
(i) In any tax able year when property, with respect to which a deduction under this subdivision (b) has been allowed, is sold or otherwise disposed of, the basis of such property shall be adjusted to reflect such deduction and if the basis as so adjusted is lower than the adjusted basis of the same property for Federal income tax purposes, the difference between the basis as so adjusted and the adjusted basis of the same property for Federal income tax purposes shall be added to the taxpayer’s Federal adjusted gross income (or Federal taxable income of a fiduciary, where applicable) in determining New York City unincorporated business taxable income.
(ii) A sale or disposition of qualifying property includes any transfer or exchange without regard to whether gain or loss from the transaction is recognized for Federal income tax purposes. (Even if the gain or loss from the sale or disposition is a long-term capital gain or loss for Federal income tax purposes, the amount to be taken into account under this paragraph (5) shall be the entire difference between the adjusted bases.)
(6) Reporting change in use of research or development property. If a taxpayer has been allowed a deduction under subparagraph (1)(iii) of this subdivision (b) for an expenditure for a qualifying research or development property and such property is used for purposes other than research or development to a greater extent than originally reported, the taxpayer shall report such use in the return for the first taxable year during which it occurs, and the Commissioner of Finance may recompute the tax for year or years for which the deduction was made and may assess any additional tax resulting from such recomputation within the time fixed by § 11-523(c)(7) of the Administrative Code.
(7) Carryover of unused deductions. If the deductions allowable under this subdivision (b) for any taxable year exceed the taxpayer’s unincorporated business taxable income determined without the allowance of such deductions, the excess may be carried over to the following taxable year or years of the same taxpayer (without allocation under 19 RCNY § 28-07) in computing unincorporated business taxable income for such year or years. If a carryover under this subdivision (b) is claimed, complete details of the computation of the carryover must be submitted with the taxpayer’s return.
(8) Rule for making elections. An election to deduct additional depreciation or expenditures for research or development purposes under this subdivision (b) shall be made by filing with the unincorporated business income tax return or returns in which such deductions are claimed a statement evidencing such election and containing complete details of the qualifying property involved and the computation of the related deduction and modification. (Such statement and information shall be submitted on form NYC-324, “Special Depreciation and Expenditure Schedule.”)
§ 28-09 Unincorporated Business Exemptions.
(a) Specific exemption. (Administrative Code § 11-510(1)).
(1) In addition to the deductions otherwise allowable under 19 RCNY §§ 28-06 and 28-08, there is allowed a specific annual exemption of $5,000 which is deductible in computing the unincorporated business taxable income. If the business was carried on or was being liquidated for a period of less than an entire taxable year of 12 months, the exemption must be prorated. The proration shall be made on a dally basis at the rate of $13.70 per calendar day unless the return is filed for a period of one or more whole months beginning on the first day and ending on the last day of a calendar month, in which event the proration is to be made on a monthly basis at the rate of $416.67 per month.
(2) This exemption is not subject to allocation even though the unincorporated business is carried on both within and without New York City. Only one specific exemption is allowed to an individual, partnership or other unincorporated entity, even though the individual or other entity carries on two or more unincorporated businesses. (See: 19 RCNY § 28-02(a)(4).)
Example 1: If a partnership in existence and carrying on business on January 1, 1975 ceases business operations and completely liquidates on August 15, 1975, an exemption of $3,109.90, representing 227 days at $13.70 per day, is allowed for the period beginning January 1, 1975 and ending August 15, 1975.
Example 2: If, in Example 1, the complete liquidation occurred on July 31, 1975, the exemption would be $2,916.69, representing seven months at $416.67 per month.
Example 3: Partnership A & B, in existence and doing business on January 1, 1975, is terminated and liquidated on May 31, 1975 by the admission of a new partner, C, and the formation of a new partnership A B C which continues the business from June 1, 1975 through December 15, 1975, at which time it is terminated and completely liquidated. On the unincorporated business income tax return of partnership A & B for the period beginning January 1, 1975 and ended May 31, 1975, a prorated exemption of $2,083.35 representing five months at $416.67 per month, will be allowed. The prorated exemption allowable to partnership A B C for the period June 1, 1975 through December 15, 1975 is $2,712.60, or 198 days at $13.70 per day.
Example 4: Individual A sold his unincorporated business under a deferred payment agreement on December 31, 1973 and received payments under the agreement in 1974 and in 1975, with the final payment being received on April 15, 1975. A’s unincorporated business exemption will be $5,000 for 1974 and $1,438.50 (105 days at $13.70 per day) for 1975.
(1) General. For taxable years beginning before July 1, 1994, a partnership (or other unincorporated entity which is considered to be a partnership for unincorporated business tax purposes, see 19 RCNY § 28-02(c)) is allowed an exemption in addition to the specific exemption described in 19 RCNY § 28-09(a)(1) if a partner or member of such partnership or other entity is, in its separate capacity, taxable under the general corporation tax imposed pursuant to Chapter 6 of Title 11 of the Administrative Code or the unincorporated business tax imposed pursuant to Chapter 5 of Title 11 of the Administrative Code. The additional exemption allowable in such a case is the amount of such partner’s or member’s proportionate interest in the excess of the partnership’s unincorporated business gross income (as computed under 19 RCNY § 28-05) over the partnership’s unincorporated business deductions allowed under 19 RCNY §§ 28-06 and 28-08. If the unincorporated business of a partnership which qualified for the additional exemption under this subdivision (b) is carried on both within and without New York City, the proportionate interest of a partner or member with respect to which the additional exemption is allowable is computed without regard to any allocation the partnership may be permitted to make under 19 RCNY § 28-07, other than an allocation applicable to a net operating loss deduction allowable under 19 RCNY § 28-06. No additional exemption is allowed for amounts distributed to an individual member of a partnership who also carries on his own separate and independent unincorporated business and who, pursuant to 19 RCNY § 28-05(a), is not required or permitted to include his distributive share of partnership income in computing his own separate unincorporated business gross income. Notwithstanding anything in these rules to the contrary, no additional exemption shall be allowed to an unincorporated business for any taxable year of the unincorporated business beginning after June 30, 1994.
(2) Limitation on amount of additional exemption. The additional exemption allowable under paragraph (1) of this subdivision (b) is limited to the amount which is included in the partner’s or member’s unincorporated business taxable income allocable to New York City, or included in a corporate partner’s or corporate member’s net income allocable to New York City, under the provisions of Chapter 5 or Chapter 6 of Title 11 of the Administrative Code. Thus, the additional exemption attributable to a partner cannot exceed that partner’s unincorporated business taxable income allocable to New York City in the case of an unincorporated partner or that partner’s net income allocable to New York City in the case of a corporate partner.
(3) Other rules for computation of additional exemption.
(i) Where a partnership or other unincorporated entity is entitled to exemption under paragraph (1) of this subdivision (b) with respect to more than one of its partners or members, a separate computation with respect to each partner or member must be made.
Example 1: A joint venture is entered into by four individual venturers, and X & Y, a partnership, taxable under Chapter 5 of Title 11 of the Administrative Code, and Z Inc., a corporation taxable under Chapter 6 of Title 11 of the Administrative Code. The partnership X & Y and the corporation Z Inc. each have a one-third interest in the income and profits of the joint venture. The activities of the joint venture are carried on in such a manner as to constitute the carrying on of an unincorporated business. The interests of four individual members (other than X & Y partnership or Z Inc.) in the venture are not connected with any other business carried on by them and they devote their full business time to the operation of the venture. Partnership X & Y invested business funds in the venture and, as a separate entity, was engaged in the conduct of a separate unincorporated business which it carried on both within and without New York City with an allocation of 60 percent to New York City for unincorporated business income tax purposes. Partnership X & Y had allocated taxable business income of $200,000. The corporate return of Z Inc., which included the corporate partner’s share of the joint venture income, showed a business allocation of 75 percent to New York City. Corporation Z had allocated taxable net income of $200,000. Assuming the joint venture net income (before deduction for compensation for services of partners) to be $300,000 (of which $100,000 is distributable to X & Y and $100,000 to Z Inc.), and assuming $30,000 allowable as the deduction for partners’ services under 19 RCNY § 28-08(a), the additional exemptions allowed under this subdivision (b) would be computed in the following manner:
| Joint venture net income (before 19 RCNY § 28-08(a) deduction) | $300,000 |
|---|---|
| Deduction for services permitted under 19 RCNY § 28-08(a) | ($30,000) |
| Excess of unincorporated business gross income over unincorporated business deductions | $270,000 |
| Additional exemption allowable with respect to individual venturers | None |
| Additional exemption allowable with respect to Partnership X & Y (1/3x $270,000) | $90,000 |
| Additional exemption allowable with respect to Partner Z Inc. (1/3x $270,000) | $90,000 |
| Total additional exemptions allowable | $180,000 |
~
(The additional exemption computed above would not be affected by any allocation the joint venture would have been entitled to make if the unincorporated business of the joint venture had been carried on both within and without New York City. The additional exemption would be allowable in addition to the specific exemption of $5,000 provided for in 19 RCNY § 28-09(a).
The additional exemption of the joint venture allowable with respect to the X & Y Partnership or the corporation Z, Inc. is not limited by either the 60% allocation percentage used by X & Y Partnership on its tax return or the 75% allocation percentage used by the corporation Z, Inc. on its tax return, except to the extent that the allocation percentage may reduce allocated taxable income or entire net income to an amount less than the distributive share; see paragraph (2) and example 2 of paragraph (3) of this subdivision (b).
Example 2: Same facts as in Example 1, except that partnership X & Y had allocated taxable business income of $50,000 and corporation Z Inc. had allocated taxable net income of $25,000. The additional exemption is now limited by the amount of the allocated taxable business income and allocated taxable net income of the partners. The total additional exemption cannot exceed $50,000 (for Partnership X & Y) plus $25,000 (for corporation Z Inc.) or $75,000.
Example 3: A joint venture, whose business is conducted wholly in New York City is entered into by 4 equal partners, Corporation A, Corporation B, Partnership C and Partnership D. All 4 partners allocate their net or taxable income 100% to New York City. None of the four partners are actively engaged in the conduct of the unincorporated business.
Distribution of Joint Venture Income:
| Corporation A | $100,000 |
|---|---|
| Corporation B | $100,000 |
| Partnership C | $100,000 |
| Partnership D | $100,000 |
| Total Income | $400,000 |
| (Allocated 100% to NYC) |
~
| Corp. A | Corp. B | Part. C | Part. D | |
|---|---|---|---|---|
| Distribution from joint venture | $100,000 | $100,000 | $100,000 | $100,000 |
| Net Income From other business operations | $50,000 | ($150,000) | ($100,000) | ($50,000) |
| Total Taxable Net or Business Income | $150,000 | ($50,000) | $ -0- | $50,000 |
| Additional Exemption Allowed | $100,000 | $ -0- | $ -0- | $50,000 |
~
(ii) The excess of unincorporated business gross income over unincorporated business deductions includes amounts actually paid or incurred to a partner or member which are not allowed as a deduction under 19 RCNY § 28-06(d)(1). The computation of the proportionate interest of a partner or member in such excess must reflect these non-deductible direct payments made or incurred by the unincorporated business as well as the balance of the excess distributable by the unincorporated business. Payments or distributable amounts may be included in the computation of a partner’s or member’s proportionate interest in the excess of unincorporated business gross income over allowable unincorporated business deductions only if these payments or distributable amounts are included by the partner or member in computing its taxable income allocable to the City (for non-corporate partners) or net income allocable to the City (for corporate partners).
Example 4: Corporation A, Partnership B and Mr. C enter into a joint venture subject to the unincorporated business tax. Each partner is an equal member of the venture and is actively engaged in the conduct of the venture’s business. Corporation A provides services to the venture for which it is paid $300,000 by the venture. This payment is for services of a type which are not allowed as a deduction under 19 RCNY § 28-06(d)(1) of these regulations. The venture incurs no other expenses during the year. The venture’s gross income for the year is $450,000. $15,000 is allowable as the deduction for partners’ services under 19 RCNY § 28-08(a). Since the $300,000 paid to Corporation A is not allowed as a deduction, the excess of gross income over allowable deductions is $435,000. Each partner’s proportionate interest in this excess is computed in the following manner:
| Joint venture net income before 19 RCNY § 28-08(a) deduction for services | $450,000 |
|---|---|
| ($300,000 payment to Corporation A is not an allowable deduction under 19 RCNY § 28-06(d)(1).) | |
| Deduction for services permitted under 19 RCNY § 28-08(a) | ($15,000) |
| Excess of U.B. gross income over U.B. deductions | $435,000 |
| Direct payment to Corporation A which is not allowed as a deduction under 19 RCNY § 28-06(d)(1) | ($300,000) |
| Balance distributable | $135,000 |
~
Corporation A’s proportionate interest in the excess of U.B. gross income over U.B. deduction is the sum of:
| Direct payments not deductible by the partnership | $300,000 | |
|---|---|---|
| Pro rata share of the distributable balance (1/3 of $135,000) | $45,000 | |
| $345,000 | $345,000 |
~
Partnership B’s proportionate interest in the excess of U.B. gross income over U.B. deductions is the sum of:
| Direct payments not deductible by the partnership | $0 | |
|---|---|---|
| Pro rata share of the distributable balance (1/3 of $135,000) | $45,000 | |
| $45,000 | $45,000 |
~
Mr C’s proportionate interest in the excess of U.B. gross income over U.B. deductions is the sum of:
| Direct payments not deductible by the partnership | $0 | |
|---|---|---|
| Pro rata share of the distributable balance (1/3 of $135,000) | $45,000 | |
| $45,000 | $45,000 | |
| Total of all proportionate interests in the excess of U.B. gross income over U.B. deductions | $435,000 |
~
If Corporation A’s net income allocable to New York City is $345,000 or more, the venture will be allowed an additional exemption of $345,000 for its distributions and payments to Corporation A. If Partnership B’s taxable income allocable to New York City is $45,000 or more, the venture will be allowed an additional exemption of $45,000 for its distribution to Partnership B. No additional exemption is allowed for distributions made to Mr. C. Example 5: Same facts as in example 4, except that the venture’s gross income is $150,000. $15,000 is allowable as the deduction for partners’ services under § 28-08(a) of these regulations. Since the $300,000 paid to Corporation A is not allowed as a deduction, the excess of gross income over allowable deductions is $135,000. Each partner’s proportionate interest in this excess is computed in the following manner:
| Joint venture net income before 19 RCNY § 28-08(a) deduction for services ($300,000 payment to Corporation A is not an allowable deduction under 19 RCNY § 28-06(d)(1).) | $150,000 |
|---|---|
| Deduction for services permitted under 19 RCNY § 28-08(a) | ($15,000) |
| Excess of U.B. gross income over U.B. deductions | $135,000 |
| Direct payment to Corporation A which is not allowed as a deduction under 19 RCNY § 28-06(d)(1) | ($300,000) |
| Balance distributable (not less than zero) | 0 |
~
Corporation A’s proportionate interest in the excess of U.B. gross income over U.B. deductions is the sum of:
| Direct payments not deductible by the partnership (not to exceed 100% of the excess) | $135,000 | |
|---|---|---|
| Pro rata share of the distributable balance | 0 | |
| $135,000 | $135,000 |
~
Partnership B’s proportionate interest in the excess of U.B. gross income over U.B. deductions is the sum of:
| Direct payments not deductible by the partnership | $0 | |
|---|---|---|
| Pro rata share of the distributable balance | $0 | |
| $0 | $0 |
~
Mr. C’s proportionate interest in the excess of U.B. gross income over U.B. deductions is the sum of:
| Direct payments not deductible by the partnership | $0 | |
|---|---|---|
| Pro rata share of the distributable balance | $0 | |
| $0 | $0 | |
| Total of all proportionate interests in the excess of U.B. gross income over U.B. deductions | $135,000 |
~
If Corporation A’s net income allocable to New York City is $135,000 or more, the venture will be allowed an additional exemption of $135,000 for its payments to Corporation A. Partnership B has no part in the $135,000 excess of gross income over allowable deductions. No additional exemption is allowed the venture with respect to Partnership B. No additional exemption is allowed for distributions made to Mr. C.
(iii) Where an unincorporated business is entitled to an additional exemption with respect to a partner which is also a member in one or more other unincorporated businesses, the total additional exemption allowable to all the unincorporated business with respect to this common partner cannot exceed that partner’s taxable or net income allocable to New York City. In the event the total of the common partner’s proportionate interest in the excess of unincorporated business gross income over allowable deductions of all the unincorporated businesses is greater than the common partner’s taxable or net income allocable to New York City, then each unincorporated business will be allowed an additional exemption with respect to this common partner which is limited to that unincorporated business’ pro rata share of the common partner’s taxable or net income allocable to New York City. The pro rata share is computed by multiplying the common partner’s taxable or net income allocable to New York City by a fraction. The numerator of this fraction shall be the common partner’s share of the excess of unincorporated business gross income over allowable deductions. The denominator shall be the total of all the shares of the excess of unincorporated business gross income over allowable deductions received by the common partner. No significance shall be given to whether all the unincorporated businesses are related or unrelated.
Example 6: Corporation A is a member of three joint ventures: AB, AC and AD. Corporation A’s proportionate interest in the excess of venture AB’s gross income over venture AB’s allowable deductions is $100,000. Corporation A’s proportionate interest in the excess of venture AC’s gross income over venture AC’s allowable deductions is $300,000. Corporation A’s proportionate interest in the excess of venture AD’s gross income over venture AD’s allowable deductions is $400,000. Corporation A’s other activities during the year have resulted in losses. Corporation A’s net income allocable to New York City is $400,000.
The maximum additional exemption allowable to venture AB for Corporation A is its pro rata share of Corporation A’s net income allocable to New York City or $50,000
[$400,000 × $100,000 = $50,000]. $800,000
The maximum additional exemption allowable to venture AC for its distribution to Corporation A is $150,000
[$400,000 × $300,000 = $150,000]. $800,000
The maximum additional exemption allowable to venture AD for its distribution to Corporation A is $200,000
[$400,000 × $400,000 = $200,000]. $800,000
(iv) The additional exemption allowed an unincorporated business with respect to a corporate partner is limited to the corporate partner’s net income allocable to the City even though the corporate partner does not pay a New York City general corporation tax measured by allocated net income because one of the alternative measures of the general corporation tax produces a higher tax.
Example 7: Partnership ABC is composed of three corporate partners, Corporation A, Corporation B and Corporation C. The partnership distributes $100,000 to each corporate partner. Corporation A’s other activities have resulted in losses. Corporation A’s net income allocable to New York City is zero. Corporation A will pay its New York City general corporation tax computed on capital. Corporation B’s net income allocable to New York City is $50,000, but because of large salary payments to officers its New York City general corporation tax liability will be determined under the alternative measure based on entire net income plus officer’s compensation. This alternative base totals $75,000. Corporation C’s net income allocable to New York City is $200,000. No additional exemption will be allowed Partnership ABC for its distribution to Corporation A because Corporation A’s net income allocable to New York City is zero. The additional exemption allowed Partnership ABC for its distribution to Corporation B is $50,000. The additional exemption allowed Partnership ABC for its distribution to Corporation C is $100,000, the full amount of the distribution to Corporation C.
§ 28-10 [Reserved]
(a) Requirement of declaration. (Administrative Code § 11-511(a)).
(1) Every unincorporated business shall make a declaration of estimated unincorporated business tax for each taxable year if: (i) for taxable years beginning after 1986 but before 1996, its unincorporated business taxable income can reasonably be expected to exceed $15,000; (ii) for taxable years beginning in 1996, its unincorporated business taxable income can reasonably be expected to exceed $20,000; and (iii) for taxable years beginning after 1996, its estimated unincorporated business tax can reasonably be expected to exceed $1,000 for the taxable year. The declaration must cover a calendar year accounting period, or a full fiscal year if the taxpayer files its unincorporated business tax return on a fiscal year basis, unless a declaration for a short period is required by 19 RCNY § 28-15(k).
(2) If the unincorporated business is carried on by an individual, an estate or a trust, any declaration required by paragraph (1) of this subdivision (a) shall be made on form NYC-5UBTI.
(3) If the unincorporated business is carried on by a partnership, joint venture or other similar unincorporated entity, any declaration required by paragraph (1) of this subdivision (a) shall be made on form NYC-5UB.
(1) An unincorporated business which has an estimated unincorporated business taxable income from farming (including oyster farming) which is at least two-thirds of its total estimated unincorporated business taxable income for the taxable year may file its declaration for the taxable year by the date specified below, in lieu of the time prescribed in 19 RCNY § 28-15(d) and (j):
(i) if on a calendar year basis, on or before the 15th day of January of the succeeding calendar year, or
(ii) if on a fiscal year basis, on or before the 15th day of the month immediately following the close of the taxable year, or
(iii) in the case of a short taxable year, on or before the 15th day of the month immediately following the close of such taxable year.
(2) Income is attributable to farming if obtained from the cultivation of the soil, the raising or harvesting of any agricultural or horticultural commodities, or the raising of livestock, bees or poultry. The requisite percentage of unincorporated business income must be derived from the operation of stock, dairy, poultry, fruit or truck farming or from a plantation, ranch, nursery or orchard. If an unincorporated business receives, for the use of its land, income in the form of a share of the crops produced thereon, such income is from farming.
(1) For taxable years beginning before 1997, an unincorporated business which has an estimated unincorporated business tax of $40 or less may file its declaration for the taxable year as follows:
(i) if on a calendar year basis, on or before the 15th day of January of the succeeding calendar year, or
(ii) if on a fiscal year basis, on or before the 15th day of the month immediately following the close of such taxable year.
(iii) in the case of a short taxable year, on or before the 15th day of the month immediately following the close of such taxable year.
(2) Alternatively, if on or before
(i) February 15 of the succeeding calendar year, or
(ii) the 15th day of the second month immediately following the close of the taxable year, if a fiscal other than a calendar year, or
(iii) the 15th day of the second month immediately following the close of a short taxable year, an unincorporated business files its return for the taxable year and pays therewith the full amount of the tax shown to be due thereon, such return shall be considered as its declaration if the tax shown on the return is $40 or less.
(1) If an unincorporated business files its unincorporated business tax 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, the date corresponding thereto, and pays therewith the full amount of tax shown to be due on the return, then
(i) if the declaration is not required to be filed during the taxable year, but is required to be filed on or before January 15 of the succeeding year (or the date corresponding thereto in the case of a fiscal year), such return shall be considered as such declaration; or
(ii) if a declaration was filed during the taxable year, such return shall be considered as the amendment of the declaration permitted to be filed on or before January 15 of the succeeding year (or the date corresponding thereto in the case of a fiscal year), if the tax shown on the return is greater than the estimated tax shown in the declaration.
(2) 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 an unincorporated business tax return by February 15 (or the dates corre sponding thereto in the case of a fiscal year) will not relieve the taxpayer of the additional charge for underpayment of installments if he failed to pay estimated unincorporated business tax which was due earlier in the taxable year.
(1) The provisions of this section and 19 RCNY § 28-16 shall apply to a taxable year other than a calendar year by the substitution of the corresponding fiscal year month for calendar year months referred to in this section.
(2) In the case of a business on a fiscal year basis (except in cases referred to in 19 RCNY § 28-15(e)), the declaration must be filed on or before the 15th day of the fourth month of the taxable year. If, however, the requirements prescribed for filing a declaration are first met after the first day of the fourth month, but before the second day of the sixth month, the declaration must be filed on or before the 15th day of the sixth month of the taxable year; such requirements are first met after the first day of the sixth month, but before the second day of the ninth month, the declaration must be filed on or before the 15th day of the ninth month of the taxable year; and if such requirements are first met after the first day of ninth month, the declaration must be filed on or before the 15th day of the first month of the succeeding fiscal year. Thus, if the business has a fiscal year ending on June 30, 1984, its declaration for such fiscal year must be filed on or before October 15, 1983. If, however, as a further example, the requirements for filing are met after October 1, 1983 and prior to December 2, 1983, the declaration need not be filed until December 15, 1983.
(1) No declaration may be made for a period of more than 12 months. If an unincorporated business is required to make a declaration of estimated unincorporated business tax pursuant to 19 RCNY § 28-15(a), and a short taxable year is involved, a separate declaration for such fractional part of the year is required, except as noted in paragraph (2) of this subdivision (k) below. For the purpose of determining whether the anticipated unincorporated business taxable income for a short taxable year, resulting from a change of accounting period, necessitates the filing of a declaration, the anticipated unincorporated business taxable income is computed on the basis of the short taxable year for which a return is to be made in accordance with the applicable rules for determination of unincorporated business taxable income as set forth in 19 RCNY § 28-18(a).
(2) No declaration is required if the short taxable year is:
(i) A period of less than four months, or
(ii) A period of at least four months, but less than six months, and the requirements of 19 RCNY § 28-15(a) are first met after the day of the fourth month, or
(iii) A period of at least six months, but less than nine months, and the requirements of 19 RCNY § 28-15(a) are first met after the first day of the sixth month, or
(iv) A period of nine months or more, and the requirements of 19 RCNY § 28-15(a) are first met after the first day of the ninth month.
(1) at least four months, but less than six months, or
(2) at least six months, but less than nine months, and the requirements are not met until after the first day of the fourth month, or
(3) is for nine months or more, and such requirements are not met until after the first day of the sixth month, the declaration may be filed on or before the 15th day of the succeeding taxable year.
§ 28-16 Payments of Estimated Tax.
(a) General. (Administrative Code, § 11-512(a)). The amount of estimated unincorporated business tax due as shown on a declaration of estimated unincorporated business tax (Form NYC-5UBTI or Form NYC-5UB) 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 installment payment must accompany the declaration. In the case of a declaration for a calendar year, the initial installment payment and the subsequent installment payments required are as follows:
| Date of filing declaration | Dates of installment payments |
|---|---|
|
In four equal installments – first at time of filing declaration (on or before April 15), second on or before June 15, third on or before September 15, and fourth on or before January 15 of the succeeding taxable year. |
|
In three equal installments – first at time of filing declaration, second on or before September 15, and third on or before January 15 of the succeeding taxable year. |
|
In two equal installments – first at time of filing declaration, and second on or before January 15 of the succeeding taxable year. |
|
In full at time of filing declaration. |
~
(5) If a declaration is filed after the time prescribed in 19 RCNY § 28-15(d), or within any extension of time or after the expiration of any extension of time, then paragraphs (2), (3) and (4) of this subdivision (a) shall not apply, and there shall be paid at the time of filing all installments of estimated unincorporated business tax which would have been payable at or before such time if the declaration had been filed at the time prescribed in 19 RCNY § 28-15(d). The remaining installments shall be paid at the time and in the amounts in which they would have been payable if the declaration had been filed at the time prescribed in 19 RCNY § 28-15(d). Thus, for example, B, required to file a declaration of estimated unincorporated business tax on or before April 15, 1983, files the declaration for 1983 on September 18, 1983. In such case, at the time of filing the declaration, B was delinquent in the payment of three installments of the estimated unincorporated business tax for the taxable year 1983. Hence, upon filing the declaration of September 18, 1983, three-fourths of the estimated tax shown thereon must be paid.
§ 28-17 Accounting Periods and Methods.
(a) Accounting periods. (Administrative Code, § 11-513(a)). The taxable year for which the unincorporated business taxable income is to be computed and for which an unincorporated business tax return is to be made shall be the same as the taxpayer's taxable year for Federal income tax purposes. The taxable year under Chapter 5 of Title 11 of the Administrative Code will accordingly 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, a taxable period consisting of 52 or 53 weeks, or an accounting period of less than 12 months permitted or required under the Federal Internal Revenue Code. If a taxpayer does not have a taxable year for Federal income tax purposes, the unincorporated business taxable income shall be computed and the return shall be made for the calendar year, unless the Commissioner of Finance authorizes the use of some different accounting period.
(1) The accounting method or basis on which the unincorporated business taxable income is to be computed shall be the same as the taxpayer’s method of accounting for Federal income tax purposes. In addition to the overall basis of accounting (such as cash basis or accrual basis), the term “method of accounting” means the accounting treatment accorded particular items of income or deduction, such as installment sales, long-term contracts, depreciation, research and development costs, etc. The accounting method used for Federal income tax purposes shall also be applied to items of gross income and deduction derived from or connected with the unincorporated business which are includible in the unincorporated business tax return, but which are not required to be reported in the taxpayer’s Federal income tax return.
(2) In the absence of an accounting method for Federal income tax purposes, the unincorporated business taxable income shall be computed in accordance with the method regularly employed in keeping the books of the taxpayer, if such method clearly reflects income. If the books of such a taxpayer do not clearly reflect income, or if no books are kept, the compu tation of the unincorporated business taxable income shall be made in such manner as, in the opinion of the Commissioner of Finance, does clearly reflect the income.
(1) If a taxpayer’s taxable year for Federal income tax purposes is changed, the taxable year or accounting period for which the unincorpo rated business tax return is made shall also be changed at the same time to coincide with the new Federal income tax accounting period or taxable year. Where a taxable year or accounting period of less than 12 months results from a change of accounting period, annualization of the unincorporated business income is not required. In such a case, however, the unincorporated business $5,000 annual exemption must be prorated in the manner prescribed in 19 RCNY § 28-09.
(2) 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 unincorporated business income tax returns required under Chapter 5 of Title 11 of the Administrative Code. In such a case, however, there should be filed with the first return made for the new accounting period under Chapter 5 of Title 11 a copy of the consent of the Commissioner of Internal Revenue to the change for Federal income tax purposes, or if no consent is required, a statement to that effect referring to the particular provisions of the Internal Revenue Code, or regulations thereunder, authorizing the change.
(3) In the case of a taxpayer who has an established accounting period for Federal income tax purposes, no change of accounting period for unincorporated business tax purposes (other than one required by reason of a change of the Federal accounting period as set forth in paragraph (1) of this subdivision (c)) will be permitted.
(4) A taxpayer who has no established accounting period for Federal income tax purposes, but has such a period for New York City unincorporated business income tax purposes, shall not make any change of accounting period without first obtaining the consent of the Commissioner of Finance. An application for permission to make such change shall state the reasons therefor and must be made on or before the last day of the month following the close of the short period for which a return is required to effect the change of accounting period. If the Commissioner of Finance approves the change of accounting period, he will advise the taxpayer as to the effective date of such change and as to any short period returns required as the result thereof.
(1) If a taxpayer’s method of accounting for Federal income tax purposes is changed, the accounting method employed in making the unincorporated business tax return shall also be changed at the same time to the new method permitted or required to be used in the taxpayer’s Federal income tax return. Upon a change of accounting method under this paragraph, any adjustments which are determined to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted shall (subject to the applicable modifications prescribed by 19 RCNY §§ 28-05 and 28-06) be taken into account to the extent that they are required to be taken into account in determining the taxpayer’s gross income and deductions for Federal income tax purposes for the year of the change.
(2) A taxpayer whose method of accounting is changed under the provisions of paragraph (1) of this subdivision (d) is not required to apply for or obtain the permission or consent of the Commissioner of Finance to the change for unincorporated business tax purposes. In such a case, however, there must be filed with the first tax return in which the new accounting method is used a copy of the consent of the Commissioner of Internal Revenue to the change for Federal income tax purposes, together with the statement referred to in paragraph (4) of this subdivision (d), including complete details of any adjustments with respect to items of income or deduction permitted or required to be made as an incident to the change of accounting method for Federal income tax purposes.
(3) A taxpayer who has a method of accounting for Federal income tax purposes will not be permitted to make any change of the accounting method used in the unincorporated business tax return other than one required by reason of a change in the Federal method as set forth in paragraph (1) of this subdivision (d).
(4) A taxpayer who has no accounting method for Federal income tax purposes, but who has a method of accounting which has been accepted or prescribed by the Commissioner of Finance for New York City unincorporated business tax purposes, shall not make any change with respect to such New York City accounting method without obtaining the prior consent of the Commissioner of Finance. An application for permission to change the method of accounting under this paragraph (4) must be made within 90 days after the beginning of the taxable period to which the proposed change will relate. Such application shall be accompanied by a statement specifying the nature of the taxpayer’s business, the present method of accounting, the method to which a change is desired, the taxable year in which the change is to be effected, the classes of items to receive different treatment under the new system, and all items which would be duplicated or omitted as a result of the proposed changes. If such a taxpayer later adopts a Federal method of accounting and such method differs from the method used under the New York City unincorporated business tax, the taxpayer must conform the City method of accounting to the Federal. If a taxpayer’s method of accounting is changed under this paragraph (4), any adjustments which the Commissioner of Finance determines to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted in computing taxable income shall (subject to the applicable modifications prescribed by 19 RCNY §§ 28-05 and 28-06) be taken into account for the year of the change.
(5) For purposes of this section and 19 RCNY § 28-17(e), the term “change of accounting method” includes any change or modification of the manner of, or basis for, determining the amount of, or the time for, the reporting or deducting of any item of unincorporated business gross income or deduction, or the net amount of all such items, which would constitute a change in accounting method for Federal income tax purposes. The term “year of the change,” as used in these regulations, means a taxable year for which the taxable income of the taxpayer is computed under a method of accounting different from the one used in the preceding taxable year or accounting period. (For limitations on amount of additional taxes resulting from changes in accounting methods, see: 19 RCNY § 28-17(e).)
(1) Change other than from accrual to installment method of accounting.
(i) If a taxpayer’s method of accounting is changed, other than from an accrual to an installment method, there shall be taken into account in computing unincorporated business taxable income for the taxable year of the change those adjustments which are determined to be necessary to prevent amounts from being duplicated or omitted. The adjustments necessitated by reason of such change in accounting method may result in an amount of unincorporated business tax for the year of the change in excess of the unincorporated business tax which would have been determined had there not been such a change in the method of accounting. In such event, the additional unincorporated business tax for the year of change resulting from such adjustments shall not be greater than if such adjustments were ratably allocated and included for the taxable year of the change and the preceding taxable years, not in excess of two, during which the taxpayer used the method of accounting from which the change was made.
(ii) The taxpayer shall submit a statement with his unincorporated business tax return for the year of the change, setting forth the following information and calculations:
(A) Each adjustment necessitated by the change.
(B) The net amount of the adjustments. This means the consolidation of the adjustments (whether the amounts thereof represent increases or decreases in items of income or deductions) arising with respect to balances in various accounts at the beginning of the taxable year of the change. Where the change in the method of accounting occurs by reason of a Federal change, this net amount shall be the same for unincorporated business tax purposes as it is for Federal income tax purposes, except to the extent of any modifications described in the sections and subdivisions pertaining to such adjust- ments.
(C) The unincorporated business tax for the taxable year of the change with the net amount of adjustments included in the computation of unincorporated business taxable income.
(D) The unincorporated business tax for the taxable year of the change computed as if the net amount of such adjustments were not included in the computation of unincorporated business taxable income.
(E) The additional unincorporated business tax, if any, incurred solely by reason of the net amount of adjustments included in unincorporated business taxable income, computed by subtracting item (D) from item (C).
(F) The allocation of the net amount of adjustments (item (B)) to the taxable year of the change and the preceding taxable year or years, not in excess of two, during which the taxpayer used the method of accounting from which the change is made. The amount to be allocated to each such year is determined by dividing the net amount of adjustments into as many equal parts as there are taxable years involved (either two taxable years or three taxable years, including the taxable year of the change).
(G) The unincorporated business taxable income for the year of the change and for the preceding year or two years, as the case may be, computed both (a) without any amount of the net adjustments, and (b) with the addition of the appropriate share of the net adjustments as determined under item (F).
(H) The additional unincorporated business tax which would result for each of the above taxable years chosen in item (F) by the addition to the unincorporated business taxable income in each such year of the appropriate share of the net adjustments.
(I) The total amount of such additional tax for the years involved.
(iii) If the amount described in item (I) exceeds the amount described in item (E), the taxpayer shall compute his unincorporated business tax for the year of the change without a ratable allocation of the net adjustments to any preceding year or years. If the amount described in item (E) exceeds the amount described in item (I), the amount of such excess shall be subtracted from the City unincorporated business tax for the year of the change as determined under item (C). The resulting sum is the amount of New York City unincorporated business tax due for the taxable year of the change.
Example: Assume that the taxpayer is an individual proprietor who used the cash method in 1981 and 1982, but changed to an accrual basis for 1983. In 1981 and 1982, he had unincorporated business taxable income of $16,000 and $7,000, respectively, figured on a cash basis. In 1983 he had unincorporated business taxable income of $11,000 figured on an accrual basis. The unincorporated business taxable income for each of the years 1981, 1982 and 1983 was arrived at as follows:
| 1981 | 1982 | 1983 | |
|---|---|---|---|
| Unincorporated business gross income pursuant to 19 RCNY § 28-05 | $36,000 | $28,000 | $30,000 |
| Less unincorporated business deductions pursuant to 19 RCNY § 28-06 | $10,000 | $13,000 | $10,000 |
| Unincorporated business taxable income before deduction for personal services pursuant to 19 RCNY § 28-08 and exemption pursuant to 19 RCNY § 28-09 | $26,000 | $15,000 | $20,000 |
| Less deduction for personal services pursuant to 19 RCNY § 28-08 | $5,000 | $3,000 | $4,000 |
| Less $5,000 exemption pursuant to 19 RCNY § 28-09 | $5,000 | $5,000 | $5,000 |
| Total deduction and exemption pursuant to 19 RCNY §§ 28-08 and 28-09 | $10,000 | $8,000 | $9,000 |
| Unincorporated business taxable income | $16,000 | $7,000 | $11,000 |
| Unincorporated business tax | $ 640 | $280 | $440 |
~
Assume further that the taxpayer’s books at the beginning of 1983 included the following accounts: accounts receivable $15,000; accounts payable $8,000; inventory $5,000. The amount of unincorporated business taxable income due for the taxable year of the change is computed in the following manner: Subject to the amount of any modifications required under these regulations, the unincorporated business taxable income for the year of the change, including the net amount of adjustments (see: items (ii)(A) and (ii)(B) of this subdivision (e)), would be $22,000, computed as follows:
| Unincorporated business taxable income on accrual basis before deduction for personal services under 19 RCNY § 28-08 and the exemption under 19 RCNY § 28-09 (new method but before adjustments) | $20,000 | |
|---|---|---|
| (a) Adjustments: | ||
| Add: Items not previously reported as income:Accounts receivable 1/1/83 | $15,000 | |
| Items previously deducted but constituting marketable business assets:Inventory 1/1/83 | 5,000 | |
| Total to be added | $20,000 | |
| Subtract: Items not previously deducted:Accounts payable 1/1/83 | $ 8,000 | |
| (b) Net amount of adjustments (increase) | $12,000 | |
| Unincorporated business taxable income after adjustments but before deduction for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $32,000 | |
| Subtract: Allowance for personal services under 19 RCNY § 28-08 | $ 5,000 | |
| Exemption under 19 RCNY § 28-09 | $ 5,000 | $10,000 |
|
$22,000 | |
| The net additional tax for the year of the change described in item (ii)(E) of this paragraph (1) is computed as follows: | ||
|
$880 | |
|
$440 | |
|
$440 |
~
Since the taxpayer used the cash method for the two years preceding the change-over year, the adjustments for 1983 determined to be necessary solely by reason of the change, amount to $12,000. The taxpayer may reduce the tax on the increase by allocating the $12,000 as follows: $4,000 to 1981, $4,000 to 1982, and $4,000 to 1983 (see: items (ii)(F) to (H) of this paragraph (1)). The net tax due for the year of change is then computed in the following manner:
| 1981 | 1982 | 1983 | |
|---|---|---|---|
| Unincorporated business taxable income before adjustments and before deduction for personal services under 19 RCNY § 28-08 and the exemption under 19 RCNY § 28-09 | $26,000 | $15,000 | $20,000 |
| Add: Net adjustments | $4,000 | $4,000 | $4,000 |
| $30,000 | $19,000 | $24,000 | |
| Subtract: Allowance for personal services pursuant to 19 RCNY § 28-09 | $5,000 | $3,800 | $4,800 |
| Subtract: $5,000 exemption pursuant to§ 28-09 | $5,000 | $5,000 | $5,000 |
| Total Subtractions | $10,000 | $8,800 | $9,800 |
| Unincorporated business taxable incomeafter adjustments | $20,000 | $10,200 | $14,200 |
| Unincorporated business tax after adjustments | $ 800 | $408 | $568 |
| Unincorporated business tax before adjustments | $640 | $280 | $440 |
| Increase in tax due to adjustments | $160 | $128 | $128 |
| Total increase in tax attributable to adjustments ($160 and $128 and $128) | $416 | ||
| Net additional tax determined at item (f) above | $440 | ||
| Excess | $24 | ||
| Total tax determined at item (d) above | $880 | ||
| Less excess shown above | $24 | ||
| Net tax due for year of change | $856 |
~
(2) Change from accrual to installment method of accounting.
(i) General. If a taxpayer has changed his method of accounting from an accrual to an installment method, any installment payments actually received in the year of change or in subsequent taxable years (such year or years being referred to as “adjustment years”), on account of sales or other dispositions of property made in any taxable year prior to the year of the change (and already accrued in income), are also required to be included in unincorporated business gross income of the year of receipt. Therefore, profits attributable to installment sales which were taxed in the year of sale because the taxpayer was then on the accrual method of accounting would also be taxed in the adjustment years (that is, during the years the installments are actually received) after the change to the installment method of accounting. To avoid such duplication of tax, any additional tax for the adjustment years attributable to the receipt of installment payments properly accrued in a prior year shall be reduced as explained in paragraph (2)(ii) of this subdivision (e), by an amount equal to the portion of tax for the prior year attributable to the prior accrual of income from installment sales included in unincorporated business gross income in the adjustment years.
(ii) Reduction in tax for adjustment year. To give effect to the foregoing, the tax for an adjustment year shall be reduced by the lower of the following amounts:
(A) that proportion of the tax for the prior year (in which the installment sales were reported on the accrual basis) which the amount of installment sales gross profits reportable in the prior year of sale and in the adjustment year bears to the unincorporated business gross income for such prior year of sale;
(B) the excess, if any, of the amount of the tax for the adjustment year on the entire unincorporated business taxable income over the amount of tax for such year computed without regard to the amount of the installment sales gross profits reported in both the prior year of accrual and in the adjustment year. Where previously reported installments received in an adjustment year include installments on sales made in more than one prior year, the reduction allowable with respect to the installments for each prior year shall be computed separately. In such a case, the excess tax calculated under subparagraph (ii)(B) of this paragraph (2), computed with respect to the installments from all prior years, shall be prorated over the several prior years in proportion to the amount of the duplicated installment sales profits attributable to each such prior year.
Example: The computation of the reduction of tax for the adjustment year is illustrated by the following example:
| 1981(accrual basis) | 1982(adjustment year) | 1983(adjustment year) | |
|---|---|---|---|
| Gross profit from installment sales (receivable in five installments) | $10,000 | $2,000 (from 1981 sales)$3,000 (from 1982 sales) | $2,000 (from 1981 sales)$3,000 (from 1982 sales)$5,000 (from 1983 sales) |
| Other unincorporated business gross income | $86,000 | $41,000 | $23,000 |
| Total unincorporated business gross income | $96,000 | $46,000 | $33,000 |
| Unincorporated business deductions under 19 RCNY § 28-06 | $6,000 | $6,000 | $18,000 |
| Unincorporated business taxable income before deduction for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $90,000 | $40,000 | $15,000 |
| Less allowance for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $10,000 | $10,000 | $8,000 |
| Unincorporated business taxable income | $80,000 | $30,000 | $7,000 |
| Unincorporated business tax | $3,200 | $1,200 | $280 |
~
Computation of adjustment – 1982:
Tax attributable to 1981 installment payments in 1982 (first adjustment year), the year in which the change was made from the accrual basis to the installment basis:
| Tax on 1982 taxable income including gross profit from 1981 sales | $1,200 | |
|---|---|---|
| Tax on taxable income excluding such gross profit: | ||
| Taxable income before deduction for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $40,000 | |
| Less gross profit from 1981 sales accrued in prior year | $2,000 | |
| $38,000 | ||
| Less deduction for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $10,000 | |
| Revised taxable income | $28,000 | |
| Tax on revised taxable income | $1,120 | |
| Additional tax attributable to prior year installment payments | $80 | |
| Tax attributable to prior inclusion in 1981: | $2,000 × $3,200 = $66.67$96,000 |
~
Therefore, the tax for 1982 (first adjustment year) may be reduced by $66.67, the lesser of the two amounts computed above.
Computation of adjustment – 1983:
Tax attributable to 1981 installment payments in 1983 (second adjustment year):
| Tax on 1983 taxable income, including gross profit from 1981 sales | $280 | |
|---|---|---|
| Tax on taxable income, excluding such gross profit: | ||
| Taxable income before deduction for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $15,000 | |
| Less gross profit from 1981 sales accrued in a prior year | $2,000 | |
| $13,000 | ||
| Less deduction for personal services under 19 RCNY § 28-08 and exemption under 19 RCNY § 28-09 | $7,600 | |
| Revised taxable income | $5,400 | |
| Tax on revised taxable income | $216 | |
| Additional tax attributable to prior year installment payments | $ 64 | |
| Tax attributable to prior inclusion in 1981: | $2,000 × $3,200 = $66.67$96,000 |
~
Therefore, the tax for 1983 (second adjustment year) may be reduced by $64.00, the lesser of the two amounts computed above.
(iii) Statement to be attached to return. A taxpayer who changes from the accrual method to the installment method under this section shall attach a statement to his unincorporated business tax return for each adjustment year. This statement must show
(A) the pertinent facts as to sales in each year preceding the year of change;
(B) the number of remaining taxable years over which it will be necessary to compute adjustments; and
(C) a schedule showing the computation as prescribed in this subdivision (e) of the adjustment for the taxable year.
§ 28-18 Returns and Payment of Tax.
(a) Returns – filing requirements. (Administrative Code § 11-514(a)). For taxable years beginning after 1986 but before 1997, a return on a form prescribed by the Commissioner of Finance must be made and filed for each taxable year by or for every unincorporated business which is carried on in this City to any extent, and which has either unincorporated business gross income of more than $10,000, computed without deduction for cost of goods sold or services performed and without regard to allocation under 19 RCNY § 28-07, regardless of whether or not it has unincorporated business taxable income, or any amount of unincorporated business taxable income. In addition, for taxable years beginning after 1996, a return on a form prescribed by the Commissioner of Finance must be made and filed for each taxable year by or for every unincorporated business that is carried on in this City to any extent and that has either (1) unincorporated business gross income, computed without deduction for cost of goods sold or services performed and without regard to allocation, of more than $25,000 in the case of a partnership, or more than $75,000 for any other unincorporated business, regardless of whether it has unincorporated business taxable income, or (2) unincorporated business taxable income of more than $15,000 in the case of a partnership, or more than $35,000 for any other unincorporated business. Any return required under this subdivision (a) shall be made by the individual or unincorporated entity who or which was engaged in the conduct or the liquidation of the business, unless such individual is deceased, or unless such individual or entity is under a disability, in which case the return shall be made and filed by the executor or administrator (in the case of a deceased individual), or by any fiduciary or other person charged with the property of the individual or entity, or by a duly authorized agent. The foregoing provision regarding the filing of returns by fiduciaries or agents in the case of death or disability of an individual taxpayer does not relieve the taxpayer or his estate from liability if such fiduciary, agent or other person omits or fails to file any return required under Chapter 5 of Title 11 of the Administrative Code. If an individual or other unincorporated entity is engaged in several distinct business activities, only one return shall be filed. In such a case, however, a separate schedule for each activity should be filed with the return.
(a-1) Simplified return. The Commissioner of Finance may prescribe a form which may be filed voluntarily by a business whose income falls below the amount that would require the filing of a return under the Administrative Code. This filing will constitute the filing of a return pursuant to these rules and § 11-523 of the Administrative Code, which states (subject to the exceptions provided in subdivision (c) of that section) that if a return was filed, unincorporated business tax may be assessed only within three years after the return was filed.
Example 1: New businesses. If an individual, fiduciary or other unincorporated entity having a previously established accounting period for Federal income tax purposes begins business during the year, such established accounting period shall be the taxable year for unincorporated business tax purposes. If an individual, fiduciary or other unincorporated entity having no previously established accounting period begins to carry on an unincorporated business, the taxable year for purposes of filing the first unincorporated business tax return shall be the taxable year properly adopted or prescribed for Federal income tax purposes.
Example 2: Business terminated. If the unincorporated business of an individual is terminated and completely liquidated during the year, the unincorporated business tax return for the year of termination shall be a return for the established taxable year for Federal income tax purposes, and shall be filed on or before the 15th day of the fourth month following the close of such year. If the unincorporated business of an estate, trust, partnership or other unincorporated entity is terminated and completely liquidated during the year and such complete termination and liquidation results in an accounting period of less than 12 months for Federal income tax purposes, such period shall be the taxable year for the return for the year of termination for unincorporated business tax purposes, and an unincorporated business income tax return shall be filed on or before the 15th day of the fourth month following the close of such accounting period. In the event the termination of an estate, trust, partnership or other entity for Federal income tax purposes does not, by reason of liquidating activities of the entity, constitute complete termination for unincorporated business tax purposes, any new accounting period resulting from the termination for Federal income tax purposes shall become the taxable year for purposes of filing the unincorporated business tax returns for the year of termination of the entity for Federal income tax purposes and for subsequent taxable years under Chapter 5 of Title 11 of the Administrative Code.
(1) The Commissioner of Finance may grant reasonable extensions of time for filing returns whenever good cause exists. An application for an extension of time must be made prior to the due date of the return.
(2) An automatic six months extension of time to file for taxpayers required to file form NYC 202 (individuals, estates or trusts) will be granted only on condition that form NYC-62 (Application for Automatic Extension of Time to File for Individuals, Estates or Trusts) 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. Such application must set forth the amount of tax which the taxpayer properly estimates it will be required to pay. An automatic six month extension of time to file for taxpayers required to file form NYC 204 (partnerships) will be granted only on condition that form NYC-64 (Application for Automatic Extension of Time to File for Partnerships) 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. Such application must set forth the amount of tax which the taxpayer properly estimates it will be required to pay. The amount of tax will be deemed to be properly estimated if the tax paid is either:
(i) not less than ninety 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; provided, however, in the case of any taxpayer which had unincorporated business taxable income, or the portion thereof allocated within the City, of one million dollars or more for any taxable year during the three years immediately preceding the taxable year involved, such amount shall be deemed an amount properly estimated only if it meets the conditions of subparagraph (i)of this paragraph. Failure to meet any of the requirements in this paragraph (2) makes the application invalid and any return filed after the due date will be treated as a late filed return.
(3) Except for taxpayers outside the United States, no additional extension for filing a return may be granted beyond the six months specified in paragraph (2) of this subdivision (c). For taxpayers outside the United States, an application for an additional extension may be made in writing before the expiration of the previous extension. The application must include the following information:
(i) the taxpayer’s complete name and address,
(ii) the taxpayer’s employer identification number or social security number,
(iii) the tax period for which an extension is requested, and
(iv) the reason for requesting the additional extension. If the U.S. Internal Revenue Service has granted a taxpayer who is outside the United States an extension of time to file his Federal income tax return beyond the City’s automatic extension period described in paragraph (2) of this subdivision (c), the taxpayer will automatically be entitled to an additional extension of time to file a New York City unincorporated business tax return. This additional extension, to coincide with the Federal extension, will be granted without additional application, as long as a copy of the approved Federal extension is attached to the annual unincorporated business tax return when filed. A partnership is entitled to the automatic additional extension only where the partnership itself has been granted an extension of time to file its Federal partnership return.
(4) An extension of time to file a New York City unincorporated business tax return automatically extends the time for payment of the unincorporated business tax balance due, after the payment of the properly estimated tax, to the same date. Interest, however, must be paid at the rate prescribed by the Commissioner of Finance pursuant to the authority of § 11-537(f) of the Administrative Code on any balance of unincorporated business tax due from the original due date of the unincorporated business tax return (determined without regard to any extensions of time) to the date of payment.
(1) General. Any return, declaration, statement or other document required to be made pursuant to Chapter 5 of Title 11 of the Administrative Code shall be signed in accordance with instructions prescribed by the Commissioner of Finance. The fact that an individual’s name is signed to a return, declaration, statement, or other document, shall be prima facie evidence for all purposes that the return, declaration, statement or other document was actually signed by him.
(2) Partnerships. Any return, statement or other document required of a partnership shall be signed by one or more partners. The fact that a partner’s name is signed to a return, statement, or other document, shall be prima facie evidence for all purposes that such partner is authorized to sign on behalf of the partnership.
(3) Certifications. The making or filing of any return, declaration, statement or other document or copy thereof required to be made or filed pursuant to Chapter 5 of Title 11 of the Administrative Code, including a copy of a Federal return, shall constitute a certification by the person making or filing such return, declaration, statement or other document or copy thereof that the statements contained therein are true and that any copy filed is a true copy.
(1) If a return required by Chapter 5 of Title 11 of the Administrative Code is prepared for the taxpayer by another person, other than a regular full-time employee of the taxpayer, for a fee or other compensation or as an incident of the performance of other services for which such person received compensation, such person shall sign the return on the line designated “Signature of preparer other than taxpayer,” and shall also enter thereon his address and the date when he signs the return. Such signature may be either written, stamped or otherwise legibly imprinted and shall constitute a certificate by such person that, based on all information of which he has any knowledge, the return is correct and the statements contained therein are true.
(2) Any such person who fails to sign a return as required by this subdivision (i) may be liable for the penalties provided for in § 11-525 and § 11-535(g) of the Administrative Code.
(3) As used in this subdivision (i), the word “person” includes partnerships and corporations.
(4) This subdivision (i) in no way affects the taxpayer’s obligation to sign and certify his return.
(1) the parking facility name;
(2) the parking facility address;
(3) the license number of the facility, if applicable;
(4) the licensed capacity of the facility, if licensed;
(5) the total number of transactions and amount of receipts for the taxable year from all sales of parking services including prepaid parking services, all parking services provided without charge and all parking services paid for by a person other than the person whose vehicle is parked, garaged or stored (such as a merchant validation of a parking ticket);
(6) the total number of transactions and amount of receipts from sales of monthly or longer term parking services, including a designation of each transaction and receipt as exempt from the eight percent Manhattan parking tax, where applicable; and
(7) the total number of transactions and amount of receipts from sales of monthly or longer term parking services provided to tenants. The taxpayer must maintain records containing the name, address, and license plate number for each tenant and must make such records available to the Department upon request.
§ 28-19 Returns, Notices, Records and Statements.
(a) Permanent books of account or records. (Administrative Code § 11-518(a)). Every taxpayer shall keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits and other matters required to be shown by such taxpayer in any return of such tax or information. The Commissioner of Finance is authorized to prescribe the contents and form of returns and statements and may require the inclusion of a return, document, or statement of any information he deems necessary for the proper enforcement of Chapter 5 of Title 11 of the Administrative Code.
§ 28-20 Report of Change in Federal or New York State Taxable Income or New York State Sales and Compensating Use Tax Liability.
(a) Report of change in Federal or New York State taxable income. (Administrative Code § 11-519)
If the amount of the taxpayer’s Federal or New York State taxable income reported on the Federal or New York State income tax return is changed or corrected by the United States Internal Revenue Service or the New York State Department of Taxation and Finance or other competent authority, or changed as a result of a renegotiation of a contract or subcontract with the United States or the State of New York, or if the taxpayer, pursuant to subsection (d) of § 6213 of the Internal Revenue Code, executes a notice of waiver of the restrictions on assessment and collection provided in subsection (a) of said section of the Internal Revenue Code, or if a taxpayer, pursuant to subdivision (f) of § 681 of the New York Tax Law, executes a notice of waiver of the restrictions provided in subdivision (c) of said section of the New York Tax Law, and such change, correction or waiver pertains to the unincorporated business gross income or unincorporated business deductions of the taxpayer, a report of such change, correction or waiver, and the changes or correction in his Federal or New York State taxable income on which it is based, must be filed within ninety days after the final determination of such change, correction, or renegotiation, or such execution of such notice of waiver. The taxpayer shall concede the accuracy of such determination or state wherein it is erroneous. Any taxpayer filing an amended Federal or New York State income tax return shall also file within ninety days thereafter an amended return under these regulations for New York City unincorporated business tax purposes.
Where the State Tax Commission changes or corrects a taxpayer’s sales and compensating use tax liability with respect to the purchase or use of items for which a sales or compensating use tax credit against the tax imposed by Chapter 5 of Title 11 of the Adminis trative Code was claimed (see: 19 RCNY § 28-03(c)(3)), the taxpayer shall report such change or correction to the Commissioner of Finance within ninety days of the final determination of such change or correction, and shall concede the accuracy of such determination or state wherein it is erroneous. Any taxpayer filing an amended return or report relating to the purchase or use of such items shall also file within ninety days thereafter a copy of such amended return or report with the Commissioner of Finance.
(1) A closing agreement made under § 7121 of the Internal Revenue Code of 1954, or with the New York State Tax Commission, finally and irrevocably adjusting and settling a taxpayer’s liability.
(2) An 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 such refund is made on the Commissioner’s or State Tax Commission’s own motion or pursuant to a judgment of a court.
(3) The 90-day deficiency notice pursuant to § 6212 of the Internal Revenue Code of 1954 or § 681 of the Tax Law of the State of New York, or the 90-day Notice of Determination pursuant to § 1138 of the Tax Law of New York, unless a timely petition to redetermine the deficiency is filed in the Tax Court of the United States or with the New York State Division of Tax Appeals, in which event the judgment of the court of last resort affirming the deficiency, or the redetermination of the deficiency pursuant to a judgment of the court of last resort, is the final determination.
(4) The assessment of a deficiency pursuant to a waiver filed under § 6213 of the Internal Revenue Code of 1954 or § 681 of the Tax Law of the State of New York, where no 90-day deficiency notice is issued.
(5) The filing of a signed consent irrevocably and finally fixing sales and use tax liability under § 1138 of the Tax Law of the State of New York.
§ 28-21 Interest and Penalties
(a) Interest on underpayments. (Administrative Code § 11-524).
(1) 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. No interest shall be paid if the amount thereof is less than one dollar.
(2) Exception as to estimated tax. This subdivision (a) shall not apply to any failure to pay estimated tax under § 11-512 of the Administrative Code.
(3) Exception for mathematical error. No interest shall be imposed on any underpayment of tax due solely to mathematical error if the taxpayer files a return within the time prescribed in 19 RCNY § 28-18 (including any extension of time) and pays the amount of underpayment within three months after the due date of such return, as it may be extended.
(4) Suspension of interest on deficiencies. If a waiver of restrictions on assessment of a deficiency has been filed by the taxpayer, and if notice and demand by the Commissioner of Finance for payment of such deficiency is not made within 30 days after the filing of such waiver, interest shall not be imposed on such deficiency for the period beginning immediately after such 30th day and ending with the date of notice and demand.
(5) Tax reduced by carryback. If the amount of tax for any taxable year is reduced by reason of a carryback of a net operating loss, such reduction in tax shall not affect the computation of interest under this subdivision (a) for the period ending with the filing date for the taxable year in which the net operating loss arises, determined without regard to extensions of time to file.
Example: Partnership ABC has an unincorporated business tax deficiency of $1,000 for its taxable year ended December 31, 1983, due April 15, 1984. It sustains a loss for the year ended December 31, 1984, which when carried back to tax year 1983 reduces the deficiency for that year to $600. Interest accrues at the statutory rate (compounded) on $1,000 to April 15, 1985 (the filing date for the year of loss) and then on $600 to the date of payment.
(6) Interest on penalties or additions to tax. Interest shall be imposed under paragraph (1) of this subdivision (a) in respect to any assessable penalty or addition to tax only if such assessable penalty or addition to tax is not paid within ten days from the date of the notice and demand therefor under subdivision (b) of § 11-532 of the Administrative Code, and in such case interest shall be imposed only for the period from the date of the notice and demand to the date of payment.
(7) Payment prior to notice of deficiency. If, prior to the mailing to the taxpayer of a notice of deficiency under subdivision (b) of § 11-521 of the Administrative Code, the Commissioner of Finance mails to the taxpayer a notice of proposed increase of tax and within 30 days after the date of the notice of proposed increase the taxpayer pays all amounts shown on the notice to be due to the Commissioner of Finance, no interest under this subdivision (a) on the amount so paid shall be imposed for the period after the date of such notice of proposed increase.
(8) Payment within ninety days after notice of deficiency. If a notice of deficiency under § 11-521 of the Administrative Code is mailed to the taxpayer, and the total amount specified in such notice is paid on or before the 90th day after the date of mailing, interest under this subdivision (a) shall not be imposed for the period after the date of the notice.
(9) Payment within ten days after notice and demand. If notice and demand is made for payment of any amount under subdivision (b) of § 11-532 of the Administrative Code, and if such amount is paid within ten days after the date of such notice and demand, interest paid under this subdivision (a) on the amount so paid shall not be imposed for the period after the date of such notice and demand.
(10) Interest on erroneous refund. Any portion of tax or other amount which has been erroneously refunded, and which is recoverable by the Commissioner of Finance, shall bear interest at the rate set by the Commissioner of Finance from the date of the payment of the refund, but only if it appears that any part of the refund was induced by fraud or a misrepresentation of a material fact.
(11) Satisfaction by credits. If any portion of a tax is satisfied by credit of an overpayment, no interest shall be imposed under this subdivision (a) on the portion of the tax so satisfied for any period during which, if the credit had not been made, interest would have been allowable with respect to such overpayment.
(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 (b)) 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 of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding 25 percent 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) of this paragraph, the amount of 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 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 (b)) and not due to willful neglect, there shall be added to the amount shown as tax on such return one-half of one percent of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding 25 percent 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 within ten 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 (b)) 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 of such tax for each month or fraction thereof during which such failure continues, not exceeding 25 percent 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 month be more than five percent.
(B) If paragraphs (1) and (2) of this subdivision (b) are both applicable, the addition under paragraph (1) is reduced by the addition under paragraph (2). Thus, the addition to tax will be four and one-half percent under paragraph (1) and one-half of one percent under paragraph (2) for each month up to and including the first five months. After the first five months, the addition of one-half per month pursuant to paragraph (2) will apply for the next 45 months for a maximum aggregate of 47 1/2 percent addition to tax. However, in any case described in sub paragraph (1)(ii) of this subdivision (b) (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 paragraph (i.e. the lesser of $100 or 100% of the tax due).
(C) If paragraphs (1) and (3) of this subdivision (b) are both applicable, the maximum amount of the addition to tax may not exceed 25 percent in the aggregate. The maximum amount of the addition to tax pursuant to paragraph (3) of this subdivision (b) shall be reduced by the amount of the addition to tax pursuant to paragraph (1) of this subdivision (b) (determined without regard to subparagraph (1)(i) of this subdivision (b)) which is attributable to the tax for which the notice and demand is made and which is not paid within ten days of such notice and demand.
(ii) The provisions of this paragraph (4) may be illustrated by the following examples:
Example 1:
| 20 percent (5% per month for the 3 months from April 16 through July 15 and 5% for the fractional part of the month from July 16 through July 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 |
~
| Addition computed without regard to limitation: 6 percent (5 1/2% for the 11 months from September 19, 1984, through August 18, 1985, and 0.5% for the fractional part of the month from August 19 through August 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 2: A taxpayer files his tax return for the year January 1, 1983 to December 31, 1983 on December 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 December 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, 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, 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 percent for the 5 months April 16 through September 15 of the net amount due ($500) | $12.50 |
| Addition to tax under paragraph (1) | $112.50 |
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(5) Reasonable cause as used in paragraphs (1), (2) and (3) of this subdivision (b) 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 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 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 (6)(i) of this subdivision) an amount equal to 50 percent of the interest payable under 19 RCNY § 28-21(a) with respect to the portion of the underpayment prescribed in such paragraph (6)(i) which is attributable to the negligence or intentional disregard referred to in such subparagraph (6)(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).
(iii) If any payment is shown on a return made by a payor with respect to dividends, patronage dividends and interest under subsection (a) of § 6042, subsection (a) of § 6044 or subsection (a) of § 6049 of the Internal Revenue Code, respectively, and the payee fails to include any portion of such payment in unincorporated business gross income, as that term is defined in 19 RCNY § 28-05, any portion of a deficiency attributable to such failure shall be treated, for purposes of this paragraph (6), as due to negligence in the absence of clear and convincing evidence to the contrary. If any addition to tax is imposed under this paragraph (6) by reason of the preceding sentence, the amount of the addition to tax imposed by paragraph (6)(i) of this subdivision (b) shall be five percent of the portion of the deficiency which is attributable to the failure described in the preceding sentence.
(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 50 percent 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 paragraph (7)(i) of this subdivision) an amount equal to 50 percent of the interest payable under 19 RCNY § 28-21(a) with respect to the portion of the underpayment described in such paragraph (7)(i) which is attributable to fraud, for the period beginning on the last day prescribed by law for payment of such underpayment (determined with out 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 25 percent penalty due to willful neglect for failure to file a return due to willful neglect, five percent penalty due to negligence and the additional one-half of one percent per month penalty pursuant to paragraphs (2) and (3) of this subdivision (b).
(8) Any person who fails to pay tax, or to make, render, sign or certify any return, or declaration of estimated tax, or to supply any information within the required time, with fraudulent intent, shall be liable for a penalty of not more than $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 (8).
(9) Substantial understatement of liability. 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 of the amount of any underpayment attributable to such understatement. For purposes of this paragraph (9), 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 “under statement” means the excess of the amount of the tax required to be shown on the return for the taxable year, over the amount of the tax imposed which is shown on the return, reduced by any rebate (within the meaning of § 521(g) of the Administrative Code). The amount of such understatement [;under the preceding sentence]; 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 paragraph (9) 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.
(10) Aiding or assisting in the giving of fraudulent returns, reports, statements or other documents. (i) 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 compen sation, 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, declaration, 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, declaration, statement or other document shall pay a penalty not exceeding ten thousand dollars.
(ii) For purposes of paragraph (10)(i) of this subdivision, 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 paragraph (10)(i) of this subdivision, 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 (10) shall be in addition to any other penalty provided by law.
(1) The addition to tax under 19 RCNY § 28-21(c) with respect to any underpayment of any installment, shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment of such installment equals or exceeds whichever of the follow ing is the lesser:
(i) The amount which would have been required to be paid on or before such date if the estimated tax were whichever of the following is the least:
(A) The tax shown on the return of the taxpayer for the preceding taxable year, if a return showing a liability for tax was filed by the taxpayer for the preceding taxable year and such preceding year was a taxable year of 12 months, or
(B) An amount equal to the tax computed, at the rates applicable to the taxable year, but otherwise on the basis of the facts shown on his return for, and the law applicable to, the preceding taxable year, or
(C) An amount equal to 90 percent of the tax for the taxable year computed by placing on an annualized basis the unincorporated business taxable income for the months in the taxable year ending before the month in which the installment is required to be paid. For purposes of this subparagraph (i), the unincorporated business taxable income shall be placed on an annualized basis by: (a) multiplying by 12 (or, in the case of a taxable year of less than 12 months, the number of months in the taxable year) the unincorporated business taxable income for the months in the taxable year ending before the month in which the installment is required to be paid, and (b) dividing the resulting amount by the number of months in the taxable year ending before the month in which such installment date falls, or
(D) (a) If the base period percentage for any six consecutive months of the taxable year equals or exceeds 70 percent, an amount equal to 90 percent of the tax determined in the following manner:
(1) take the unincorporated business taxable income for all months during the taxable year preceding the filing month.
(2) divide such amount by the base period percentage for all months during the taxable year preceding the filing month,
(3) determine the tax on the amounts determined under sub paragraph (i)(D)(a)(2), and
(4) multiply the tax determined under subparagraph (i)(D)(a)(3) by the base period percentage for the filing month and all months during the taxable year preceding the filing month.
(b) For purposes of subparagraph (i)(D)(a)
(1) the base period percentage for any period of months shall be the average percent which the unincorporated business taxable income for the corresponding months in each of the three preceding years bears to the unincorporated business taxable income for the three preceding taxable years.
(2) the term “filing month” means the month in which the installment is require to be paid; or
(ii) An amount equal to 90 percent of the tax computed, at the rates applicable to the taxable year, on the basis of the actual unincorporated business taxable income for the months in the taxable year ending before the month in which the installment is required to be paid.
(2) (i) Except as provided in paragraph (1)(ii) hereof, subparagraphs (i)(A) and (i)(B) of paragraph (1) of this subdivision (d) shall not apply in the case of any taxpayer which had unincorporated business taxable income, or the portion thereof allocated within the City, of $1 million or more for any taxable year during the three taxable years immediately preceding the taxable year involved.
(ii) For taxable years beginning in 1983, the amount treated as the estimated tax under subparagraphs (i)(A) and (i)(B) of paragraph (1) of this subdivision (d) shall in no event be less than 75 percent of the tax shown on the return for the taxable year beginning in 1983 or, if no return was filed, 75 percent of the tax for such year.
(1) Failure to file a return or report; supply information; or supplying false information. . Any person who, with intent to evade any tax imposed or any requirement of law or any lawful requirement of the Commissioner of Finance, shall fail to make, render, sign, certify or file any return or report, or to supply any information within the time required by or under the provisions of the law, or who, with like intent, shall supply any false or fraudulent information, shall be guilty of a misdemeanor.
(2) False returns or reports. .
(i) Any person who, with intent to evade any tax imposed by or any requirement of law, or any lawful requirement of the Commissioner of Finance, shall make, render, sign, certify or file any false or fraudulent return or report, declaration or statement shall be guilty of a misdemeanor.
(ii) Any person who, with intent to evade any tax imposed, files a false or fraudulent return or report and, with such intent, substantially understates on such return or report his tax liability shall be guilty of a class E felony.
(iii) For purposes of subparagraph (ii) of this paragraph (2) the term “substantially understates” refers to the excess amount of the tax required to be shown on the return or report for the taxable year or other applicable taxable period over the amount of the tax imposed which is shown on the return or report, provided that the excess is more than $1,500, and provided that the taxpayer, acting without reasonable ground for belief that his conduct is lawful, intended to evade at least said amount of such excess.
(3) Aiding or assisting in the giving of fraudulent returns, reports, statements or other documents. .
(i) Any person who, with the intent that any tax imposed, or any lawful requirement of the Commissioner of Finance 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, declaration, 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, declaration, statement or other document shall be guilty of a misdemeanor.
(ii) Any person who, with the intent that any tax imposed 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 of any return or report, which is filed, and which is fraudulent or false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, and thereby causes, by means of a common scheme or plan, an under statement of tax liability of one or more persons of more than $1,500 in the aggregate, shall be guilty of a class E felony. The term “under statement” shall mean the excess of the amount of the tax required to be shown on the return or report over the amount of the tax imposed which is shown on the return or report.
(4) Failure to pay tax. . Any person, who, with intent to evade any tax imposed or any requirement of law or any lawful requirement of the Commissioner of Finance, shall fail to pay the tax, shall be guilty of a misdemeanor.
(5) 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.
§ 29-01 Excise Taxes.
Excise taxes. (Chapters 7, 8, 11, 12, 13, 14, 15, 21, 24, 25 and 27 of Title 11 of the Administrative Code).
(2) On or before January 15 in each year, the Commissioner of Finance shall determine the average prime rate charged by banks for the quarter year ending on the immediately preceding December 31. Such average prime rate, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph that shall be effective during the twelve-month period commencing on March 1 in such year. Provided, however, that on or before July 15 in each year, the Commissioner shall determine the average prime rate charged by banks during the quarter-year ending on June 30 of such year. In any year in which the average prime rate for the quarter-year ending on June 30 differs by more than two percentage points from the average prime rate for the quarter-year ending on the immediately preceding December 31, then such average prime rate for the quarter-year ending on June 30, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph for the six-month period commencing on September 1 in such year. Provided, further, that for the period commencing February 24, 1983 and ending on February 29, 1984, the rate of interest prescribed in accordance with the provisions of this paragraph shall be and is hereby set at 17% per annum, and such rate shall remain in effect unless a new rate is prescribed for the six-month period commencing on September 1, 1983 as provided in the preceding sentence. For purposes of this paragraph, the average prime rate charged by banks during any quarter-year shall be the average predominant prime rate quoted by commercial banks to large businesses in the three months constituting such quarter-year as such rate is determined and published by the Board of Governors of the Federal Reserve System of the United States. For the purpose of the computation to the nearest one-tenth of a percentage point, a hundredth of a percentage point is to be disregarded unless it amounts to five hundredths of a percentage point or more, in which case the amount (determined without regard to the hundredth of a percentage point) shall be increased by one-tenth of a percentage point.
| Period | Rate |
|---|---|
| Prior to April 1, 1970 | 6% |
| Between April 1, 1970 and March 14, 1980 | 9% |
| Between March 15, 1980 and February 23, 1983 | 12% |
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(2) If an underpayment which became due prior to February 24, 1983 remains unpaid on or after that date, interest with respect to such underpayment is to be computed at the rate of 12 percent per annum up to and including February 23, 1983, and thereafter at the rate set forth in subdivision (c) of this section from February 24, 1983 to the date such underpayment of tax is paid. However, if a notice of determination for such underpayment had been issued between April 1, 1970 and March 14, 1980, interest on such underpayment accrues at 9% per annum up to and including March 14, 1980, at 12% per annum between March 15, 1980 and February 23, 1983, and thereafter at the rate set forth in subdivision (c) of this section. Further if a notice of determination had been issued prior to April 1, 1970, interest on the underpayment accrues at 6% per annum up to and including March 31, 1970, at 9% per annum between April 1, 1970 and March 14, 1980, at 12% per annum between March 15, 1980 and February 23, 1983, and thereafter at the rate set forth in subdivision (c) of this section.
| Period | Rate Per Annum |
|---|---|
| February 24, 1983 through August 31, 1983 | 17% |
| September 1, 1983 through February 29, 1984 | 10.5% |
| March 1, 1984 through February 28, 1985 | 11% |
| March 1, 1985 through February 28, 1986 | 11.8% |
| March 1, 1986 through February 28, 1987 | 9.5% |
| March 1, 1987 through February 29, 1988 | 7.5% |
| March 1, 1988 through February 28, 1989 | 8.9% |
| March 1, 1989 through February 28, 1990 | 10.2% |
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§ 29-02 Corporate Business Taxes.
(Chapter 6 of Title 11 of the Administrative Code).
(2) On or before January 15 in each year, the Commissioner of Finance shall determine the average prime rate charged by banks for the quarter-year ending on the immediately preceding December 31. Such average prime rate, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph that shall be effective during the twelve-month period commencing on March 1 in such year. Provided, however, that on or before July 15 in each year the Commissioner shall determine the average prime rate charged by banks during the quarter-year ending on June 30 of such year. In any year in which the average prime rate for the quarter-year ending on June 30 differs by more than two percentage points from the average prime rate for the quarter-year ending on the immediately preceding December 31, then such average prime rate for the quarter-year ending on June 30, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph for the six-month period commencing on September 1 in such year. Provided, further, that for the period commencing February 24, 1983 and ending on February 29, 1984, the rate of interest prescribed in accordance with the provisions of this paragraph shall be and is hereby set at 17% per annum, and such rate shall remain in effect unless a new rate is prescribed for the six-month period commencing on September 1, 1983 as provided in the preceding sentence. For purposes of this paragraph, the average prime rate charged by banks during any quarter-year shall be the average predominant prime rate quoted by commercial banks to large businesses in the three months constituting such quarter-year as such rate is determined and published by the Board of Governors of the Federal Reserve System of the United States. For the purpose of the computation to the nearest one-tenth of a percentage point, a hundredth of a percentage point is to be disregarded unless it amounts to five hundredths of a percentage point or more, in which case the amount (determined without regard to the hundredth of a percentage point) shall be increased by one-tenth of a percentage point.
| For Taxable Periods: | Rate Per Annum |
|---|---|
| Beginning before June 1, 1978 | 6% |
| Beginning on or after | |
| June 1, 1978 | 8.5% |
| June 1, 1980 | 10.5% |
| July 1, 1981 | 12% |
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| Period | Rate Per Annum |
|---|---|
| February 24, 1983 through August 31, 1983 | 17% |
| September 1, 1983 through February 29, 1984 | 10.5% |
| March 1, 1984 through February 28, 1985 | 11% |
| March 1, 1985 through February 28, 1986 | 11.8% |
| March 1, 1986 through February 28, 1987 | 9.5% |
| March 1, 1987 through February 29, 1988 | 7.5% |
| March 1, 1988 through February 28, 1989 | 8.9% |
| March 1, 1989 through February 28, 1990 | 10.2% |
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§ 29-03 Unincorporated Business Tax.
(Chapter 5 of Title 11 of the Administrative Code).
(2) On or before January 15 in each year, the Commissioner of Finance shall determine the one-year constant maturity yield index for United States treasury securities for the quarter-year ending on the immediately preceding December 31. Such index, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph that shall be effective during the twelve-month period commencing on March 1 in such year. Provided, however, that on or before July 15 in each year, the Commissioner shall determine the one-year constant maturity yield index for United States treasury securities for the quarter-year ending on June 30 of such year. In any year in which the index for the quarter-year ending on June 30 differs by more than two percentage points from the index for the quarter-year ending on the immediately preceding December 31, then such index for the quarter-year ending on June 30, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph for the six-month period commencing on September 1 in such year. Provided, further, that for the period commencing February 24, 1983 and ending on February 29, 1984, the rate of interest prescribed in accordance with the provisions of this paragraph shall be and is hereby set at 14% per annum, and such rate shall remain in effect unless a new rate is prescribed for the six-month period commencing on September 1, 1983 as provided in the preceding sentence. For purposes of this para graph, the one-year constant maturity yield index for United States treasury securities for any quarter-year shall be the average of such index for the three months constituting such quarter-year as such index is compiled by the United States Department of the Treasury, published by the Board of Governors of the Federal Reserve System of the United States, and expressed in terms of percentage interest per annum. For the purpose of the computation to the nearest one-tenth of a percentage point, a hundredth of a percentage point is to be disregarded unless it amounts to five hundredths of a percentage point or more, in which case the amount (determined without regard to the hundredth of a percentage point) shall be increased by one-tenth of a percentage point.
| For Taxable Periods: | Rate Per Annum |
|---|---|
| Beginning before June 1, 1978 | 6% |
| Beginning on or after | |
| June 1, 1978 | 8.5% |
| June 1, 1980 | 10.5% |
| July 1, 1981 | 12% |
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| Period | Rate Per Annum |
|---|---|
| February 24, 1983 through August 31, 1983 | 14% |
| September 1, 1983 through February 29, 1984 | 9.2% |
| March 1, 1984 through February 28, 1985 | 10% |
| March 1, 1985 through February 28, 1986 | 10% |
| March 1, 1986 through February 28, 1987 | 7.9% |
| March 1, 1987 through February 29, 1988 | 6% |
| March 1, 1988 through February 28, 1989 | 7.2% |
| March 1, 1989 through February 28, 1990 | 8.5% |
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§ 29-04 Miscellaneous.
(a) Commercial rent tax. (Chapter 7 of Title 11 of the Administrative Code). Quarterly Returns. If any amount of tax required to be paid together with a return, other than the final return for a tax year, 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 set by the Commissioner of Finance pursuant to 19 RCNY § 29-01 shall be paid for the period from such last date until 20 days after the end of the tax year during which such payments were due or until such prior time as the tax paid for the tax year equals 75% of the full tax required to be paid for the tax year. Such interest shall be paid with the final return for the tax year to which it relates. Interest under this subdivision shall not be paid if the amount thereof is less than one dollar.
(1) (i) Pursuant to § 11-905(a) and § 11-906(a) of the Administrative Code, the Commissioner of Finance is required to set the rate of interest on underpayments and overpayments of the foreign and alien insurers tax arising or remaining due or unpaid on or after August 5, 1984. For underpayments becoming due and overpayments made prior to August 5, 1984, interest is computed at the rate of 6% per annum up to August 5, 1984 and thereafter at the rates set by the Commissioner. For underpayments or overpayments which remain or become due or overpaid on or after August 5, 1984, the Commissioner of Finance is required to set a rate of interest as prescribed in sub-paragraph (ii) of this paragraph but not less than six percent per annum. Any such rate set by the Commissioner of Finance pursuant to the provisions of sub-paragraph (ii) shall apply to taxes, or any portion thereof, which remain or become due or overpaid on or after the date on which such rate becomes effective and shall apply only with respect to interest computed or computable for periods or portions of periods occurring in the period in which such rate is in effect. No interest shall be paid if the amount thereof is less than one dollar. Interest to be paid by the Commissioner of Finance or by the taxpayer is to be computed and compounded daily on or after September 4, 1984 on amounts (including interest) accruing or remaining unpaid on or after such date.
(ii) On or before January 15 in each year, the Commissioner of Finance shall determine the average prime rate charged by banks for the quarter-year ending on the immediately preceding December 31. Such average prime rate, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph that shall be effective during the twelve-month period commencing on March 1 in such year. Provided, however, that on or before July 15 in each year, the Commissioner shall determine the average prime rate charged by banks during the quarter-year ending on June 30 of such year. In any year in which the average prime rate for the quarter-year ending on June 30 differs by more than two percentage points from the average prime rate for the quarter-year ending on the immediately preceding December 31, then such average prime rate for the quarter-year ending on June 30, rounded to the nearest one-tenth of a percentage point, shall be the rate of interest prescribed by this paragraph for the six-month period commencing on September 1 in such year. Provided, further, that for the period commencing August 5, 1984 and ending on February 28, 1985, the rate of interest prescribed in accordance with the provisions of this paragraph shall be and is hereby set at 11% per annum. For purposes of this paragraph, the average prime rate charged by banks during any quarter-year shall be the average predominant prime rate quoted by commercial banks to large businesses in the three months constituting such quarter-year as such rate is determined and published by the Board of Governors of the Federal Reserve System of the United States. For the purpose of the computation to the nearest one-tenth of a percentage point, a hundredth of a percentage point is to be disregarded unless it amounts to five hundredths of a percentage point or more, in which case the amount (determined without regard to the hundredth of a percentage point) shall be increased by one-tenth of a percentage point.
(2) Pursuant to the provisions of paragraph (1) above, the interest which shall be added to underpayments of tax pursuant to § 11-905(a) of the Administrative Code and which shall be paid on overpayments pursuant to § 11-906(a) of the Administrative Code, or any portion thereof, which remain or become due or overpaid on or after August 5, 1984 is to be computed at the applicable rate or rates shown in the following schedule:
| Period | Rate Per Annum |
|---|---|
| August 5, 1984 through February 28, 1985 | 11% |
| March 1,1985 through February 28, 1986 | 11.8% |
| March 1,1986 through February 28, 1987 | 9.5% |
| March 1, 1987 through February 29, 1988 | 7.5% |
| March 1, 1988 through February 28, 1989 | 8.9% |
| March 1, 1989 through February 28, 1990 | 10.2% |
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§ 30-01 Definitions.
Aggregate employment shares. The term “aggregate employment shares” means the sum of all employment shares maintained by an eligible business in a taxable year.
(i) For purposes of the credit allowed by subdivision (i) of § 11-503, subdivision 17 of § 11-604 or § 11-643.7 of the Administrative Code of the City of New York and the reduction in base rent allowed by subdivision f of § 11-704 of such Code, the number of eligible aggregate employment shares of an eligible business is the amount, if any, by which the number of aggregate employment shares maintained by it in the eligible area in the taxable year in which it claims such credit or reduction exceeds the number of aggregate employment shares maintained by it in the eligible area in the taxable year immediately preceding the taxable year during which it first relocates. (Note: when used in these rules the term “relocate” has the meaning set forth in this definition section. Note also, the taxable year preceding the taxable year of an eligible business’ first relocation shall hereafter be referred to as the “base year”.)
(ii) The amount determined under subparagraph (i) of this paragraph shall not exceed whichever of the following is the least:
(A) the amount, if any, by which the number of aggregate employment shares maintained by the eligible business in particular to which it has relocated premises in the taxable year in which the credit or reduction is claimed exceeds the number of aggregate employment shares maintained in such premises in the taxable year immediately preceding the taxable year during which the eligible business relocates to such premises. (This amount shall hereafter be referred to as “Limitation 1”.);
(B) for any taxable year following the third taxable year immediately succeeding the taxable year of relocation to particular eligible premises, the amount, if any, by which the highest number of aggregate employment shares maintained by the eligible business in the premises in the taxable year during which it relocates to such premises or in any of the three immediately succeeding taxable years exceeds the number of aggregate employment shares maintained in such premises in the taxable year immediately preceding the taxable year of the relocation. (This amount shall hereafter be referred to as “Limitation 2”.);
(C) an amount equal to twice the number of aggregate employment shares maintained by the eligible business outside the eligible area in the base year. (This amount shall hereafter be referred to as “Limitation 3”).
(iii) If an eligible business relocates to more than one particular premises, Limitations 1 and 2 must be calculated separately for each particular premises. In such case, the amount determined under subparagraph (i) of this paragraph shall not exceed the lesser of
(A) the sum of the lesser of Limitations 1 and 2 for each particular premises or
(B) Limitation 3.
Example 1: During 1987 a calendar year taxpayer has 200 full time employees, 100 of whom work in Manhattan south of 96th Street and 100 of whom work in New Jersey. On January 1, 1988, taxpayer relocates all 200 employees to eligible premises in Brooklyn, and hires an additional 50 employees to work at the new location. All 250 employees work full time during the taxable year. Taxpayer has 250 eligible aggregate employment shares in 1988.
Example 2: Same facts as in example 1. For the commercial rent tax year ending May 31, 1988, the number of eligible aggregate employment shares is calculated by multiplying 250 workers by the number of weeks they worked ending within the period January 1, 1988 to May 31, 1988, then dividing by the number of weeks ending within the period of June 1, 1987 to May 31, 1988. From this amount, the number of aggregate employment shares in the base year would be subtracted (except that here the number is zero). The base year for the commercial rent tax is January 1, 1987 to December 31, 1987, the same as the base year for the general corporation tax, unincorporated business tax, or banking corporation tax, whichever is applicable.
Example 3: Same facts as in example 1, except that the relocation and hiring take place on the first day of the 27th week of 1988. Taxpayer has 125 eligible aggregate employment shares in 1988 (250 workers times 26 work weeks per worker divided by 52 weeks in the taxable year).
Example 4: Same facts as in example 1, except that, instead of having 100 employees in Manhattan, these employees were in non-eligible premises in Queens prior to relocation to Brooklyn. Taxpayer has 150 eligible aggregate employment shares in 1988 .
Example 5: Same facts as in example 1, except that, instead of hiring 50 new employees at the eligible premises, taxpayer hires 300 new employees for a total of 500 employees at the eligible premises. Taxpayer has 400 eligible aggregate employment shares in 1988 (Limitation 3 applies).
Example 6: Same facts as in example 1, except that 100 of the employees were moved to non-eligible premises in Queens so that only 150 employees were working at the eligible premises in Brooklyn. Taxpayer has 150 eligible aggregate employment shares in 1988 (Limitation 1 applies).
Example 7: Same facts as in example 1, with the following additional facts: The taxable year in question is 1991, the third taxable year after the year of relocation. On January 1, 1991, taxpayer hires 50 more employees for a total of 300 full-time employees working the entire year. Taxpayer has 300 eligible aggregate employment shares in 1991.
Example 8: Same facts as in example 7, except that the taxable year in question is 1992, the fourth taxable year after the year of the relocation. On January 1, 1992, taxpayer hires an additional 100 employees to work at the eligible premises, for a total of 400 full-time employees working the entire year. Taxpayer has 300 eligible aggregate employment shares in 1992 (Limitation 2 applies).
Example 9: Same facts as in example 1, with the following additional facts: On January 1, 1992, taxpayer hires 100 additional employees, 50 of whom work at the eligible premises in Brooklyn (P1) for a total of 300, and 50 of whom work at new eligible premises in the Bronx (P2). Taxpayer has 300 eligible aggregate employment shares in 1992. (Pursuant to Reg. § 13(c), the lesser of Limitations 1 and 2 for P1 is Limitation 2, or 250. This is added to 50 for P2 pursuant to limitation 1, resulting in a sum of 300.)
Example 10. Same facts as in example 1, except that on June 1, 1988, taxpayer hires an additional 50 workers who work full-time through May 31, 1989.
For the commercial rent tax year June 1, 1988 through May 31, 1989, taxpayer has 300 eligible aggregate employment shares. (Taxpayer has 300 aggregate employment shares in the year June 1, 1988 through May 31, 1989. Since there were no aggregate employment shares in the base year, which is calendar year 1987, no shares are subtracted.)
Base year. “Base year” shall mean the taxable year preceding the taxable year during which an eligible business first relocates.
Commencement date of improvements. For buildings receiving tax abatement benefits under the Industrial and Commercial Incentive Program, or from the Industrial and Commercial Incentive Board, commencement date shall mean the date a “Certificate of Eligibility” issued relating to such benefits is effective. For buildings owned by not-for-profit corporations, the Urban Development Corporation, or the City of New York, or for buildings financed with Industrial Development Agency bonds, commencement date shall mean the date of issuance of the first building permit which authorizes commencement of the work which involves the expenditures for improvements to real property which would qualify the premises for this program.
Eligible area. “Eligible area” means the area of the city excluding that area in the borough of Manhattan lying south of the center line of 96th Street.
Eligible business. “Eligible business” shall mean:
(i) has been conducting substantial business operations at one or more business locations outside the eligible area for at least 24 consecutive months immediately preceding the taxable year during which such eligible business relocates; and
(ii) on or after May 27, 1987 relocates all or part of such business operations; and
(iii) either:
(A) on or after May 27, 1987 first enters into a contract to purchase or lease the premises to which it relocates, or a parcel on which will be constructed such eligible premises, or
(B) as of May 27, 1987 owns such parcel or premises and has not prior to such date made application for benefits under the Industrial and Commercial Incentive Program pursuant to Part 4 of Subchapter 2 of Chapter 2 of Title 11 of the Administrative Code.
(i) the premises to which it relocates are physically separate and distinct from the other premises;
(ii) no contract to purchase or lease the premises to which it relocates was entered into prior to May 27, 1987; and
(iii) if the premises to which it relocates are rented, the rent for such premises is separately stated in the lease for such premises. For purposes of these rules, an option to purchase or lease premises or a parcel of land will be considered a contract to purchase or lease such premises or parcel.
Eligible premises. “Eligible premises” shall mean:
(i) wholly contained in or situated on real property which has been leased from the New York City Industrial Development Agency established pursuant to Article 18-A of the General Municipal Law, provided that such premises were constructed or renovated subsequent to the approval of such construction or renovation by such Agency; or
(ii) wholly contained or situated on real property owned by the city in accordance with the applicable provisions of the New York City Charter, a lease for which was approved, provided that such premises were constructed or renovated subsequent to such approval, or
(iii) wholly contained in or situated on real property which has been leased from the port authority of the State of New York and New Jersey or the New York State Urban Development Corporation, or a subsidiary thereof, provided that such premises were constructed or renovated subsequent to the execution of such lease, or
(iv) wholly contained in real property which would be eligible to receive benefits pursuant to Part 4 of Subchapter 2 of Chapter 2 of Title 11 of the Administrative Code except that such property is exempt from real property taxation; provided that expenditures have been made for improvements to such real property in excess of 50 percent of the value at which such real property was assessed for tax purposes for the tax year in which such improvements commenced and such expenditures have been made within 36 months or, in the case of expenditures for such improvements to such real property in excess of fifty million dollars, within 72 months from the date of such commencement, that such real property is located in the eligible area, and provided further that no contract to purchase or lease such premises has been entered into prior to May 27, 1987.
Employment share.
(i) the number of full-time work weeks worked by such employee, partner or sole proprietor during the eligible business’ taxable year, divided by the number of weeks in the taxable year, and
(ii) the number of part-time work weeks worked by such employee, partner or sole proprietor during the eligible business’ taxable year divided by an amount equal to twice the number of weeks in the taxable year.
(ii) In the case of an employee, partner or sole proprietor who works part of the week within and part of the week without a particular premises, hours are attributable to such particular premises as follows:
(A) If an employee, partner or sole proprietor spends substantially all of his or her time at a particular premises, all hours are attributable to such premises.
(B) If an employee, partner or sole proprietor does not spend substantially all of his or her time at a particular premises, all hours are nonetheless attributable to such premises if the employee, partner or sole proprietor is present at such premises at the beginning or end of each work day and all of the employee’s, partner’s or sole proprietor’s time spent outside of such premises relates primarily to business operations carried on at such premises, provided that hours worked at a particular premises cannot be attributed by reason of this subparagraph to another particular premises maintained by the same eligible business. If an eligible business has both eligible and non-eligible premises in the same building, hours worked at the non-eligible premises cannot be attributed by reason of this subparagraph (ii)(B) to the eligible premises.
(C) If neither subparagraph (ii)(A) or (ii)(B) of this paragraph (3) applies, only hours worked at a particular premises are attributable to such premises.
(iii) Time not actually worked by an employee, partner or sole proprietor due to vacation, sick leave or other leave may nevertheless be counted as time worked by that employee, partner or sole proprietor provided
(A) such vacation, sick leave or other leave time is granted pursuant to an established policy of the eligible business which is applied uniformly to all employees, partners or sole proprietors of the business or to all employees, partners or sole proprietors within a specific class, and
(B) the employee, partner or sole proprietor continues to receive his or her regular rate of pay during such vacation, sick leave or other leave. Such time shall be attributed to the eligible area and the eligible premises in the same proportion as the number of work weeks actually worked by an employee, partner or sole proprietor attributable to the eligible area and eligible premises bears to the total number of work weeks actually worked by the employee, partner or sole proprietor in the taxable year in question. Terminal leave preceding the termination of an employee’s, partner’s or sole proprietor’s employment may not be counted as time worked by the employee, partner or sole proprietor. A work week which begins in one taxable year and ends in the following taxable year shall be treated as a work week in the taxable year in which it ends.
(iv) The operation of this paragraph (3) is illustrated by the following examples:
Example 1: X, an employee of ABC Corporation, an eligible business having one eligible premises, works 40 hours a week driving a truck and making deliveries. X loads his truck every morning at ABC Corp.’s eligible premises and spends the rest of his time making deliveries outside the eligible area. Since X starts each day at the eligible premises and spends the rest of his time on deliveries from the eligible premises, all of his time will be attributable to the eligible premises. Thus, ABC Corp. may count a full time work week in the eligible area and at the eligible premises with respect to each week worked by X.
Example 2: Y, who also drives a truck and works 40 hours a week for ABC Corp., spends 10 hours each week loading at the eligible premises, 10 hours loading at premises maintained by the business outside of the eligible area, and 20 hours making deliveries outside of the eligible area. The 10 hours spent at the eligible premises are counted toward a work week at the eligible premises. The 10 hours spent at the non-eligible premises are counted toward the non-eligible premises and do not qualify. The 20 hours spent making deliveries cannot be countedtoward either premises. Thus, Y does not have a full or part time work week in the eligible area or at the eligible premises.
Example 3: Z, a salesman, spends substantially all of his time in Alaska selling products manufactured at ABC Corp.’s eligible premises. Since Z does not start or end each day at the eligible premises, none of Z’s time is attributable to the eligible premises.
Example 4: E, an executive of ABC Corp., spends 16 hours a week at ABC Corp.’s eligible premises and 25 hours at the premises outside the eligible area. Only 16 hours (i.e., a part-time work week) are attributable to the eligible premises.
(v) It shall be within the discretion of the Commissioner to determine whether hours worked by an employee, partner or sole proprietor outside of eligible premises maintained by the eligible business have been fairly apportioned within and without the eligible area, and within and without the eligible premises.
(i) the number of full-time work weeks worked by the employee, partner or sole proprietor during the eligible business’ taxable year attributable to the eligible area divided by the number of weeks in the taxable year, and
(ii) the number of part-time work weeks worked by such employee, partner or sole proprietor during the eligible business’ taxable year attributable to the eligible area divided by an amount equal to twice the number of weeks in the taxable year.
(i) the number of full-time work weeks worked by the employee, partner or sole proprietor during the eligible business’ taxable year attributable to the eligible premises divided by the number of weeks in the taxable year and
(ii) the number of part-time work weeks worked by such employee, partner or sole proprietor during the eligible business’ taxable year attributable to the eligible premises divided by an amount equal to twice the number of weeks in the taxable year.
Expenditure. “Expenditure” shall mean an amount actually paid, incurred, or provided in kind to improve the real property which in part improves the premises. Expenditures may include those made for: construction contracts, materials, labor, rental equipment, insurance, permit fees and other direct expenses of construction; installation of partitions and other tenant work by or for the first tenant or occupant of new or substantially renovated space; architectural, engineering, construction management, legal, accounting and other services rendered in connection with the construction work; marketing, brokerage, legal and other services rendered in connection with the initial leasing or sale of eligible property created or substantially renovated by eligible construction work; interest on construction loans, insurance and other fixed costs arising during the course of construction; and fees for connection to existing sewer, water or utility lines. Expenditures shall not include the costs of acquiring the site.
Hotel services. “Hotel services” shall mean:
Particular premises. “Particular premises” shall mean all premises occupied by an eligible business within a single building except that if there are eligible and non-eligible premises in the same building, such eligible and non-eligible premises constitute separate particular premises.
Person. “Person” shall mean any individual, partnership, association, joint-stock company, corporation, estate or trust, and any combination of the foregoing.
Relocate. “Relocate” shall mean to transfer pre-existing business operations which are not retail activities or hotel services to premises that are or will become eligible premises, or the establishment of new business operations which are not retail activities or hotel services at such premises, provided that a relocation will not be deemed to have taken place unless at least one employee, partner or sole proprietor of the eligible business is transferred to such premises from pre-existing business operations outside the eligible area. The date of relocation to any particular premises shall be any date elected by the eligible business is transferred to the particular premises from a pre-existing business location outside the eligible area and begins to work at such premises, provided that such date is subsequent to the date of the commencement of immprovements to real property in which such premises are located, which improvements will meet the requirements in the definition of “eligible premises” of these rules relating to expenditures for improvements, and provided further that such date is prior to the date of issuance of an initial certification of eligibility pursuant to 19 RCNY § 30-02. No claim for credit or refund of an overpayment of tax shall be allowed under this definition which is otherwise barred by any statute of limitations. The election provided for in this section shall be irrevocable.
Retail activity. “Retail activity” shall mean:
Taxable Year. “Taxable year” shall mean:
§ 30-02 Authorization to Provide Relocation and Employment Assistance Credits and Base Rent Reductions.
(a) An eligible business which relocates shall be allowed a credit against the unincorporated business tax imposed by Chapter 5, the general corporation tax imposed under Subchapter 2 of Chapter 6, or the banking corporation tax imposed under Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code as described in subdivision (i) of § 11-503, subdivision 17 of § 11-604 and § 11-643.7 of the Administrative Code. Any such eligible business which is subject to the commercial rent tax shall also receive a reduction in base rent subject to tax as described in subdivision f of § 11-704 of the Administrative Code.
(1) (i) Prior to such date such business has purchased, leased or entered into a contract to purchase or lease particular premises or a parcel on which will be constructed such premises, or already owned such premises or parcel;
(ii) prior to such date improvements have been commenced on such premises or parcel which improvements will meet the requirements of the definition of eligible premises relating to expenditures for improvements;
(iii) prior to such date such business submits a preliminary application for a certificate of eligibility with respect to a proposed relocation to such premises; and
(iv) such business relocates to such premises no later than 36 months or, in a case where the expenditures made for improvements specified in subparagraph (ii) of this paragraph are in excess of 50 milion dollars, within 72 months from the date of submission of such preliminary application; or
(2) (i) not later than June 30, 2002, such business has purchased, leased or entered into a contract to purchase or lease particular premises wholly contained in a building in which at least 40 percent or 200,000 square feet, whichever is less, of the nonresidential floor area of such building has been purchased or leased by a business or businesses that did not receive certifications of eligibility with respect to such floor area under these rules prior to July 1, 1999 but which meet or will meet the requirements of paragraph one of this subdivision with respect to such floor area and which are or will become certified to receive a credit under these rules with respect to such floor area;
(ii) not later than June 30, 2002, such business submits a preliminary application for a certificate of eligibility with respect to a proposed relocation to such particular premises; and
(iii) not later than June 30, 2002 such business relocates to such particular premises.
§ 30-03 Continued Eligibility Despite Sale of Business.
An eligible business receiving benefits under this program will not be rendered ineligible for the program solely by virtue of the sale of the business.
§ 30-04 Unincorporated Business Tax Credit.
(a) The amount of the unincorporated business tax credit authorized by 19 RCNY § 30-02 is determined by multiplying $500 by the number of eligible aggregate employment shares maintained during the taxable year by the taxpayer with respect to particular premises to which the taxpayer has relocated during the taxable year, provided, however, that no credit shall be allowed for the relocation of any retail activity or hotel services.
§ 30-05 General Corporation Tax Credit.
(a) The amount of the general corporation tax credit authorized by 19 RCNY § 30-02 is determined by multiplying $500 by the number of eligible aggregate employment shares maintained during the taxable year by the taxpayer with respect to particular premises during the taxable year by the taxpayer with respect to particular premises to which the tax payer has relocated, provided, however, that no credit shall be allowed for the relocation of any retail activity or hotel services.
§ 30-06 Banking Corporation Tax Credit.
(a) The amount of the banking corporation tax credit authorized by 19 RCNY § 30-02 is determined by multiplying $500 by the number of eligible aggregate employment shares maintained during the taxable year by the taxpayer with respect to particular premises to which the taxpayer has relocated, provided, however, that no credit shall be allowed for the relocation of any retail activity or hotel services.
§ 30-07 Commercial Rent Tax Base Rent Reduction.
(a) For each particular eligible premises occupied by a tenant which has obtained the certification required by 19 RCNY § 30-02, base rent shall be reduced by an amount determined by multiplying such base rent by a fraction, the numerator of which is the number of eligible aggregate employment shares maintained by such tenant at such eligible premises in the tax year for which the reduction is claimed and the denominator of which is a number equal to the number of aggregate employment shares maintained by such tenant in such eligible premises in such tax year, provided that the denominator shall not exceed the highest number of aggregate employment shares maintained by such eligible tenant in such eligible premises in the tax year during which such tenant relocates to such eligible premises and in each of the three immediately succeeding tax years.
Example 1: X, a calendar year taxpayer, relocated to eligible premises on June 1, 1989 and received the certifications required by 19 RCNY § 30-02. X’s annual rent for the eligible premises is $100,000. During 1988, X had 100 employees at the eligible premises and another 100 employees at another premises in Manhattan south of 96th Street. On June 1, 1989 (the date of the relocation), X moved all 100 employees from Manhattan to the eligible premises.
The fraction by which base rent is reduced in the tax year June 1, 1989 to May 31, 1990, is computed as follows: (Assume that the tax year has exactly 52 weeks, that each quarter has exactly 13 weeks, and that all employees work full time during the entire tax year.) The numerator of the fraction is the number of eligible aggregate employment shares in the eligible premises. The number of eligible aggregate employment shares is the number of aggregate employment shares in the area in the tax year in question less the number of aggregate employment shares in the eligible area in the taxable year preceding the taxable year of relocation (subject to limitations). During the commercial rent tax year June 1, 1989 to May 31, 1990, X maintained 200 employees at the eligible premises, each of whom worked 52 weeks. The number of aggregate employment shares for the tax year is 200 (200 employees times 52 weeks worked by each employee, divided by 52 weeks). During calendar year 1988 (the taxable year preceding the taxable year of relocation), X maintained 100 employees at the eligible premises, each of whom worked 52 weeks. The number of aggregate employment shares for 1988 is 100 (100 employees × 52/52). The numerator of the fraction (the number of aggregate employment shares) is 100 . The denominator (the number of aggregate employment shares in the eligible premises in the tax year) is 200.
The percentage reduction is 100/200 = 50%. Since base rent prior to the deduction was $100,000 the deduction is $50,000 ($100,000 times 50%).
Example 2: Assume the same facts as in example 1, except that the relocation takes place on September 1, 1989. There are 100 employees in the eligible premises for the entire tax year and 100 additional employees in the eligible premises for 39 weeks of the tax year . Aggregate employment shares for the tax year thus equals 175. ((100 × 52) (100 × 39))/52.) The numerator of the fraction by which base rent is reduced is 75 . The denominator is 175.The percentage reduction is 75/175 = 42.86%. Since X relocated on September 1, this percentage is applied only to the base rent attributable to the portion of the tax year following relocation, or $75,000. The reduction is equal to 42.86% of $75,000, or $32,145. Thus, taxpayer’s base rent for the tax year June 1, 1989 through May 31, 1990, is $100,000 less $32,145, or $67,855.
§ 30-08 Quarterly Reductions.
A tenant who has received the initial certification required by 19 RCNY § 30-02 of these rules may reduce its base rent for premises to which it has relocated on an estimated basis on the returns filed for the quarterly tax periods ending on the last days of August, November and February of the tax year. Such rent reduction shall be computed in the same manner as the annual rent reduction except that, in determining the numerator and denominator of the fraction by which base rent is reduced, the number of employment shares for each employee for the quarter in question is the sum of
To illustrate: Assume the same facts as in example 2 of 19 RCNY § 30-07. The rent reduction for the third quarter ending February 28, 1990 is computed as follows: (Assume 13 weeks in each quarter).
There are 100 employees in the eligible premises for 39 weeks and 100 additional employees in the eligible premises for 26 weeks . Aggregate employment shares until the end of the third quarter equals:
((100 workers × 39 weeks) (100 workers × 26 weeks))/39 weeks = 167.
The numerator of the fraction by which base rent is reduced is 67
(167 shares through February 28, 1990, less 100 shares in 1988.)
The denominator is 167.
The percentage reduction is 67/167 = 40.12%
Assuming that the base rent for the quarter ending February 28 is $25,000 (i.e., 25% of $100,000), the reduction is 40.12% of $25,000 or $10,030. Thus, X’s base rent for the quarter is $25,000 less $10,030, or $14,970.
§ 30-09 Apportionment of Reduction.
To determine the percentage reduction of base rent at a particular premises to which the taxpayer has relocated where the taxpayer has more than one such premises, the taxpayer must first calculate the total number of eligible aggregate employment shares pursuant to 19 RCNY § 30-01 “Aggregate employment shares” (1). The eligible aggregate employment shares must then be apportioned between the premises so that for each particular premises the apportioned eligible aggregate employment shares is in the same proportion to total eligible aggregate employment shares as the maximum number of eligible aggregate employment shares for that particular premises pursuant to the limitations delineated in 19 RCNY § 30-01 “Aggregate employment shares” (1)(ii)(A) and (1)(ii)(B) is to the sum of the maximum number of eligible aggregate employment shares for all premises to which the taxpayer has relocated pursuant to these limitations.
Example: Y, a company with 1,000 employees outside the eligible area in the base year, has relocated to two eligible premises denoted PI and P2. The columns below headed P1 and P2 indicate the number of aggregate employment shares in each premises in the designated year. The column headed NE shows aggregate employment shares in the eligible area which are not in eligible premises. The column headed TA shows total aggregate employment shares in the eligible area. The base year is the taxable year preceding the taxable year of the relocation.
| Year | P1 | P2 | NE | TA |
|---|---|---|---|---|
| Base Year | 10 | 0 | 90 | 100 |
| 1 | 85 | 65 | 50 | 200 |
| 2 | 85 | 65 | 50 | 200 |
| 3 | 85 | 65 | 50 | 200 |
| 4 | 85 | 65 | 50 | 200 |
| 5 | 100 | 55 | 60 | 215 |
~
The following computation illustrates the percentage base rent deduction for Year 5:
Step (1) – Compute eligible aggregate employment shares for Year 5 (basic computation – see: 19 RCNY § 30-01 “Aggregate employment shares” (1)(i).
Eligible aggregate employment shares (subject to limitations) equals 115 (215 aggregate employment shares in the eligible area in the tax year less 100 aggregate employment shares in the eligible area in the taxable year preceding the taxable year of relocation).
Step (2) – Premises Limitations (See: 19 RCNY § 30-01 “Aggregate employment shares” (1)(iii)) Determine the lesser of Limitations 1 and 2 specified in 19 RCNY § 30-01 “Aggregate employment shares” (1)(ii) for each premises. Eligible aggregate employment shares cannot exceed the sum of the limitations so determined for all premises (See: 19 RCNY § 30-01 “Aggregate employment shares (1)(iii)).
For P1, Limitation 2 is the lesser limitation. For P2, Limitation 1 is the lesser limitation. The computation is as follows: P1 85 aggregate employment shares (highest number in first 4 years) less 10 shares (number at premises in year prior to relocation) = 75
P2 55 aggregate employment shares (number in year 5), less 0 shares (number at premises in year prior to relocation) = 55
Sum of the limitations for P1 and P2 = 130 Since this sum is greater than the 115 shares determined in the basic computation (Step 1), it does not reduce the number of eligible aggregate employment shares. However, it is used for the apportionment of the eligible aggregate employment shares.
Step (3) – Limitation 3 19 RCNY § 30-01 “Aggregate employment shares” (1)(ii)(c). Limitation 3 equals 2,000 shares and is, therefore, not applicable.
Step (4) – Apportionment The 115 eligible aggregate employment shares are apportioned to the two premises in the same ratio as the maximum number of eligible aggregate employment shares for each premises bears to the sum of the maximum number of such shares for all premises. Thus, the number of shares apportioned to P1 is computed as follows: 75/130 × 115 = 66.35 shares. The number of shares apportioned to P2 is computed as follows: 55/130 × 115 = 48.65 shares.
Step (5) – The percentage reductions are then computed as follows (See: § 30-04): P1 66.35 eligible aggregate employment shares in the eligible premises divided by 85 aggregate employment shares yields a percentage reduction of 78.06%. (Note – the denominator would have been 100, the number of aggregate employment shares in the premises in the tax year in question, except that it is limited here by the highest number of such shares in the year of relocation and the three succeeding tax years.) P2 48.65 eligible aggregate employment shares divided by 55 aggregate employment shares yields a percentage reduction of 88.45%.
Step (6) – Apply percentage reduction computed in step 4 to base rent for each eligible premises.
§ 31-01 Adjudications Conducted by the Department.
Pursuant to New York City Charter §§ 1041 and 1046 - 1048, the Department of Finance has determined that the following adjudications shall be conducted by the Department: Contested cases that pertain to excise and non-property taxes imposed or administered by the City under New York City Administrative Code, Title 11, Chapters 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 21, 22, 24, 25 and 27 and any other tax laws as may hereinafter be enacted requiring administration and/or collection by the Commissioner of Finance.
§ 31-02 Adjudications Conducted by the Office of Administrative Trials and Hearings.
The following adjudications shall be conducted by the Office of Administrative Trials and Hearings:
§ 31-03 Findings of Fact and Decisions.
After conducting such hearings, Department of Finance Hearing Officers and Administrative Law Judges of the Office of Administrative Trials & Hearings shall make written proposed findings of fact and shall recommend decisions to the Commissioner of Finance. The Commissioner or his designee shall make the final determination.
§ 32-01 Submission Requirements.
The notice of claim and demand for certificate of lien required to be submitted to the Commissioner of Finance under the provisions of § 28-01(3) of the Administrative Code of New York City and Section 331 of the New York State Insurance Law, shall be submitted in person or by registered or certified mail to:
Department of Finance, Tax Operations Division Attention: Special Programs Unit Manager Fire Insurance Proceeds Section 25 Elm Place, 4th Floor Brooklyn, New York 11201
§ 32-02 Twenty Day Period for Filing Lien.
The 20 day period provided in Section 331(d) of the New York State Insurance Law, in which the Department of Finance must file its Certificate of Special Lien, shall run from the date of receipt of the insurer’s notice of claim and demand for certificate of lien at the address specified herein. When such notice and demand is submitted by mail, it shall be deemed to have been received by the office specified herein on the date of receipt indicated in the United States Post Office certificate of mailing.
§ 33-01 General Provisions.
(a) Purpose.
(1) Title 11, Chapter 2, § 11-208.1 of the Administrative Code of the City of New York requires owners of designated income-producing properties to file annual income and expense statements with the Department of Finance. The income and expense statement must be filed by electronic means in accordance with the provisions of subdivision (b) of 19 RCNY § 33-02. The annual filing of income and expense statements is necessary to improve the accuracy of assessments of income-producing properties, reduce the number of administrative and judicial review proceedings challenging tentative assessed valuations, ensure the equitable distribution of the intra-class tax burden, substantially reduce tax refunds to be paid by the City of New York, and ultimately to achieve fairness in the assessment process.
(2) These regulations govern the administration of the filing of income and expense statements as authorized by Title 11, Chapter 2, § 11-208.1 of the Administrative Code of the City of New York.
(3) Income and expense statements filed by property owners shall be governed by the substantive law and regulations in effect as of the date on which such statements are filed with the Department.
(4) The Commissioner of Finance may delegate any of the duties of the Commissioner under these regulations to any employee of the Department of Finance whom the Commissioner designates as the Commissioner’s representative. All references contained in these regulations relating to the Commissioner of Finance shall mean the Commissioner and/or the Commissioner’s representative.
(1) The term “income-producing property” as used in these regulations shall mean property owned for the purpose of securing an income from the property itself for which an income and expense statement is required pursuant to § 11-208.1 of the Administrative Code. Income-producing property shall include but shall not be limited to the following type of property:
(i) apartment houses;
(ii) commercial and professional condominiums;
(iii) department stores; notwithstanding the provisions of subparagraph (iv) of paragraph (2) of this section, any owner-occupied department store occupying 10,000 or more square feet in a building is income-producing property for purposes of these rules; (iv) factories and industrial buildings;
(v) garages and parking lots, regardless of whether they are owner-occupied;
(vi) hospitals;
(vii) hotels or motels, regardless of whether they are owner-occupied in part or in their entirety;
(viii) lofts;
(ix) mixed-use buildings of all types (e.g., buildings which contain both commercial and residential space, office and garage space, hotel and restaurant space);
(x) nursing homes and health-related facilities;
(xi) office buildings;
(xii) partially tax-exempt properties;
(xiii) places of public assembly;
(xiv) privately owned educational structures;
(xv) rented commercial and/or professional space in residential condominium buildings, or cooperative buildings with more than 2,500 square feet of commercial space, not including any garage;
(xvi) restaurants;
(xvii) retail stores;
(xviii) theaters (movie or stage), regardless of whether they are owner-occupied;
(xix) transportation facilities;
(xx) vacant land (when income is derived from the land, e.g., unimproved land used as a parking lot);
(xxi) warehouses;
(xxii) self-storage warehouses, regardless of whether they are owner-occupied;
(xxiii) gasoline stations, regardless of whether they are owner-occupied;
(xxiv) car washes, regardless of whether they are owner-occupied; and
(xxv) power plants, generators, telecommunication lines and other equipment defined as real property in paragraphs (d), (e), (f) and (i) of subdivision 12 of § 102 of the Real Property Tax Law, regardless of whether it is owner-occupied, other than special franchise property that is assessed pursuant to article 6 of the Real Property Tax Law.
(2) The following properties are not considered income-producing property for the purpose of these regulations and owners of such properties may, but are not required to, file income and expense statements pursuant to § 11-208.1 of the Administrative Code:
(i) property with a tentative actual assessed valuation of $40,000 or less on the tentative assessment roll promulgated in the year that the income and expense statement would otherwise be required to be filed pursuant to subdivision (a) of 19 RCNY § 33-02; notwithstanding the preceding sentence, owners are not required to file income and expense statements if the actual assessed valuation for such tax year is subsequently reduced to $40,000 or less;
(ii) residential property containing ten or fewer dwelling units;
(iii) property classified in tax class one or tax class two as defined in § 1802 of the Real Property Tax Law containing six or fewer dwelling units and one retail store;
(iv) except as otherwise provided in paragraph (1) of this subdivision, residential or commercial properties which are completely owner-occupied; for purposes of these rules, the meaning of “owner-occupied” shall include property that is leased to (A) individuals that are the spouse, parents, children or siblings of the property owner; (B) individuals that are the mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the property owner; (C) businesses that are in common control with the property owner; and (D) beneficiaries of a property owner that is a fiduciary for such beneficiaries;
(v) property which is fully exempt from real property taxation;
(vi) exclusively residential property held in condominium form of ownership, or cooperative property with no more than 2,500 square feet of commercial space; and
(vii) special franchise property that is assessed pursuant to article 6 of the Real Property Tax Law; and
(viii) property that does not generate income (e.g., abandoned or uninhabitable property).
(3) Notwithstanding any other provision of this subdivision, an income and expense statement must be filed for the commercial portion of a property owned by a not-for-profit organization or government entity if the property is leased to a commercial tenant, and in such cases, the commercial tenant may file the income and expense statement. Notwithstanding the preceding sentence, no income and expense statement is required if the use of the property by the commercial tenant is an exempt use under the provisions of the Real Property Tax Law and if real property owned by such tenant, if it owned any, is or would be exempt from taxation under the Real Property Tax Law, and if the rent paid by such tenant does not exceed the amount of the carrying, maintenance and depreciation charges of the portion of the property occupied by such tenant.
(1) Income items shall include but shall not be limited to the following:
(i) rental income from tenants – actual rent paid or accrued for space occupied by tenants;
(ii) rental value of owner-occupied space – the total rental value attributable to space occupied by the owner;
(iii) operating escalation income actual amounts paid or accrued pursuant to lease escalation clauses in addition to a tenant’s base rent resulting from increases in operating expenses;
(iv) water, sewer and real estate tax escalation income – actual amounts paid or accrued pursuant to lease escalation clauses in addition to a tenant’s base rent resulting from increases in water and sewer charges and real estate taxes;
(v) sales of utilities and services – actually gross income from the sale of utilities and services such as electricity, air conditioning and cooking fuel;
(vi) common area charges – amounts paid by or accrued from tenants for the maintenance and repair of interior and exterior common areas;
(vii) services (e.g., laundry, valet, vending machines) – actual gross income from such services;
(viii) senior citizen rent increase exemption (SCRIE) tax abatement – the sum of all real estate taxes abated by the City of New York plus any amounts above the current tax liability which are refunded or credited as a result of the exemption of individual senior citizens from rental increases pursuant to § 467-b of the Real Property Tax Law;
(ix) rent subsidies paid by or accrued from a governmental body;
(x) the value of improvements provided by the tenant in lieu of rent; and
(xi) other income – any other income derived from the property, excluding interest on bank accounts and tenants’ deposits.
(2) Expense items shall include but shall not be limited to the following:
(i) fuel – amounts paid or accrued for any fuel for heating or supplying hot water for the premises (including the cost of any cooking fuel provided to any of the tenants);
(ii) light and power – amounts paid or accrued for these utilities;
(iii) cleaning – amounts paid or accrued for cleaning contracts;
(iv) wages – salaries and commissions paid or accrued for services relating to the operation and maintenance of the property (excluding salaries or commissions paid to directors, officers or management);
(v) repairs and maintenance – amounts paid or accrued for the general maintenance and repair of the property, excluding the amount attributable to capital improvements. Reserve accounts for appropriate replacement costs (e.g., roofing, boilers), when prorated on a yearly basis over an acceptable period, will be treated as an acceptable expense, whether or not actually expended;
(vi) common area maintenance – amounts paid or accrued for the maintenance of interior and exterior common areas;
(vii) management and administration – expenses for management, legal and accounting services attributable to the property;
(viii) insurance – annual charges for all insurance premiums relating to the property (multi-year policy premiums are to be prorated on a yearly basis);
(ix) water and sewer – actual expenses incurred for water and sewer usage;
(x) advertising and promotion – fees paid or accrued for advertising rental space in the property;
(xi) decorating – the cost of all contracted labor and decorating materials;
(xii) leasing expenses – prorated yearly costs of broker commissions and consultant fees which relate to renting space in the property;
(xiii) real estate taxes – total annual real property taxes paid or accrued or in the case of a senior citizen rent increase exemption, the total tax levied; and
(xiv) miscellaneous expenses – other expenses not mentioned above relating to the operation and maintenance of the property, excluding depreciation expenses, mortgage payments or interest expenses of any type.
§ 33-02 Annual Filing.
(a) Deadlines.
(1) Owners of income-producing property must file with the Department of Finance an income and expense statement no later than the first day of June of each year. If the first day of June falls on a Saturday, Sunday or City of New York holiday, the deadline for filing will be the next business day. A separate income and expense statement must be filed for each parcel of income-producing property, except that a consolidated income and expense statement may be filed for one or more tax lots that are:
(i) operated together as an economic unit or are otherwise related for purposes of valuation; and
(ii) are under common ownership; and
(iii) are contiguous or within the same tax block or within adjacent tax blocks; and
(iv) are located within the same borough of the City.
(2) The Commissioner of Finance may for good cause extend the deadline contained in paragraph (1) of this subdivision (a) for filing an income and expense statement by a period not to exceed thirty days, except that with respect to residential class two properties held in the cooperative or condominium form of ownership, by a period not to exceed sixty days.
(1) Income and expense statements or, where required, claims of exclusion must be submitted electronically in the format prepared by the Department of Finance and located on the Department of Finance Internet website and in accordance with the instructions for submission of the income and expense statement found on the website.
(2) Request for waiver of electronic filing requirement. The Commissioner may, for good cause, waive the requirement that the income and expense statement or, where required, claim of exclusion be filed electronically and permit the income and expense statement or, where required, claim of exclusion to be filed by means of a paper form. A request for waiver of the electronic filing requirement must be made in writing no later than thirty days prior to the deadline for filing an income and expense statement or, where required, claim of exclusion. Any filing in paper format must be filed with the New York City Department of Finance at such address as may be designated by the Department.
(3) In the discretion of the Commissioner of Finance, if the New York City Tax Commission accepted an electronic filing of an income and expense statement as part of an application for correction of assessment for a property for the year for which an income and expense statement must be filed with the Department of Finance for such property, the electronic filing with the Tax Commission may satisfy either all or part of the requirements for the filing of an income and expense statement as determined by the Commissioner.
(1) Owners of income-producing property who maintain their books and records on a calendar year basis shall file an income and expense statement containing information for the calendar year that immediately precedes the deadline for filing such statements.
(2) Owners of income-producing property who maintain their books and records on a fiscal year basis shall file an income and expense statement containing information for the last fiscal year concluding before the first day of May immediately preceding the deadline for filing such statements.
(3) Owners of income-producing property shall file an income and expense statement which indicates whether they maintain their books and records using the cash or accrual method of accounting.
(4) Where the owner of the property has not owned the property and is without knowledge of the income and expenses of the operation of the property for the entire year for which the income and expense statement is required, then an income and expense statement will not be required for such year. However, the owner may be required to file a claim of exclusion pursuant to paragraph (3) of subdivision (e) of 19 RCNY § 33-02.
(5) In addition to the income and expense statement, for any year, the Commissioner of Finance may require owners of income-producing property with a tentative actual assessed value at or above an amount determined by the Commissioner to file an addendum to the income and expense statement in a format determined by the Commissioner, containing rent roll information for a period determined by the Commissioner. The addendum will not be required for a property with a tentative actual assessed value of less than $750,000 for the tax year during which filing of the income and expense statement is required. Any addendum required by this paragraph shall be considered to be a part of the income and expense statement and any filing requirement contained in these rules for the income and expense statement shall also be applicable to the addendum.
(1) An owner of income-producing property will not be required to file an income and expense statement if the net lessee of the property files an income and expense statement for the property which contains complete information relating to the operation of the property, i.e., information from all net lessees of the property which reports all income derived from the property. Should both the owner and the net lessee fail to file a properly completed income and expense statement pursuant to 19 RCNY § 33-02(e), then the owner will be subject to the penalties provided in 19 RCNY § 33-03.
(2) Properties for which an income and expense statement is filed by a net lessee will not be included on the list provided to the Tax Commission pursuant to 19 RCNY § 33-03(b).
(3) Owners of income-producing property must file an income and expense statement notwithstanding the fact that the building was vacant for all or part of the calendar or fiscal year preceding the deadline for filing such statement, unless as of the deadline for filing the income and expense statement, the property is vacant due to an impending demolition and has no existing leases.
(4) The owner of a building situated on land that it leases must file an income and expense statement for the building. The owner of land subject to a ground lease must file a separate income and expense statement for the land unless the owner of a building situated on the leased land provides the leasehold rent for the building on his or her income and expense statement.
(5) Property leased by a subsidiary from a parent corporation is not considered owner-occupied for purposes of 19 RCNY § 33-01(b)(2)(iv) unless the subsidiary is wholly (100 percent) owned by the parent corporation. If a subsidiary is not wholly (100 percent) owned by the parent corporation, the parent corporation must file an income and expense statement for property leased to the subsidiary.
(6) Owners of residential condominium with commercial and/or professional space, and owners of residential cooperative buildings with more than 2,500 square feet of commercial and/or professional space, must file an income and expense statement, but income and expense information is required only for the commercial and/or professional portion of the property.
(7) If a property for which an income and expense statement is required is owned by either a government entity or a not-for-profit corporation, the income and expense statement may be filed by either the owner or, with respect to any space occupied by a commercial lessee, by such commercial lessee.
(8) With respect to power plants, generators, telecommunication lines and other equipment defined as real property in paragraphs (d), (e), (f) and (i) of subdivision 12 of § 102 of the Real Property Tax Law, other than special franchise property that is assessed pursuant to article 6 of the Real Property Tax Law, in addition to the requirement to file an income expense statement, the owner of such property must also file with the Department of Finance, no later than September 1 each year, a statement that includes a description of the use and the cost of:
(i) all such property owned by such owner in the City of New York as of the end of the reporting year;
(ii) any such property that was retired during the reporting year; and
(iii) any such property that was added to inventory during the reporting year, including any such property the construction of which remained in progress as of the end of the reporting year.
(9) Notwithstanding the provisions of 19 RCNY § 33-01(b)(1)(xv) and 19 RCNY § 33-01(b)(2)(vi), for space in a condominium or cooperative building that represents units that have not been sold and remain owned by the sponsor, the property owner must file an income and expense statement that includes rent roll information in a format determined by the Commissioner of Finance, but this requirement will not apply unless at least ten percent in the aggregate of the total number of units in the condominium or cooperative building remain unsold and remain owned by the sponsor (or if a condominium or cooperative consists of more than one building governed by the same board of managers or directors, at least 10% of the units in the buildings in the aggregate remain unsold and remain owned by the sponsor).
(1) The failure of an owner of income-producing property to submit a form RPIE by the filing deadline shall subject the owner to the penalties provided in 19 RCNY § 33-03.
(2) Notwithstanding the submission of a form RPIE by an owner, for purposes of 19 RCNY § 33-03, the term “failure to file an income and expense statement” may include, but not be limited to:
(i) failure to file in the electronic format prepared by the Department of Finance, or, in the event that the electronic filing requirement is waived by the Commissioner under 19 RCNY § 33-02(b)(2), failure to use the forms prepared by the Department of Finance;
(ii) failure to submit a separate income and expense statement for each parcel (consolidated statements may be submitted only for contiguous condominium lots operated as a single entity);
(iii) failure to complete forms in a legible manner;
(iv) failure to submit an addendum, when required under 19 RCNY § 33-02(c)(5);
(v) failure to file a substantially complete and accurate income and expense statement which shall include but shall not be limited to:
(A) failure to provide data for the appropriate accounting period; and
(B) failure to provide a complete and accurate and itemized list of income and expense data; or
(vi) in the event that the electronic filing requirement is waived by the Commissioner under 19 RCNY § 33-02(b)(2), failure to use the forms prepared by the Department of Finance, or failure to submit an income and expense statement containing the original signature of the owner(s) (the signature of an agent is anot acceptable unless a power of attorney is attached to the statement).
(3) (i) Owners of property who contend that they are excluded from the filing requirement based on any provision of paragraph (2) of subdivision (b) of 19 RCNY § 33-01, other than subparagraphs (i), (ii), (iii) or (vii) of such paragraph (2), must file with the Department of Finance a claim of exclusion on a form prepared by the Department, no later than the first day of June each year for as long as the owner claims that the property is excluded from the filing requirement. If the first day of June falls on a Saturday, Sunday or City of New York holiday, the deadline for filing will be the next business day.
(ii) In addition to the requirements of subparagraph (i) of this paragraph, owners of properties who claim that they are excluded from the filing requirement, and are required to file a claim of exclusion, must file a claim of exclusion on a form prepared by the Department no later than the June 1 that immediately follows the date on which the owner took title to the property. If the first day of June falls on a Saturday, Sunday or City of New York holiday, the deadline for filing will be the next business day.
(iii) Owners who erroneously claim to be excluded from the filing requirements shall be subject to the penalties set forth in § 11-208.1 of the Administrative Code and 19 RCNY § 33-03 for failure to file an income and expense statement. Owners whose claim of exclusion is approved by the Department must notify the Department of any subsequent change in the physical condition or use of their property which would result in their being required to file an income and expense statement in future years. Failure to notify the Department of Finance of such a change may result in the imposition of penalties for the year(s) in which an income and expense statement was required.
(iv) Owners of property who are required to file a claim of exclusion pursuant to paragraph (3) of subdivision (e) of 19 RCNY § 33-02 who file neither a timely claim of exclusion nor a timely income and expense statement will be subject to the penalties set forth in section 11-208.1 of the Administrative Code and 19 RCNY § 33-03.
(v) The Commissioner may for good cause extend the deadlines provided in subparagraphs (i) and (ii) of this paragraph for filing a claim of exclusion by a period not to exceed thirty days, except that with respect to residential class two properties held in the cooperative or condominium form of ownership, by a period not to exceed sixty days.
(vi) Notwithstanding the submission of a claim of exclusion by an owner, for purposes of 19 RCNY § 33-03, the term “failure to file a claim of exclusion” may include, but not be limited to:
(A) failure to file in the electronic format prepared by the Department of Finance, or, in the event that the electronic filing requirement is waived by the Commissioner under paragraph (2) of subdivision (b) of 19 RCNY § 33-02, failure to use the forms prepared by the Department of Finance;
(B) failure to submit a claim of exclusion containing the original signature of the owner or owners, or the signature of an agent accompanied by a power of attorney authorization);
(C) failure to submit a separate claim of exclusion for each parcel (consolidated claims of exclusion may be submitted only for contiguous condominium lots operated as a single entity); and
(D) failure to complete forms in a legible manner.
§ 33-03 Penalties for Failure to File.
(a) Monetary penalties.
(1) Owners of income-producing property who fail to file an income and expense statement by the first day of June, or in the event of an extension, by the extended due date, shall be subject to a penalty in accordance with the monetary penalty schedule set forth below, except as set forth in paragraph (2) of this subdivision. The final actual assessed valuation for the property promulgated in the calendar year in which the income and expense statement is required to be filed will be used to determine monetary penalties.
| Final Actual Assessed Valuation | Penalty Amount |
|---|---|
| $40,001 to $99,999 | $300 |
| $100,000 to $249,999 | $750 |
| $250,000 to $499,999 | $1,500 |
| $500,000 to $999,999 | $3,000 |
| $1,000,000 to $4,999,999 | $5,000 |
| $5,000,000 to $9,999,999 | $20,000 |
| $10,000,000 to $14,999,999 | $40,000 |
| $15,000,000 to $24,999,999 | $60,000 |
| $25,000,000 and above | $100,000 |
~
(2) Owners of income-producing property who fail to file an income and expense statement for three consecutive years shall be subject to a penalty of five percent of the final actual assessed value for the property promulgated in the calendar year in which such a statement was to be filed.
(3) [Reserved.]
(4) Owners of income-producing property who are required to submit a claim of exclusion but fail to do so by the first day of June, or in the event of an extension, by the extended due date, will be subject to a penalty. Such penalty will not exceed the following amounts:
(i) one hundred dollars for failure to submit a claim of exclusion in one year;
(ii) five hundred dollars for failure to submit a claim of exclusion in two consecutive years;
(iii) one thousand dollars for failure to submit a claim of exclusion in three consecutive years or more.
(5) Any penalties prescribed in subdivision (a) of 19 RCNY § 33-03 when entered in the records of the Department of Finance will be a lien on the real property as to which the statement or claim was required to be filed and will continue to be a lien until paid. The lien may be enforced by tax lien sale, in rem foreclosure, or any other means provided by law for enforcement of tax liens.
(6) If any penalty imposed under this subdivision is not paid within thirty days from the date it is entered in the records of the Department of Finance, interest will accrue on the amount of the penalty at the rate applicable to the affected real property for delinquent real property taxes, calculated from the date of entry to the date of payment.
(7) Innocent purchasers. In cases where the closing or finalizing of the sale of real property occurs after the filing deadline for income and expense statements and precedes the later of the publication of both lists described in paragraph (7) of subdivision (d) of section 11-208.1 of the Administrative Code or the first property tax bill to reflect a penalty imposed on such property for failure to file an income and expense statement or, when required, a claim of exclusion, the Commissioner may waive any such penalty and/or cancel the lien imposed as a result of such penalty, upon request of the owner of the property, provided the owner files in the electronic format prepared by the Department a properly completed innocent purchaser waiver request no later than one hundred and twenty days following the later of the publication of both lists or the first property tax bill to reflect such a penalty.
(8) The Commissioner, may for good cause, waive the requirement that the innocent purchaser waiver request form be filed electronically and permit the innocent purchaser waiver request form to be filed by means of a paper form. A request for waiver of the electronic filing requirement must be made in writing no later than ninety days following the later of the publication of both lists described in paragraph (7) of subdivision (d) of section 11-208.1 of the Administrative Code or the first property tax bill to reflect such a penalty. Any filing in paper format must be filed with the New York City Department of Finance at such address as may be designated by the Department.
§ 33-04 Hearings.
(a) General provisions.
(1) Notice of failure to file timely statements and opportunity to cure.
(i) Owners of income-producing property who fail to file a timely income and expense statement or, where required, a claim of exclusion, in compliance with section 11-208.1 of the Administrative Code and these rules will be notified of such failure to comply and of the opportunity for a hearing prior to the imposition of the penalties contained in 19 RCNY § 33-03.
(ii) Except as provided in subparagraph (iii) of this paragraph, the notice will also provide that such owners may avoid penalties for failure to file by filing a properly completed income and expense statement or, where required, a claim of exclusion, no later than thirty days following the date of the notice.
(iii) Notwithstanding any other provision of these rules, or any other determination by the Department of Finance of failure to file, if the Department of Finance determines by audit that an owner failed to file a substantially complete and accurate income and expense statement, the provisions of subparagraph (ii) of this paragraph do not apply with respect to the audit determination and, therefore, the owner may not avoid penalties for failure to file with respect to the audit determination by filing a properly completed income and expense statement.
(2) Opportunity for hearings. Owners of income-producing property who were served with a notice pursuant to this subdivision shall have thirty days from the date of such notice to request a hearing before the Department of Finance by filing a petition for hearing on the form provided by the Department. Failure to file a petition for a hearing within thirty days of the date of such notice shall result in the imposition of such penalty or penalties as the Commissioner of Finance deems appropriate and as provided for in these rules.
(3) Where to file petitions. Petitions shall be filed in person or by mail with the New York City Department of Finance at such address as may be designated by the Department.
(4) Eligible petitioners. A petition may be filed only by an owner or by a duly authorized representative of the owner.
(5) Designation of hearing officer. The Commissioner of Finance shall designate persons to serve as hearing officers to hear petitions filed pursuant to these rules. Such persons need not be employees of the Department of Finance.
(6) Representation of petitioners.
(i) An individual owner may file a petition on his or her own behalf and may present his or her own case at the hearing. A partnership may file a petition on its own behalf and may present its own case through a general partner without filing a power of attorney. A corporation may file a petition on its own behalf and may present its own case at the hearing through an officer or an employee for whom a duly authorized power of attorney is submitted.
(ii) Attorney or agent with power of attorney. A petitioner may appear by an attorney or agent in a proceeding under these rules if such attorney or agent appears with the petitioner or files a power of attorney in proper form authorizing the attorney or agent to represent the petitioner.
(iii) In any case in which a power of attorney has been filed and thereafter the petitioner desires to authorize an additional or a new attorney or agent, a new power of attorney must be filed revoking any and all powers of attorney previously filed with respect to the same proceeding. The revocation of the authority of the former attorney or agent shall not be effective so far as the Commissioner of Finance is concerned until the petitioner gives notice to that effect to the Commissioner.
(iv) The power of attorney shall be filed with the hearing officer, unless one was filed with the petition.
(7) Matters reviewable. The purpose of the hearing is to determine whether:
(i) an income and expense statement or, where required, a claim of exclusion, was not filed, and if it was not filed, what penalties, if any, should be imposed;
(ii) an income and expense statement or, where required, a claim of exclusion, was not timely filed, and if it was not timely filed, what penalties, if any, should be imposed; and/or
(iii) a defective income and expense statement was filed, and if so, what penalties, if any, should be imposed;
(8) Consolidation, joinder, severance.
(i) Any party may request the consolidation of hearings relating to the same owner or parcel.
(ii) Any party may request the severance of a case relating to another parcel when such parcel is not owned or controlled by the same owner or identical issues of fact or law are not involved.
(iii) Consolidation, joinder or severance of any case or issue shall be permitted at the discretion of the hearing officer, subject to the provisions of 19 RCNY § 33-06.
(9) All final decisions rendered by the Commissioner of Finance are reviewable under article 78 of the Civil Practice Law and Rules.
(10) Ex parte communications. There shall be no ex parte communication with respect to the merits of any pending case between any party and the hearing officer.
(11) Burden of proof. The petitioner shall have the burden of establishing each fact relevant to a determination of the matters reviewable under 19 RCNY § 33-04(g).
(1) Petition for hearing by mail.
(i) A petition for a hearing by mail may be made only on a form provided by the Department of Finance, and must be made within the time prescribed for a request for a hearing pursuant to subdivision (a) of this section.
(ii) Submission of additional documents. The petitioner may submit legal memoranda, additional documents or other material with the petition in support of the petitioner’s position. The Department of Finance may also submit additional material to the hearing officer to support its position within a reasonable time as determined by the hearing officer.
(2) Petition for hearing by website.
(i) A petition for a hearing by website may be made only via the Department’s website in accordance with the instructions that are found on the website for making such a request.
(ii) Submission of additional documents. Except as otherwise provided in paragraph (3) of this subdivision, no documents other than the electronically filed petition may be submitted by the petitioner. The Department of Finance may submit additional material to the hearing officer to support its position within a reasonable time as determined by the hearing officer.
(3) Request for additional documentation. Notwithstanding any other provision of this subdivision, the hearing officer may request additional memoranda or evidence from the parties where the hearing officer deems the submissions insufficient for a decision to be rendered.
(4) At any time after approval of a request for a hearing by mail or website, the Commissioner of Finance may by subpoena require the production of books, papers and documents required to be kept by statute or rule.
(5) The Commissioner of Finance shall issue a final determination based on the submissions that contains findings of fact, conclusions of law, and the dollar amount of the penalty imposed, if any. A copy of the determination shall be mailed to the petitioner and to the petitioner’s representative.
(1) Subpoena.
(i) At any time during a proceeding, the Commissioner of Finance may by subpoena require the attendance of witnesses and the production of books, papers and documents required to be kept by statute or rule.
(ii) Upon request of a party not represented by an attorney, the Commissioner of Finance may issue subpoenas to require the attendance of witnesses at a hearing or to require the production of documentary evidence. Such request shall be made to the hearing officer by submitting a proposed subpoena. If the request is approved, service of the subpoena shall be the responsibility of the requesting party. An attorney may subpoena a witness or the production of documents as provided by article 23 of the Civil Practice Law and Rules.
(2) Hearing officer.
(i) The hearing shall be conducted by a hearing officer, who shall be authorized to:
(A) administer oaths and affirmations;
(B) regulate the course of the hearing, set the time and place for continuing the hearing, and fix the time for filing of legal briefs, memoranda and other documents;
(C) rule upon offers of proof and receive relevant evidence;
(D) require the parties at any time during the hearing to state their respective positions in support of any issues under consideration in the case;
(E) question any party or witness for the purpose of clarifying the record;
(F) take any other action for a speedy and expeditious hearing.
(3) Hearing schedule.
(i) The hearing shall be scheduled as soon as is practicable. The parties shall be given notice of the hearing date no fewer than twenty days prior to such date. The notice shall include the time, place and nature of the hearing.
(ii) No request for postponement of the hearing date will be considered unless a written application setting forth good cause for the postponement is received by the hearing officer within ten calendar days after mailing of the hearing notice. In the event of an emergency, however, a postponement may be considered on less notice than provided herein. A postponement may be granted only in writing by the hearing officer.
(4) Evidence.
(i) At the hearing, the parties shall have the right to call and examine witnesses, to introduce exhibits, and to cross-examine opposing witnesses.
(ii) No decision or determination shall be made except upon consideration of the record as a whole and as supported by the evidence. In the discretion of the hearing officer, technical rules of evidence need not be applied. However, effect shall be given to the rules of privilege recognized by law. Objections to evidentiary offers may be made and shall be noted in the record.
(5) Failure to appear. A default shall be entered upon the failure of the petitioner to appear at a hearing or at any adjourned date thereof, provided the petitioner has been given notice of the hearing date, and no written postponement has been granted pursuant to 19 RCNY § 33-04(c)(3). In the event of a default, the hearing shall be concluded and a final determination shall be issued pursuant to 19 RCNY § 33-04(c)(7) based on the record, if any, previously made.
(6) Hearing record. Hearings shall be transcribed verbatim or recorded by electronic recording devices. A copy of the transcript or electronic recording may be purchased at such rates as may be fixed by the Commissioner of Finance. If any party deems the hearing record to be inaccurate in any material respect, that party shall promptly notify the other parties and the hearing officer not later than five calendar days from receipt of the hearing record, specifying the portions of the record believed to be inaccurate.
(7) Final determination. Upon completion of the hearing, the Commissioner of Finance shall issue a final determination containing findings of fact, conclusions of law, and the dollar amount of the penalty imposed, if any. A copy of the determination shall be mailed to the petitioner and to the petitioner’s representative.
§ 33-05 Mailing Rules.
(a) Date of filing. Any form or document that is permitted under these rules to be filed in paper format and which is required to be filed within a prescribed period or on or before a prescribed date under authority of any provision of § 11-208.1 of the Administrative Code, or any regulation enacted relating to the administration of such provision, that is mailed, shall be deemed delivered as of the date of the United States Postal Service postmark stamped on the envelope.
(1) Any form or document that is permitted under these rules to be filed in paper format that is mailed will not be considered to be timely filed unless the document is mailed in accordance with the following requirements:
(i) The document must be contained in an envelope or other appropriate wrapper and properly addressed to the Commissioner of Finance, bureau, office, officer or person with which or with whom the document is required to be filed.
(ii) The envelope containing the document must be deposited in the mail of the United States within the prescribed period or on or before the prescribed date with sufficient postage prepaid. For this purpose, such document is considered to be deposited in the mail of the United States when it is deposited with the domestic mail service of the United States Postal Service. The domestic mail service of the United States Postal Service includes mail transmitted within, among and between the United States, its territories and possessions, and Army-Air Force (APO) and Navy (FPO) post offices.
(iii) The envelope or other wrapper containing the document must bear a date stamped by the United States Postal Service which is within the prescribed period or on or before the prescribed date for the filing of such document, including any extension granted for such filing. If the postmark stamped by the United States Postal Service on the envelope or wrapper containing the document does not bear a date which falls within the prescribed period or on or before the prescribed date for filing such document the document will be considered not to be timely filed, regardless of when the envelope or wrapper containing such document is deposited in the mail. The sender assumes the risk that the envelope containing the document will not bear a postmark date stamped by the United States Postal Service within the prescribed period or on or before the prescribed date for the filing of such document (including any extension of time granted for such filing). See paragraph (3) of this subdivision (b) regarding the use of registered mail or certified mail. Furthermore, if the postmark made by the United States Postal Service on the envelope or wrapper containing the document is not legible, the person who is required to file the document has the burden of proving when the postmark was made.
(2) Postmarks not made by the United States Postal Service.
(i) If the postmark on the envelope or wrapper containing the document is made by other than the United States Postal Service, the document will be deemed to be timely filed or timely made in accordance with the following requirements:
(A) the postmark so made must bear a date which falls within the prescribed period or on or before the prescribed date for the filing of such document, (including any extension granted for such filing); and
(B) the document must be delivered by United States mail, within five days of the date of the postmark, to the Commissioner of Finance, bureau, office, officer or person with which or with whom such document is required to be filed.
(ii) In case the document is received after five days from the date of the postmark, such document will be treated as having been timely filed, if the person who is required to file the document establishes:
(A) that it was actually deposited in the mail within the prescribed period or on or before the prescribed date for filing the document;
(B) that the delay in receiving the document was due to a delay in the transmission of the mail; and
(C) the cause of such delay.
(iii) If the envelope or wrapper containing the document has a postmark made by the United States Postal Service in addition to the postmark not so made, the postmark which was not made by the United States Postal Service will be disregarded, and whether the envelope was timely mailed will be determined solely by applying the provision of 19 RCNY § 33-05(a).
(3) Registered and certified mailing.
(i) If an envelope or wrapper containing a document is sent by United States registered mail, the date of such registration is treated as the postmark date and the date of delivery.
(ii) If an envelope or wrapper containing a document is sent by United States certified mail and the sender’s receipt is postmarked by the postal employee to whom such envelope is presented, the date of the postmark on such receipt is treated as the postmark date of the document and the date of delivery.
(4) Document defined. The term “document”, as used in this section, means but shall not be limited to any return, report, declaration, claim, statement, form, notice, petition, application, or other document required to be filed under authority of any provision of § 11-208.1 of the Administrative Code, or any regulation relating to the administration of such provision.
§ 33-06 Confidentiality – Disclosure Restrictions.
(a) Neither income and expense statements filed in accordance with § 11-208.1 of the Administrative Code and these rules, nor any information set forth or contained in such statements, shall be disclosed to any person or entity, except:
(1) to the Tax Commission;
(2) to the property owner who filed such income and expense statement or the duly authorized representative of such owner;
(3) to the duly authorized agent of the Department of Finance or the Tax Commission whose services have been retained in connection with the review, analysis, or compilation of information contained in such statements upon the execution of an agreement to maintain the confidentiality of such statements;
(4) to the legal representative of the Department of Finance or Tax Commission where an owner has brought an action to correct an assessment of real property; or
(5) pursuant to proper judicial order or as otherwise provided by law.
§ 33-07 Effective Date.
These regulations shall take effect immediately, and shall apply to income and expense statements and certificates of exclusion that are required to be filed by September 1, 1989, or, if the deadline is extended, by the deadline set by the Commissioner of Finance, and for every year thereafter.
§ 34-01 Definitions.
Unless the context of these Rules require otherwise, the definitions contained in this section shall apply throughout this chapter.
City. “City” means the City of New York.
City Charter. “City Charter” means the Charter of the City of New York.
Code. “Code” means the Administrative Code of the City of New York.
Commissioner of Finance. “Commissioner of Finance” means the Commissioner of Finance of the City of New York.
Compromise agreement. “Compromise agreement” means the agreement between the Department and the taxpayer as described in subdivision (b) of 19 RCNY § 34-06.
Compromise amount. “Compromise amount” means the total amount required to be paid in accordance with the terms of the compromise agreement.
Conciliation Bureau. “Conciliation Bureau” means the Conciliation Bureau of the Department of Finance of the City of New York established under 19 RCNY § 38-02 as authorized by section 11-124 of the Code.
Department. “Department” means the Department of Finance of the City of New York.
Doubt as to collectibility. “Doubt as to collectibility” means the taxpayer has been discharged in bankruptcy or can be shown, by proof, to be insolvent.
Doubt as to liability. “Doubt as to liability” means there is some doubt as to the taxpayer’s liability and whether the Department could prevail against the taxpayer in administrative or judicial proceedings.
Fixed and final matter. “Fixed and final matter” means a matter where the tax liability or administrative action taken by the Department has been finally fixed and the taxpayer no longer has any right to administrative or judicial review.
Insolvent. “Insolvent” means a person’s liabilities exceed the fair market value of the person’s assets. In determining the liabilities of a taxpayer, all liabilities will be included, including the amount of the taxpayer’s tax debt.
Non-final matter. “Non-final matter” means a matter that is not a fixed and final matter.
Statutory notice. “Statutory notice” means any written notice of the Commissioner of Finance that gives a person the right to a hearing in the Tribunal or the right to request a conciliation conference, including but not limited to, a notice of determination of tax due, tax deficiency or a disallowance of a refund.
Taxpayer. “Taxpayer” shall mean the person or persons primarily liable for a tax or a vault charge, including interest, penalties and additions to the tax or charge, and any person who is or may be secondarily liable for any such tax or charge under any provision of title 11 of the Code or any other provision of law, including any person liable under any trust fund relationship with the City or as a transferee of or successor-in-interest to any other person liable for the tax or charge.
Tribunal. “Tribunal” shall mean the New York City Tax Appeals Tribunal as defined in 20 RCNY § 1-02.
§ 34-02 General Authority.
(a) The Commissioner of Finance is authorized to compromise any civil liability for income or non-property excise taxes or annual vault charges or any warrant or judgment for income or non-property excise taxes or annual vault charges administered by the Department of Finance, and the civil penalties, interest and additions to tax or charge in connection therewith. Fixed and final matters may be compromised only on the basis of doubt as to collectibility. Non-final matters may be compromised only on one or both of the following grounds:
(1) doubt as to collectibility;
(2) doubt as to liability.
§ 34-03 Filing.
(a) Form, Contents and Supporting Documentation.
(1) An offer-in-compromise must be filed on the form or forms prescribed by the Department for such purpose at the address prescribed in the forms. In the discretion of the Commissioner of Finance, an offer-in-compromise may be filed on forms prescribed by another taxing authority provided that those forms contain the information required by this subdivision.
(2) Contents of offer-in-compromise. The offer-in-compromise must contain:
(i) the taxpayer’s name, address and taxpayer identification number (employer identification number or social security number);
(ii) the name, address and telephone number of the taxpayer’s representative (if applicable);
(iii) the tax liabilities included in the offer-in-compromise, which, in the case of an offer based in whole or in part on doubt as to collectibility, must consist of all outstanding liabilities for all City-administered income, non-property excise taxes and annual vault charges;
(iv) the total amount the taxpayer is offering to pay;
(v) a brief indication of the grounds for the offer-in-compromise; and
(vi) the taxpayer’s agreement to comply with the Department’s general conditions for accepting the offer-in-compromise (see subdivision (d) of 19 RCNY § 34-05).
(3) Supporting Documentation.
(i) An offer-in-compromise based in whole or in part on doubt as to collectibility requires a showing that the taxpayer has been discharged in bankruptcy or is insolvent. The taxpayer must submit a statement of financial condition and the other information and documents specified on the forms prescribed by the Department. The Department may require the submission of additional financial information or documents that the Department deems necessary, including current financial statements that have been audited by an independent licensed public accountant or an independent certified public accountant. The statement of financial condition, and any other information submitted to support an offer-in-compromise, becomes the property of the Department and will not be returned to the taxpayer.
(ii) An offer-in-compromise based in whole or in part on doubt as to liability must be supported by appropriate facts, evidentiary documents and legal arguments submitted in writing by the taxpayer. The Department may require the taxpayer to submit additional information or documents that the Department deems necessary. The acceptable offer-in-compromise amount will depend upon the degree of doubt determined by the Department in the particular case.
(4) The taxpayer shall file an original and three conformed copies of the required offer-in-compromise forms and supporting documentation.
(1) In fixed and final matters an offer-in-compromise may be filed at any time prior to the full payment of the liability.
(2) In non-final matters, an offer-in-compromise may be filed only after the issuance to the taxpayer of a statutory notice and before the non-final matter becomes a fixed and final matter. Where the taxpayer has requested a conciliation conference and/or filed a petition with the Tribunal:
(i) If the taxpayer has requested a conciliation conference and no conciliation decision has been issued and served in the matter, the offer-in-compromise may be filed during the time the matter is pending in the Conciliation Bureau;
(ii) If a conciliation decision has been issued and served, or if the taxpayer has not requested a conciliation conference, and the Tribunal has not issued a final decision and given notice of such decision, the offer-in-compromise must be filed within the statutory period (ordinarily 90 days) for filing a petition with the Tribunal or during the time the matter is pending in the Tribunal;
(iii) If the Tribunal has issued a final decision in the matter and given notice of such decision, the offer-in-compromise must be filed within the four-month period provided for the taxpayer to seek judicial review of the Tribunal’s decision.
(1) The filing of an offer-in-compromise shall not:
(i) constitute the filing of a request for conciliation (see Chapter 38 of Title 19 of these Rules) or a petition or exception to the Tribunal (see Title 20 of these Rules);
(ii) constitute cause for postponement of a conciliation conference or any hearing, motion or other proceeding in the Tribunal; or
(iii) suspend the running of the period of limitations for filing a request for a conciliation conference, a petition or exception to the Tribunal, or to seek judicial review of a Tribunal decision;
(iv) operate to stay the collection of any tax or charge liability. However, enforcement of collection may be deferred if the interests of the Department will not be jeopardized.
(2) In non-final matters, the filing of the offer-in-compromise constitutes the taxpayer’s waiver of the statute of limitations on the assessment of the tax liability involved for the period beginning on the day the offer-in-compromise is filed and ending six months after the date the offer-in-compromise is withdrawn or rejected. If the offer-in-compromise is accepted, as a condition of such acceptance, the taxpayer agrees to waive the statute of limitations as provided in paragraph (5) of subdivision (d) of 19 RCNY § 34-04.
§ 34-04 Review.
(a) Process.
(1) Where an offer-in-compromise is based solely on doubt as to collectibility, the Department’s Collections Division shall review the offer-in-compromise. If the offer-in-compromise was filed with a bureau or division of the Department other than the Collections Division, that bureau or division shall refer such offer-in-compromise to the Collections Division for review.
(2) Where the offer-in-compromise is based in part on doubt as to collectibility and in part on doubt as to liability, the offer-in-compromise shall be first reviewed by the Collections Division pursuant to paragraph (1) of this subdivision and thereafter by Office of Legal Affairs pursuant to paragraph (3) of this subdivision.
(3) Where an offer-in-compromise is based solely on doubt as to liability, the Department’s Office of Legal Affairs shall review the offer-in-compromise. If the offer-in-compromise was filed with a bureau or division of the Department other than the Office of Legal Affairs, that bureau or division shall refer the offer-in-compromise to the Office of Legal Affairs.
(4) If the offer-in-compromise is not complete when filed, the division reviewing the offer may hold the offer-in-compromise in abeyance. In such a case, the taxpayer will ordinarily have 30 days after notification from the division reviewing the offer in which to complete the offer-in-compromise and supply any required information or documentation, unless the taxpayer can demonstrate to the satisfaction of that division that more time is necessary. If the offer-in-compromise is not completed within the required time period, the offer will be deemed to have been withdrawn by the taxpayer under subdivision (c) of this section. The division reviewing the offer will give the taxpayer written notice of this deemed withdrawal.
(5) The acceptance of an offer-in-compromise will not be a ground for acceptance of any other subsequent offer-in-compromise regarding prior, concurrent, or subsequent periods or liabilities for the same or any other tax or charge.
(1) Procedure. An offer-in-compromise may be withdrawn by the taxpayer making the offer-in-compromise at any time prior to its acceptance or rejection. The Department may deem an offer-in-compromise to be withdrawn pursuant to paragraph (5) of subdivision (a) of this section if the offer-in-compromise is incomplete and requested information is not submitted to the Department in a timely manner.
(2) Effect. If an offer-in-compromise is withdrawn, the Department will have the same rights that it would have had with respect to any liability that was the subject of the offer-in-compromise, including all rights to enforce and collect the liability, had the offer-in-compromise not been submitted.
(1) agrees to pay an amount in addition to all amounts previously paid or collected against the tax liability, including all amounts to which the taxpayer may be entitled through overpayments of tax, interest or penalties, for periods ending before or as of the end of the calendar year in which the offer is accepted;
(2) agrees to immediately return to the Department any refunds of overpayments received by the taxpayer after the taxpayer’s offer was filed;
(3) agrees to waive the right to seek a refund of any payment of the compromise amount or any other amounts paid or collected against the liability that is the subject of the offer-in-compromise;
(4) agrees not to contest in court or otherwise, the amount of the liability to be compromised, and, in non-final matters, withdraws from any proceeding with respect to the liability pending in the Conciliation Bureau, the Tribunal or any other court;
(5) waives the running of the statutory period of limitations on collection of the liability to be compromised for the period beginning on the day the offer-in-compromise is filed and ending one year following the date on which the compromise amount has been paid in full (including any interest due on any installment thereof);
(6) agrees to comply with all provisions of the Code relating to filing of returns and paying required taxes in the five-year period beginning with the first day of the year in which the offer-in-compromise is accepted;
(7) is in compliance with all tax filing and payment requirements for periods not covered in the offer-in-compromise up to and including the year in which the offer-in-compromise is filed;
(8) agrees, in non-final matters, that the Department may proceed with any appropriate collection procedures for the compromise as if the matter were a fixed and final matter;
(9) meets any and all other conditions that the Department may also require as a condition of acceptance of an offer, including:
(i) entering into a signed agreement under which the taxpayer agrees to pay over a fixed percentage of the taxpayer’s future earnings or other income for a specific period of time;
(ii) pledging collateral or other security for the duration of any provision of the compromise agreement which allows for periodic payments as permitted under paragraph (2) of subdivision (c) of 19 RCNY § 34-06; or
(iii) providing a guarantee of the taxpayer’s obligations under the compromise agreement or any collateral agreement;
(iv) anything else deemed necessary given the facts of the case and the taxpayer’s circumstances.
(1) Where the offer-in-compromise is based solely on doubt as to collectibility, the Collections Division will recommend in writing acceptance or rejection of the offer-in-compromise.
(i) If the aggregate amount of the liability subject to the offer-in-compromise (including interest, additions to tax and penalties) is less than $25,000, the Collections Division shall send the offer-in-compromise, together with that Division’s recommendation directly to the Commissioner of Finance.
(ii) If the aggregate amount of the liability that is the subject of the offer-in-compromise (including interest, additions to tax and penalties) is $25,000 or more, the Collections Division shall submit the offer-in-compromise, together with the Collection Division’s recommendation, to the Office of Legal Affairs, which shall review the offer-in-compromise and the Collection Division’s recommendation. The Office of Legal Affairs shall give its recommendation as to whether the offer-in-compromise meets the requirements of subdivision (c) of 19 RCNY § 34-02, and shall submit its written recommendation along with the recommendation of the Collections Division and the offer-in-compromise to the Commissioner of Finance.
(2) Where the offer-in-compromise is based in part on doubt as to collectibility and in part on doubt as to liability, the Collections Division shall prepare its recommendation with respect to doubt as to collectibility. The Collections Division shall then submit its recommendation and the offer-in-compromise to the Office of Legal Affairs. The Office of Legal Affairs will recommend acceptance or rejection of the offer-in-compromise with respect to doubt as to liability. If the aggregate amount of the liability that is the subject of the offer-in-compromise (including interest, additions to tax and penalties) is $25,000 or more, the Office of Legal Affairs shall also give its recommendation as required under subparagraph (ii) of paragraph (1) of this subdivision. The Office of Legal Affairs shall then submit its written recommendation on doubt as to liability, its written recommendation under subparagraph (ii) of paragraph (1) of this subdivision, if required, the recommendation of the Collections Division on doubt as to collectibility and the offer-in-compromise to the Commissioner of Finance.
(3) In non-final matters where the offer-in-compromise is based solely on doubt as to liability, the Office of Legal Affairs shall submit its written recommendation directly to the Commissioner of Finance.
(4) Oral communications with any officer or employee of the Department regarding an offer-in-compromise will be considered to have minimal probative value and are strongly discouraged. Any recommendation to accept or reject an offer-in-compromise and the decision by the Commissioner of Finance to accept or reject an offer-in-compromise shall be based on the terms of the offer-in-compromise and the documentation and correspondence filed or submitted in support thereof.
(1) Upon the receipt of a recommendation or recommendations submitted to subdivision (e) of this section, the Commissioner of Finance will accept or reject the offer-in-compromise and will notify the taxpayer of the decision.
(2) In final matters where the amount to be compromised is more than $100,000, exclusive of civil penalties, interest, or additions to tax or charge, the Commissioner of Finance’s acceptance of the offer-in-compromise must be referred to a justice of the Supreme Court for approval, prior to sending notification of acceptance to the taxpayer.
§ 34-05 Rejection.
(a) Basis. The following exemplify reasons for rejecting an offer-in-compromise:
(1) failure to meet the statutory requirements (e.g., the taxpayer has not been discharged in bankruptcy or is not insolvent and/or the department can collect more through legal proceedings than the amount being offered);
(2) making a frivolous offer or filing an offer for the purpose of delaying the collection of tax liabilities;
(3) failure to verify financial information, where required;
(4) failure to make full financial disclosure (e.g., not fully disclosing all assets or income);
(5) there is evidence of conveyance of assets for less than fair market value;
(6) public policy considerations;
(7) the taxpayer has not demonstrated a good faith effort to repay/resolve the tax debt (e.g., where the taxpayer has displayed a wanton disregard for the tax debt over an extended period of time and disposed of significant assets and other holdings); or
(8) the tax liability sought to be compromised relates to any crime of which the taxpayer has been convicted. The causes for rejection of an offer-in-compromise set forth in this subdivision are not all-inclusive nor should any one cause be interpreted as restricting or otherwise limiting the Department’s discretion with respect to other causes.
(1) If an offer-in-compromise is rejected, the taxpayer will be promptly notified in writing. Further, the Department will have the same rights that it would have had with respect to the any liability that was the subject of the offer-in-compromise, including all rights to assess or collect the liability, had the offer-in-compromise not been submitted.
(2) Written notification of the taxpayer of the decision to reject the offer-in-compromise will not constitute a statutory notice. The acceptance or rejection of an offer-in-compromise is within the exclusive authority of the Commissioner of Finance and is not subject to administrative review by the Conciliation Bureau or the Tribunal.
(3) In non-final matters, the filing of the offer-in-compromise constitutes the taxpayer’s waiver of the statute of limitations as provided under paragraph (2) of subdivision (c) of 19 RCNY § 34-03, for the period therein provided, which includes the six-month period after the offer-in-compromise has been rejected. Such six-month period shall commence on the date of the Commissioner’s written notice of rejection.
§ 34-06 Acceptance.
(a) Notification. The Commissioner of Finance shall notify the taxpayer in writing of the decision to accept the offer-in-compromise. No acceptance of the offer-in-compromise shall be effective until:
(1) the taxpayer has received written notification of acceptance, and
(2) if required, the acceptance of the offer-in-compromise has been approved by a justice of the Supreme Court as provided in paragraph (2) of subdivision (f) of 19 RCNY § 34-04.
(1) The accepted offer-in-compromise shall constitute the compromise agreement between the taxpayer and the Department.
(2) The compromise agreement shall include the conditions for acceptance set forth in subdivision (d) of 19 RCNY § 34-04, the compromise amount (i.e. the amount paid or required to be paid under the terms of the compromise agreement), and the terms of payment of the compromise amount.
(3) No liability will be considered compromised, nor any warrant satisfied, until all obligations of the taxpayer under the compromise agreement are performed.
(4) The compromise agreement relates to the entire liability of the taxpayer, including taxes, interest, additions to the tax and penalties, with respect to which the offer-in-compromise is filed.
(5) Neither the taxpayer nor the Department shall be permitted to reopen a matter that is the subject of a compromise agreement for any reason, except as specifically provided in the compromise agreement or upon a showing of the taxpayer’s default, fraud, malfeasance or misrepresentation of a material fact.
(1) Generally, within 60 days of notification of acceptance, the taxpayer must make full payment of the compromise amount.
(2) If a taxpayer can demonstrate the need for periodic payments over a period of time, the Department may grant a reasonable period of time for payment of the compromise amount not to exceed two years. Where special circumstances are demonstrated, the two-year period may be extended in the discretion of the Commissioner of Finance. In the case of periodic payments, interest will be due at the established underpayment rate compounded daily on any deferred portion of the compromise amount from the date of notification of acceptance until the compromise amount is fully paid.
(1) Where the offer-in-compromise is accepted, a record of the offer-in-compromise will be placed on file in the office of the Commissioner of Finance. The record will include the written recommendations of the Collection Division, and/or the Office of Legal Affairs with respect to the offer-in-compromise.
(2) Where the aggregate amount of the liability subject to the offer-in-compromise is $25,000 or more (including interest, additions to tax and penalties), the record also shall contain a written statement indicating the basis for the decision of the Commissioner of Finance.
(3) The record also shall include a written statement of:
(i) the amount of taxes or charges that are the subject of the offer-in-compromise;
(ii) the amount of interest, additions to tax or penalties imposed on the taxpayer; and
(iii) the compromise amount.
(1) In fixed and final matters, the Department may proceed to collect the full amount of the original liability that was the subject of the offer-in-compromise (including all applicable interest and penalties), less all amounts previously paid to the Department, including any payments of the compromise amount;
(2) In non-final matters, the Department may proceed to docket a warrant for the full amount of the original liability that was the subject of the offer-in-compromise (including all applicable interest and penalties), less all amounts previously paid to the Department, including any payments of the compromise amount, and may proceed to collect that amount as if the matter were a fixed and final matter. The Department shall give the taxpayer written notice of any action taken under this subdivision.
§ 34-07 Other Rights and Powers Preserved.
Nothing in this chapter of these rules shall be read or construed to limit, diminish or otherwise impair any power the Department may exercise under the City Charter, the Code or any other provision of law, including, but not limited to, any authority the Department has to settle and adjust tax liabilities under paragraphs (a) and (e) of subdivision (2) of section 1504 of the City Charter.
§ 35-01 Certiorari Proceedings or Settlements Correcting Assessed Valuations.
Refunds of overpayments resulting from correction of assessed valuations by certiorari proceedings or tri-departmental settlements may be obtained only by filing formal application with the Financial Services Unit, 25 Elm Place, 4th Floor, Brooklyn, New York 11201. The following steps are to be taken in applying for a refund or transfer:
(1) Serve the Comptroller with a certified and conformed copy of each Court Order if costs are involved.
(2) Serve the New York City Commissioner of Finance with a certified copy of the Court Order if no costs are involved.
(1) All original receipted bills covering payments of the taxes involved. Where receipted bills are missing photostatic copies of both sides of the checks used in payment thereof must be presented together with affidavit setting forth efforts made to locate bills.
(2) All cancelled checks or photostatic copies of both sides thereof. If checks are missing, bank statements or letters may be submitted in lieu thereof showing clearance of check used together with an affidavit setting forth efforts made to locate check. If no proof of payment is available, a Surety Bond equal to the amount of refund must be submitted. However, if the refund claim for the Court Order period is less than $1,000.00 and proof of payment is not available for a cancelled check of less than $1,000.00, and the cash record register indicates that this payment has been made, no Surety Bond shall be required.
(3) A conformed copy of Court Order must be presented to the City Collector in addition to the certified copy served on either the Comptroller or Commissioner of Finance.
(4) If an Estate, Trust, Committee, Power of Attorney or other similar capacity is involved, an official certificate or copy of the Court Order showing appointment must be submitted.
§ 35-02 Ordinary Overpayments and Double Payments.
Application for refund or transfer of over and double payments of taxes, water charges, sewer rents and assessments may be made by submitting the following to the Financial Services Unit:
§ 36-01 Definitions.
(1) Buying, selling, leasing or otherwise providing goods or services.
(2) Operating a transient hotel, except that:
(i) a structure or part of any hotel owned or leased by a not-for-profit corporation to provide governmentally funded emergency housing is not considered a hotel for purposes of the ICAP; and
(ii) a condominium hotel unit or timeshare hotel unit is part of a transient hotel where the property as a whole is operated as a transient hotel. An individual condominium or timeshare unit located in a transient hotel building may qualify for abatement benefits under this chapter if the unit is:
(A) made available to the general public at large for a minimum of 183 days during the calendar year on terms and dates which are consistent with standards in the hotel industry; and
(B) not occupied for more than 183 days in any calendar year by
(I) the owner or any relative of the owner; or
(II) any employee of the owner, or any employee of any corporation, partnership, limited liability corporation or other entity owner or controlled by such owner.
(3) Operating a theater or other entertainment business.
(4) Manufacturing conducted in a building or individual condominium unit where less than 75 percent of the floor area upon completion of construction is used for manufacturing.
(5) Providing information or services to businesses or investors on a nonprofit, limited profit, or cooperative basis, including operating a stock or commodity exchange, insurance rating bureau, testing service, clearinghouse, wire service, buying service, or private label company or the like.
(6) Providing computer software development and services, including:
(i) internet and web related activities;
(ii) computer graphics and designs; or
(iii) desk-top publishing.
(7) Operating any other lawful businesses, including governmental or not-for-profit activities.
(8) Operating repair of equipment and service businesses such as heating, ventilation and air conditioning (“HVAC”), plumbing and refrigeration.
(9) Operating nursing homes or adult care facilities.
(1) when relating to the construction of a new building or structure, the earlier of the date on which:
(i) the department of buildings issues a final certificate of occupancy; or
(ii) an architect or engineer certifies to the department of finance that construction is complete.
(2) when relating to modernization, rehabilitation, expansion or improvement of an existing building or structure work, the earlier of the date on which an architect or engineer certifies to the department of finance that construction is complete.
Construction of buildings or structures for which benefits have been approved must be completed no later than five years after the date the first building permit is issued, or if no permit was required, after the completion of construction. Failure to complete construction within such time period will result in the loss of the inflation protection benefits described in 19 RCNY § 36-10(l).
(1) Areas used for manufacturing activities. Areas of a building used for manufacturing activities include, but are not limited to:
(a) space used to house or repair equipment used for assembly, fabrication or processing work;
(b) space used to store raw materials, semi-finished or finished goods for short periods before or after assembly, fabrication or processing in normal quantities for the manufacturing activity involved;
(c) space used to ship or receive such raw materials or goods;
(d) space used to store normal quantities of supplies and spare parts for use in the manufacturing activity;
(e) testing and research laboratories operated in connection with manufacturing activities;
(f) cafeterias, locker rooms and other facilities for the workers engaged in manufacturing activities;
(g) office space, not in excess of 10 percent of the total floor area, used directly in the administration of the manufacturing activity; and
(h) other space used for activities necessarily done at the same site as the manufacturing activity and integrally related to such activity.
(2) Workers engaged in manufacturing activities. Workers engaged in manufacturing activities are workers performing assembly, fabrication or processing or related immediate supervision, equipment repair or maintenance, goods handling, testing or research.
(3) Specific uses. Manufacturing activities include, but are not limited to:
(a) printing, but not including publishing or the service of taking retail orders for material to be printed; printing is characterized by the production of multiple copies of identical, or nearly identical, written material or designs on paper or other tangible material;
(b) reproduction or processing of photographic film, audio or video media, or magnetic or other data storage media, but not including creation of the original image, sound or data;
(c) scientific or technical testing or research to develop or improve products of other manufacturing activities;
(d) shipbuilding or repair;
(e) rebuilding or repairing stationary machinery or equipment used in other manufacturing activities;
(f) rebuilding other machinery or equipment;
(g) processing or packaging of food products for wholesale distribution;
(h) packaging of dry goods for a manufacturer or wholesaler, but not including packaging done at an establishment used for retailing, wholesaling or warehousing activities;
(i) pattern-making and cutting cloth for garments, sewing and finishing garments, including custom made garments, except activities done in a retail establishment; and
(j) building theatrical scenery, other than activities done in a theater or on the set of a film or television studio.
(4) Non-manufacturing uses.
(a) Uses which are not permitted in a manufacturing district, as defined by the Zoning Resolution, are not manufacturing activities, including:.
(i) construction, repair, operation or maintenance of real property, including activities performed in a building contractor’s shop, or the preassembly of structural elements or service equipment for installation in a building;
(ii) generation, collection, storage, transmission distribution or sale of gas, electricity, steam, water, refrigeration, cable television, telephone, telegraph or other one-way or two-way communication service, delivered through mains, pipes, cables, lines or wires;
(iii) collection, removal, carting, processing or disposal of sewerage, drainage, wastes, garbage or trash;
(iv) broadcasting, transmission or reception of television, radio or other electromagnetic signals;
(v) transportation of passengers or goods;
(vi) operation of a public or private warehouse;
(vii) operation of a showroom;
(viii) operation of a workshop, studio, sound stage, set or other place for creation of original works of art, films or recordings; or
(ix) buying, selling, leasing or providing goods or services.
(b) [Reserved.]
(c) The following activities, except as specifically provided in paragraphs (2) and (3) of this subdivision, are not manufacturing activities:
(i) general management;
(ii) storage, shipping or receiving of materials and finished goods;
(iii) maintenance, repair or construction of real property;
(iv) professional, clerical or information processing activities;
(v) buying, selling, leasing or providing goods or services;
(vi) activity conducted for the purpose of retail sale on the premises; or
(vii) utility services.
(1) A “peaking unit” will include all real property used in connection with the generation of electricity and any facilities used to interconnect the peaking unit with the electrical transmission or distribution system, but will not include any facilities that are part of the electric transmission or distribution system; it may be comprised of a single turbine and generator or multiple turbines and generators located at the same site.
(2) Notwithstanding any provision of this title to the contrary, a peaking unit will be considered industrial property. Peaking units will not be considered utility property.
(3) The abatement benefit schedule for peaking units is set forth in 19 RCNY § 36-12(c).
(1) “Net square footage” means square footage within a room or area of a building, measured by the inside wall-to-wall dimensions.
(2) “Gross square footage” means the total amount of square footage in a building. It includes below grade space, elevator shafts, vertical penetrations, equipment areas, ductwork shafts, and stairwells, as well as the usable square footage occupied by or available to tenants.
(3) “Rentable square footage” means the net square footage of the building plus a pro-rata share of building common areas.
aa. “Temporary commercial incentive area boundary commission” means the commission described in Section 11-274 of the Administrative Code.
bb. “Utility property” means property and equipment as described in Paragraphs (c), (d), (e), (f), and (i) of Subdivision 12 of Section 102 of the Real Property Tax Law that is used in the ordinary course of business by its owner or any other entity, or property as described in Paragraphs (a) and (b) of such Subdivision 12 that is owned by any entity that uses, in the ordinary course of business, property and equipment as described in Paragraphs (c), (d), (e) and (f) and (i) of such Subdivision 12 without regard to the classification of such property and equipment for real property tax purposes pursuant to Section 1802 of such Law, except that any such property and equipment used solely to serve the building to which they are attached will not be deemed to be utility property.
§ 36-02 Areas Eligible for Abatement Benefits.
(1) The area in Manhattan bounded by Murray Street on the north starting at the intersection of West Street and Murray Street, running easterly along the center line of Murray Street; connecting through City Hall Park with the center line of Frankfort Street and running easterly along the center line of Frankfort and Dover Streets to the intersection of Dover Street and South Street; running southerly along the center line of South Street to Peter Minuit Plaza; connection through Peter Minuit Plaza to the center line of State Street and running northwesterly along the center line of State Street to the intersection of State Street and Battery Place; running westerly along the center line of Battery Place to the intersection of Battery Place and West Street; and running northerly along the center line of West Street to the intersection of West Street and Murray Street.
(2) The area in Manhattan defined as the special garment center district by Chapter one of Article XII of the Zoning Resolution of the City, which is the area in Manhattan bounded by the centerline of West 40th Street on the north between 7th and 8th Avenue; running southerly along the centerline of 7th Avenue to the center line of West 38th Street; running easterly along the centerline of West 38th Street to the centerline of Broadway; running southerly along the centerline of Broadway to the centerline of West 35th street to 7th Avenue and running southerly along the centerline of 7th Avenue to the centerline of West 34th Street; running westerly to the centerline of 8th avenue, running northerly to the centerline of West 35th Street to 100 feet east of 9th Avenue, running northerly to the centerline of West 39th Street, running easterly to 8th Avenue and running northerly to the centerline of West 40th Street.
(3) The area in Manhattan south of the center line of 59th Street, other than the areas designated renovation areas by Paragraphs (1) and (2) of this subdivision.
(1) The boundaries of special commercial abatement areas as designated by the temporary commercial incentive area boundary commission will be described on the department’s website.
(2) In accordance with Section 489-gggggg of the Real Property Tax Law and Section 11-274 of the Administrative Code, the temporary commercial incentive area boundary commission may designate an area in the City of New York, other than in the area lying south of the centerline of 96th Street in Manhattan, to be a special commercial abatement area if it determines that market conditions in the area are such that the availability of a special abatement is required in order to encourage commercial construction in such area.
§ 36-03 Application Procedures.
An applicant must receive approval for a series of milestones in order to receive ICAP tax abatement benefits.
(1) An entity is eligible to apply for ICAP benefits:
(i) if it is obligated to pay real property tax on the property, either by virtue of ownership or contract; or
(ii) if the property is exempt from real property taxation and the record owner or lessee of such property has entered into an agreement to sell or lease such property to another entity, provided that both parties to the agreement are co-applicants.
(2) Co-Application with public entity. A co-applicant with a public entity may be eligible for abatement benefits except benefits will not be available for any period for which the property is exempt from real property tax because it is owned or controlled by a public entity. Abatement benefits will only be available if the recipient meets the requirements of Subdivision g of Section 11-270 of the Administrative Code.
(3) Multiple buildings. Where a completed project will result in creating two or more buildings, and separate building permits were obtained, a separate application must be filed for each permitted building.
(1) An applicant must submit a completed preliminary application before issuance of the first building permit, or if no permit is required, the start of construction. The preliminary application must be made on the form prescribed by the Commissioner. The completed preliminary application must be accompanied by a narrative describing the proposed project, including:
(i) the project site;
(ii) the proposed improvement(s);
(iii) the proposed uses of the building or structure upon completion of improvements; and
(iv) whether the improvements are building-wide or limited to specific building systems or renovations to particular areas (such as specific floors or lobby) of the building.
(2) Failure to file a preliminary application Certificate of Eligibility for ICAP benefits before receipt of the first building permit, or if no permit is required, the start of construction, will disqualify the project from receiving benefits under this program.
(3) The preliminary application deadline for ICAP benefits is March 1, 2019. Work performed pursuant to a building permit first issued after April 1, 2019, shall not be included in the project, except as otherwise provided by statute.
(4) Work excluded from the project shall not be considered for purposes of meeting the minimum required expenditure or determining the completion date.
(1) For projects with a total estimated cost of between $750,000 and $1,500,000 an ICAP applicant must certify that it accessed the directory of City certified M/WBE business enterprises (“directory”). The ICAP applicant must file the certification with the department in conjunction with the final application for benefits along with a report of whether or not efforts were made by the applicant to include Minority- and Women-Owned business enterprises in the construction work on property for which benefits are sought and describe those efforts.
(2) For projects with a total estimated cost of $1,500,000 or more ICAP applicants must comply with the following M/WBE requirements to obtain abatement benefits:
(i) After filing a preliminary application for benefits, the applicant must inform the division of contracting and subcontracting opportunities at construction sites where the applicant will be performing construction work subject to benefits pursuant to this part. The division shall make information on such contracting and subcontracting opportunities available to the general public by posting them on its website.
(ii) The ICAP applicant must review the directory to identify Minority- or Women-Owned business enterprises that may be qualified to perform contracting or subcontracting work on construction projects subject to benefits pursuant to this part.
(iii) For each subcontract on the project, the ICAP applicant must solicit or arrange for the solicitation of bids from at least three Minority- or Women-Owned enterprises to perform contracting work.
(iv) The ICAP applicant must maintain records demonstrating its compliance with these M/WBE requirements.
(v) When filing a final application for benefits with the department, the ICAP applicant must certify that it has complied with and will continue to comply with the M/WBE provisions. The certification must also include: (A) the name and contact information of every minority or women-owned business enterprise that the applicant solicited bids from and (B) whether any such Minority- or Women-Owned firm was awarded a subcontract.
(vi) Work performed by an applicant’s contractors or subcontractors is eligible construction work except when such work is not included in the project description, contained in the final application or an amendment thereto.
(vii) The division shall have authority to audit the records maintained by each applicant to ensure compliance with the requirements of such subdivision.
(viii) The applicant must maintain records demonstrating its compliance with the provisions of this subdivision.
(3) Each ICAP application must contain a statement that the ICAP applicant and its contractors and subcontractors agree to be equal opportunity employers and comply with all applicable requirements of Executive Order 50 of 1980, as amended by Executive Order 94 of 1986, Executive Order 108 of 1986, and Executive Order 159 of 2011 (“Executive Order 50”), and the rules of the division.
(4) ICAP applicants must file an employment report with the division for projects with a total estimated cost of $2,500,000 or more or if any subcontractor will perform construction work with a total estimated cost of $1,000,000 or more. If the ICAP applicant or any of its contractors or subcontractors will not perform work meeting these estimated dollar thresholds, the ICAP applicant must file a letter with the division that the applicant or subcontractor will not perform construction work having such an estimated cost.
(5) (i) The division will inform the Commissioner in writing when an applicant or its contractors or subcontractors, or any successor to such applicant, or its contractors or subcontractors, has failed to comply with any requirement of Executive Order 50 or the rules of the division, whereupon the division may issue a written recommendation to the Commissioner that any benefit provided under this Chapter be denied, suspended, revoked or terminated.
(ii) If the Commissioner has determines, in accordance with the procedures in 19 RCNY § 36-15, that an ICAP applicant, contractor, or subcontractor has made false or misleading statements or omissions in employment reports provided to the division, all benefits will be revoked from the date of the false statement or omission.
(1) An applicant must submit to the department a completed final application no later than one year from the date of issuance of the first building permit for construction work on the project, or when construction work does not require a building permit, no later than one year from the date of commencement of construction on the project, for all projects including new projects as described in 19 RCNY § 36-05(a). Construction does not have to be completed prior to submitting the final application. Stop work orders issued by the department of buildings will not extend the deadline for filing the final application.
(2) Failure to file a final application no later than one year from the date of issuance of the first building permit for construction work on the project, or when construction work does not require a building permit, no later than one year from the date of commencement of construction on the project, will disqualify the project from receiving benefits under this chapter.
(3) The final application must be made on the form prescribed by the department. As part of the final application the applicant must provide a narrative description of the project which must include:
(i) A written description of the proposed project stating the specific work to be undertaken including the floor area (below grade and above grade floors and roof) and location within the property of space created or affected by the work;
(ii) List each permit number and the work associated with such permit, including elevator permits;
(iii) List any work that did not require a permit;
(iv) Date or anticipated date of start of construction;
(v) Estimated date of completion of project or actual date of first temporary certificate of occupancy or final certificate of occupancy, and include copies of any certificate of occupancy issued;
(vi) Contractors and sub-contractors by trade, including addresses;
(vii) Cost of construction broken down by major categories of expenses;
(viii) Number and location of buildings on project property and where multiple buildings exist on a lot or project site, include a survey showing each building; and
(ix) (A) Statement of current or prior use by square foot; and
(B) Statement of proposed use by square feet, distinguishing between commercial and residential use.
(4) The applicant must also provide copies of all executed construction contracts or a statement from the engineer or architect detailing cost estimates.
(5) The department reserves the right to require that any documents submitted in support or as part of any application be certified.
(6) No ICAP benefits will be granted for any construction work unless the applicant files with the final application an affidavit setting forth the following information:
(i) statement that within the seven years immediately preceding the date of the final application for benefits, neither the applicant, nor any person owning a substantial interest in the property, nor any officer, director or general partner of the applicant or such person was finally adjudicated by a court of competent jurisdiction to have violated Section 235 of the real property law or any section of Article 150 of the penal law or any similar arson law of another state with respect to any building, or was an officer, director or general partner of a person at the time such person was finally adjudicated to have violated such law; and
(ii) a statement setting forth any pending charges alleging violation of Section 235 of the real property law or any section of Article 150 of the penal law or any similar arson law of another jurisdiction with respect to any building by the applicant or any person owning a substantial interest in the property or any officer, director or general partner of the applicant or such person.
(iii) “Substantial interest” as used in Subparagraphs (i) and (ii) of this paragraph will mean ownership and control of an interest of 10 percent or more in a property or any person owning a property.
(iv) If any person described in the statement required by Subparagraph (i) or (ii) of this paragraph is finally adjudicated by a court of competent jurisdiction to be guilty of any charge listed in such statement, the recipient will cease to be eligible for benefits pursuant to this part and must pay with interest any taxes for which an abatement was claimed pursuant to this part.
(1) The applicant must file the notice of completion with the department within 120 days of the taxable status date after completion of construction. Abatement benefits will not be granted until the applicant files the notice of completion. If the notice of completion is not filed within such 120 day period, abatement benefits will not be granted until such notice is filed, and the department may delay the granting of such benefits, at the departments discretion, to investigate the reason for the late filing. Except as allowed by Paragraph (2) of this subdivision, the notice of completion must be submitted electronically in the format required by the department on the department’s website, and in accordance with the instructions for submission of such notices of completion described on the website.
(2) Request for waiver of electronic filing requirement. The Commissioner may, for good cause, waive the requirement that the notice of completion be filed electronically. A request for waiver of the electronic filing requirement must be made in writing no later than 30 days prior to the deadline for filing a notice of completion. Any filing in paper format must be filed with the Department, at such address as may be designated by the department.
(3) The notice of completion must contain certification by a New York State licensed engineer or architect, or general contractor that the narrative description provided in the final application for Certificate of Eligibility, as last amended, is an accurate and complete description of the completed project; and a final certificate of occupancy.
(4) The notice of completion must include a detailed itemized statement of the cost of construction. This statement must be certified by a certified public accountant, unless the project cost is less than $2,500,000 in which case the statement may be certified by the applicant.
(5) All applications must be submitted to the address set forth on the applicable forms.
(1) Preliminary application filing: $150
(2) Final application filing: $500
(3) Notice of Completion filing: $1,000
None of the filings listed above will be processed until the applicable fee is paid. All fees must be paid in a form acceptable to the Department.
§ 36-04 First Building Permit.
(i) such permit was granted before submission of completed plans and specifications for the entire building; or
(ii) such permit shall have expired by limitation of time or otherwise become invalid; or
(iii) another permit is issued for the same project on the basis of same or similar plans, subject to the provisions of 19 RCNY § 36-05(a).
§ 36-05 New Projects and Abandoned Projects.
(1) a building permit was previously issued for the project and an applicant has shown that there is a change in the project for which a new building permit is issued which meets at least one of the following criteria:
(i) change in the total estimated cost of the project of at least 10 percent as certified by the applicant; or
(ii) change in the total floor area of the project of at least 10 percent; or
(iii) change in use.
For purposes of the requirements of filing a preliminary application pursuant to 19 RCNY § 36-03(b), the previously issued building permit will be deemed to be the first building permit for a project that meets the requirements specified in this paragraph but does not meet the requirements specified in Paragraph (2) of this subdivision.
(2) a building permit was previously issued for the project and an applicant has shown that there is a change in the project which meets at least one of the following criteria:
(i) the current project will require an estimated expenditure at least twice as great as the project for which a building permit was previously issued, where the estimated expenditures of the project for which a building permit was previously issued and of the current project are each measured as if construction commenced on the date of each such project’s preliminary application as certified by the applicant; or
(ii) the current project will enclose floor area to be used for industrial or commercial purposes that is at least twice as great as the floor are of the project for which the prior permit was issued.
For purposes of the requirements of filing a preliminary application pursuant to 19 RCNY § 36-03(b), a new building permit will be deemed to be the first building permit for a project that meets the requirements specified in this paragraph.
(3) the application for the project is made either:
(i) more than four years after issuance of the building permit for the prior completed project; or
(ii) for a new project in a discrete, separate part of the building than the project that was the subject of the prior building permit.
(4) the project consists of alteration work that is not specified in a previously issued building permit or associated plan and for which a preliminary application was not previously filed.
For purposes of the requirements of filing a preliminary application pursuant to 19 RCNY § 36-03(b), a subsequent building permit will be deemed to be the first building permit for a project that meets the requirements specified in this paragraph.
§ 36-06 Eligible construction work.
(1) A permanent capital improvement to real property with a useful life of at least three years;
(2) Described or integrally related to work described in the approved plans or narrative description submitted as part of the application;
(3) Performed during the construction period which is five years after issuance of the first building permit, or if no permit was required, after the commencement of construction; and
(4) Not rendered ineligible by any provision of law or these rules, or by any agreement made as part of the application.
(1) Renovations that increase the square footage or cubic content of an existing building; or
(2) Modernization of core facilities including:
(i) Upgrading of electrical and plumbing systems;
(ii) Installation of new elevators and elevator banks;
(iii) Renovation or new installation of the exterior of a structure;
(iv) Major upgrading of lobby space;
(v) Reconfiguration of multi-tenant floor space to single tenant space;
(vi) Installation of central HVAC systems;
(vii) Major abatement of asbestos contamination;
(viii) Conversion of obsolete office space into functional space; or
(ix) Major conversion of a building’s use involving structural changes.
(1) Ordinary repairs, replacements or redecoration;
(2) Placement of personal property that remains personal property;
(3) Extension of streets, sewers, water or utility systems to a site not provided with such services; or
(4) Installation of satellite dishes, billboards, or cellular and microwave antennae.
(1) the earthwork or partial demolition is integrally related to the other construction work on the project and is commenced not more than one year after the date that a preliminary application was filed; and
(2) the applicant requests inclusion of the earthwork or partial demolition in the preliminary application or a subsequent notice filed at least 15 business days before the commencement of the earthwork or partial demolition and before a permit for the earthwork or partial demolition is issued.
(2) Notwithstanding Paragraph (1) of this subdivision, where a building or structure is owned in condominium form, and an application for benefits under this chapter includes more than one property in the same condominium, then for purposes of this paragraph, the 5 percent and 20 percent of the rentable square footage shall be determined based upon the aggregate usage of all such properties.
§ 36-07 Minimum Required Expenditure.
(1) construction contracts;
(2) materials, labor, equipment rental, insurance, permit fees and other direct expenses of construction;
(3) installation of partitions and other tenant work by or for the tenant or occupant of new or substantially renovated space;
(4) architectural, engineering, construction management, legal, accounting and other professional services rendered in connection with the construction work to the extent that the total of all such fees do not exceed 10 percent of the expenses incurred for direct construction costs;
(5) site preparation, such as the erection of partitions, fences, barricades, scaffolding, temporary walkways, removal of debris or any similar work allocable to the project; and
(6) fees for connection to existing sewer, water or utility lines.
(1) the costs of selecting or acquiring the site;
(2) the costs of determining the feasibility of the project;
(3) the costs of moving or installing machinery or equipment, except the cost of installing equipment that is real property and installed as part of the project;
(4) charges to any reserve, contingency or sinking fund;
(5) the costs of earthwork or demolition except as provided in 19 RCNY § 36-06(d);
(6) the costs or payments for the extension of streets, sewers, water lines or other public utilities to a site not provided with these services; and
(7) the cost or payments associated with vacating the site or existing buildings such as terminating existing leases or tenancies.
§ 36-08 Eligibility and Compatibility With Other Abatements/Exemptions.
§ 36-09 Benefit Period Commencement.
Upon approval by the department of a final application for benefits, the first year of the abatement shall be the tax year with the first taxable status date that follows the earlier of (a) completion of construction, or (b) four years from the date the first building permit was issued, or if no permit was required, the commencement of construction.
§ 36-10 Calculation of Abatement.
(1) the land area of each portion;
(2) the square footage of the building or structure used or dedicated to each purpose;
(3) the market value of the building situated on each portion;
(4) the location of each portion on the lot;
(5) the topography of the lot;
(6) zoning and other land use restrictions applicable to the lot or portion thereof;
(7) analyses of income factors relating to each portion;
(8) analyses of cost factors; and
(9) other relevant factors.
If any tax lot included in a project that is the subject of a pending or approved final application for ICAP benefits is subdivided, the applicant must file an amendment to the final application designating the tax lots that constitute the property that is the subject of the application. The Department shall allocate the initial and, if applicable, the post construction assessed values based on the allocation of the historical assessments made pursuant to Subdivision 5 of Section 1805 of the real property tax law.
Example: Commercial construction work outside of a special commercial abatement area. Preliminary application filed 7/1/2008; first building permit issued 8/1/2008. Project consists of commercial construction work to renovate and modernize the building.
In this case, the initial tax liability is based on the FY2008/09 tax liability (assessment roll with a taxable status date preceding the first building permit)
Section 1805 of the real property tax law requires that certain changes to assessed valuation (“AV”) be phased in over a number of years rather than one year. This is transitional AV.
| Actual AV | Transitional AV | |
|---|---|---|
| Total AV | $1,100,000 | $900,000 |
| Land AV | $400,000 | $300,000 |
| Building AV | $700,000* | $600,000* |
| Initial Tax Liability | $60,000** | $600,000 x 0.10 |
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*The initial tax liability will be based on the lower of the building actual AV or building transitional AV.
**FY 2008/09 Tax Rate Assume an initial tax rate of 10% for 2008/09 for illustrative purposes
Example: In this case, the construction was completed by November 2011; therefore, the post completion tax is based on the 2012/13 AV roll . The AV for the building on that assessment roll was:
| Actual AV | Transitional AV | |
|---|---|---|
| Building AV | $1,100,000 | $1,000,000 |
| FY 2008/09 Tax Rate of 10% | .10 | .10 |
| Post Completion Tax | $110,000* | $100,000* |
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*Post completion tax is based on the lower of the actual AV or transitional AV.
The abatement base is equal to the post-completion tax liability less 115% of the initial tax liability.
| Post Completion Tax Liability | $100,000 |
|---|---|
| Initial Tax Liability | $60,000 |
| 115% of Initial Tax Liability | $69,000 |
| Abatement Base | $31,000 |
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(i) No more than 10 percent of gross square footage in industrial and commercial buildings in special commercial abatement areas used for retail purposes is eligible to receive a 25 year abatement benefit. If more than 10 percent of the property is used for retail purposes, the portion exceeding the 10 percent retail use will be eligible for a 15 year abatement benefit.
(ii) For renovation areas in Manhattan, any retail use in excess of 5 percent of the building(s) gross square footage will be ineligible for ICAP benefits, except in the Lower Manhattan renovation area, as set forth in 19 RCNY § 36-02(c)(1), where there will be no limit on portion of gross square footage dedicated to retail use.
(2) The determination of the percent of gross square footage used for retail purposes shall be based on the gross square footage of the entire building in all cases, including those where the ICAP application relates to one or more condominium units in the building.
(3) In a building in which at least 10% of the gross square footage is dedicated exclusively to industrial or commercial purposes other than retail purposes, the gross square footage of retail space shall not include space used for common building mechanical equipment, maintenance or circulation.
(1) Inflation protection for industrial construction projects. Inflation protection is available during years 2 through 13 of the abatement period if in such year there is an increase in the tax over the immediately preceding year resulting from an increase in the property’s total taxable assessed value. The new increase in tax liability, based upon the increase in taxable assessed value, will be added to the abatement base using the initial tax rate.
For industrial construction projects the inflation protection is the full amount of the increase in taxes based upon the initial tax rate, unless there is a physical change from the immediately preceding year and the increase in taxable assessed value due to such physical change is more than 5 percent of the taxable assessed value for the immediately preceding year. Under such circumstances, none of the increase in tax liability, whether the increase in taxable assessed value is solely the result of a physical change or a combination of physical change and non-physical change, may be added to the abatement base. For industrial projects the percentage of retail use does not have any impact on eligibility for inflation protection.
(2) Inflation protection for commercial projects in special commercial abatement areas. Inflation protection is available during years 2 through 13 of the abatement period if in any such year there is an increase in taxable assessed value of more than 5 percent of the initial tax rate. The increase in tax liability based upon the increase in taxable assessed value that is more than 5 percent calculated using the initial tax rate will be added to the abatement base.
However, no inflation protection will be provided for commercial projects in special commercial abatement areas where there is a physical change from the immediately preceding year and the increase in taxable assessed value due to such physical change is more than 5 percent of the taxable assessed value for the immediately preceding year. Under such circumstances, none of the increase in tax liability, whether the increase in taxable assessed value is solely the result of a physical improvement or a combination of physical improvement and equalization, may be added to the abatement base. For commercial projects in special commercial areas the percentage of retail use does not have any impact on eligibility for inflation protection. If the building is currently receiving inflation protection for one ICAP project and any additional ICAP projects are approved that qualify for inflation protection, the inflation protection for the current ICAP project will be terminated and inflation protection benefits for the most recently approved ICAP project will commence upon such termination.
Hotels located in special commercial abatement areas are eligible for the inflation protection set forth in this paragraph.
Examples: In the examples below, inflation protection is provided on the calculation of total abatement base for commercial construction projects in a special commercial abatement area when the retail portion of the square footage of the project is not more than 10% (Example 1), as well as when the retail portion is more than 10% of the square footage of the project (Example 2).
Example 1: Commercial construction in special commercial abatement area – retail not more than 10% of square footage (equalization increases in taxable assessed value).
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| YR 1 | 100,000 | 10% | 31,000 | 100% | ||
|---|---|---|---|---|---|---|
| 3% | YR 2 | 103,000 | 10% | 31,000 | 100% | |
| 6% | YR 3 | 109,180 | 10% | 1,030 | 32,030 | 100% |
| 6% | YR 4 | 115,731 | 10% | 1,092 | 33,122 | 100% |
| 4% | YR 5 | 120,360 | 10% | 33,122 | 100% | |
| 3% | YR 6 | 123,971 | 10% | 33,122 | 100% | |
| 2% | YR 7 | 126,450 | 10% | 33,122 | 100% | |
| 6% | YR 8 | 134,037 | 10% | 1,265 | 34,387 | 100% |
| 3% | YR 9 | 138,058 | 10% | 34,387 | 100% | |
| 1% | YR 10 | 139,439 | 10% | 34,387 | 100% | |
| 1% | YR 11 | 140,833 | 10% | 34,387 | 100% | |
| 2% | YR 12 | 143,650 | 10% | 34,387 | 100% | |
| 3% | YR 13 | 147,960 | 10% | 34,387 | 100% | |
| 4% | YR 14 | 153,878 | 10% | 34,387 | 100% | |
| 2% | YR 15 | 156,956 | 10% | 34,387 | 100% | |
| 4% | YR 16 | 163,234 | 10% | 34,387 | 100% | |
| 3% | YR 17 | 168,131 | 10% | 34,387 | 90% | |
| 2% | YR 18 | 171,494 | 10% | 34,387 | 80% | |
| 4% | YR 19 | 178,354 | 10% | 34,387 | 70% | |
| 5% | YR 20 | 187,272 | 10% | 34,387 | 60% | |
| 6% | YR 21 | 198,508 | 10% | 34,387 | 50% | |
| 3% | YR 22 | 204,463 | 10% | 34,387 | 40% | |
| 2% | YR 23 | 208,552 | 10% | 34,387 | 30% | |
| 1% | YR 24 | 210,638 | 10% | 34,387 | 20% | |
| 2% | YR 25 | 214,851 | 10% | 34,387 | 10% |
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Example 2: Commercial construction in special commercial abatement area – retail more than 10% of square footage (equalization increases in taxable assessed value). The retail space is 25% of square footage.
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| YR 1 | 100,00 0 | 10% | 31,000 | 26,350 | 100% | 4,650 | 100% | ||
|---|---|---|---|---|---|---|---|---|---|
| 3% | YR 2 | 103,00 0 | 10% | 31,000 | 26,350 | 100% | 4,650 | 100% | |
| 6% | YR 3 | 109,18 0 | 10% | 1,030 | 32,030 | 27,226 | 100% | 4,804 | 100% |
| 6% | YR 4 | 115,73 1 | 10% | 1,092 | 33,122 | 28,154 | 100% | 4,968 | 100% |
| 4% | YR 5 | 120,36 0 | 10% | 33,122 | 28,154 | 100% | 4,968 | 100% | |
| 3% | YR 6 | 123,97 1 | 10% | 33,122 | 28,154 | 100% | 4,968 | 100% | |
| 2% | YR 7 | 126,45 0 | 10% | 33,122 | 28,154 | 100% | 4,968 | 100% | |
| 6% | YR 8 | 134,03 7 | 10% | 1,265 | 34,387 | 29,229 | 100% | 5,158 | 100% |
| 3% | YR 9 | 138,05 8 | 10% | 34,387 | 29,229 | 100% | 5,158 | 100% | |
| 1% | YR 10 | 139,43 9 | 10% | 34,387 | 29,229 | 100% | 5,158 | 100% | |
| 1% | YR 11 | 140,83 3 | 10% | 34,387 | 29,229 | 100% | 5,158 | 100% | |
| 2% | YR 12 | 143,65 0 | 10% | 34,387 | 29,229 | 80% | 5,158 | 80% | |
| 3% | YR 13 | 147,96 0 | 10% | 34,387 | 29,229 | 60% | 5,158 | 60% | |
| 4% | YR 14 | 153,87 8 | 10% | 34,387 | 29,229 | 40% | 5,158 | 40% | |
| 2% | YR 15 | 156,95 6 | 10% | 34,387 | 29,229 | 20% | 5,158 | 20% |
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(3) Industrial construction work on a peaking unit will have the same inflation protection as other industrial construction projects.
(4) A property receiving abatement benefits for both industrial and commercial construction is eligible for the inflation protection provided under this section based upon the predominant use of the property as determined by the department.
(5) Time limit for completion of construction. Construction of buildings or structures must be completed no later than five years from the date of issuance of the first building permit, or if no permit was required, the commencement of construction. Failure to meet this requirement will result in the termination of any inflation protection provided under this subdivision for any tax year that begins following the date by which completion of construction is required.
§ 36-11 Additional Industrial Abatement.
| Years 1 to 4 | 50% of the initial tax liability |
|---|---|
| Year 5 | 40% of the initial tax liability |
| Year 6 | 40% of the initial tax liability |
| Year 7 | 30% of the initial tax liability |
| Year 8 | 30% of the initial tax liability |
| Year 9 | 20% of the initial tax liability |
| Year 10 | 20% of the initial tax liability |
| Year 11 | 10% of the initial tax liability |
| Year 12 | 10% of the initial tax liability |
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§ 36-12 ICAP Abatement Schedules.
The abatement schedules below set forth the abatement amounts available pursuant to the ICAP program. While an applicant may meet the eligibility requirements for abatement benefits such abatement benefits will not be granted until the applicant complies with the notice of completion requirements set forth in 19 RCNY § 36-03(e).
| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 11 | 100% of abatement base |
| 12 | 80% of abatement base |
| 13 | 60% of abatement base |
| 14 | 40% of abatement base |
| 15 | 20% of abatement base |
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| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 16 | 100% of abatement base |
| 17 | 90% |
| 18 | 80% |
| 19 | 70% |
| 20 | 60% |
| 21 | 50% |
| 22 | 40% |
| 23 | 30% |
| 24 | 20% |
| 25 | 10% |
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| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 15 | 100% of abatement base |
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| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 11 | 100% of abatement base |
| 12 | 80% of abatement base |
| 13 | 60% of abatement base |
| 14 | 40% of abatement base |
| 15 | 20% of abatement base |
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(1) Upon approval by the department of a final application for benefits, an applicant who has performed renovation construction work in a renovation area, as described in 19 RCNY § 36-02(c)(1), shall be eligible for an abatement of real property taxes as set forth in the table below.
(2) Upon approval by the department of a final application for benefits, an applicant who has performed renovation construction work in a renovation area as described in 19 RCNY § 36-02(c)(2) shall be eligible for an abatement of real property taxes for the non-retail portion of such building or structure and up to 5% of such building or structure used for retail purposes as set forth in the table below. Any retail portion in excess of 5% of such building or structure is not eligible for abatement benefits.
| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 8 | 100% of abatement base |
| 9 | 80% of abatement base |
| 10 | 60% of abatement base |
| 11 | 40% of abatement base |
| 12 | 20% of abatement base |
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| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 5 | 100% of abatement base |
| 6 | 80% of abatement base |
| 7 | 60% of abatement base |
| 8 | 40% of abatement base |
| 9 | 20% of abatement base |
| 10 | 20% of abatement base |
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| Tax year during benefit period | Amount of abatement |
|---|---|
| Years 1 to 4 | 100% of the abatement base |
| 5 | 80% of the abatement base |
| 6 | 60% of the abatement base |
| 7 | 40% of the abatement base |
| 8 | 20% of the abatement base |
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§ 36-13 Continuing Use.
(1) For the duration of the benefit period. ICAP benefit recipients must file with the department a certificate of continuing use on or before the taxable status date of January fifth every other year that states any changes in the structure or use of the property that have occurred since the previous submission for that property, except that ICAP benefit recipients receiving benefits for construction work on a peaking unit must file such statement on or before January fifth and July fifth of each year. For example, for recipients of benefits not for peaking units, the first certificate of continuing use must be filed after the first year benefits are received and the next certificate of continuing use must be filed after the third year benefits are received.
(2) The certificate of continuing use form must be filed electronically in the manner prescribed by the Commissioner. The Commissioner may, for good cause, waive the requirement that the statement of continuing use be filed electronically and permit the statement of continuing use to be filed by means of a paper form. A request for waiver of the electronic filing requirement must be made in writing no later than thirty days prior to the deadline for filing a statement of continuing use. Any filing permitted to be filed in a paper format must be filed with the Department, at the address designated by the department.
(3) ICAP benefit recipients who fail to file an ICAP certificate of continuing use by January fifth of a required filing year, or in the case of an ICAP benefit recipient receiving benefits for construction work on a peaking unit by January fifth or July fifth of each year, may have their ICAP benefits reduced or suspended. ICAP benefit recipients who fail to file an ICAP certificate of continuing use for two consecutive required filing years, may have their ICAP benefits terminated. The Commissioner may, after providing notice to the ICAP benefit recipient and an opportunity to be heard, reduce, suspend, terminate or revoke ICAP benefits. Such notice will inform the recipient of the reasons for the proposed action by the department and that the ICAP recipient has the right to present information as to why the ICAP recipient should not be penalized to the Commissioner or his or her designee, within 10 business days of delivery of the notice by hand or 15 business days of the posting of notice by mail.
(4) An ICAP certificate of continuing use delivered by an ICAP benefits recipient which contains a false or misleading statement as to a material fact or omits any material fact required to be reported under this subdivision may result in a determination that the recipient is ineligible for current and future tax abatements for the subject property or any other property. The Commissioner may, after providing notice to the ICAP benefit recipient and an opportunity to be heard, reduce, suspend, terminate or revoke ICAP benefits. Such notice will inform the recipient of the reasons for the proposed action by the department and that the ICAP recipient has the right to present information as to why the ICAP recipient should not be penalized to the Commissioner or his or her designee, within 10 business days of delivery of the notice by hand or 15 business days of the posting of notice by mail.
(1) Continuing eligibility for ICAP benefits is contingent upon continued use of buildings and property for the purpose specified in the application as last amended in the most recent certificate of continuing use.
(2) ICAP benefits will be suspended for code violations pursuant to Section 11-277 of the Administrative Code.
(3) When the eligibility of a property to receive ICAP benefits is affected by a conversion as described in Subdivision c of this section, the recipient must establish by clear and convincing evidence the last date that the property was eligible for the benefits previously granted, which will be deemed the date of the conversion. If no certificate of continuing use has been submitted, a building permit indicating a change in use will be treated as a presumption of conversion.
(4) A recipient must file an amendment to the latest filed statement of continuing use prior to conversion of industrial use as set forth in Subdivisions e and f of this section. For all other conversions an applicant must file an amendment to the latest filed statement of continuing use within 60 days of the conversion.
(1) A conversion of property, a building or a building site is any intentional change in the nature of the improvements for which benefits were granted, or in the use of such improvements by any person, including by the benefit recipient, a tenant or an occupant.
(2) A demolition, in full or part, or any other structural change which necessarily causes a change in use is a conversion.
(3) A discontinuance of use may be deemed a conversion if the dilapidated condition of the property and prolonged period of nonuse evidences intent to abandon the property and permanently discontinue use. Temporary nonuse due to inability to secure tenants or funding for completion of construction shall not constitute a change in use.
(1) A change in ownership or control of property, provided that the department is notified of such change in ownership or control, or
(2) A change in the identity of a tenant or occupant.
(1) If a property receives industrial abatement benefits, but then at any time prior to the end of the abatement period, less than 65 percent of the total net square footage is used as an industrial property, no further abatement benefits for industrial work will be granted except as set forth in this subdivision. Except as otherwise provided in this section, any taxes owed from a converted use will be due, and interest assessed, as of the date of such conversion.
(2) Notwithstanding Paragraph (1) of this subdivision, any applicant whose property was receiving industrial abatement benefits in a special commercial abatement area that would have been eligible to receive benefits for commercial construction work at the time such applicant applied for abatement benefits will continue to receive the abatement for industrial construction work until the expiration of such benefit period.
(3) Notwithstanding Paragraph (1) of this subdivision any applicant whose property was receiving industrial abatement benefits other than in a special commercial abatement area who would have been eligible to receive benefits for commercial construction work at the time such applicant applied for abatement benefits will receive any abatement which such applicant would have received in the corresponding tax year pursuant to the benefits granted for commercial construction work. Such benefits will commence with the date of conversion to commercial property and continue until the expiration of the benefit period for commercial construction work.
(4) If a property that converts from industrial to commercial use was receiving benefits for industrial construction work in any area of the city and at least 65 percent of the net square footage continues to be used for manufacturing activity after such conversion to commercial use, the recipient will not be required to pay the pro-rata share of tax for the abatement claimed during the tax year for which an abatement was claimed during the tax year in which such conversion occurred.
(5) Any industrial property that was receiving the additional industrial abatement pursuant to 19 RCNY § 36-11 will cease to be eligible for such additional benefits from the date of conversion to commercial property.
(1) Any applicant whose property has been granted benefits for commercial, industrial or renovation construction work and who, before the benefit period expires, uses or allows the use of the property or a portion of the property as residential property, will cease to be eligible for further abatement for commercial, industrial or renovation construction work as of the date such property was first used as residential property, as follows:
(i) If 20 percent or more of the rentable square footage of the property is used as residential property, then the entire property will cease to be eligible for further abatement.
(ii) If less than 20 percent of the rentable square footage of the property is used as residential property, then that portion of such property used as residential property will cease to be eligible for further abatement.
(iii) Notwithstanding Subparagraph (ii) of this paragraph, where less than 5 percent of a property’s rentable square footage is used as residential property, that use will be considered negligible and will not be a basis for benefits to cease under this subdivision.
(iv) Where benefits cease or are reduced pursuant to this subdivision, the recipient of such ceased or reduced benefits must pay, with interest, any taxes for which an abatement was received after the conversion of the property as described in this subdivision, including the pro rata share of tax for which such abatement was claimed during the tax year in which such use occurred. The abatement will continue for the commercial, industrial or renovation construction work for the portion of the property that continues to be used for commercial purposes as long as the property is still eligible for such abatement benefits.
(2) For purposes of this subdivision, “property” means the real property contained within an individual tax lot.
(3) Notwithstanding Subparagraph (iv) above, where a building or structure is owned in condominium form, and an application for benefits includes more than one unit in the same condominium, then for purposes of this subdivision, the 5 percent and 20 percent of the rentable square footage determination will be based on the total square footage of all condominium units applying for ICAP benefits.
(1) Where a property has been granted benefits for industrial or commercial construction work in special commercial abatement areas on buildings where not more than 10 percent of the rentable square footage of the building or structure is used for retail purposes, and where, before the benefit period expires, the property or a portion thereof is converted so that 10 percent or more of the rentable square footage of the building or structure is used for retail purposes, the department will recalculate the abatement upon conversion in accordance with subdivision e of this section.
(2) Where a property has been granted benefits for renovation construction work in renovation areas and where, before the benefit period expires, the property or a portion of the property is converted so that more than 5 percent of the rentable square footage of the building or structure is used for retail purposes, the department will recalculate the abatement upon conversion to reflect the benefit for which the current use is eligible.
§ 36-14 Subsequent Abatements.
An applicant may not file a preliminary application for new ICAP benefits for an additional construction project on any portion of a property that is already receiving any ICAP benefit for four years after the start of the first tax year for which such property is receiving such ICAP benefits. For any ICAP benefit granted for a property that has previously been granted any other ICAP benefit, the initial tax to determine the new abatement will not include the ICAP abatement previously received.
§ 36-15 Administration of ICAP Program.
(1) A recipient fails to comply with any requirement provided for by Title 2-f of Article 4 of the real property tax law, Part 5 of Title 11 of the administrative code, or this chapter; or
(2) An application, certificate, report or other document delivered by an applicant or benefit recipient contains a false or misleading statement as to a material fact or omits any material fact, and may declare any applicant or recipient who makes such false or misleading statement or omits such material fact, ineligible for future tax abatements for the subject property or any other property.
Such notice will inform the recipient of the reasons for the proposed action by the department and that the ICAP applicant or ICAP recipient has the right to present information as to why the ICAP recipient should not be penalized to the Commissioner or his or her designee, within 10 business days of delivery of the notice by hand or 15 business days of the posting of notice by mail.
§ 37-01 Scope of Rules.
The books of the annual record of assessed valuation of real property containing the tentative assessed valuation of real property for the succeeding fiscal year are open to the public during a period beginning January 15th and ending March 1st of each year, except that for property defined as class one property pursuant to § 1802 of the Real Property Tax Law, the books are open to the public beginning January 15th and ending March 15th of each year. Section 1512 of the New York City Charter provides that during the period in which the books of the annual record of the assessed valuation of real property are open for public inspection, the Commissioner of Finance may correct the assessment roll by adding property that had been omitted or by increasing or decreasing the assessed valuation of property. An additional period ending May 10th is provided for changes for non-residential real property. These proposed rules provide guidelines for property owner requests for Department of Finance review of the tentative assessed valuation of real property. A request for such review filed with the Department of Finance pursuant to these rules shall not:
§ 37-02 Definitions.
When used in these rules:
Commissioner. “Commissioner” shall mean the Commissioner of Finance of the City of New York.
Department. “Department” shall mean the New York City Department of Finance.
Equalization. “Equalization” shall mean the process by which the Commissioner of Finance fixes the valuations of property throughout the City of New York for purposes of taxation in such amounts as will, in the Commissioner’s judgment, establish a just and equal relation between the valuations of property in each borough and throughout the entire City.
Property Division. “Property Division” shall mean the division of the New York City Department of Finance that is responsible for the assessment of real property in the City of New York.
Residential real property. “Residential real property” shall include all real property defined as class one or class two property pursuant to § 1802 of the Real Property Tax Law.
Tentative assessed valuation. “Tentative assessed valuation” shall mean the valuation of real property by the Department of Finance for purposes of taxation of real property in the City of New York that appears on the books of the annual record of assessed valuation during the period in which such books are open for public inspection pursuant to section 1510 of the New York City Charter and which shall be applicable to the succeeding fiscal year.
§ 37-03 Delegation of Authority.
The Commissioner may delegate any powers pursuant to these rules to another employee of the Department.
§ 37-04 Additions and Changes to the Annual Record of Assessed Valuation – Generally.
During the period beginning January 15th of each year and ending as provided herein, the Commissioner may add real property to the assessment roll or increase or decrease the assessed valuation of any real property as in the Commissioner’s judgment may be just or necessary for the equalization of taxes. For real property defined as class one property pursuant to § 1802 of the Real Property Tax Law, such changes must be made no later than March 15th of each year. For real property defined as class two property, such changes must be made no later than March 1st of each year. For real property other than residential real property, the Commissioner may make such additions or increases or decreases during an additional period ending the tenth day of May of each year.
§ 37-05 Changes Initiated by the Department.
In addition to any other power to correct errors vested in the Commissioner by law, during the period provided in 19 RCNY § 37-04, the Department may make changes on its own initiative in response to recently acquired sales information, demolitions that were overlooked, imputing errors, apportionments and mergers, clerical errors, granting and restoring of exemptions and any other factors that the Commissioner deems appropriate for purposes of equalization.
§ 37-06 Changes Initiated by Property Owners.
(a) During the period beginning January 15th and ending February 28th of each year, an owner of real property defined as class one property pursuant to § 1802 of the Real Property Tax Law may apply to the Department for review of the tentative assessed valuation of such property for the succeeding fiscal year. Any change made by the Department for the succeeding fiscal year must be made no later than March 15th of each year.
(2) Except as hereinafter provided, any such request must be made in duplicate on a form prescribed by the Commissioner and include an original and a photocopy of:
(i) a sworn Tax Commission application for correction of tentative assessed valuation, whether or not such application was filed with the Tax Commission. If such application was filed with the Tax Commission, a photocopy will be accepted. See 19 RCNY § 37-01 for a description of the effect on a property owner’s rights relating to the application for correction with the Tax Commission;
(ii) a Tax Commission affidavit of sale (TC 230), when the application is based on a sale;
(iii) rent rolls, when the application is for commercial property; and
(iv) any other information the Department deems necessary for the evaluation of the request.
(3) Notwithstanding the foregoing provisions of this subdivision (d), in cases relating to real property defined as class one property, a letter and a photocopy thereof from the owner of the property or the owner’s representative will be accepted in lieu of a request meeting the requirements of the foregoing provisions if such letter includes the following:
(i) the borough, block and lot of the property; and
(ii) an estimation of the market value of the property, including the basis for the estimation.
(2) Any such request for a conference must:
(i) be in writing and sent to the Equalization Unit of the Property Division;
(ii) provide the names of those persons who will attend the conference on behalf of the owner; and
(iii) specify the reasons for the request for a conference and the issues to be raised.
(3) It shall be within the sole discretion of the Department to:
(i) determine whether such a conference will be held; and
(ii) determine which, if any, supporting documentation must be brought to the conference by the owner or the agent of the owner.
§ 37-07 Notice.
(a) No increase in assessed valuation will be made pursuant to § 1512 of the New York City Charter and 19 RCNY §§ 37-04, 37-05 or 37-06 unless the owner of the affected real property or the agent of the owner is given 10 days written notice, which shall be addressed to the last known address of such owner or agent as indicated on the records in the Office of the City Collector. Such notice will contain the prior assessed valuation and the tentative assessed valuation of the property and the locations of the borough offices of the Property Division.
§ 37-08 List of Changes in Assessments Made by the Department.
So that the public will be informed of the results of the changes in assessed valuation of real property pursuant to 19 RCNY §§ 37-04, 37-05 and 37-06, the Department will maintain a list of all such changes made and will make the list available for public inspection in the borough offices and the central office of the Property Division.
§ 37-09 Public File.
(a) The Property Division will maintain a public file for each property for which a request for review was made by the owner or on which any action was taken by the Department pursuant to these rules. Such file will be located at the central office of the Property Division and will contain:
(1) written records relating to any change in assessment made by the Department on its own initiative pursuant to 19 RCNY § 37-05 which shall provide the reasons for such change;
(2) any request for review filed with the Department by a property owner pursuant to 19 RCNY § 37-06, together with any supporting documentation submitted by the owner except as provided in subdivision (f) of 19 RCNY § 37-06; and
(3) if a property owner meets with members of the Property Division pursuant to subdivision (e) of 19 RCNY § 37-06, a standardized form to be completed by the Property Division which shall contain the names of those persons in attendance at the conference and the substance of the meeting.
§ 38-01 Definitions.
Unless the context of these rules requires otherwise, the definitions contained in this section apply.
Code. The term “code” means the Administrative Code of the City of New York.
Commissioner. The term “commissioner” means the New York City Commissioner of Finance.
Conciliation beareau. The term “conciliation bureau” means that the Bureau within the department that is responsible for providing conciliation conferences and issuing conciliation decisions.
Conciliation decision. The term “conciliation decision” means the final order issued by the director of the conciliation bureau discontinuing conciliation with regard to one or more issues.
Conciliation proceeding. The term “conciliation proceeding” means the proceeding conducted by the conciliation bureau, which shall commence with the filing of a timely request for conciliation and conclude with an executed consent and waiver or the issuance of a conciliation decision.
Conciliator. The term “conciliator” means any person duly designated and authorized by the commissioner to conduct conciliation conferences.
Department. The term “department” means the New York City Department of Finance.
Domestic partner. The term “domestic partner” means a person who has registered a domestic partnership in accordance with applicable law with the City Clerk, or has registered such partnership with the former City Department of Personnel pursuant to Executive Order 123 during the period August 7, 1989 through January 7, 1993. (The records of domestic partnerships registered at the former City Department of Personnel have been transferred to the City Clerk.)
Operating division. The term “operating division” means that division or bureau within the department responsible for the particular action or actions being protested.
Party. The term “party” means either the person on whose behalf the request for conciliation is filed, an authorized representative of such person,or the operating division.
Person. The term “person” includes, but is not limited to, an individual, partnership, society, association, joint stock company, corporation, estate, receiver, trustee, assignee, referee, any other individual or entity acting in a fiduciary or representative capacity and any combination of the foregoing, other than the conciliation bureau or the department.
Petition. The term “petition” includes an “application for hearing,” “petition for hearing,” “demand for hearing” or any variation of such terms as used in the applicable sections of the Code for a form requesting a formal hearing before the tribunal.
Request for conciliation. The term “request for conciliation” means the written application or request for a conciliation proceeding.
Requestor. The term “requestor” means the person on whose behalf conciliation is requested and, except for purposes of 19 RCNY § 38-03, any person authorized to represent such person at conciliation.
Statutory notice. The term “§ atutory notice” means any written notice of the commissioner that gives a person the right to a hearing in the tribunal, including but not limited to a notice of determination of tax due, of a tax deficiency, of a denial of a refund or a credit application or of the refusal to grant, the suspension of, or the revocation of, a license. For the purposes of this definition, if the commissioner fails to act with respect to a refund application before the expiration of the time period after which the taxpayer may file a petition for refund with the tribunal pursuant to § 11-529(c) or § 11-680(3) of the Code, such failure shall be deemed to be a notice of denial of a refund.
Tribunal. The term “tribunal” means the New York City Tax Appeals Tribunal.
§ 38-02 Establishment of Conciliation Bureau and Delegation of Authority.
There shall be within the department a conciliation bureau which shall be headed by a director. This bureau shall function independently from other operating divisions in order to resolve controversies with the department and shall report directly to the commissioner. The director shall exercise all powers and perform all functions of the conciliation bureau under the Code and these rules. The director of the conciliation bureau may designate other persons to act on his or her behalf.
§ 38-03 Representation of Requestor.
(a) Personal appearance. An individual on whose behalf a conciliation conference is requested may appear and represent himself or herself or may be represented by his or her spouse, domestic partner, parent or child. A partnership may act through one of its general partners without filing a power of attorney, provided written evidence of such designation is presented. When a corporation requests a conciliation conference, it may act through one of its duly authorized officers or employees. When the corporation acts through an employee who is not a duly authorized officer, a power of attorney executed by a duly authorized officer of the corporation must be filed.
(1) an attorney-at-law admitted to practice in any jurisdiction of the United States;
(2) a certified public accountant duly qualified to practice in any jurisdiction of the United States;
(3) a public accountant duly qualified in any jurisdiction of the United States; and
(4) an agent enrolled to practice before the Internal Revenue Service.
§ 38-04 Request for Conciliation Proceeding.
(a) Filing of conciliation request. Any person who has the right to file a petition for a hearing from a statutory notice may request conciliation. A request for conciliation may be made by filing a written request and one copy thereof, with the conciliation bureau. The request should be typewritten,if possible, and should include the information set forth in paragraph (1) of subdivision (b) of this section. The request may be made on a Requst for Conciliation form.
(1) The request should contain:
(i) the name, address, and taxpayer identification number (employer identification number or social security number) of the person on whose behalf the request is made;
(ii) the name, address and taxpayer identification number of such person’s representative, if applicable;
(iii) the taxable years or periods involved and the ammount and type of the tax in question;
(iv) the action or actions of the operating division being protested;
(v) the facts, law or reasons that the requestor asserts are relevant to the controversy;
(vi) a signed acknowledgement by the requestor that the request is made with knowledge that a willfully false representation is a misdemeanor punishable under § 11-4004 of the Code;
(vii) a legible copy of the statutory notice being protested; and
(viii) if required pursuant to 19 RCNY § 38-03, an original power of attorney or a legible copy of a power of attorney previously submitted to the department.
(2) At any time during the conciliation proceeding, the conciliator may ask the requestor to supply additional information in order to properly process the request and resolve the issues raised in the request.
(1) A request for conciliation must be filed within the statutory period for filing a petition.
(2) The filing of a timely request for conciliation will suspend the running of the period for filing a petition. The filing of a request for conciliation does not suspend the accrual of any amount that may be due as an additional to tax, interest or penalty on any amount of tax finally determined to be due.
§ 38-05 Conciliation Conference and Review of Request.
(a) Acknowledgement of receipt of request and review of documents. The conciliation bureau shall acknowledge the receipt of a request and seek any additional information necessary to process the request. The request and other documents concerning the controversy shall then be reviewed to ascertain that the request is timely filed and is complete. Where the review indicates that the request is not timely filed, the director of the conciliation bureau shall dismiss the request. Such dismissal shall not constitute a conciliation decision giving the requestor 90 days to file a petition.
(1) A conciliation conference will be scheduled at the office of the conciliation bureau. Written notice of the time and place of the opening of the first conciliation conference shall be mailed to all parties at least 30 days prior to the date of such conference. Written notice of the time and place of any adjourned or continued conciliation shall be mailed at least ten days prior to the date of such adjourned or continued conference unless all parties agree to reconvene within a shorter period of time.
(2) The conciliator may grant an adjournment where good cause is shown upon receipt of a written request for adjournment at least five days in advance of the scheduled conciliation conference date. In the event of an emergency, an adjournment may be granted on less notice.
(3) Where a requestor fails to appear and where an adjournment has not been granted, the director of the conciliation bureau may issue a conciliation decision discontinuing conciliation. If within 30 calendar days after service on the requestor of a conciliation decision discontinuing conciliation for failure to appear, the requestor files a written application with the conciliation bureau showing a reasonable excuse for the failure to appear and requesting that the conciliation conference be reopened, then such decision may be withdrawn and a conciliation conference rescheduled at the discretion of the conciliator. Unless such decision is withdrawn, the 90 day period to file a petition commences from the service of the conciliation decision and is not extended by the request to reopen.
(1) Conciliation is intended to provide the parties with an opportunity to resolve disagreements. With the cooperation of the parties, the conciliator will endeavor to develope those facts and issues on which there is no disagreement and those facts and issues that are in dispute. The goal of conciliation is, in whole or in part, to resolve the controversy between the parties within the framework of the Code, thereby narrowing the scope of, or eliminating the need for, a hearing at the tribunal. The conciliator shall conduct the conciliation conference in an informal manner and shall hear or receive statements and documentation deemed necessary or desirable for a just and equitable result. To accomplish the expeditious resolution of controversies, the conciliator may waive or modify penalties and additions to tax in accordance with the commissioner’s authority to waive or modify penalties and additions to tax under the Code. At the request of the conciliator or the operating division, a representative of the operating division may appear and participate in the conciliation proceeding.
(2) (i) After reviewing the statements, documentation and comments, the conciliator will serve on the requestor a proposed resolution, incorporating a consent and waiver. In developing the proposed resolution, the conciliator may contact any party to clarify any issues or facts in dispute. Notice of any such contact, including the nature of any matter discussed and an opportunity to comment, shall be provided to all parties. The proposed resolution may provide for the full or partial resolution of the case including, but not limited to, revising the amounts of deficiencies or refunds specified in the statutory notice, or withdrawing or adhering to the statutory notice.
(ii) The requestor shall have 15 days following service of the proposed resolution to execute and return the consent and waiver agreeing in all respects to the terms of the proposed resolution and waiving the right to a hearing on any issue resolved by the proposed resolution. Such consent and waiver executed by a requestor shall be a determination of the commissioner as to those issues resolved by a proposed resolution fixing the ammount of tax due or the amount of any refund owed. In the absence of a showing of fraud, malfeasance or misrepresentation of a material fact, the executed consent and waiver shall be binding on all parties with regard to all issues that it resolves. Upon receipt of an executed consent and waiver that is a partial resolution of a case at conciliation, the director of the conciliation bureau shall issue a conciliation decision discontinuing conciliation for those issues not resolved.
(iii) Where the requestor fails to execute and return the consent and waiver as in subparagraph (ii) of this paragraph within 15 days, the proposed resolution may be deemed withdrawn and the director of the conciliation bureau will issue a conciliation decision discontinuing conciliation.
(3) Conciliation decisions and proposed resolutions shall not be published. Such decisions and resolutions shall not be considered precedent, nor shall they be given any force or effect in any subsequent proceeding with respect to the requestor or any other person.
(4) If the executed consent and waiver provides for a refund, the case will be forwarded to the Miscellaneous Refunds Unit to process and issue the refund.
§ 38-06 Request for Discontinuance.
At any time before the conclusion of conciliation, the requestor may serve on the conciliation bureau a written request for discontinuance. Once a request for discontinuance has been served, the director of the conciliation bureau shall issue and serve a conciliation decision confirming discontinuance of conciliation.
§ 38-07 Effect of Conciliation Decision.
The service of a conciliation decision discontinuing conciliation shall start the running of the 90 day period for filing a petition, or shall reinstate any previously filed petition as provided in 19 RCNY § 38-04(d), with regard to all issues not resolved at conciliation. A conciliation decision shall be served on the requestor and a copy thereof shall be mailed to the tribunal.
§ 38-08 Miscellaneous Provisions.
(a) Service.
(1) Service of all requests and filing of other papers with the conciliation bureau shall be made either by delivery to its office during office hours, or by mail properly addressed to such office. Where service or filing is made by mail, the date of service or filing is the date specified in Chapter 17 of Title 19 of the Rules of the City of New York. Where service or filing is made by courier, delivery, messenger or similar services, the date of service or filing is the date of receipt.Subject to paragraph (2) of this subdivision, service on parties can be madein the same manner and the same rules regarding date of service or filing shall apply.
(2) Service of conciliation decisions shall be made by hand delivery or by registered or certified mail.
(3) When the last day prescribed by any section of these rules for service of a request or filing of other papers with the conciliation bureau or performing any other act falls on a Saturday, Sunday or legal holiday in the State of New York, such service, filing or act shall be considered timely if it is performed on the next succeeding day that is not a Saturday, Sunday or legal holiday.
§ 39-01 Definitions.
When used in this chapter, unless otherwise expressly stated, the following definitions shall apply:
Administrative law judges (ALJ’s). “Administrative law judges,” or “ALJ’s” are persons appointed by the Commissioner to hear and determine charges of parking violations and fix fines and assess penalties as provided in these rules, and when so designated by the Director, be members of the appeals board of the Bureau.
Business entity. “Business entity” means a corporation, partnership, organization or other entity engaged in business, but does not include an individual person or persons.
Car rental program. “Car rental program” means a voluntary enrollment program whereby a lessor, upon registering vehicles and paying fees in accordance with 19 RCNY § 39-11(b), receives computer-generated hearing logs and can schedule hearings in PVB’s Commercial Adjudication Unit (CAU).
Commercial Abatement Program. “Commercial Abatement Program” means a voluntary enrollment program whereby commercial organizations that are enrolled in the Fleet Program and meet the eligibility criteria established in 19 RCNY § 39-03.2, but are not eligible for the Stipulated Fine Program pursuant to 19 RCNY § 39-03.1, waive their right to challenge parking summonses and agree to pay a reduced fine amount for each summons, pursuant to 19 RCNY § 39-03.2.
Commercial Organization. “Commercial Organization” means any business entity that is an owner or lessee of at least one vehicle that is used exclusively for the delivery of goods or services.
Director. Whenever used, the term “Director” shall refer to the head of the Parking Violations Bureau, “the Bureau”, appointed by the Commissioner of New York City Department of Finance or other official within the Department of Finance responsible for supervising the operations of the Bureau.
Fiscal year. “Fiscal year” means a period of one year commencing on the first day of July and terminating on the thirtieth day of June.
Fleet Program. “Fleet Program” means a voluntary enrollment program whereby commercial organizations receive computer-generated hearing logs and can schedule hearings in the Parking Violation Bureau’s (PVB’s) Commercial Adjudication Unit (CAU) pursuant to 19 RCNY § 39-03.
Lessee. “Lessee” means any person, corporation, firm, partnership, agency, association or organization that rents, bails, leases or contracts for the use of one or more vehicles and has the exclusive use thereof for any period of time.
Lessor. “Lessor” means any person, corporation, firm, partnership, agency, association or organization engaged in the business of renting or leasing vehicles to any lessee or bailee under a rental agreement, lease or otherwise, wherein the said lessee or bailee has the exclusive use of said vehicle for any period of time. “Lessor” shall be construed to include the “owner,” as defined in this 19 RCNY § 39-01, of a vehicle rented or leased in a vehicle renting or leasing business wherein the said lessee or bailee has the exclusive use of said vehicle for any period of time; provided, however, that a lessee of a vehicle shall not be construed to be a lessor even if it is a registrant or co-registrant of a vehicle.
Long-term lease. “Long-term lease” means a lease for a term of one year or more.
Notice of violation (summons). “Notice of violation” shall mean:
(1) A form or duplicate thereof prepared and distributed by the Bureau substantially completed and sworn to or affirmed by authorized issuing agents which shall constitute a notice of violation when served as hereinafter provided.
(2) For purposes of this definition, authorized issuing agents shall be members of the Police Department, Fire Department, Department of Transportation, Traffic Enforcement Agents, Department of Sanitation, the Sheriff, Under Sheriff and Deputy Sheriffs of the Department of Finance’s Office of the City Sheriff, Fraud and Associate Fraud Investigators of the Department of Finance, Department of Business Services, Business Integrity Commission, New York City Housing Authority Police, Port Authority of New York and New Jersey Police, Police of the Metropolitan Transportation Authority and its subsidiary authorities, United States Park Police, Department of Buildings Special Patrolmen, State Regional Park Police, Taxi and Limousine Commission, Waterfront Commission of New York Harbor, Department of Parks and Recreation, Department of Correction, Roosevelt Island Security Organization, Sea Gate Association Police, Snug Harbor Rangers with peace officer status, officers of the Co-op City Department of Public Safety, Amtrak Police Officers, Office of Court Administration Court Officers, Department of Health Police Officers, Health and Hospitals Corporation Police Officers, New York State Office of Mental Health Safety Officers, New York State Office of Mental Retardation and Developmental Disabilities Police Officers, Triborough Bridge and Tunnel Authority Police Officers, State University Maritime College Public Safety Officers, Department of Environmental Protection Police Officers, managers of the New York City Transit Authority, and Officers of the Federal Protective Service of the United States Department of Homeland Security.
(3) For purposes of this definition, authorized issuing agents shall also include special patrolmen appointed by the police commissioner pursuant to subdivision (c) of § 14-106 of the Administrative Code of the City of New York to do special duty at Parkchester South Condominium, at the New York City Hunts Point Terminal Market in the borough of the Bronx, Stuyvesant Town in the borough of Manhattan, and various facilities under the jurisdiction of the Department of Citywide Administrative Services.
Operator. Whenever used, the term “operator” shall mean any person, corporation, firm, agency, association or organization that uses, operates or is responsible for a vehicle at the time the violation occurs, with or without the permission of the owner, and an owner who operates his or her or its own vehicle.
Owner. “Owner” means any person, corporation, partnership, firm, agency, association, lessor or organization who at the time of the issuance of a notice of violation in connection with a vehicle operated in the City of New York:
(1) is the beneficial or equitable owner of such vehicle; or
(2) has the title to such vehicle; or
(3) is the registrant or co-registrant of such vehicle which is registered with the Department of Motor Vehicles of this state or any other state, territory, district, province, nation or other jurisdiction; or
(4) used such vehicle in its vehicle renting and/or leasing business; or
(5) is an owner of such vehicle as defined by sections 128 or 2101(a) of the Vehicle and Traffic Law.
Parking violations. “Parking violations” are traffic infractions constituting a violation of any law, rule or regulation providing for or regulating the parking, stopping or standing of a vehicle.
Parking Violations Bureau. “Parking Violations Bureau” is an administrative tribunal in the New York City Department of Finance established to accept pleas to, and to hear and determine charges of traffic infractions relating to parking violations within the City of New York, to provide for monetary fines, penalties and fees for such violations, and to enter and enforce judgments of the Bureau in the same manner as the enforcement of money judgments in civil actions.
Plea of guilty. As used herein, the term “plea of guilty” shall mean an admission of liability.
Plea of not guilty. As used herein, the term “plea of not guilty” shall mean a denial of liability.
Primary filing. “Primary filing” means the initial filing of registration plate numbers by a lessor or commercial organization prior to the commencement of each fiscal year.
Respondent. Whenever used, the term “respondent” shall mean the person charged with a parking violation.
Stipulated Fine Program. “Stipulated Fine Program” means a voluntary enrollment program whereby commercial organizations that make expeditious pick-ups, deliveries and/or service calls and that are enrolled in the Fleet Program and meet the eligibility criteria established in 19 RCNY § 39-03.1, waive their right to challenge parking summonses and agree to pay a reduced fine amount for each summons, pursuant to 19 RCNY § 39-03.1.
Supervising and senior administrative law judges. “Supervising and senior administrative law judges” are persons appointed by the Commissioner of Transportation thus far, or appointed by the Commissioner of Finance thus far and from now on, to hear and determine charges of parking violations, assist the Director in the supervision and administration of the work of the Bureau, and when so designated by the Director, be members of the Appeals Board of the Bureau.
§ 39-02 Notice of Violation (Summons).
(a) Contents.
(1) The notice of violation (summons) shall be in such form as may be prescribed by the Director and shall contain the registration plate number, the type of registration, the state of registration, the date of expiration, a description of the vehicle, a general statement of the violation alleged, including a reference to 34 RCNY § 4-08 or applicable provision of the Vehicle and Traffic Law or of the Administrative Code of the City of New York or any other law or rule, information as to the days and hours the applicable rule or provision is in effect, unless always in effect pursuant to the rule or provision and where appropriate the word “all” when the days and/or hours in effect are every day and/or twenty-four hours a day, the date, time and particular place of occurrence, and, if a meter violation, the meter number. A mere listing of a meter number in cases of charged meter violations shall not be a sufficient description of a particular place of occurrence of the charged violation.
(2) Where the plate type or the expiration date are not shown on either the registration plates or sticker of a vehicle or where the registration sticker of a vehicle is covered, faded, defaced or mutilated so that it is unreadable, the plate type or the expiration date may be omitted from the notice of violation, provided that such condition is so described and inserted on the notice of violation.
(3) If any information that is required to be inserted in a notice of violation is omitted from the notice of violation, misdescribed, or illegible, the violation shall be dismissed upon application of the person charged with the violation.
(4) The notice of violation (summons) shall also contain information advising the respondent of the manner and time in which a plea with respect to the violation alleged in the said notice may be entered and information warning that failure to plead in the manner and time provided shall be deemed an admission of liability and that a default judgment may be rendered.
(1) Personally on the operator of a vehicle. In such case, the name, of the person served shall also be inserted in the notice of violation (summons).
(2) If the operator is not present, the notice of violation (summons) shall be served on the owner of the vehicle by affixing the notice to the vehicle in a conspicuous place. Service of the notice of violation (summons) as herein provided shall have the same force and effect as if personally served.
This rule applies to all respondents, including commercial organizations, except as provided in paragraph (2) of this subdivision. Note that the respondent is entitled to only five free copies per request, not per plate.
(2) Indigent respondents. Notwithstanding any other provision of this subdivision, a Senior Hearing Administrative Law Judge, a Supervising Administrative Law Judge, the Chief Administrative Law Judge, the Special Counsel for Adjudications, the First Deputy Commissioner of Finance or the Commissioner of Finance may authorize, without fee, the provision of summons copies to which a fee is otherwise applicable under this subdivision, to a respondent who is a natural person for the purpose of defending against a charged parking violation or moving to open a default judgment, upon the respondent making affidavit or sworn statement on the record that the respondent is unable to pay the fee and demonstrating the indigence of the respondent. Such affidavit or sworn statement shall also state the reason the copy of each summons that was served at the time of occurrence is unavailable and, in the case of a motion to open default judgment, the basis of excusable neglect.
§ 39-03 PVB Fleet Program – Weekly Listing of Newly Issued Summonses.
(a) Prior to enrollment, all unpaid summonses (judgment and non-judgment) on all company plates must be satisfied.
(1) the failure to pay the fine amount for each summons the company does not contest within 60 days after the Department of Finance system entry date for such summons will result in a penalty of $10.00;
(2) the continued failure to pay the summons fine amount for an additional 30 days beyond the period stated in paragraph (1) of this subdivision will result in a further penalty of $20.00 in addition to the penalty provided in paragraph (1) of this subdivision;
(3) the continued failure to pay the summons fine amount for an additional 45 days beyond the period stated in paragraph (2) of this subdivision will result in a further penalty of $30.00 in addition to the penalties provided in paragraphs (1) and (2) of this subdivision; and
(4) the continued failure to pay the summons fine amount for an additional 7 days beyond the period stated in paragraph (3) of this subdivision will result in the entry of a judgment against the owner in the fine amount as provided in 19 RCNY § 39-05 plus the penalties provided in paragraphs (1), (2) and (3) of this subdivision.
The penalties set forth in subdivision (a) of 19 RCNY § 39-07 shall not apply to any company subject to this subdivision.
§ 39-03.1 Program of Stipulated Fines for Vehicles Enrolled in the Fleet Program.
(a) Agreement; waiver of right to contest notices of violation. Notwithstanding any inconsistent provision of 19 RCNY § 39-05, the Commissioner of Finance may enter into agreements with the owners of vehicles with commercial plates enrolled in the Fleet Program for the payment of stipulated fines in accordance with a reduced fine schedule for parking violations set forth in the agreement ("stipulated fine amounts"). Such stipulated fine amounts shall not apply to enrolled vehicles unless the owner of such vehicles enters into a written agreement with the Commissioner, in advance, in which the owner agrees to waive the right to contest all notices of violation issued against such owner's enrolled vehicles during a stated period of time and to pay the stipulated fine amounts for all such violations. This waiver includes any right to challenge or otherwise contest any such summonses that have become due and payable at the unreduced full amount pursuant to the enforcement provisions set forth in the agreement and in subdivision (e) of this section.
(1) The failure to pay the stipulated fine amount within 45 days after the Department of Finance system entry date for the summons will result in a penalty of $10.00.
(2) The continued failure to pay the stipulated fine amount for an additional 45 days beyond the period stated in paragraph (1) of this subdivision will result in a further penalty of $20.00 in addition to the penalty provided in paragraph (1) of this subdivision.
(3) The continued failure to pay the stipulated fine amount for an additional 45 days beyond the period stated in paragraph (2) of this subdivision will result in a further penalty of $30 in addition to the penalties provided in paragraphs (1) and (2) of this subdivision.
(4) The continued failure to pay the stipulated fine amount for an additional 7 days beyond the period stated in paragraph (3) of this subdivision will result in the entry of a judgment against the owner in the original unreduced fine amount as provided in 19 RCNY § 39-05, plus the penalties provided in paragraphs (1), (2) and (3) of this subdivision.
§ 39-03.2 Program of Commercial Abatements for Vehicles Enrolled in the Fleet Program.
(a) Agreement; waiver of right to contest notices of violation. Notwithstanding any inconsistent provision of 19 RCNY § 39-05, the Commissioner of Finance may enter into agreements with the owners of vehicles with commercial plates enrolled in the Fleet Program that are not eligible for the Stipulated Fine Program under 19 RCNY § 39-03.1, for the payment of fines in accordance with a reduced fine schedule for parking violations set forth in the agreement ("commercial abatement fine amounts"). Such commercial abatement fine amounts will not apply to enrolled vehicles unless the owner of such vehicles enters into a written agreement with the Commissioner, in advance, in which the owner agrees to waive the right to contest all notices of violation issued against such owner's enrolled vehicles during a stated period of time and to pay the commercial abatement fine amounts for all such violations. This waiver includes any right to challenge or otherwise contest any such violations that have become due and payable at the unreduced full amount pursuant to the enforcement provisions set forth in the agreement and in subdivision (d) of this section.
(1) The failure to pay the commercial abatement fine amount within 45 days after the Department of Finance system entry date for the summons will result in a penalty of $10.00.
(2) The continued failure to pay the commercial abatement fine amount for an additional 45 days beyond the period stated in paragraph (1) of this subdivision will result in a further penalty of $20.00 in addition to the penalty provided in paragraph (1) of this subdivision.
(3) The continued failure to pay the commercial abatement fine amount for an additional 45 days beyond the period stated in paragraph (2) of this subdivision will result in a further penalty of $30 in addition to the penalties provided in paragraphs (1) and (2) of this subdivision.
(4) The continued failure to pay the commercial abatement fine amount for an additional 7 days beyond the period stated in paragraph (3) of this subdivision will result in the entry of a judgment against the owner in the original unreduced fine amount as provided in 19 RCNY § 39-05 plus the penalties provided in paragraphs (1), (2) and (3) of this subdivision.
§ 39-04 Methods of Pleading and Payment of Fines.
(a) Entry of plea.
(1) A plea shall be entered within thirty days after service of the notice of violation (summons).
(2) A plea may be entered in person or by representative at any borough hearing office listed in 19 RCNY § 39-08(a) or by ordinary mail.
(3) The Bureau shall not reject any plea entered by mail if received by the Bureau within thirty days after service of the notice of violation (summons).
(1) Entering the desired plea on the plea form on the back of the summons;
(2) Entering his or her name and address in the space provided on the plea form;
(3) Signing the plea form and;
(4) Mailing the notice of violation (summons) with the plea form completed, by appropriate form of mail, to the mailing address stated on the notice of violation (summons).
(1) A respondent pleading not guilty may request a hearing.
(2) If a plea of not guilty is made in person, an immediate hearing may be had on request of the respondent, if convenient to the Bureau.
(3) The Bureau reserves the right to set a date, time and place of hearing different from that selected by the respondent.
§ 39-05 Amount of Fines.
Scheduled fines. The following schedule of fines shall apply to violations listed below:
| Violation | |
|---|---|
|
$100.00 |
|
$100.00 |
|
$30.00 |
|
$80.00 |
|
$50.00 |
|
$80.00 |
|
$50.00 |
|
$100.00 |
|
$100.00 |
|
$30.00 |
|
$20.00 |
|
$150.00 |
|
$50.00 |
|
|
| First offense | $250.00 |
| Any subsequent offense within a six month period | $500.00 |
|
$30.00 |
|
$45.00 |
|
$100.00 |
|
$100.00 |
|
$500.00 |
|
$500.00 |
|
$500.00 |
|
$500.00 |
|
$500.00 |
|
$50.00 |
~
As used in this section, the term “Restricted Area” means all of Manhattan south of the building line on the north side of 96th Street, and between the Hudson River and the East River. Within the Restricted Area, the fine for violations enumerated in paragraphs (c), (k), (o) and (p) is $50.00 and for paragraph (j) the fine is $45.00.
Fines following a hearing.
§ 39-06 Declaration of Emergency Conditions.
When a civil emergency other than a snow emergency affecting traffic conditions within the City of New York has been declared by the Governor of the State of New York or the Mayor or Police Commissioner of the City of New York and which, upon request, has been confirmed by order of the Transportation Commissioner or Deputy Commissioner of Traffic, the fine of $50.00 shall become effective for all violations of a rule prohibiting parking, and the fine of $100.00 shall become effective for all violations of a rule prohibiting stopping or standing, twenty-four hours after the adoption of the order of the Transportation Commissioner or Deputy Commissioner and shall apply to all notices of violation for such violations issued during the emergency.
§ 39-07 Penalties.
(a) Additional penalties. Additional penalties may be assessed against the respondent for failure to plead or appear pursuant to these rules, or having appeared for a hearing, failing to make payment assessed thereat. The additional penalties shall be assessed according to the following schedule; provided, however, that if a respondent makes a plea or appears within 20 days after the Bureau mails a notice of violation to the owner pursuant to Vehicle and Traffic Law § 235(2)(a) or prior to such mailing, the additional penalties which may be imposed pursuant to paragraphs (1), (2) and (3) of this subdivision shall not exceed the amount set forth in paragraph (1):
(1) Upon entry of a plea more than 30 days after date of summons . . . an additional penalty in an amount of $10.00. Payment of the base fine that is received no later than 7 days after the Department of Finance has sent a notice of an additional penalty described by this paragraph (1) will be deemed payment in full of the violation, but no additional penalty described by this paragraph (1) that is paid following the aforementioned 30 day period will be refunded.
(2) Upon entry of a plea more than 45 but less than 76 days after date of summons . . . penalty as noted in paragraph (1) and additional penalty of $20.00.
(3) Upon entry of a plea more than 75 days after date of summons or upon entry of default, final determination or judgment . . . penalties as noted in paragraphs (1) and (2) and additional penalty of $30.00.
(4) Upon failure to either pay in full within 7 days, the amount of fine and penalties fixed by an administrative law judge after a determination sustaining the charges, or otherwise comply with the provisions of 19 RCNY § 39-12, the scheduled fine amount shall be restored and additional penalties shall become due in accordance with the amounts set forth in paragraphs (1), (2) and (3) of this subdivision as if there had been no plea or appearance.
(1) Lessors of a vehicle registered with the Bureau under 19 RCNY § 39-11(b) who otherwise comply with the provisions of 19 RCNY § 39-11(b) shall not be liable for penalties imposed pursuant to this 19 RCNY § 39-07.
(2) A lessor of a vehicle registered with the Bureau under 19 RCNY § 39-11(b) shall be liable for penalties imposed pursuant to this section only as provided in 19 RCNY § 39-11(b), unless such penalties shall be abated as provided in 19 RCNY § 39-07(b).
§ 39-08 Hearings.
(a) Location of hearings.
(1) Hearings may be held or payments made at any locations designated by the Director.
(2) The Director, in his or her discretion, may establish such special purpose hearing parts, and at such locations as deemed necessary.
(1) Hearing parts shall meet on days and at times as the Director shall from time to time in his or her discretion determine, upon appropriate notice to the public.
(2) The Director, in his or her discretion, may set additional times and days for hearings or limit, reduce or vary the time and days for hearings, to meet the needs of the Bureau, upon appropriate notice to the public.
(3) Reserved.
(1) A respondent may be represented by counsel.
(2) Appearance by Counsel shall not be recognized unless such attorney shall have filed a proper notice of appearance. The notice of appearance shall contain the name, office address and telephone number of the attorney. No other attorney shall be permitted to appear for the respondent in such matter without an order in writing or made at open hearing by an administrative law judge. (See 19 RCNY § 39-09 – Representatives at Parking Violations Bureau Hearings)
(1) The administrative law judge shall not be bound by the rules of evidence in the conduct of the hearing, except rules relating to privileged communications.
(2) Evidence may be presented in any form. All testimony shall be given on oath or affirmation.
(3) The respondent shall have the right to present witnesses, to conduct examination and to introduce documentary evidence.
(4) The summons shall constitute prima facie evidence of the statements contained therein. A reproduction of the summons or the original thereof filed with the Bureau may be used at the hearing in lieu of the copy from which it was made.
§ 39-09 Representatives at Parking Violations Bureau Hearings.
(a) Brokers.
(1) Definitions.
Broker. “Broker” means a person who:
(i) is not the owner or operator of the summonsed vehicle;
(ii) represents another person or firm;
(iii) requests a hearing three or more times within any six month period; and
(iv) is not an employee of the respondent (as defined in 19 RCNY § 39-09(b)(1)).
Brokerage Company. “Brokerage Company” means a corporation, company, partnership or entity that:
(i) is not the owner or operator of the summonsed vehicle;
(ii) engages brokers to represent another person or firm; and
(iii) requests a hearing three or more times within any six month period.
(2) Rules and authorization. The rules set forth in paragraph (8) of subdivision (a) of this section apply to brokers appearing before the Department in any capacity, which include but are not limited to: the fleet program, stipulated fine program, commercial abatement program, car rental program, hearings by mail, CAU hearings, and scheduling and billing.
A broker must register with the Department before representing a respondent before the Department in any capacity. Such registration must be on a Broker Authorization Form prescribed by the Department. The Broker Authorization Form must be:
(i) signed by a duly authorized principal, officer or partner of the respondent;
(ii) duly acknowledged before a Notary Public; and
(iii) mailed to PVB by certified mail, return receipt requested, or hand delivered to the Fleet Program Manager, who will issue a receipt. The Broker Authorization Forms will be filed in a central location in the Commercial Adjudication Unit (CAU). Upon revocation of the authorization of a broker to represent a person or company, it is the joint and several responsibility of the broker and the person or company to notify PVB within seven days by certified mail, return receipt requested.
(3) Hearing location and schedule. All hearings involving brokers shall be conducted by appointment only in CAU. No other location or unit (e.g. Help Centers) shall schedule or conduct hearings for respondents represented by brokers.
(4) Fleet program and car rental program. All respondents represented by a broker must register in the Fleet Program, if eligible. For vehicles registered in either the Fleet Program or the Car Rental Program, no hearing will be allowed without a PVB computer-generated log.
(5) Hearing logs. For vehicles not in the Fleet Program or Car Rental Program, brokers shall be responsible for the proper preparation of the hearing log as per instruction of the CAU manager.
(6) Summons copy fees. Companies represented by brokers are subject to the same summons copy fees as the general public (19 RCNY § 39-02(e)).
(7) Hearing procedures.
(i) Before each hearing, brokers must submit to the CAU reception clerk all of the summonses scheduled to be adjudicated. These summonses will be delivered to the presiding judge before the hearing begins. No additional summonses may be submitted or accepted for adjudication at that hearing session once the hearing begins without the authorization of the CAU manager.
(ii) The hearing shall not be interrupted or stopped by the broker because of a dispute on a ruling. The determination of the presiding judge is final and may be overruled only by an appeal.
(iii) Except for the lunch break, the hearing shall proceed without interruption until the end of the day, unless before then the ALJ adjudicates all of the summonses the broker has submitted or adjourns the hearing.
(iv) Absent such adjournment, if the broker is not present or otherwise fails to proceed at the hearing, the ALJ may render judgment on all of the unadjudicated summonses as if they were submitted for a hearing by mail.
(v) Any summons not adjudicated on the day of the hearing due to an adjournment for further evidence shall be retained by CAU together with documents attached thereto, and shall be adjudicated on the adjourned date by the same ALJ who began the hearing, if possible. On that adjourned date, the ALJ shall not hear any of the broker summonses except those left unadjudicated from the original hearing without special authorization from the CAU manager.
(8) Conduct while at PVB.
(i) Brokers shall observe in good faith the laws and regulations governing the adjudication of parking violation summonses and any forms and instructions provided to the broker by the Department.
(ii) Brokers must exercise due diligence in:
(1) Learning and obeying applicable statutes, rules, and instructions governing the disposition of, or agreements concerning payment of, parking violation summonses before the CAU;
(2) Complying with schedules for appearances; and
(3) Ensuring that their oral and written arguments and statements to the Department are correct.
(iii) A broker who knows or has reason to believe that a respondent has made a factual error in or omission from a document submitted at the hearing must advise the respondent promptly of such error or omission. A broker shall urge the applicant to correct the error and promptly submit the corrected information. If the applicant refuses to do so, the broker must withdraw from representation for the summons(es) where continued representation would violate this section.
(iv) Brokers must not file an application, submit a document, or present testimony or other evidence that is obviously false, or that the broker knows or has reason to believe is false, fraudulent, or contains false information.
(v) Brokers must not make any statement or fail to disclose any fact in any situation where such broker knows or has reason to know such statement or failure to disclose information will mislead the ALJ at a hearing.
(vi) Brokers must not present a demand or an opinion of fact or law to the ALJ at a hearing unless the broker holds it in good faith and can support it on reasonable grounds.
(vii) A broker must not sign an application in the name of the applicant. A broker signing an application pursuant to a broker authorization form must sign in the broker’s own name.
(viii) Brokers must not attempt to initiate conversations or correspondence about particular cases with the ALJ before or after the hearing. At the hearing, brokers must discuss the scheduled matters only. Brokers must not telephone or write the ALJ or other employees of the Department before or after the hearing with additional arguments.
(ix) Brokers must not attempt to influence any ALJ or employee of the Department by the use of threats, false accusations, intimidation or coercion; promises of advantage; or the presenting or offer of any gift, favor or thing of value. A broker must report promptly any such acts of which the broker is aware to the New York City Department of Investigation.
(x) Brokers must not engage in disrespectful conduct in appearing before an ALJ through means including, but not limited to, using abusive language or disrupting a hearing.
(xi) Brokers must not go into any non-public service area unless accompanied or authorized by a manager or supervisor and they must not operate any PVB terminal or other equipment at any time.
(xii) Brokers must not request any Department clerical staff to perform non-routine tasks. All such requests must be addressed directly to and approved by the CAU Manager. “Nonroutine” means anything out of the regular processing stream.
(9) Penalty for violation of these rules. Any broker or brokerage company who willfully or repeatedly violates these rules may be barred from representing clients at PVB in any capacity. The Commissioner may, after providing notice to the broker and, if the brokerage company is also subject to suspension, the brokerage company, and an opportunity to be heard, suspend the broker for any period up to life from appearing before the Department in any capacity, except that the broker may appear on parking violations issued in the broker’s name, and/or suspend a brokerage company for any period up to and until the dissolution of the brokerage company from appearing before the Department in any capacity, except that the brokerage company may appear on parking violations issued in the brokerage company’s name. Such notice(s) will inform the broker and, if the brokerage company is subject to suspension, the brokerage company, of the reasons for the proposed suspension and that the broker and the brokerage company, if the brokerage company is subject to suspension, has the right to present information as to why the broker and/or brokerage company should not be suspended to the Commissioner, or his or her designee, within 10 business days of delivery of the notice by hand or 15 business days of the posting of notice by mail. Any suspension of a broker will apply solely to the broker unless the Department has evidence either that the brokerage company which employed the broker had knowledge of the broker’s infractions and did not inform the Department or that the standard practice of such brokerage company was to commit infractions in its interactions with the Department regardless of the broker involved. Any suspension of a brokerage company will apply to all brokers employed by the brokerage company for the period during which those brokers remain employed by the brokerage company. Any brokerage company shall be barred from representing clients at PVB in any capacity when a broker subject to a life suspension is employed by, engaged by, is subcontracted to, consults with or has any ownership interest in, such brokerage company.
(1) Definitions.
Employee. As used in these regulations, the term “employee” refers to a person who:
(i) is a principal, partner, officer or salaried employee of the respondent; (ii) was not the operator of vehicle at the time it was summonsed; and
(iii) is not a broker (as defined in 19 RCNY § 39-09(a)(1)).
(2) Rules and authorization. The rules set forth in paragraph (8) of subdivision (b) of this section apply to employees appearing before the Department in any capacity, which include but are not limited to: the fleet program, stipulated fine program, commercial abatement program, car rental program, hearings by mail, CAU hearings, and scheduling and billing.
An employee must register with the Department before representing a respondent before the Department in any capacity. Such registration must be on an Employee Authorization Form prescribed by the City of New York Department of Finance. The Employee Authorization Form must be:
(i) on the letterhead of the registrant;
(ii) signed by a duly authorized principal, officer or partner of the respondent; and
(iii) duly acknowledged before a Notary Public. Such Authorizations must be received by CAU before an employee may act on behalf of his or her company. They will be kept on file at CAU.
(3) Hearing location and schedule. All hearings in which employees act as representatives shall be conducted by appointment only in CAU. No other location or unit (e.g. Help Centers) shall schedule or conduct hearings for respondents represented by employees.
(4) Fleet program and car rental program. All respondents represented by an employee must register in the Fleet Program, if eligible. For vehicles registered in either the Fleet Program or the Car Rental Program, no hearing will be allowed without a computer-generated log.
(5) Hearing logs. For vehicles not in the Fleet Program or Car Rental Program, employees shall be responsible for the proper preparation of the hearing log as per instruction of the CAU manager.
(6) Summons copy fees. Companies represented by employees are subject to the same summons copy fees as the general public (19 RCNY § 39-02(e)).
(7) Hearing procedures.
(i) Before each hearing, employees must submit to the CAU reception clerk all of the summonses scheduled to be adjudicated. These summonses will be delivered to the presiding judge before the hearing begins. No additional summonses may be submitted/accepted for adjudication at that hearing session once the hearing begins without the authorization of the CAU manager.
(ii) The hearing shall not be interrupted or stopped by the employee because of a dispute on a ruling. The determination of the presiding judge is final and may be overruled only by an appeal.
(iii) Except for the lunch break, the hearing shall proceed without interruption until the end of the day, unless before then the ALJ adjudicates all the summonses the employee has submitted or adjourns the hearing.
(iv) Absent such adjournment, if the employee is not present or otherwise fails to proceed at the hearing, the ALJ may render judgment on all of the unadjudicated summonses as if they were submitted for a hearing by mail.
(v) Any summons not adjudicated on the day of the hearing due to an adjournment for further evidence shall be retained by CAU together with documents attached thereto, and shall be adjudicated on the adjourned date by the same ALJ who began the hearing, if possible. On that adjourned date, the ALJ shall not hear any summonses except those left unadjudicated from the original hearing without special authorization from the CAU manager.
(8) Conduct while at PVB.
(i) Employees shall observe in good faith the laws and regulations governing the adjudication of parking violation summonses and any forms and instructions provided to the employee by the Department.
(ii) Employees must exercise due diligence in:
(1) Learning and obeying applicable statutes, rules, and instructions governing the disposition of, or agreements concerning payment of parking violation summonses before the CAU;
(2) Complying with schedules for appearances; and
(3) Ensuring that their oral and written arguments and statements to the Department are correct.
(iii) An employee who knows or has reason to believe that a respondent has made a factual error in or omission from a document submitted at the hearing must advise the respondent promptly of such error or omission. An employee shall urge the applicant to correct the error and promptly submit the corrected information.
(iv) Employees must not file an application, submit a document, or present testimony or other evidence that is obviously false, or that the employee knows or has reason to believe is false, fraudulent, or contains false information.
(v) Employees must not make any statement or fail to disclose any fact in any situation where such employee knows or has reason to know such statement or failure to disclose information will mislead the ALJ at a hearing.
(vi) Employees must not present a demand or an opinion of fact or law to the ALJ at a hearing unless the broker holds it in good faith and can support it on reasonable grounds.
(vii) An employee must not sign an application in the name of the applicant. An employee signing an application pursuant to an employee authorization form must sign in the employee’s own name.
(viii) Employees must not attempt to initiate conversations or correspondence about particular cases with the ALJ before or after the hearing. At the hearing, employees must discuss the scheduled matters only. Employees must not telephone or write the ALJ or other employees of the Department before or after the hearing with additional arguments.
(ix) Employees must not attempt to influence any ALJ or employee of the Department by the use of threats, false accusations, intimidation or coercion; promises of advantage; or the presenting or offer of any gift, favor or thing of value. An employee must report promptly any such acts of which the employee is aware to the New York City Department of Investigation.
(x) Employees must not engage in disrespectful conduct in appearing before an ALJ through means including, but not limited to, using abusive language or disrupting a hearing.
(xi) Employees must not go into any non-public service area unless accompanied or authorized by a manager or supervisor and they must not operate any PVB terminal or other equipment at any time.
(xii) Employees must not request any Department clerical staff to perform non-routine tasks. All such requests must be addressed directly to and approved by the CAU Manager. “Non-routine” means anything out of the regular processing stream.
(9) Penalty for violation of these rules. Any employee who willfully or repeatedly violates these rules may be barred from representing his or her employer at PVB in any capacity. The Commissioner may, after providing notice to the employee and an opportunity to be heard, suspend the employee for any period up to life from appearing before the Department in any capacity, except that the employee may appear on parking violations issued in the employee’s name. Such notice will inform the employee of the reasons for the proposed suspension and that the employee has the right to present information as to why the employee should not be suspended to the Commissioner, or his or her designee, within 10 business days of delivery of notice by hand or 15 business days of the posting of notice by mail. Any suspension will apply solely to the employee unless the Department has evidence either that the standard practice of the employer was to commit infractions in its interactions with the Department regardless of the employee involved or that the employer had knowledge of the employee’s infractions and did not inform the Department.
(1) Definitions.
Unpaid representative. An “unpaid representative” is a person who:
(i) is not the owner or operator of the summonsed vehicle;
(ii) represents another person or firm;
(iii) is not a broker (as defined in 19 RCNY § 39-09(a)(1)) or employee (as defined in 19 RCNY § 39-09(b)(1)); (iv) is not representing the respondent as an attorney; and
(v) receives no fee or other payment for representing respondents at PVB.
(2) Authorization for summonses not in judgment. Prior to any hearing involving summonses not in judgment, an unpaid representative must file with the Department of Finance a signed and notarized designation from the respondent that the representative is authorized to represent the respondent.
(3) Authorization for summonses in judgment. An unpaid representative may not have a hearing on summonses in judgment unless he or she submits to the Department of Finance a notarized Request for Hearing After Judgment, signed by the registrant of the summonsed vehicle and duly acknowledged before a Notary Public.
§ 39-10 Decisions and Judgments.
(a) Rendering of decision. The administrative law judge shall make a determination on the charges, either sustaining or dismissing them.
(1) The administrative law judge shall not examine the respondent’s parking violations record prior to making a determination on the charges, without the respondent’s consent.
(2) Where a determination has been made sustaining the charges, the administrative law judge may examine the respondent’s parking violations record prior to fixing fines and assessing penalties and fees.
(1) Where a respondent has failed to plead within the time allowed or to appear for a hearing, or on any subsequent adjourned date, a default judgment sustaining the charges, fixing the fine and, in appropriate cases, assessing penalties and fees, may be entered against said respondent.
(2) Before such a default judgment is rendered, the Bureau shall notify the respondent by such form of first class mail as the Director may determine that a violation is outstanding, of the impending default judgment, and that such judgment may be avoided by entering a plea or making an appearance within thirty days of such notice. Failure or refusal to accept or claim such mail shall be deemed adequate notice for purposes of penalties and entry of a default judgment against the respondent.
(1) Notice of an impending default judgment shall not be required prior to the rendering and entry thereof in the case of operators or owners who are non-residents of the State of New York.
(2) Registered owners of vehicles registered elsewhere than the State of New York shall be deemed to be non-residents of the State of New York.
(1) All judgments are to be paid immediately upon entry.
(2) In the case of judgments rendered after hearing, the respondent shall pay such judgments in full immediately. However, for good cause shown, the Director or his or her designee may extend the time for such payment or set conditions therefor.
(3) Default judgments shall be paid in full by or on behalf of the respondent within seven days of the date of entry of such judgments. Nothing in this paragraph shall be construed to limit the Bureau’s rights under law to collect such judgments.
(1) A determination dismissing a charged parking violation that has been procured due to the knowing fraud, false testimony, misrepresentation or other misconduct, or the knowing alteration of a notice of parking violation, by the person so charged or his or her agent, employee or representative may be set aside by an administrative law judge as hereinafter provided.
(2) Notice shall be served on the owner by mail to the last known registered address within two years of the time that the enforcing authority discovers, or could with reasonable diligence have discovered, that the dismissal was procured due to the knowing fraud, false testimony, misrepresentation, or other misconduct, or the knowing alteration of a notice of parking violation, by the person so charged or his or her agent, employee or representative. Such notice shall fix a time when and place where a hearing shall be held before an administrative law judge to determine whether or not dismissal of a charged parking violation shall be set aside. Such notice shall set forth the basis for setting aside the dismissal and advise the owner that failure to appear at the date and time indicated in such notice shall be deemed an admission of liability and shall result in the setting aside of the dismissal and entry of a determination on the charged parking violation. Such notice shall also contain a warning that civil penalties may be imposed for the violation pursuant to this subdivision and that a default judgment may be entered thereon.
(3) Upon a finding by an administrative law judge that the dismissal of a charged parking violation has been procured due to the knowing fraud, false testimony, misrepresentation, or other misconduct, or the knowing alteration of a notice of parking violation, by the person so charged or his or her agent, employee or representative, the dismissal shall be set aside and a determination may be rendered against the owner on the charged parking violation. The administrative law judge may impose monetary penalties for the charged parking violation of up to three times the scheduled fine for the violation pursuant to 19 RCNY § 39-05 and three times the additional penalties that may be imposed for failure to respond to a notice of violation pursuant to 19 RCNY § 39-07. The administrative law judge shall also impose, without multiplying, the surcharge authorized by section 1809-a of the Vehicle and Traffic Law. For purposes of determining the amount of such additional penalties, the administrative law judge shall disregard the plea that procured the dismissal that has been set aside and shall calculate such penalties as if there had been no plea or appearance in the proceeding. In any proceeding under this subdivision to set aside a determination and to impose penalties for the violation, it shall not be necessary for the administrative law judge to find that the owner personally committed the unlawful acts that procured the dismissal of the violation.
(4) Failure to appear at the hearing in response to a notice issued pursuant to this subdivision, or to pay, within 7 days, the amount assessed by an administrative law judge pursuant to paragraph 3, shall be deemed to be an admission of liability for the charged parking violation as set forth in the original notice of violation, and a default judgment may be entered against the owner in the maximum amount set forth in paragraph 3 of this subdivision.
(5) A default judgment pursuant to paragraph 4 of this subdivision may be entered more than two years after the expiration of the time prescribed pursuant to subdivision (f) of this section, but no more than two years after the time that the enforcing authority discovers, or could with reasonable diligence have discovered, that the dismissal was procured by fraud, false testimony, misrepresentation, or other misconduct, or the knowing alteration of a notice of parking violation by the respondent or by his or her agent, employee or representative.
(6) The respondent and the City of New York shall have the right to appeal from any adverse decision in accordance with the appeal procedure set forth in 19 RCNY § 39-12.
§ 39-11 Liability.
(a) Operators and owners.
(1) The operator of a vehicle shall be liable for the fines or penalties imposed pursuant to 19 RCNY §§ 39-05, 39-06 and 39-07.
(2) Except as otherwise provided in 19 RCNY § 39-11(b), the owner of the vehicle, even if not the operator, shall be jointly and severally liable with the operator if such vehicle was used or operated with the permission of the owner, express or implied.
(1) The lessor of a motor vehicle shall not be liable for the fines and penalties imposed by 19 RCNY §§ 39-05, 39-06 and 39-07 if prior to the issuance of a notice of a violation against the vehicle, the lessor has registered the vehicle with the Bureau as hereinafter provided, has paid the required filing fee provided for in paragraph (6) of this 19 RCNY § 39-11(b) and has otherwise complied with the provisions of this 19 RCNY § 39-11(b), and section 239 of the Vehicle and Traffic Law.
(2) A lessor may register a vehicle with the Bureau by filing with the Bureau the following information:
(i) Plate number
(ii) Plate type
(iii) State of registration. Where more than one party meet the definition of the term “Lessor” set forth in 19 RCNY § 39-01, then each such party is required to co-register. Such co-registrants may designate one of them for the service of notices given by the Bureau or elect to receive each notice separately
(iv) Lessor’s legal name and the address at which it does business
(v) A statement from the lessor indicating whether and how it will inform the lessee of the lessee incurring a parking violation once the lessor is notified by the Department of the issuance of the parking violation. Such statement should indicate whether the lessor plans to collect parking violation amounts from the lessee
(vi) Such bank and credit information of the lessor as required by the Bureau.
(3) Any information required or permitted to be furnished under this 19 RCNY § 39-11(b) shall be on forms prescribed by the Bureau. Information will also be accepted by the Bureau if filed on magnetic tape or other recording media in a format prescribed by the Bureau. If requested by a lessor, the Bureau will give notices or provide other information to a lessor on magnetic tape or other similar media in a format prescribed by the Bureau.
(4) Lessor shall file the vehicle registration by first class mail to a post office box or shall personally deliver the registration to the office designated by the Bureau. Payment of the required filing fee shall be made by delivery of a check or money order payable to the “Parking Violations Bureau.”
(5) A vehicle shall be deemed registered on the “effective date” of the filing of the registration as follows:
(i) For the primary filing:
(A) If the plate registration and the annual filing fee is received by the Bureau in connection with the lessor’s primary filing at least 30 days prior to the commencement of the fiscal year, the effective date shall be the first day of the fiscal year.
(B) If the plate registration and the annual filing fee in connection with the lessor’s primary filing, is received by the Bureau less than 30 days prior to the commencement of the fiscal year, the effective date of such filing shall be 30 days from such date. However, the Bureau may designate an earlier date as the effective date of such filing.
(ii) For a filing other than a primary filing: If the plate registration and the required filing fee is received by the Bureau during any month, the effective date shall be retroactive to the first day of that month. The Bureau shall notify the lessor of the effective date of filing of the registration.
(6) The annual filing fee for each vehicle registration shall be twelve dollars for each fiscal year. If a lessor files a plate registration during the fiscal year, the filing fee shall be reduced at the rate of one dollar per month from the commencement of the fiscal year to the effective date of registration. The Bureau shall notify the lessor of receipt of the filing fee. Lessors shall not be entitled to a refund, credit or other reduction of filing fees for registrations withdrawn from service, destroyed, or surrendered during the fiscal year.
(7) Within 90 days after issuance of a Notice of Violation to a vehicle registered with the Bureau hereunder, the Bureau will give notice of such issuance to the lessor. Such notice will be given by first class mail or by personal delivery to the lessor’s address on file with the Bureau. Within 37 days after receipt of the notice of outstanding violations, the lessor shall provide to the Bureau the name and address of the lessee. For the purpose of determining lessor’s time to provide the information required hereunder, the lessor shall be presumed to have received the notice of the outstanding violations from the Bureau five days after such notice is mailed or delivered by the Bureau unless the lessor can demonstrate that such notice was actually received on a later date.
(8) In addition to the information required under paragraph (7) of this 19 RCNY § 39-11(b), upon the specific request from the Bureau, the lessor shall provide to the Bureau any or all of the following:
(i) The name and address of a lessee’s employer and or billing address where contained in the rental agreement or lease;
(ii) A copy of the rental agreement or lease;
(iii) Such credit information about a lessee where contained in the rental agreement or lease;
(iv) A copy of the motor vehicle registration as filed with the State Motor Vehicle Department;
(v) The vehicle identification number.
(9) If the lessor elects to pay the fine and penalty for a violation issued against a vehicle registered under this 19 RCNY § 39-11(b) and such payment is received by the Bureau within 37 days after the lessor received notice of the outstanding violations, and if the Bureau subsequently collects the fine and penalty from the operator or lessee who is liable therefore, the Bureau shall refund to the lessor the amount received from such operator or lessee, less the Bureau’s costs of collection.
(10) The Bureau shall give notice to a lessor if a notice of outstanding violation mailed to the name and address of a lessee provided by the lessor is returned to the Bureau by the United States postal authorities. The name and address provided by the lessor previously furnished to the Bureau shall be presumed to be an incorrect name and address unless the lessor shall furnish proof satisfactory to the Bureau, within 60 days after the lessor has received notification of said incorrect name and address, that the lessor has previously furnished the correct name and address. A copy of the rental agreement or lease setting forth the name and address previously furnished shall conclusively rebut the foregoing presumption.
(11) A lessor shall not be liable for a fine or penalty issued to any vehicle if such vehicle has been reported to the police as stolen prior to the time the violation occurred and had not been recovered by such time. A sworn statement that the vehicle has not been recovered at the time of such violation, together with the police alarm number or a certified copy of the police report of the stolen vehicle, shall be sufficient to abate any liability imposed hereunder.
(12) After a lessor provides to the Bureau the name of the lessee, the Bureau shall give notice to the lessee of the outstanding violation and the entry of a default judgment by first class mail and otherwise in accordance with the provisions of section 241 of the Vehicle and Traffic Law.
(13) If a lessor has registered a vehicle with the Bureau, it shall be liable for fines and penalties if:
(i) The lessor fails to provide the name and address of the lessee or otherwise fails to respond by requesting a hearing or by payment of the original fine within 37 days after the lessor receives a notice of outstanding violation from the Bureau;
(ii) the lessor willfully and wrongfully provides fraudulent or incorrect information to the Bureau.
(14) Penalties.
(i) In the event a lessor fails to provide the information specifically requested by the Bureau, under 19 RCNY § 39-11(b)(8), within 60 days of the request or in the event the lessor fails to comply with 19 RCNY § 39-11(b)(13), then the Bureau shall send a notice stating that the lessor is liable for the original fine and mandatory five dollar surcharge. If payment of the original fine and mandatory five dollar surcharge is not made within the time prescribed in said notice, which shall not be less than 30 days, the lessor shall be liable for penalties as prescribed in 19 RCNY § 39-07 as if the vehicle had not been registered with the Bureau pursuant to this subdivision on the date of the summons.
§ 39-12 Appeals.
(a) Appeals Board – powers.
(1) There shall be an Appeals Board within the Bureau which will consist of three or more persons duly qualified as Administrative Law Judges, Senior Administrative Law Judges, or Supervising Administrative Law Judges, as the Director shall determine, but in no event shall the Administrative Law Judge from whose decision the appeal is taken be included in the panel determining said appeal.
(2) The Appeals Board may review the facts and the law in any matter and, except in the interests of justice and upon consent of the respondent, shall not consider any evidence which was not presented to the administrative law judge. A concurring vote by two members of the Appeals Board panel will be required to make a determination on an appeal.
(3) Appeals shall be from final determinations or from decisions denying applications to open defaults, or from decisions to vacate dismissals, only. No intermediate appeals shall be allowed, but all claimed errors shall be deemed to be incorporated in the decision appealed from.
(2) The filing of a notice of appeal shall not stay the enforcement of a final determination, unless so directed by the Appeals Board on written application or unless the respondent, on or before the filing of a notice of appeal, shall have posted a cash or recognized surety company bond in the full amount of the final determination appealed from. In lieu thereof, the respondent may pay the fines and penalties assessed, subject to reimbursement thereof in appropriate circumstances.
(3) The requirement of service of a notice of appeal within thirty days of the entry of the decision may be waived in the interest of justice by the Director or a Senior or Supervising Administrative Law Judge designated for such purpose. If granted, such waiver shall be conditioned upon service of a notice of appeal within 30 days of the waiver, unless such notice has already been served.
(1) Briefs shall not be required. If the respondent desires to file a brief, it shall be in such form and number of copies as prescribed by the Director.
(2) In the event a respondent desires to file a brief, it shall be so indicated on the face of the notice of appeal.
(3) Briefs shall be filed in the same manner as notices of appeal, at the time of the filing of the notice of appeal, unless the time to do so is extended by the Appeals Board for good cause. Failure to file briefs within the time allowed shall be deemed an abandonment of the appeal.
(1) Appeals shall be heard upon the record of the hearing before the administrative law judge (if provided), the notice of appeal and such briefs as the respondent may file. The Appeals Board may request or accept briefs on behalf of other interested parties or by amici curiae. All appeals shall be submitted to the Appeals Board without oral argument, unless such oral argument is expressly requested by the appellant, or his or her attorney in the notice of appeal, and upon compliance with the rules and regulations of the Bureau. Procedures for oral argument and application therefor, shall be prescribed by the Director,
(2) The Bureau shall notify the respondent, either personally or by ordinary first class mail, of the date, time and place of such appearance. Failure or refusal to accept or claim such mail shall be deemed an abandonment of the appeal.
(1) Failure by any Respondent-Appellant to furnish or supply any relevant material required to process his or her appeal, within thirty days of a request by the Bureau therefor shall be deemed an abandonment of such appeal.
(2) Appeals which are abandoned shall be automatically dismissed. The Director may prescribe procedures for such dismissal.
§ 39-13 Certification to Motor Vehicle Commissioner.
(a) Certification of final determinations. In the event a respondent shall have failed to comply with the provisions of 19 RCNY § 39-10(h) in connection with final determinations or judgments entered on three or more summonses served within a period of eighteen months, the Bureau shall certify such fact to the Commissioner of Motor Vehicles of the State of New York.
§ 39-14 Computing Times.
(a) Computation.
(1) In computing the period of time to perform any act under these rules, the first day on which an act may be performed, e.g. the date of issuance of the notice of violations (summons) shall not be included but the last day of the period shall be included unless it is a Saturday, Sunday, or holiday, in which event the period shall be extended until the next business day.
(2) A holiday is any day appointed as such by the President or Congress of the United States, the Governor or Legislature of the State of New York or the Mayor or Council of the City of New York.
§ 39-15 Mail Proceedings.
(a) Adjudication by mail. The Director may denominate certain classes of alleged violations as appropriate for adjudication by mail and may prescribe procedures for such adjudication.
§ 39-16 Severability.
If any provision of this chapter or the application of such provision to any person or circumstances shall be held unconstitutional or invalid, the constitutionality or validity of the remainder of this chapter and the applicability of such provision to other persons or circumstances shall not be affected thereby.
§ 39-17 Red Light Violation Monitoring Program.
(a) Liability. The liability of an owner pursuant to § 1111-a of the vehicle and traffic law for a violation of subdivision (d) of § 1111 of such law shall be $50.00.
§ 39-18 Bus Lane Restriction Program.
(a) Liability. The liability of an owner pursuant to § 1111-c of the vehicle and traffic law shall be $50.00 for a first offense within a twelve-month period, $100.00 for a second offense within a twelve-month period, $150.00 for a third offense within a twelve-month period, $200.00 for a fourth offense within a twelve-month period, and $250.00 for each subsequent offense within a twelve-month period. For the purposes of this subdivision, the twelve-month period is defined as the twelve months going backwards from the date of the most recent offense.
§ 39-19 Hearings by Website.
The Director may determine certain classes of alleged violations as appropriate for adjudication electronically through the Department of Finance website and may prescribe procedures for such adjudication.
§ 39-20 Reduction of Fine Program.
(a) Cessation of program. The Reduction of Fine Program, in which a respondent was offered the opportunity to plead guilty and request the reduction of the fine for certain types of violations, will not be offered after January 31, 2012.
(1) No standing
(2) No parking
(3) Parking meter
(4) Double parking; and
(4) Status (e.g., expired registration, overdue for inspection)
(1) for summonses that were issued more than one hundred days prior to the plea and that were in judgment
(2) if the respondent had a prior hearing or settlement of the violation
(3) for any of the following violations:
(i) no stopping
(ii) handicapped violations
(iii) parking at a fire hydrant
(iv) traffic lane violation
(v) bicycle lane violation
(vi) sidewalk violation
(v) crosswalk violation
(vi) engine idling violation
(vii) blocking an intersection
(viii) safety zone violation; and
(ix) pedestrian ramp violation.
§ 39-21 Photo Speed Violation Monitoring System.
(a) Liability. A vehicle owner who is liable for a violation pursuant to § 1180-b of the Vehicle and Traffic Law will be liable for a penalty of $50.00 for each such violation.
§ 40-01 Definitions.
Unless the context requires otherwise, as used in these rules:
“Administrative Code” shall mean the Administrative Code of the City of New York.
“Commissioner” shall mean the Commissioner of Finance of the City of New York.
“Date of sale” shall have the meaning provided in Administrative Code § 11-320(e).
“Tax lien” shall have the meaning provided in Administrative Code § 11-301.
§ 40-02 Sale of Tax Liens.
The Commissioner, on behalf of the City of New York, may sell tax liens, either individually, in combinations, or in the aggregate, pursuant to the procedures provided in Chapter 3 of Title 11 of the Administrative Code, and is authorized by law to establish the terms and conditions of a sale of a tax lien or tax liens. The Commissioner may, in his or her discretion, sell a tax lien or tax liens through a competitive sale or a negotiated sale, including the negotiated sale of tax liens to a trust or other entity created by the City or in which the City has an ownership or residual interest. The Commissioner shall sell such tax liens at a purchase price that, in the determination of the Commissioner, is in the best interests of the City. The amount of a tax lien that is sold shall be the unpaid amount of the lien as of the date of sale, including: any interest and penalties thereon, any taxes, assessments, sewer rents, sewer surcharges, water rents, any other charges that are made a lien subject to the provisions of Chapter 3 of Title 11 of the Administrative Code, the costs of any advertisements and notices given to effectuate the sale, any other charges that are due and payable, any surcharge imposed by law, and interest and penalties thereon, or such component of the amount thereof as shall be determined by the Commissioner, notwithstanding the amount paid for purchase of the tax lien or component of the amount thereof.
§ 40-03 Installment Agreements.
(a) Generally. A property owner, or other eligible person as defined in subdivision (i) of this section, may enter into an installment agreement with the Department of Finance that allows for the payment in installments of any delinquent real property taxes or any charges that are made a lien on real property under Chapter 3 of Title 11 of the Administrative Code, excluding any delinquent sewer rents, sewer surcharges and water rents that are collected by the New York City Water Board. Except as provided in subdivision (g) of this section, when a property owner or other eligible person enters into an agreement with the Department of Finance for the payment of any such lien(s), any proposed sale of a tax lien(s) on a property will be cancelled.
(1) Monthly installments: If an installment agreement requires monthly payments, then payments must be made by the first day of each month.
(2) Quarterly installments: If an installment agreement requires quarterly payments, then payments must be made by January 1, April 1, July 1 and October 1.
(1) Definition of default: The property owner or other eligible person will be in default of such agreement, if any installment required under an installment agreement remains unpaid for a period of six months from the date payment is required to be made under subdivision (c) of this section, or if any other tax or charge that becomes due on the property during the term of such agreement remains unpaid in whole or in part for a period of six months.
(2) Consequences of default; cure of default: In the event of default of an installment agreement pursuant to paragraph (1) of this subdivision, the agreement may be cancelled and the tax lien(s) on the property that were required to be paid under the agreement, including any tax liens that became due during the term of the agreement, may be sold.
However, such default may be cured upon payment, prior to the date of the first tax lien sale that occurs following a default, of all past due installments required by the agreement, and all other charges that became due during the term of the agreement that are past due and unpaid at the time of the default, including interest and fees.
(3) Bar from executing future installment agreements: If a default is not cured as described in paragraph (2) of this subdivision prior to the date of the first tax lien sale that occurs following such default, the owner of the affected property and any other eligible person acting on behalf of the owner will not be eligible to enter into an installment agreement with the Department of Finance for the affected property for five years from the date of such sale, unless there is a finding of extenuating circumstances by the Department of Finance as described in paragraph (4) of this subdivision.
(4) “Extenuating circumstances” for purposes of paragraph (3) of this subdivision:
(i) “Extenuating circumstances” shall mean (1) the death of the signatory to the agreement, of any person named on the deed for the property or of a contributing household member, (2) a loss of income to the signatory, to any person named on the deed for the property or to a contributing household member due to his or her involuntary absence from the property for any consecutive period of six months or more for treatment of an illness, for military service, or pursuant to a court order, that results in a default of the agreement or inability to cure the default prior to the date of sale of the tax lien or tax liens, (3) a loss of income to the signatory to the agreement, to any person named on the deed for the property or to a contributing household member due to his or her unemployment for any consecutive period of six months or more that results in a default of the agreement or inability to cure the default prior to the date of sale of the tax lien or tax liens, or (4) active enrollment in, that is, enrolled and up-to-date with payments, as well as compliance with, the requirements of the New York City Department of Environmental Protection’s water debt assistance program as authorized by the New York City Water Board and Wastewater Rate Schedule which is set forth in Part VIII, section 4 of Appendix A of 15 RCNY Chapter 42.
(ii) For purposes of this paragraph, “contributing household member” shall mean any person eighteen years of age or older who has lived in the property that is the subject of the installment agreement at least since the execution of the agreement and has paid household expenses since the execution of the agreement in an amount equal to at least fifty percent of each installment amount due under the agreement.
(iii) An application for a finding of extenuating circumstances may be made only on a form prepared by the Commissioner or his or her designee and shall include a certification by the applicant that extenuating circumstances exist. The Department of Finance may require additional documentation to support a claim of extenuating circumstances by a property owner or other eligible person. If the Department of Finance determines that the applicant has provided inaccurate information in the application, any installment agreement entered into based on the finding of extenuating circumstances shall be revoked and the property owner and other eligible person shall not be eligible to enter into an installment agreement with the Department for the subject property for five years from the date of sale. The determination on an application for a finding of extenuating circumstances or on the accuracy of such application will be made by the Payment Operations Division of the Department of Finance. If the application is denied or if the information in the application is determined to be inaccurate, the property owner or other eligible person may appeal the determination within 30 days to the Commissioner or his or her designee.
(iv) No signatory to an installment agreement who has defaulted on such agreement and who, as a result of a finding of extenuating circumstances, has been allowed to enter into a second installment agreement for the subject property, shall be eligible to enter into any subsequent agreement on the subject property by applying for a finding of extenuating circumstances for the default of such second installment agreement. The same restriction shall apply to any other person whose change of circumstances was the basis, in whole or in part, for the original finding of extenuating circumstances.
Example: Under the Administrative Code, real property tax liens that are on property classified as class two, that is not a condominium or cooperative, may be sold if the real property tax liens are at least one year past due. Also under the Administrative Code, for the same type of class two property, tax liens for water and sewer charges may be sold if the liens have been unpaid for at least one year and total at least $1,000.
If such a class two property has real property tax liens that have been unpaid for at least one year, and also has water and sewer liens that have been unpaid for at least one year and total at least $1,000, the Department of Finance will cancel the tax lien sale of those real property tax liens when the owner of the property or other eligible person enters into an installment agreement with the Department of Finance to pay the unpaid real property tax liens that are subject to the proposed tax lien sale. However, the water and sewer liens may still be sold in a tax lien sale unless they are paid or the owner or other eligible person enters into an installment agreement with the Department of Environmental Protection to pay those water and sewer liens pursuant to that agency’s rules for installment agreements.
(1) Fiduciary. A fiduciary entering into an installment agreement must submit a copy of a document issued by the Surrogate’s Court that evidences his or her appointment as a fiduciary of the property of the estate of the decedent who owned the real property for which an installment agreement is sought. Such documents may include but are not limited to copies of Letters Testamentary or Letters of Administration.
(2) Estate beneficiary. A beneficiary of real property belonging to a decedent’s estate and for which an installment agreement is sought, who is therefore an owner of the property, must submit:
(i) If the decedent had a will, a copy of the decedent’s death certificate or other documentation which, in the determination of the Department of Finance, substantiates the death of the owner of the real property for which an installment agreement is sought, and:
(A) a copy of the will that indicates that the beneficiary was bequeathed the decedent’s entire estate or a share thereof containing the real property for which an installment agreement is sought, or was devised the real property or a share of the real property for which an installment agreement is sought; or
(B) a notarized letter signed by the court-appointed fiduciary of the decedent’s estate providing that the beneficiary has inherited from the estate the real property or a share of the real property for which an installment agreement is sought, together with a copy of a document issued by the Surrogate’s Court, such as Letters Testamentary, that evidences the appointment of the fiduciary; or
(C) if there have been no documents filed with the Surrogate’s Court and no fiduciary has been appointed by the Surrogate’s Court with respect to the decedent’s estate, documentation issued by a government agency which, in the determination of the Department of Finance, substantiates the beneficiary’s claim that he or she inherited the real property or a share of the real property for which an installment agreement is sought, making such beneficiary an owner of the property.
(ii) If the decedent died without a will, a copy of the decedent’s death certificate or other documentation which, in the determination of the Department of Finance, substantiates the death of the owner of the real property for which an installment agreement is sought, and:
(A) a copy of the document filed with or issued by the Surrogate’s Court naming the beneficiary as an heir of the decedent’s entire estate or a share thereof containing the real property for which an installment agreement is sought; or
(B) a notarized letter signed by the court-appointed fiduciary of the decedent’s estate providing that the beneficiary is an heir of the real property or a share of the real property for which an installment agreement is sought, together with a copy of a document issued by the Surrogate’s Court, such as Letters of Administration, that evidences the appointment of the fiduciary; or
(C) if there have been no documents filed with the Surrogate’s Court and no fiduciary has been appointed by the Surrogate’s Court with respect to the decedent’s estate, documentation issued by a government agency which, in the determination of the Department of Finance, substantiates the claim that the beneficiary is an heir of the decedent and inherited the real property or a share of the real property for which an installment agreement is sought, making such beneficiary an owner of the property.
§ 42-01 Fees for the Release of Stolen Motor Vehicles.
Any stolen motor vehicle seized by the City Sheriff pursuant to section four hundred twenty-four of the Vehicle and Traffic Law shall be released to the owner upon payment of the following fees: 1. Seventy dollars for towing the vehicle from the place where the vehicle was recovered to the storage yard; 2. Fifteen dollars a day for the first three days of storage; and 3. Seventeen dollars a day for the fourth day of storage and for each day thereafter.
§ 42-02 Abandoned Vehicles.
Any stolen motor vehicle which is unclaimed after notice of the recovery of such vehicle is mailed to the owner shall be considered to be an abandoned vehicle and shall be disposed of in accordance with section twelve hundred twenty-four of the Vehicle and Traffic Law.
§ 42-03 Personal Property.
The City Sheriff shall inventory and hold onto all personal property which is found in a stolen motor vehicle. Any such property that fits the definition of an instrument under subdivision 2 of section 251 of the Personal Property Law, and any other personal property with a value of $20.00 or more, shall be turned over to the police property clerk subsequent to the determination under 19 RCNY § 40-02 that a stolen motor vehicle is an abandoned vehicle, but prior to disposal of the vehicle.
§ 43-01 Requirement of Recording and Endorsement Page.
Any person presenting a document affecting real property to the Office of the City Register of the City of New York for recording and indexing shall complete and submit with the document a recording and endorsement page on a form to be supplied by the City Register. The recording and endorsement page shall be considered a part of the document to be recorded.
§ 43-02 Notice of Recording.
(a) Registration to receive notice. An owner, (or owner's agent/attorney or designee of owner), lienor (or lienor's agent/attorney) or executor/administrator (or the agent/attorney of the executor/administrator) of the estate of the owner or lienor of real property located in the City of New York may register with the Department of Finance, in a format determined by the Commissioner of Finance, to receive notice from the Department that a deed-related or mortgage-related document, as described in subdivision (e) of this section, has been recorded against such property in the Office of the City Register or, in the county of Richmond, in the Office of the County Clerk.
(1) shall not result in any liability of the City of New York, including the Department of Finance, or the Office of the Richmond County Clerk;
(2) shall not prevent the levy, collection and enforcement of taxes on the affected property;
(3) shall not invalidate any proceedings or filings with respect to the affected property; and
(4) shall not prevent the City of New York, including the Department of Finance, or the Office of the Richmond County Clerk from taking any actions under or enforcing any provision of law or rule.
(i) Air rights
(ii) Condemnation proceeding documents;
(iii) Condo declaration;
(iv) Confirmatory deed;
(v) Contract of sale;
(vi) Correction deed;
(vii) Court order;
(viii) Deed;
(ix) In rem deed;
(x) Judgment;
(xi) Life estate deed;
(xii) Memorandum of contract;
(xiii) Power of attorney;
(xiv) Real estate investment trust deed;
(xv) Revocation of power of attorney;
(xvi) Sundry agreement; and
(xvii) Unit assignment.
(2) Mortgage-related documents. For purposes of this section, a mortgage-related document shall include any document determined by the City Register to be mortgage-related, and includes, but is not limited to:
(i) Collateral mortgage;
(ii) Mortgage;
(iii) Mortgage and consolidation;
(iv) Mortgage spreader agreement;
(v) Satisfaction of mortgage;
(vi) Subordination of mortgage;
(vii) Sundry mortgage; and
(viii) UCC-1 (financing statement).
§ 44-01 General Authority.
Section 11-128 of the Administrative Code of the City of New York authorizes the Department of Finance to accept and, with respect to real property taxes for any property with an annual tax liability equal to or greater than $300,000, require, payment of real property taxes by electronic funds transfer.
§ 44-02 Mandatory Payment by Electronic Funds Transfer.
(a) The real property taxes for any property with an annual tax liability equal to or greater than $300,000 must be paid by electronic funds transfer.
§ 45-01 Purpose and Scope.
Section 11-354 of the New York City Administrative Code provides that real property sold pursuant to a foreclosure action brought by the City of New York under such section may be sold only to the highest responsible bidder. As authorized by such section, the Commissioner of Finance, after consultation with the Commissioner of Housing Preservation and Development, promulgates these rules establishing criteria by which a purchaser may be deemed a responsible bidder. These rules shall apply to all sales of real property pursuant to judgments in foreclosure actions brought pursuant to New York City Administrative Code § 11-354 to foreclose a tax lien.
§ 45-02 Definitions.
(a) "Affiliate" means
(1) any other person controlling or controlled by or under common control with the bidder; or
(2) any other person, as defined in this section, who has, directly or indirectly, a five percent (5%) or greater ownership interest in the bidder, or any other person in which the bidder, a partner or shareholder of the bidder, or partner or shareholder of any person that is a partner or shareholder of the bidder, has a five percent (5%) or greater ownership interest; or
(3) any individual who is a member of the immediate family (whether by birth or marriage) of a person who is an affiliate, which includes for purposes of this definition a spouse, a domestic partner as defined in § 1150(13) of the New York City Charter, a brother or sister of the whole or half blood (including an individual related by or through legal adoption) of such individual or his/her spouse or domestic partner, a lineal descendant or ancestor (including an individual related by or through legal adoption) of any of the foregoing, or a trust for the benefit of any of the foregoing; or
(4) any person who is a nominee of an affiliate, or serves in the capacity of a straw-buyer for an affiliate. The term “ownership” includes beneficial ownership effected by ownership of intermediate entities.
§ 45-03 Responsible Bidder Criteria.
The criteria used by the Departments of Finance and Housing Preservation and Development to determine whether a bidder qualifies as a responsible bidder for the purchase of real property pursuant to New York City Administrative Code § 11-354 may include the following:
(1) be delinquent in the payment of any taxes or charges to the City of New York;
(2) be in default in or on any other monetary or non-monetary obligation to the City; (3) be the owner or an affiliate of an owner of real property, or for one year prior to the sale of the property, have been the owner or an affiliate of an owner of property that has an average of three or more hazardous or immediately hazardous violations of record per dwelling unit under the New York City Housing Maintenance Code, or that is subject to a lien or liens for the repair or the elimination of any dangerous or unlawful conditions pursuant to § 27-2144 of the New York City Administrative Code, in an amount equal to or greater than one thousand dollars; or
(4) be the owner or an affiliate of an owner of real property that is the subject of pending litigation or an unpaid judgment resulting from litigation to enforce the New York City Housing Maintenance Code by the Department of Housing Preservation and Development’s Housing Litigation Division. For purposes of this subdivision, a bidder is delinquent in the payment of taxes if a tax or charge on a property owned by the bidder remains unpaid following the last date such tax or charge could be paid before accruing interest. For purposes of this subdivision, a bidder who has entered into an in rem installment agreement for the payment of delinquent taxes or charges, and who has not defaulted on such agreement at any time, shall not be considered to be delinquent in the payment of taxes or charges.
(1) residential management experience;
(2) financial capacity;
(3) rehabilitation experience;
(4) ability to work with government and community organizations;
(5) neighborhood ties;
(6) ability to finance or obtain financing for any required rehabilitation; and
(7) intent and ability to improve, manage and maintain the foreclosed property. The Departments of Finance and Housing Preservation and Development may also consider whether the entity is a not for profit organization or neighborhood-based for-profit individual or organization.
(1) If the property subject to the foreclosure sale is operated as a limited profit housing company project within the meaning of Article II of the Private Housing Finance Law, or a redevelopment company pursuant to Article V of such law, or a housing development fund company pursuant to Article XI of such law, a bidder may be required by the Department of Housing Preservation and Development to execute an agreement in which the bidder agrees that the property will continue to be subject to any statutory covenants and restrictions pursuant to Articles II, V or XI of such law for any period of time remaining during which such property would otherwise have been subject to such covenants and restrictions.
(2) If the property subject to the foreclosure sale is subject to any statutory covenants or restrictions imposed as a result of a loan, grant, tax benefit or other expenditure of public funds made pursuant to the Private Housing Finance Law or pursuant to Article 16 of the General Municipal Law, a bidder may be required by the Department of Housing Preservation and Development to execute an agreement in which the bidder agrees that the property will continue to be subject to any such statutory covenants and restrictions for any period of time remaining during which such property would otherwise have been subject to such covenants and restrictions.
§ 45-04 Pre-Approval of Responsible Bidders.
The Departments of Finance and Housing Preservation and Development may review the qualifications of any potential bidder prior to any foreclosure sale pursuant to Administrative Code § 11-354 to determine whether any such potential bidder qualifies as a responsible bidder in accordance with this chapter.
§ 45-05 Incorporation of Rules.
These rules shall be deemed to be incorporated into any judgment of foreclosure made pursuant to Administrative Code § 11-354 and shall be deemed to be incorporated into the terms of a foreclosure sale of any property subject to such judgment.
§ 45-06 Severability.
If any sentence, paragraph, section or part of these rules shall be adjudged invalid by a court of competent jurisdiction such judgment shall not impair or invalidate the remainder thereof but shall be confined to that part.
§ 46-01 Definitions.
Unless the context requires otherwise, as used in these rules:
Administrative Code. “Administrative Code” means the Administrative Code of the City of New York.
Basic STAR. “Basic STAR” means the school tax relief exemption from real property taxes as defined in paragraph (a) of subdivision 2 of sectiion 425 of the Real Property Tax Law.
Class one property. “Class one property” means real property classified as class one property pursuant to section 1802 of the Real Property Tax Law.
Commissioner. “Commissioner” means the Commissioner of Finance of the City of New York or the designee of the Commissioner.
Department. “Department” means the New York City Department of Finance.
Fiscal year. “Fiscal year” means the period beginning July 1 and ending the following June 30.
Real property tax surcharge or surcharge. “Real property tax surcharge” or “surcharge” means the real property tax surcharge imposed under section 307-a of the Real Property Tax Law and section 11-238 of the Administrative Code.
STAR exemption. “STAR exemption” means the school tax relief exemption from real property taxes pursuant to section 425 of the Real Property Tax Law.
§ 46-02 Certification.
(a) Certification of exclusion from surcharge; timing of application.
(1) Property to which surcharge applies. As provided for by New York State Real Property Tax Law § 307-a and New York City Administrative Code § 11-238, a real property tax surcharge is imposed on certain class one property, excluding vacant land, that provides rental income and is not the primary residence of the owner or owners of such class one property or the primary residence of the parent or child of such owner or owners. The surcharge shall be a lien on the subject property, and may be collected in any manner provided by law. The property shall be deemed to be the primary residence of the owner or owners if the property would be eligible to receive the STAR exemption, regardless of whether the property is currently receiving the exemption. Property owners who have registered to receive the STAR exemption (or other exemption from real property tax administered by the Department of Finance for which primary residency is a requirement) are not required to file an additional certification under paragraph (2) of this subdivision in order to be excluded from the surcharge.
(2) Who must file certification. In order to obtain exclusion from the surcharge, property owners not registered to receive the STAR exemption (or other exemption from real property tax administered by the Department of Finance for which primary residency is a requirement) who are eligible for exclusion from the surcharge as set forth in Administrative Code § 11-238 or New York State Real Property Tax Law § 307-a shall complete an application on which they certify to the Commissioner that their property is eligible for exclusion from the requirement of the surcharge based on the use of the property as of the applicable taxable status date for the fiscal year for which exclusion from the surcharge is sought. This application and certification of eligibility for exclusion shall be on a form provided by the Department of Finance.
(3) Timing of certification. A certification of eligibility for exclusion from the surcharge must be filed with the Department no later than March 15 immediately prior to the fiscal year for which the owner is applying for exclusion from the surcharge. The Commissioner may, from time to time in the discretion of the Commissioner, require recertification from the owner.
(4) Special rule for fiscal year 2004. Notwithstanding any other provision of this subdivision, a certification of eligibility for exclusion from the surcharge for fiscal year 2004 must be filed with the Department no later than March 15, 2004, and must be based on the use of the property as of the date of the certification.
(5) Certification upon conveyance of property or interest therein. The Department may make the form for certification under these rules a part of the real property transfer tax return or an attachment thereto and in such case a certification shall be completed and filed with any such return that is filed with the Department.
(1) By application provided pursuant to paragraph (2) of subdivision (a) of this section, the owner shall certify that the class one property is the primary residence of at least one owner.
(2) If the subject property is not the primary residence of at least one owner, then the owner must certify, and may be required to provide proof as set forth under subdivision (b) of 19 RCNY § 46-03, that such property is the primary residence of such owner’s or owners’ parent or child. Such owner or owners may also be required to provide certification as to the resident’s or residents’ relationship to the owner or owners and such proof of the relationship as the Commissioner deems acceptable.
(3) If the subject property is not so used as provided for in paragraphs (1) and (2) of this subdivision, the owner or owners must certify that such owner or owners receive no rental income of any kind, or in any manner or form, whatsoever, from the use of such property. The Department of Finance may require that the owner provide the Commissioner with a copy of the owner’s or owners’ most recent federal or New York State or New York City personal income tax return(s) together with this certification.
(4) Owners making the above listed certification(s) to the Department of Finance shall make such certifications under penalty of perjury, subject to audit and subject to the penalties set forth in Administrative Code § 11-238(d), including the imposition of an additional penalty tax of $500.00 against the subject property.
§ 46-03 Proof of Primary Residency.
(a) Generally. Where requested, the burden shall be on the owner or owners to establish that the property is their primary residence. While a person may have one or more residences, there can be only one primary residence, and the owner, upon request, must establish that the subject property is an owner's or owners' primary residence.
(1) a valid driver’s license;
(2) copy of a federal or New York State Personal Income Tax Return;
(3) a copy of a utility bill or 911 service listing;
(4) a voter registration card;
(5) a social security statement;
(6) an automobile registration;
(7) a recent tax bill addressed to the owner at the property address;
(8) a recent bank statement; and
(9) other forms of proof that the Commissioner deems acceptable. In determining whether an owner has demonstrated primary residency, the Commissioner need not base the determination on any single factor and, in addition to the above forms of proof, the Commissioner may consider the length of time the person has resided on the property, and other conduct and behavior that provide evidence as to which property is the owner’s or owners’ primary residence.
§ 46-04 Audit.
The Department of Finance may audit such certifications and require and verify proof of residence or absence of rental income provided in connection with a certification. In the course of such audit, the Commissioner may request, consider and verify additional forms of proof of primary residence or absence of rental income. If following an audit, the Commissioner determines that an owner who provided a certification pursuant to paragraph (2) of subdivision (a) of 19 RCNY § 46-02 should have been required to pay the surcharge, the surcharge shall be imposed on the property, together with interest accrued as of the date that the surcharge would have been due and payable but for the filing of the application and certification of eligibility for exclusion, plus any penalties that may be imposed as set forth in Administrative Code § 11-238(d), including the imposition of an additional penalty tax of $500.00 against the subject property. Any amounts imposed pursuant to this section shall be a lien on the subject property, and may be collected in any manner provided by law.
§ 46-05 Change in Eligibility.
(a) Notification to Commissioner. The owner or owners of the property shall notify the Commissioner in the event that (1) a property that was granted an exclusion from the surcharge based on its use as a primary residence of the owner or owners or the parent or child of the owner or owners ceases to be used as the primary residence of the owner or owners or the parent or child of the owner or owners, or (2) a property that was granted an exclusion based on the fact that it does not produce rental income begins to produce rental income.
(1) Mid-year change in use of property excluded from surcharge. Where a determination that a property was eligible for exclusion was based on the status of the property prior to the commencement of a fiscal year for which exclusion was granted, then in the event that a cessation of use for an excluded purpose occurs prior to the end of such fiscal year, the property will remain excluded from the surcharge for the remainder of such fiscal year.
(2) Mid-year change in use of property subject to surcharge. In the event that a property that is subject to the surcharge for a fiscal year based on the status of the property prior to the commencement of such fiscal year first meets the requirements for eligibility for exclusion based on a change in use prior to the end of such fiscal year, the property will remain subject to the surcharge for the remainder of such fiscal year, and the property will become eligible for exclusion for the next succeeding fiscal year, subject to the certification requirements of these rules.
§ 47-01 Obligation to Collect and Pay Tax.
Chapter 12 of Title 11 of the Administrative Code of the City of New York imposes a tax on all admissions to running horse race meetings conducted at race meeting grounds or enclosures located wholly or partly within the city of New York at the rate of three percent of the admission price. The racing association or corporation conducting a running horse race meeting must collect the tax and pay it to the Department of Finance, by depositing it to the account of the City in such bank or banks as may be designated by the City.
§ 47-02 Returns and Payment of Tax.
(a) Every racing corporation or association that collects the tax described in 19 RCNY § 47-01 shall file with the Department of Finance such forms as shall be prescribed by the Department of Finance showing the taxes and the number of persons admitted to meetings conducted by the racing corporation or association during the periods covered by the return, together with any and all other information that the Department of Finance shall require to be included and reported in such return.
To illustrate: During 2004, Aqueduct Racetrack holds three race meetings and Belmont Park holds two. At Aqueduct, the meetings are the Winter meeting, beginning January 1 and ending March 7; the Spring meeting, beginning March 10 and ending May 2; and the Fall meeting, beginning October 27 and ending December 31. The horse race admission tax collected during the meeting must be paid, and the required forms filed, no later than March 17 for the Winter meeting; May 12 for the Spring meeting; and January 10, 2005, for the Fall meeting. At Belmont, the meetings are the Spring/Summer meeting, beginning May 5 and ending July 25; and the Fall Championship meeting, beginning September 10 and ending October 24. The horse race admission tax collected during the meeting must be paid, and the required forms filed, no later than August 4 for the Spring/Summer meeting, and November 3 for the Fall meeting.
§ 48-01 Purpose and Scope of Rules.
The purpose of these rules is to set forth the application and credit allocation process for the New York City biotechnology credit to be applied against New York City unincorporated business tax and general corporation tax. The Tax Law authorizes the New York City Department of Finance to promulgate rules to establish procedures for the allocation of such credits including, but not limited to, the application process, due dates for applications, the standards to be used for evaluating applications, documentation that will be provided to taxpayers to substantiate the amount of tax credits allocated to such taxpayers and any other provisions deemed necessary and appropriate. Although much of the law that established the New York City biotechnology credit is substantially identical to the law that established the New York State Qualified Emerging Technologies Facilities, Operations and Training Credit, these rules only apply to determination and implementation of the New York City credit. For purposes of this chapter, “credit” shall mean the New York City biotechnology credit.
§ 48-02 Application Procedure.
(a) An applicant for the credit must submit an application on a form or in a format established by the Commissioner of Finance ("Commissioner") to the Department of Finance ("Department") no later than January 15 in the calendar year that immediately follows the calendar year for which the credit is sought.
§ 48-03 Allocation of Credit.
(a) Maximum aggregate amount of credits. The aggregate amount of biotechnology credits allowed for all applicants in any calendar year shall not exceed $3 million.
§ 48-04 Criteria for Evaluation of Applications.
Any of the following shall be grounds for the Department to deny an application:
§ 48-05 Examination of Credit Application and Tax Return; Retention of Records.
The Commissioner of Finance, for the purpose of ascertaining the correctness of any application for credit or tax return on which a credit was claimed, shall have the power to examine or to cause to have examined, by any agent or representative designated by the commissioner for that purpose, any books, papers, records or memoranda bearing upon the matters required to be included in an application for a credit or a return on which a credit is claimed.
§ 49-01 Challenges to assessed valuation of real property.
(a) Tentative Assessment Roll.
(i) Except for the property defined as class one property pursuant to § 1802 of the Real Property Tax Law, the tentative assessment roll containing the tentative assessed valuation of real property for the succeeding fiscal year is open to the public beginning January 15th and ending March 1st of each year.
(ii) For the property defined as class one property pursuant to § 1802 of the Real Property Tax Law, the tentative assessment roll is open to the public beginning January 15th and ending March 15th of each year.
(iii) Section 1512 of the New York City Charter provides that during the period in which the tentative assessment roll is open for public inspection, the Commissioner of Finance may correct the assessment roll by adding property that had been omitted or by increasing or decreasing the assessed valuation of property. An additional period ending May 10th is provided for changes for non-residential real property. Chapter 37 of Title 19 of the Rules of the City of New York provides the procedure for property owner requests for the Department of Finance to review the tentative assessed valuation of real property.
(i) affect a property owner’s right to apply for a correction of tentative assessed valuation with the New York City Tax Commission;
(ii) affect any deadline for such application with the Tax Commission; or
(iii) satisfy the requirement that a property owner have filed a timely application for correction with the Tax Commission in order to obtain subsequent judicial review of an assessed valuation.
§ 49-02 Appeal to New York City Tax Commission.
The New York City Charter provides the process for a property owner to apply to the New York City Tax Commission for correction of the tentative assessment of real property by the Department of Finance.
(i) For property classified as class one under Real Property Tax Law § 1802, property owners may submit applications to the Tax Commission for correction of the tentative assessment from January 15th until March 15th immediately prior to the tax year to which the tentative assessment pertains.
(ii) For all other classes of property, property owners may submit applications to the Tax Commission for correction of the tentative assessment from January 15th until March 1st immediately prior to the tax year to which the tentative assessment pertains.
(iii) Notwithstanding the above, New York City Administrative Code § 11-208.1 requires that the Tax Commission deny a hearing on the correction of the tentative assessment for any property as to which an income and expense statement is required but was not timely filed in the immediately preceding calendar year.
§ 50-01 Purpose and scope of rules.
Section 467-a of the Real Property Tax Law, originally enacted in 1996, established an abatement from real property taxes for dwelling units in real property held in the cooperative or the condominium form of ownership that meet the qualification criteria of the law. This law was amended in 2013 to change certain provisions relating to eligibility and application for the abatement for fiscal years beginning in 2012, 2013 and 2014. Section 467-a authorizes the Commissioner of Finance of the City of New York to promulgate rules necessary to effectuate the purposes of the law. These rules are intended to clarify the criteria for eligibility for the abatement and the requirements concerning application for the abatement for fiscal years beginning in 2012, 2013 and 2014.
§ 50-02 Definitions.
Unless the context requires otherwise, as used in this chapter:
(j-1) “Law enforcement officer” means anyone who is, or was, employed as a Federal, State or local judge, prosecutor, State or Local police or peace officer or Federal law enforcement officer as defined by the United States Code.
§ 50-03 Eligibility for abatement.
(a) Primary residence abatement. Dwelling units owned by an owner, one of which is the primary residence of such owner, and which are not ineligible for the abatement pursuant to this section or § 467-a of the Real Property Tax Law, will be eligible to receive the primary residence abatement, in the amount set forth in 19 RCNY § 50-04(b), but in no case will any of the dwelling units owned by the same owner in a condominium development or a cooperative apartment corporation development receive the primary residence abatement if the owner owns more than three dwelling units in the development.
(1) Other exemption or abatement. Except as provided in paragraph (2) of this subdivision, a condominium dwelling unit that is receiving a complete or partial real property tax exemption or abatement pursuant to any other State or local law, or a dwelling unit located in real property held in the cooperative form of ownership that is receiving a complete or partial real property tax exemption or abatement pursuant to any other State or local law, will not be eligible to receive the abatement.
(2) Exceptions.
(i) For purposes of paragraph (1) of this subdivision, a condominium dwelling unit or property held in the cooperative form of ownership will be deemed not to be receiving complete or partial real property tax exemption or tax abatement if such unit or property is receiving benefits pursuant to any of the following sections of the Real Property Tax Law:
(A) § 400 (real property owned by United States);
(B) § 402 (United States or New York State property held under contract of sale):
(C) § 404 (real property owned by the State of New York);
(D) § 406 (real property owned by a municipal corporation);
(E) § 408 (real property owned by school districts and boards of cooperative educational services);
(F) § 410 (real property owned by special districts or property owners therein within district boundaries);
(G) § 410-a (real property owned by special districts or property owners therein not within district boundaries);
(H) § 412 (real property owned by public authorities);
(I) § 412-a (real property owned by industrial development agencies);
(J) § 416 (real property owned by the United Nations);
(K) § 418 (real property owned by foreign governments);
(L) § 420-a (real property owned by nonprofit organizations - mandatory class);
(M) § 420-b (real property owned by nonprofit organizations - permissive class);
(N) § 436 (real property owned by officers of religious denominations);
(O) § 458 (real property owned by veterans);
(P) § 458-a (real property owned by veterans - alternative exemption);
(Q) § 462 (real property owned by religious corporations and used for residential purposes); (R) § 467 (real property owned by persons sixty-five years of age or over);
(S) § 467-b (tax abatement for rent-controlled and rent regulated property occupied by senior citizens or persons with disabilities);
(T) § 499-bbb (green roof tax abatement); and
(U) § 499-bbbb (solar electric generating system tax abatement).
(ii) For purposes of paragraph (1) of this subdivision, a condominium dwelling unit or property held in the cooperative form of ownership will be deemed not to be receiving complete or partial real property tax exemption or tax abatement if such unit or property is receiving a tax abatement, but not an exemption, pursuant to § 489 of the Real Property Tax Law (alterations and improvements to multiple dwellings to eliminate fire and health hazards).
(1) A dwelling unit will not be eligible for the abatement if, as of the applicable taxable status date, any owner of such dwelling unit is the owner, in whole or in part, of more than three dwelling units in the same condominium development or cooperative apartment corporation development. In such cases, none of the dwelling units owned by any such owner will be eligible for the abatement.
(2) In the following examples, assuming the board applies for the abatement for fiscal year 2013/14, the eligibility of the owner for an abatement will be determined as follows: Example 1: A owns unit 101 in X Condominium Development. A also owns dwelling units 102 and 103 and a 30% ownership interest in unit 104, all in the same development as dwelling unit 101. No abatement will be granted for any of the dwelling units owned by A because A owns, in whole or in part, more than three dwelling units in the same development. Example 2: Assume the same facts as in Example 1, except that A has no ownership interest in dwelling unit 104. The abatement may be granted for all of the dwelling units owned by A because A owns a total of only three dwelling units and therefore does not own more than three dwelling units in the same development. Example 3: A owns dwelling units 101, 102 and 103, located in Building 1, which is included in Y Cooperative Corporation Development. A also owns dwelling unit 201, which is located in Building 2 in Y Cooperative Corporation Development. No abatement will be granted for any of the dwelling units owned by A because A owns more than three dwelling units in the same development. Example 4: A and B together own dwelling unit 101 in Z Condominium Development. B alone also owns dwelling units 102, 103 and 104, which are all located in Z Condominium Development. No abatement will be granted for dwelling unit 101 or any of the other dwelling units owned by B because B, an owner of dwelling unit 101, owns, in whole or in part, more than three dwelling units in the same development.
(1) Determination by Commissioner. An application for abatement will be denied, and an abatement granted will be revoked retroactively, for any fiscal year, in the event that the Commissioner determines that the transfer of such dwelling unit to the owner who owned such dwelling unit as of the applicable taxable status date for such fiscal year was made primarily for the purpose of receiving the abatement.
(2) Basis for determination by Commissioner. In making such determination, the Commissioner may consider, among other factors, the relationship, if any, between the transferor and the transferee and whether the terms of the transfer are consistent with the terms generally found in transfers of comparable dwelling units.
(3) Restoration of taxes upon revocation of abatement. If an abatement is revoked retroactively pursuant to paragraph (1) of this subdivision, then the real property taxes that were abated will be restored with interest at the rate applicable by law to real property taxes on the affected real property accrued from the date on which such restored taxes would have been due and payable had the abatement not been granted, to the date of payment. Any such restored real property taxes and interest will be enforceable as a tax lien in accordance with the provisions of chapters 3 and 4 of title 11 of the Administrative Code.
§ 50-04 Abatement percentage.
(a) Primary residence abatement. The amount of the abatement for dwelling units eligible for the primary residence abatement as set forth in subdivision (a) of 19 RCNY § 50-03 will be the following percentage of the real property taxes attributable to or due on such dwelling units:
(1) Dwelling units in property whose average unit assessed value is less than or equal to $50,000:
(A) for fiscal year 2012/13, 25%;
(B) for fiscal year 2013/14, 26.5%; and
(C) for fiscal year 2014/15, 28.1%.
(2) Dwelling units in property whose average unit assessed value is more than $50,000 but less than or equal to $55,000:
(A) for fiscal year 2012/13, 22.5%;
(B) for fiscal year 2013/14, 23.8%; and
(C) for fiscal year 2014/15, 25.2%.
(3) Dwelling units in property whose average unit assessed value is more than $55,000 but less than or equal to $60,000:
(A) for fiscal year 2012/13, 20%;
(B) for fiscal year 2013/14, 21.2%; and
(C) for fiscal year 2014/15, 22.5%.
(4) Dwelling units in property whose average unit assessed value is more than $60,000: for fiscal years 2012/13, 2013/14 and 2014/15, 17.5%.
(1) Dwelling units in property whose average unit assessed value is less than or equal to $15,000:
(A) for fiscal year 2012/13, 12.5%; and
(B) for fiscal year 2013/14, 6.25%.
(2) Dwelling units in property whose average unit assessed value is more than $15,000:
(A) for fiscal year 2012/13, 8.75%; and
(B) for fiscal year 2013/14, 4.375%.
(3) If none of the dwelling units owned by an owner in a condominium development or a cooperative apartment corporation development is the primary residence of such owner, then no abatement pursuant to this chapter will be allowed for such dwelling units for fiscal year 2014/15 or any subsequent fiscal year.
(1) For real property held in the cooperative form of ownership, the percentage of shares of the cooperative apartment corporation allocated to dwelling units, multiplied by the total assessed value of the real property of the entire cooperative apartment corporation development in which the dwelling unit is located, divided by the total number of dwelling units in the entire cooperative apartment corporation development as of the taxable status date for the fiscal year to which the abatement applies; and
(2) For real property held in the condominium form of ownership, the total assessed value of the dwelling units in the entire condominium development in which the dwelling unit is located, divided by the number of dwelling units in the entire condominium development in which the dwelling unit is located as of the taxable status date for the fiscal year to which the abatement applies.
Example 1: To determine the abatement for A’s dwelling unit for fiscal year 2013/14: Facts: A owns a dwelling unit, which is A’s primary residence, in Y Cooperative Apartment Corporation, a cooperative apartment corporation. The real property tax attributable to A’s dwelling unit for fiscal year 2013/14 is $5,000. The actual assessed value of the property of Y Cooperative Apartment Corporation (the entire development) for fiscal year 2013/14 is $5,000,000. 90% of the shares of Y Cooperative Apartment Corporation are allocated to dwelling units. As of January 5, 2013, there were a total of 100 dwelling units in Y Cooperative Apartment Corporation. Calculation: In order to determine the abatement percentage to be used in the calculation, determine the average unit assessed value by multiplying the percentage of shares allocated to dwelling units by the total assessed value of the cooperative apartment corporation (the entire development), and then dividing by the total number of dwelling units in the cooperative apartment corporation as of the taxable status date: Step 1: 90% × $5,000,000 = $4,500,000 Step 2: $4,500,000/100 = $45,000. Because the average unit assessed value is less than $50,000, the percentage to be applied is 26.5%, as provided in 19 RCNY § 50-04(a)(1)(B). Therefore, the abatement for A’s dwelling unit for fiscal year 2013/14 is 26.5% of the real property tax attributable to A’s dwelling unit for fiscal year 2013/14, or: 26.5% × $5,000 = $1,325.
Example 2: To determine the abatement for B’s dwelling unit for fiscal year 2013/14: Facts: B owns a condominium dwelling unit, which is B’s primary residence, in Z Condominium. The real property tax due on B’s dwelling unit for fiscal year 2013/14 is $10,000. The total actual assessed value of the dwelling units in the entire condominium development in which B’s dwelling unit is located for fiscal year 2013/14 is $9,000,000. As of January 5, 2013, there were a total of 100 dwelling units in the condominium development in which B’s dwelling unit is located. Calculation: In order to determine the abatement percentage to be used in the calculation, determine the average unit assessed value by dividing the total assessed value of the dwelling units in the entire condominium development by the number of dwelling units in the condominium development as of the taxable status date: $9,000,000/100 = $90,000. Because the average unit assessed value is more than $60,000, the percentage to be applied is 17.5%, as provided in 19 RCNY § 50-04(a)(4). Therefore, the abatement for B’s dwelling unit for fiscal year 2013/14 is 17.5% of the real property tax due on B’s dwelling unit for fiscal year 2013/14, or: 17.5% × $10,000 = $1,750.
§ 50-05 Application for abatement.
(a) Application for fiscal year 2012/13; where no application is required.
(1) Cooperatives that received the abatement for fiscal year 2011/12.
(A) The board of a cooperative apartment corporation that received the abatement for fiscal year 2011/12 was not required to file an application for the abatement for fiscal year 2012/13.
(B) Basis for abatement if election made on information return. If a cooperative apartment corporation described in subparagraph (A) filed an information return on or before February 15, 2012 pursuant to the requirements of § 11-2105(g) of the Administrative Code and elected that the return be deemed an application for the abatement for fiscal year 2012/13, the abatement for fiscal year 2012/13 will be based on the information contained in such information return.
(C) Basis for abatement if no election made on information return. If a cooperative apartment corporation described in subparagraph (A) filed an information return on or before February 15, 2012 pursuant to the requirements of § 11-2105(g) of the Administrative Code and did not elect that the return be deemed an application for the abatement for fiscal year 2012/13, the abatement for fiscal year 2012/13 will be based on the information contained in such information return, or on the information included in the application for the abatement that the board filed in calendar year 2011, or both.
(D) Basis for abatement if no information return filed. If a cooperative apartment corporation received the abatement for fiscal year 2011/12, but did not file an information return on or before February 15, 2012 pursuant to the requirements of § 11-2105(g) of the Administrative Code, then the abatement for fiscal year 2012/13 will be based on the information included in the application for the abatement that the board filed in calendar year 2011, if any.
(2) Condominiums that received the abatement for fiscal year 2011/12. If the board of a condominium that received the abatement for fiscal year 2011/12 did not file a timely application for the abatement for fiscal year 2012/13, the abatement for fiscal year 2012/13 will be based on the information included in the application for the abatement that the board filed in calendar year 2011.
(3) Notwithstanding any other provision of this subdivision, no abatement will be granted for fiscal year 2012/13 to any dwelling unit that was not eligible for the abatement as of January 5, 2012, the taxable status date for fiscal year 2012/13.
(1) Fiscal year 2013/14. No abatement will be granted for fiscal year 2013/14 to any dwelling unit that was not eligible for the abatement as of January 5, 2013, the taxable status date for fiscal year 2013/14.
(2) Fiscal year 2014/15. A board must file an application for an abatement for fiscal year 2014/15 no later than February 15, 2014. No abatement will be granted for fiscal year 2014/15 to any dwelling unit that is not eligible for the abatement as of January 5, 2014, the taxable status date for fiscal year 2014/15.
(1) A limited liability company or limited partnership may submit an application for a waiver of the requirement that an owner of a dwelling unit must be an individual to be eligible for the abatement. The application will be in a form and format and by a deadline determined by the Commissioner. An applicant will be eligible for a waiver if the application demonstrates that:
A. One or more of the partners or members is a law enforcement officer and there is an imminent or ongoing security concerns threat which necessitates ownership by a limited liability company or a limited partnership because disclosure of an individual’s residence could reasonably put the individual in danger; and
B. the dwelling unit is not used for commercial purposes; and
C. the dwelling unit serves as the primary residence of one or more of the partners or members; and
D. the partners or members that reside in the dwelling unit personally pay all of the cooperative maintenance fees, property taxes and other costs associated with the property’s ownership.
(2) An application must be filed on or before December 1 of the current tax year in order to be eligible for the abatement in the succeeding tax year. In order to be eligible to receive the abatement in a given tax year a waiver must be granted and in effect as of the taxable status date applicable to the tax year. The approved waiver must be submitted by the applicant to their condominium or cooperative board so that it can be submitted with the abatement application.
(3) An approved waiver is in effect for a term of one year. The applicant must submit an annual waiver renewal application to the Commissioner for approval. The applicant will be eligible for a renewal of the waiver if the applicant demonstrates either that the security threat that existed at the time of the initial application is still in existence or that there is a different security threat which necessitates ownership by a limited liability company or limited partnership.
(4) The Commissioner may request additional information if the Commissioner deems such information relevant to an application or renewal application. Such additional information will be provided within sixty days of the request. The Commissioner may deny an application for a waiver. The Commissioner will inform the applicant of the reasons for the denial in a written notice and advise the applicant that it has the right to appeal the denial. The appeal must be submitted to the Commissioner or his or her designee within 15 business days of the mailing of the notice.
§ 50-06 Primary residence.
(a) Primary residence of owner. For purposes of determining eligibility for the primary residence abatement as described in subdivision (a) of 19 RCNY § 50-03, a dwelling unit must serve as the primary residence of one or more of the owners of the dwelling unit as of the taxable status date for the fiscal year to which the abatement applies, and the conveyance of a dwelling unit subsequent to such taxable status date will not affect eligibility of the dwelling unit for the abatement for the fiscal year to which the taxable status date applies.
(1) Except as provided in paragraph (2) of this subdivision, a dwelling unit will be presumed to serve as the primary residence of one or more of the owners of the dwelling unit for a particular fiscal year if either:
(A) the dwelling unit receives a real property tax exemption pursuant to § 425 of the Real Property Tax Law for such fiscal year; or
(B) an owner of the dwelling unit entered the address of the dwelling unit as such owner’s permanent home address on a New York State Resident Income Tax Return filed during the calendar year immediately preceding the calendar year in which such fiscal year commences.
(2) Notwithstanding the presumption provided in this subdivision, the Commissioner may determine based on additional facts that a dwelling unit is not the primary residence of one or more of the owners of the dwelling unit.
(3) If the Commissioner determines that a dwelling unit will not be presumed to serve as the primary residence of one or more of the owners of the dwelling unit because the dwelling unit does not meet either of the criteria contained in paragraph (1) of this subdivision, the owner may file a supplemental application as described in subdivision (c) of 19 RCNY § 50-05 to prove eligibility for the primary residence abatement.
§ 50-07 Denial or revocation of abatement for property in arrears.
(a) Unpaid charges requiring denial or revocation of abatement. An application for the abatement will be denied, and an abatement granted will be revoked retroactively, in the event that the Commissioner determines that there are arrears in real property taxes, water and sewer charges, assessments, payments in lieu of taxes and/or other municipal charges, including interest on any of the aforementioned amounts, and including tax liens that have been sold by the City:
(1) on a condominium dwelling unit totaling in the aggregate at least $1,000; or
(2) on cooperative apartment corporation property, totaling in the aggregate at least $25,000. For purposes of this subdivision, taxes and/or charges that are in arrears do not include any taxes and/or charges that are included in a written agreement to pay such taxes and/or charges in installments with the Department of Finance or, in the case of water and sewer charges, the New York City Department of Environmental Protection or the New York City Water Board, if all payments that have become due under such agreement have been made.
§ 50-08 Correction of abatement.
(a) Erroneous determination on abatement.
(1) Erroneous abatement. If the Commissioner determines that a unit that received the abatement was not entitled to receive such abatement (an “erroneous abatement”), then the Commissioner will restore the real property taxes abated by the erroneous abatement.
(2) Erroneous denial of abatement. If the Commissioner determines that a dwelling unit was incorrectly denied an abatement to which the unit was entitled, then the Commissioner will apply the abatement in accordance with the procedures set forth in 19 RCNY § 24-04 to an installment or installments of real property taxes of the condominium dwelling unit or the cooperative apartment corporation property in which the affected cooperative apartment corporation dwelling unit is located in the amount of the abatement to which the dwelling unit was entitled. The Commissioner will mail a notice of the application of the abatement, which may be in the form of a statement of account or an amended bill for real property taxes, to the address for the affected condominium dwelling unit or cooperative apartment corporation property on record with the Department for mailing statements of account or real property tax bills.
(1) Excessive abatement. If the Commissioner determines that a dwelling unit received an abatement in an amount greater than the amount to which the dwelling unit was actually entitled (an “excessive abatement”), then the Commissioner will restore real property taxes in an amount equal to the difference between the abatement originally granted and the amount to which the dwelling unit was actually entitled.
(2) Insufficient abatement.
(A) Abatement credit. If the Commissioner determines that a dwelling unit received an abatement in an amount less than the amount to which the dwelling unit was actually entitled, then the Commissioner will apply an abatement credit in accordance with the procedures set forth in 19 RCNY § 24-04 to the real property taxes of the condominium dwelling unit or the cooperative apartment corporation property in which the affected cooperative apartment corporation dwelling unit is located, in an amount equal to the difference between the abatement originally granted and the amount to which the dwelling unit was actually entitled. The Commissioner will mail a notice of the application of the abatement credit, which may be in the form of a statement of account or an amended bill for real property taxes, to the address for the affected condominium dwelling unit or cooperative apartment corporation property on record with the Department for mailing statements of account or real property tax bills.
(B) Application of abatement credit as timely payment of installment. If the installment of real property taxes to which the Commissioner applies the abatement credit became due and payable during the fiscal year as to which the Commissioner determines that there is an abatement credit, or during any fiscal year thereafter, the Commissioner may apply the abatement credit as if the credit were a timely payment of the tax installment to which the credit is applied, such that no interest will accrue on the amount of the tax installment satisfied by the abatement credit.
§ 50-09 Audit authority.
The Commissioner may inspect or examine the books and records of the owner or the board relevant to determining eligibility of a unit for the abatement, including the amount of abatement to which a unit may be entitled.
§ 51-01 Application of Hurricane Sandy rebate to past due, current and future real property taxes and real property-related charges.
With respect to the rebate that is authorized by Administrative Code § 11-240 for owners of certain real property seriously damaged by Hurricane Sandy, the Commissioner of Finance is authorized to enter a credit in the amount of such rebate to the account of such real property. Such credit shall be applied toward the satisfaction of any real property taxes and real property-related charges that are due or are past due and those which may become due in the future. The credit will be applied if the Commissioner of Finance determines:
§ 52-01. Rent Increase Exemption Orders.
(a) Effective Date and Duration.
(1) A rent increase exemption order will be issued to each tenant who applies to the Department and is found to be eligible for Senior Citizen Rent Increase Exemption (SCRIE) or Disability Rent Increase Exemption (DRIE) benefits, except that SCRIE benefits for an apartment owned by a limited dividend housing company, a redevelopment company or a housing development fund company incorporated under the private housing finance law, a Cooperative Housing Company established under section 213 of the National Housing Act or a Mitchell Lama apartment or co-op are administered by the Department of Housing Preservation and Development (HPD) and are not governed by this rule. The effective date of a new rent increase exemption order for rent controlled and rent stabilized apartments is the first day of the first month after receipt of an initial application for SCRIE or DRIE benefits.
(2) A new rent increase exemption order for a rent controlled apartment will be for a term of two years. A new rent increase exemption order for a rent stabilized apartment will be for the duration of the lease in effect on the first day of the first month after receipt of the initial application. The effective date of a new DRIE rent increase exemption order for an apartment owned by a limited dividend housing company, a redevelopment company or a housing development fund company incorporated under the private housing finance law, a Cooperative Housing Company established under section 213 of the National Housing Act or a Mitchell Lama apartment or co-op, will be the date of the first increase in maximum rent that takes effect after the tenant is first determined to be eligible for DRIE benefits, and will be for a term of one year.
(1) Upon a showing of good cause, the time to file a renewal or other application will be extended for an additional period of six months. The tenant or his or her representative must submit sufficient documentary evidence acceptable to the Department demonstrating good cause. Upon approval of the extension of the time to file and of the renewal application, such rent increase exemption order will be renewed retroactive to the date of expiration of the prior rent increase exemption. For purposes of this paragraph, good cause exists when:
(i) the tenant requires hospitalization for a documented illness or medical condition during the six-month period following expiration of the rent increase exemption order, which prevents the tenant from filing a timely renewal application; or
(ii) the tenant’s dwelling unit is damaged by fire or flood or a natural catastrophe during the six-month period following expiration of the rent increase exemption order, which prevents the tenant from filing a timely renewal application.
(iii) The tenant demonstrates other exceptional circumstances.
(2) Upon a showing of need for more time as a reasonable accommodation for a tenant’s disability consistent with the requirements of the Americans with Disability Act (42 U.S.C §§ 12101 et seq.) (ADA) or the New York City Human Rights Law (§§ 8-101 et seq. of the Administrative Code of the City of New York) (NYCHRL), the time to file a renewal or other application will be extended for an additional period of time to be determined by the agency, which may exceed six months if the agency determines more time would be a reasonable modification of its procedure necessary to avoid discrimination on the basis of disability. To obtain an extension of time as a reasonable accommodation, the tenant or a representative of the tenant must provide or assist with the provision of medical documentation from an appropriate health care professional showing that the tenant had a disability as defined by the ADA or the NYCHRL, and that because of this disability the tenant needed more time to file an application or appeal. For purposes of this paragraph, appropriate health care professionals include, but are not limited to, doctors (including psychiatrists), psychologists and licensed health professionals. If the tenant cannot secure medical documentation from an appropriate health care professional with reasonable efforts, an extension of time may be granted if other reliable documentation is provided as may be determined by the Department.
§ 53-01. Administrative Review Procedure.
(a) Application Procedures.
(1) Any request for administrative review concerning assessment or tax of real property pursuant to this section must be filed by the owner of the property or any person who would be entitled to file a complaint pursuant to section 163 of the New York City Charter with the Property Division of the Department of Finance. Any such request must be made on an application form prescribed by the Commissioner of Finance and include all required information.
(2) An eligible filer may submit an application pursuant to this section for administrative review of clerical errors and errors in description as defined in subdivisions (a) and (b) of 19 RCNY § 53-02. An eligible filer is not restricted as to when an application may be submitted.
(3) The Department of Finance will only correct eligible errors that occurred within six years of the date of submission of an application.
(4) It will be within the sole discretion of the Department to determine whether additional documentation or an inspection is necessary to review the application for administrative review. If all requested documentation is not submitted within ninety days, the application will be denied.
§ 53-02. Clerical Errors and Errors in Description.
(a) Clerical Errors. The Commissioner of Finance may correct any assessment or tax that is erroneous due to a clerical error as defined in subdivision 2 of section 550 of the Real Property Tax Law. Clerical error will include but not be limited to the following:
(1) Failure to process partial exemption.
Example: Eligible senior citizen submits a completed application for the senior citizen homeowner exemption for the 2014/15 year and provides a certified mail receipt that is was submitted timely. The application is not approved or denied but is lost and the homeowner does not receive the exemption for 2014/15.
(2) Computer programming or inputting error resulting in value different than intended by assessor.
Example: Assessor values an office building at $1,000,000 but the assessment roll mistakenly reflects a value of $10,000,000 due to a computer programming or inputting error.
(1) Incorrect tax classification on the assessment roll due to an inventory error concerning the records maintained by the Department of the physical characteristics of the property.
Example: Department records indicated that there were twelve units on the property when there were in fact ten units. The tax class will be changed from class 2 to subclass 2B (capped).
(2) Physical change not put on the assessment roll or put on as an equalization change.
Example: New construction was performed on the property but the assessment roll does not reflect a physical increase subsequent to the completion of the work).
(3) Physical change put on the assessment roll when no physical work was done.
Example: No construction work or alterations were performed on the property but the assessment roll reflects a physical increase in assessed value.
(4) Equalization change erroneously put on an assessment roll as a physical change.
Example: The value of the property increased due to increases in rental income, but no physical work was done on the property in the previous year. The assessment erroneously reflected a physical increase in assessed value instead of an equalization increase in assessed value.
(5) In progress assessment erroneously not removed from the assessment roll.
Example: Construction has commenced on a commercial building for a year but it is not ready for occupancy by April 15th. Therefore the assessment on the improvement should be removed from the assessment roll. The failure to remove the assessment based on the partial completion will be corrected.
(6) Incorrect entry on the assessment roll of the assessed value of an improvement which was destroyed or removed prior to the taxable status date.
Example: House on the property was demolished prior to January 5th, but the assessment roll indicates a building assessed value for the property.
(7) Incorrect entry on the assessment roll of the assessed value of an improvement which was not in existence or which was present on a different parcel.
Example: House assessed for the property at 100 Main Street (vacant land) when the house existed on the property at 110 Main Street.
(8) Assessment based on incorrect square footage.
Example: Owner-occupied warehouse is valued based on 10,000 square feet when it has 5,000 square feet and the assessed value would have been lower if the correct square footage had been used.
(9) Assessment based upon incorrect number of units.
Example: Retail property is valued using four rental units when it has two rental units, and the assessed value would have been lower if the correct number of units had been used.
(10) Inaccurate building class that affected assessed value.
Example: Warehouse property (building class E1) erroneously had a K1 retail building class that resulted in higher income being applied and an assessed value that was too high.
(11) Erroneous calculation of transitional assessment or statutory limitation on assessment increases.
Example: Class one property has an equalization increase in assessed value of 10% from the previous year, which exceeds the statutory cap of 6% per year.
(12) Incorrect apportionment of parcel on the tax map.
Example: Parcel was requested to be apportioned 50% to the old owner and 50% to the new owner. The tax map erroneously apportioned 70% of the parcel to the old owner and its assessed value would have been lower if the apportionment had been done correctly.
(13) Land incorrectly deemed developable.
Example: Property is protected wetlands and cannot be developed, but is valued as if it were vacant land subject to development.
(14) Correction of defective changes by notice.
Example: The assessed value of a commercial property is increased prior to May 10th, the end of the change by notice period, but the 10-day notice required pursuant to statute is not mailed. The increase is therefore defective and the assessed value should be restored to the prior amount.
(1) Overvaluation due to inappropriate comparables or attributed income:
Example: Condominium was valued using comparable income from rentals in a different neighborhood rather than rentals from the same neighborhood.
(2) Incorrect valuation model utilized.
Example: Retail property was valued using an 8% capitalization rate, but it was determined in subsequent models that a 9% capitalization rate was more appropriate for this type of property in this location.
(3) Error in land/building ratio.
Example: The land assessed value for a class one single-family house is 40% of the total assessed value, but it is subsequently determined that the land proportion of the total assessed value should be 50%.
(4) Incorrect calculation of exemption based on error in application of the statute (inclusion of additional year in exemption calculation previously held by court not to be a clerical error).
Example: a J-51 exemption was incorrectly calculated to include equalization increase for four years instead of three years as per the statute.
§ 54-01 Definitions.
Application. The term “application” means an application for a merger or apportionment.
Apportionment. The term “apportionment” means the division of one separately assessed parcel of real property into two or more parcels of real property.
Build it Back Program. The term “Build it Back Program” means the program developed by the City of New York in 2013 to provide recovery assistance to the owners of one to four unit residential properties damaged by Superstorm Sandy. The Disaster Relief Appropriation Act, Pub.L. No. 113-2, 127 Stat. 4 (2013) appropriated federal funds to the United States Department of Housing and Urban Development for relief from Superstorm Sandy. The Build it Back Program uses funds from the HUD Community Development Block Grant Disaster Recovery program and is designed to assist both owner-occupied and tenant-occupied properties within New York City.
Department. The term “Department” means the Department of Finance of the City of New York.
Merger. The term “merger” means the combination of two or more separately assessed parcels of real property into one larger parcel of real property.
§ 54-02 Application for Mergers or Apportionments.
(a) Applications for mergers or apportionments are available on the Department’s website or can be requested by dialing 311. Except as otherwise directed by the Department, all applications and all supporting documentation required by the Department must be submitted in person to the Department’s tax map office.
(1) Outstanding taxes, charges or tax liens for prior tax years related to the parcel or parcels of real property included in the application must be satisfied unless the applicant has entered into an installment agreement to satisfy such taxes, charges or tax liens and they are current on such installment agreement.
(2) Real estate taxes for the current year for the parcel or parcels of real property included in the application must be up-to-date unless the applicant has entered into an installment agreement to pay such real estate taxes and they are current on such installment agreement.
(3) If an installment agreement already exists on parcels of real property that will be apportioned or merged, the owner must enter into a new installment agreement for the resulting apportioned or merged parcels of real property before the apportionment or merger will be approved by the Department. Any liens or charges on the parcels of real property to be apportioned or merged will be divided among the approved parcels of real property and the Department may take, if necessary, the same enforcement action against the apportioned or merged parcels of real property as it could take against the parcels of real property if they had not been apportioned or merged.
(4) Applicants must not have any outstanding Environmental Control Board judgment debt issued by the New York Office of Administrative Trials and Hearings (“OATH”), pursuant to Section 1049-a of the Charter on the parcel(s) included in the application unless the applicant has entered into an installment agreement to satisfy such judgment debt and they are current on such installment agreement. An applicant will not be required to satisfy any such outstanding judgment debt for which there is any pending Article 78 actions or motions before OATH. The applicant will not be required to satisfy any outstanding Environmental Control Board judgment debt on the parcel(s) included in a merger or apportionment application that were incurred by a previous owner(s) or for any other parcel(s) of property they own.
(5) The deed on record must show that the applicant owns the parcel or parcels of real property included in the application. The lessee of a lease with a term of ninety-nine or more years will also be eligible to submit an application for a merger or apportionment. If an application is submitted by a lessee, the fee owner will also be required to sign the application.
(1) Apportionments - New buildings:
(i) Completed application.
(ii) Final survey prepared by a licensed land New York State licensed surveyor, which must include square footage.
(iii) An approved subdivision plan work application (“PW1”) filing for a new building.
(2) Apportionments - Alterations on existing buildings or vacant land:
(i) Completed application.
(ii) An approved subdivision PW1 filing for alteration of an existing building. An approved PW1 filing is not required for vacant land unless the vacant parcel is subdivided from a parcel that contains a building.
(iii) Survey for alteration on existing building or vacant land.
(3) Apportionments - Condominiums:
(i) The applicant must comply with the requirements set forth in Article 9B of the Real Property Law.
(ii) The applicant must complete the Department’s Application for Condominium Apportionment and Approval (RP-602C) online and request new lots. Upon approval to proceed, the applicant must submit the completed RP-602C Application to the Department.
(4) Lot Mergers:
(i) Completed application.
(ii) The deed on record must show common ownership of all the parcels of real property included in such application. If the deed lacks a metes and bounds description but refers only to a filed tax map, the applicant must provide a current metes and bounds description, prepared by a New York State licensed surveyor. Applications requesting the merging of tax exempt parcels of real property with non-exempt parcels of real property will not be approved.
§ 54-03 Approval by the Department.
If the Department preliminarily approves an application, the applicant must then submit the application to the New York City Department of Buildings for certification that the newly created parcels comply with all applicable zoning laws. Such certification is not required for vacant parcels and mergers. If the New York City Department of Buildings provides such certification, the applicant must submit both approvals to the Department for final approval in order to complete the requested apportionment or merger, provided that applicants who are seeking a condominium apportionment must also receive prior approval from the New York State Attorney General’s Office before submission to the Department for final approval.
§ 54-04 Appeal Procedures.
The Department will notify the applicant concerning the determination rendered by the Department. Such notice will inform the applicant as to the reasons for the determination. The applicant may appeal a determination rendered by the Department on a form prescribed by the Department no later than 90 days after the date on the Department’s determination letter. The Department’s appeal determination is reviewable, pursuant to Article 78 of the New York Civil Practice Law and Rules.
Subchapter A: Scope and Application
§ 55-01 Scope and Construction.
This chapter applies to the enforcement by the Department of Finance of matters involving tobacco and synthetic marijuana (also known as “K2”), pursuant to various provisions of the New York City Administrative Code. The Commissioner of the Department of Finance (the “Commissioner”) hereby designates the Hearings Division of the Office of Administrative Trials and Hearings (“OATH”) to adjudicate Summonses issued by the Department alleging tobacco and synthetic marijuana violations. These rules supplement the rules of the Hearings Division of OATH found in 48 RCNY Chapter 6. The term “Summons” as used in these rules is defined by the rules of the OATH Hearings Division (48 RCNY § 6-01) and is the equivalent of a “Notice of Violation” as that term is defined in Titles 10 and 17 of the Administrative Code.
Subchapter B: Supplemental Procedures
§ 55-11 Admission of Violations Without a Hearing.
A respondent who receives a Summons for a tobacco or synthetic marijuana violation may be given an opportunity to admit to the alleged violation(s). Respondents who admit to the violation in advance of their hearing date will not be required to attend their hearing. In order to make such an admission, a respondent must admit to the violation, pay the indicated penalty amount, and accept any other penalty stated in the Summons (such as license revocation or suspension) prior to the date set forth therein. Such payment may be made by mail, in person or by such other means, including electronic means, as may be authorized by the Commissioner, in the manner prescribed in the Summons. The respondent’s admission of the alleged violation(s) will constitute a determination that respondent committed the alleged violation(s).
§ 55-12 Settlement Agreements.
(a) The Department and a respondent may enter into a written settlement agreement before the hearing date. Any respondent who enters into a settlement agreement with the Department must comply with the terms of such settlement agreement.
Subchapter C: Penalties
§ 55-31 Remedies and Penalties.
Respondents who admit to the offenses or are found in violation by OATH may be subject to penalties. The remedies and penalties provided for in this subchapter shall be in addition to any other remedies or penalties provided for the enforcement of such provisions under any other law including, but not limited to, civil or criminal actions or proceedings. Pursuant to New York City Charter § 2203(h)(1), except to the extent that dollar limits are otherwise specifically provided, civil penalties cannot exceed five hundred dollars for each violation.
§ 55-32. Retail Cigarette Dealer Penalty Schedule.
(a) The citations in the schedule of penalties set forth in Schedule A of this Chapter are to Title 17 of the Administrative Code of the City of New York.
(1) For violations of Chapter 7 of Title 17 of the Administrative Code, a first violation means the first time a person has violated such Chapter, whether by admitting to the violation; being found in violation by an OATH hearing officer; or entering into a settlement agreement for any such violation and includes any other violation of such chapter committed on the same day, provided there has been no previous violation on a different day.
(2) For purposes of Section 17-710(a) of the Administrative Code, a second or subsequent violation of the provisions of such Code subjecting the respondent to mandatory license revocation under such subdivision (a) means a violation has occurred that has been resolved through any of the dispositions set forth in paragraph (1) of this subdivision, when there has been a previous violation that occurred on a different day within a three-year period at the same place of business. Pursuant to Section 17-710(a)(5) of such Code, violation of any of the provisions of the Code stated in such Section 17-710(a)(5) shall constitute a basis for determining there has been a previous violation under any of those stated provisions.
(3) For purposes of Section 17-716(b) of the Administrative Code:
(i) A second violation of Section 17-715 of the Code means a violation that has occurred and has been resolved through any of dispositions set forth in paragraph (1) of this subdivision when there has been a previous violation of such section on a different day within a three-year period at the same place of business;
(ii) A third or subsequent violation of Section 17-715 of the Code subjecting the respondent to mandatory license suspension means a violation of such section that has occurred and has been resolved through any of dispositions set forth in paragraph (1) of this subdivision when there has been have been two previous violations on different days within a three-year period at the same place of business.
§ 55-33 Synthetic Marijuana (“K2”) Penalty Schedule.
(a) The citations in the schedule of penalties set forth in Schedule B of this Chapter are to Title 10 of the Administrative Code of the City of New York.
Subchapter D: Sealing
§ 55-41 Orders for Sealing.
(a) Issuance of Order for Sealing. If a basis for sealing exists under Administrative Code Section 11-4023, the Commissioner may, pursuant to that section, issue an order for sealing, directing the Sheriff, another peace officer of the Department, or any police officer to seal the premises as described in subdivision (c) of this section. Such order for sealing shall be enforced in accordance with the procedures set forth in Administrative Code Section 11-4023 and shall constitute the written directive of the Commissioner required under subdivision (c)(2) of such section.
(1) The order for sealing shall be posted as provided in Section 11-4023 of the Administrative Code in a conspicuous place at the premises. A warning notice stating that any perishable property that may spoil or pose a public health hazard may be disposed of by the Sheriff or other officer without further process at the time of the sealing shall also be posted in a conspicuous place in the vicinity of the order for sealing.
(2) At the time of the posting, copies of the order for sealing and the warning notice shall also be delivered at the premises to the respondent or any employee or agent of the respondent. If neither the respondent nor any employee or agent is at the premises at the time of posting, copies of the order for sealing and the warning notice must be delivered to any natural person at the premises in control or apparent control of such premises. If delivery is to be made to a natural person, and no such natural person is at the premises, no delivery will be required under this paragraph.
(3) Mailing of Order for Sealing. Within two days of the posting required by paragraph (2), a copy of the order for sealing, together with a copy of the warning notice, must be mailed to the respondent and to the record owner of the premises, if the record owner is different from the respondent, both by registered or certified mail and by regular first class mail.
(i) If the respondent or record owner is a natural person, the mailing of the documents must be sent to the premises, unless the premises is not the residence of such person. If the premises is not the residence of such person, the mailing must be sent as follows: as follows: (A) If the Department of Consumer Affairs (“DCA”) or other licensing authority can provide information about the residential address of such person, to the last such address; (B) If DCA or other licensing authority has no information about the residential address of such person, but has business or employment address information, to the last business or employment address known to DCA or other licensing authority; (C) If DCA or other licensing authority has no other address information, to the premises.
(ii) If the respondent or record owner is a corporation, joint-stock or other unincorporated association or a limited liability company, the mailing must be sent to the premises unless the principal place of business is not located at the premises. If the corporation, joint-stock or other unincorporated association or limited liability company is not located at the premises, the mailing must be sent as follows: (A) if DCA or other licensing authority has information about the address of the principal place of business within the State, to such address; (B) if DCA or other licensing authority has no such information but has information about any place of business within the State, to any such address; (C) if DCA or other licensing authority has no other address information, to the premises.
Allegations about such information that affect the mailing address must be set forth in an affidavit and maintained along with the proof of mailing. The order for sealing will be considered served upon the later of the date of posting or the date of the proof of mailing.
(4) For purposes of this section:
(i) The term “other licensing authority” means any agency or authority, other than the petitioner or DCA, which has issued a New York City retail cigarette license to the petitioner;
(ii) The term “record owner of the premises” or “record owner” means the owner of the premises identified in the records of the Office of the City Register of the City of New York (for Manhattan, Brooklyn, Queens, and the Bronx) or the Office of the County Clerk of the County of Richmond (for Staten Island) as of the date of posting;
(iii) Any person in possession or occupation of the premises must also be treated as a respondent if the transfer of the premises was not an arm’s length transaction as defined in Section 17-710(e) of the Administrative Code.
Schedule A
Schedule B
§ 56-01 Definitions.
(a) "Class two building" means any building in a special assessing unit classified as class two pursuant to subdivision 1 of Section 1802 of the Real Property Tax Law.
(i) the emergency housing rent control law; or
(ii) the rent and rehabilitation law of the City of New York enacted, pursuant to the emergency housing rent control law or to the emergency tenant protection act of nineteen seventy-four.
§ 56-02 Amount of Abatement.
An eligible building shall receive an abatement of real property taxes as provided in these rules.
(i) 0.5, multiplied by
(ii) the total approved cost of the MCI order issued by DHCR, multiplied by
(iii) a fraction, where the numerator equals the increase, of the amortization schedule of the improvement established by the rent act of 2015, measured in months, and where the denominator equals the total new amortization period for the MCI established by the rent act of 2015 applied to the eligible building, measured in months.
0.5 x $10,000 [approved cost of MCI order] = $5,000.
$5,000 x (12 months)/ (96 months) [8 year amortization schedule] =
$5,000 x 0.125 =$625.
The MCI tax abatement for the building is $625.
0.5 x $10,000 [approved cost of MCI order] =$5,000.
$5,000 x (24 months/108 months) [9 year amortization schedule] =
$5,000 x 0.222 = $1,111.
The MCI tax abatement for the building is $1,111.
§ 56-03 Application for Abatement.
(a) Except as allowed by paragraph (b) of this subdivision, an MCI tax abatement application must be submitted electronically to the department by the building owner or his or her designated representative and include all information requested by the department. The submission must follow the format required by the department and follow the instructions for submission of the application as described on the department's website. The information required by the application will include, but is not limited to:
(i) the amount of the MCI order approved by DHCR
(ii) the number of residential units in the eligible building.
§ 56-04 Administration of Abatement.
(a) An MCI tax abatement will be for a term of one tax year and is not renewable for any subsequent tax years. An MCI tax abatement or a portion thereof cannot be carried over to the next tax year if the MCI tax abatement reduces the tax liability to an amount below $0. An MCI tax abatement is not refundable but applied only as a credit.
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