§ 11-507 Unincorporated business deductions.

The unincorporated business deductions of an unincorporated business means the items of loss and deduction directly connected with or incurred in the conduct of the business, which are allowable for federal income tax purposes for the taxable year (including losses and deductions connected with any property employed in the business), with the following modifications:

   (1)   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, but not in excess of five per centum of the amount by which the unincorporated business gross income exceeds the sum of (A) the unincorporated business deductions computed without the benefit of any deduction for charitable contributions and (B) the deduction allowed under subdivision (b) of section 11-509 of this chapter, where the election permitted by such subsection has been exercised.

   (2)   (a)   A deduction shall be allowed for net operating losses incurred by the unincorporated business, except as otherwise provided by paragraph (b) of this subdivision, in an amount computed in the same manner as the net operating loss deduction which would be allowed 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 the city, of the unincorporated business); provided, however, that such net operating loss deduction which would be allowed for the taxable year for federal income tax purposes shall for purposes of this paragraph be determined as if the unincorporated business had elected under section one hundred seventy-two of the internal revenue code to relinquish the entire carryback period with respect to net operating losses, except with respect to the first ten thousand dollars of each of such losses, sustained during taxable years ending after June thirtieth, nineteen hundred eighty-nine. Such deduction shall not include any net operating loss sustained during any taxable year beginning prior to January first, nineteen hundred sixty-six and for the purposes of this paragraph a net operating loss shall be determined without regard to any deductions allowed pursuant to subdivision (b) of section 11-509 of this chapter and any net operating loss for a taxable year beginning in nineteen hundred eighty-one shall be computed without regard to the deduction allowed with respect to recovery property under section one hundred sixty-eight of the internal revenue code; in lieu of such deduction, a taxpayer shall be allowed for such taxable year with respect to such property the depreciation deduction allowable under section one hundred sixty-seven of such internal revenue code as such section was in full force and effect on December thirty-first, nineteen hundred eighty.

      (b)   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 such taxable year were persons having a proportionate interest or interests, amounting to at least eighty percent of all such interests, in the unincorporated business gross income and unincorporated business deductions of the partnership which sustained the loss for which a carryback or carryover is claimed. In such event, the carryback or carryover allowable on account of such loss shall not exceed the percentage of the amount otherwise allowable, determined by dividing (A) 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 loss is carried back or carried over, attributable to such partners, by (B) the sum of such proportionate interests owned by all partners for such taxable year. The amount by which the carryback or carryover otherwise allowable exceeds the amount allowable pursuant to the preceding sentence shall not be a carryback or carryover to any other taxable year.

      (c)   Notwithstanding any other provision of this chapter to the contrary, for taxable years beginning before January first, two thousand twenty-one, any amendment to section one hundred seventy-two of the internal revenue code made after March first, two thousand twenty shall not apply to this chapter.

   (3)   No deduction shall be allowed (except as provided in section 11509 of this chapter) for amounts paid or incurred to a proprietor or partner for services or for use of capital.

   (4)   No deduction shall be allowed for income taxes imposed by the city, this state or any other taxing jurisdiction, or the tax imposed by article thirteen-A of the tax law.

   (5)   No deduction shall be allowed for (A) interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is exempt from tax under this chapter; (B) expenses paid or incurred for the production or collection of such income or the management, conservation or maintenance of property held for the production of such income; or (C) the amortizable bond premium on any bond the interest income from which is so exempt.

   (6)   No deduction shall be allowed in respect of the excess of net long-term capital gain over net short-term capital loss, but capital losses incurred in the unincorporated business shall be treated as ordinary losses and shall be allowed in full.

   (7)   In the case of a taxpayer who has exercised the election permitted by subdivision (b) of section 11-509 of this chapter, 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 subdivision.

   (8)   A deduction shall be allowed (to the extent not allowable for federal income tax purposes) for (A) interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is subject to tax under this chapter but exempt from federal income tax; (B) ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of such income or the management, conservation or maintenance of property held for the production of such income; and (C) the amortizable bond premium for the taxable year on any bond the interest on which is subject to tax under this chapter but exempt from federal income tax.

   (9)   At the election of the taxpayer, a deduction shall be allowed for expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or improvement of industrial waste treatment facilities and air pollution control facilities.

      (A)   (i)   The term "industrial waste treatment facilities" shall mean facilities for the treatment, neutralization or stabilization of industrial waste (as the term "industrial waste" is defined in section 17-0105 of the 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)   The term "air pollution control facilities" shall mean facilities 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 section 19-0107 of the 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 air pollution control board, 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.

      (B)   However, such deduction shall be allowed only

         (i)   with respect to tangible property which is depreciable, pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in the city and used in the taxpayer's trade or business, the construction, reconstruction, erection or improvement of which, in the case of industrial waste treatment facilities, is initiated on or after January first, nineteen hundred sixty-six, and only for expenditures paid or incurred prior to January first, nineteen hundred seventy-two, or which, in the case of air pollution control facilities, is initiated on or after January first, nineteen hundred sixty-six, and

         (ii)   on condition that such facilities have been certified by the state commissioner of environmental conservation or his or her designated representative, in the same manner as provided in either section 17-0707 or 19-0309 of the environmental conservation law, as applicable, as complying with the provision of the environmental conservation law, the sanitary code and regulations, permits or orders promulgated pursuant thereto, and

         (iii)   on condition that for the taxable year and all succeeding taxable years, no deduction for such expenditures or for depreciation of the same property allowed for federal income tax purposes shall be allowed under this chapter, 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, for only a part of such expenditures, on condition that any deduction allowed for federal income tax purposes for such expenditures or for depreciation of the same property be proportionately reduced in computing unincorporated business deductions for the taxable year and all succeeding taxable years, and

         (iv)   where the election provided for in subdivision (b) of section 11-509 of this chapter has not been exercised in respect to the same property.

      (C)   (i)   If expenditures in respect to an industrial waste treatment facility or an air pollution control facility have been deducted as provided herein and if within ten 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 recompute the tax for the year or years for which such deduction was allowed and any carryback or carryover year, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section 11-523 of this chapter.

         (ii)   If a deduction is allowed as herein provided for expenditures paid or incurred during any taxable year on the basis of a temporary certificate of compliance issued pursuant to the public health 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 report 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 any carryback or carryover year, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section 11-523 of this chapter.

      (D)   In any taxable year when property is sold or otherwise disposed of, with respect to which a deduction has been allowed pursuant to this subdivision, such deduction shall be disregarded in computing gain or loss, and the gain or loss on the sale or other disposition of such property shall be the gain or loss allowable for federal income tax purposes for such taxable year.

   (10)   In the case of mines, oil and gas wells and other natural deposits, no deduction of any allowance for percentage depletion pursuant to section six hundred thirteen or section six hundred thirteen A of the internal revenue code of nineteen hundred fifty-four, as amended, shall be allowed. However, an allowance for depletion with respect to such property shall be deductible in the amount which would be allowable under section six hundred eleven of such internal revenue code if such deduction were computed without reference to such section six hundred thirteen or section six hundred thirteen A of such code. With respect to the computation of depletion pursuant to this section, the basis for such computation for taxable years beginning in nineteen hundred seventy-two 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. 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, the gain or loss thereon entering into the computation of federal taxable income shall be disregarded in computing unincorporated business taxable income and 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.

   (11)   A deduction shall be allowed for 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 section two hundred eighty C of the internal revenue code.

   (12)   For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), a deduction shall be allowed for any amount which the taxpayer could have excluded for purposes of this chapter had it not made the election provided for in such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four.

   (13)   For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), no deduction shall be allowed for any amount deductible for federal income tax purposes solely as a result of an election made pursuant to the provisions of such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four.

   (14)   In the case of property placed in service in taxable years beginning before nineteen hundred ninety-four, for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty-F of the internal revenue code and property subject to the provisions of section one hundred sixty-eight of the internal revenue code which is placed in service in this state in taxable years beginning after December thirty-first, nineteen hundred eighty-four, no deduction shall be allowed for the amount allowable as a deduction determined under section one hundred sixty-eight of the internal revenue code.

   (15)   In the case of property placed in service in taxable years beginning before nineteen hundred ninety-four, for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty-F of the internal revenue code and property subject to the provisions of section one hundred sixty-eight of the internal revenue code which is placed in service in this state in taxable years beginning after December thirty-first, nineteen hundred eighty-four, and provided a deduction has not been disallowed pursuant to subdivision thirteen of this section, a taxpayer shall be allowed with respect to property which is subject to the provisions of section one hundred sixty-eight of the internal revenue code the depreciation deduction allowable under section one hundred sixty-seven of the internal revenue code as such section would have applied to property placed in service on December thirty-first, nineteen hundred eighty.

   (16)   Notwithstanding any other provision of this chapter to the contrary, 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 or to income or gain therefrom 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 subdivision (d) of section 11-502 of this chapter.

   (17)   Notwithstanding any other provision of this chapter to the contrary, no deduction shall be allowed for any expenses directly or indirectly attributable to activities described in paragraph two of subdivision (c) of section 11-502 of this chapter if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (c) of section 11-502 of this chapter.

   (18)   Notwithstanding any other provision of this chapter to the contrary, in the case of a taxpayer that is an unincorporated entity described in subparagraph (B) of paragraph four of subdivision (c) of section 11-502 of this chapter, 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, such losses or expenses are attributable to activities of such other unincorporated entity not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (c) of section 11-502 of this chapter.

   (19)   Notwithstanding any other provision of this chapter to the contrary, no deduction shall be allowed for interest, depreciation or any other expense directly or indirectly attributable to 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 pursuant to the provisions of subdivision (d) of section 11-502 of this chapter.

   (20)   For taxable years ending after September tenth, two thousand one, in the case of qualified property described in paragraph two of subsection k of section one hundred sixty-eight of the internal revenue code, other than qualified resurgence zone property described in subdivision twenty-two of this section, and other than qualified New York Liberty Zone property described in paragraph two of subsection b of section fourteen hundred L of the internal revenue code (without regard to clause (i) of subparagraph (C) of such paragraph), no deduction shall be allowed for the amount allowable as a deduction under section one hundred sixty-seven of the internal revenue code.

   (21)   For taxable years ending after September tenth, two thousand one, in the case of qualified property described in paragraph two of subsection k of section one hundred sixty-eight of the internal revenue code other than qualified resurgence zone property described in subdivision twenty-two of this section, and other than qualified New York Liberty Zone property described in paragraph two of subsection b of section fourteen hundred L of the internal revenue code (without regard to clause (i) of subparagraph (C) of such paragraph), a deduction shall be allowed with respect to such property equal to the depreciation deduction allowable under section one hundred sixty-seven of the internal revenue code as such section would have applied to such property had it been acquired by the taxpayer on September tenth, two thousand one, provided, however, that for taxable years beginning on or after January first, two thousand four, in the case of a passenger motor vehicle or a sport utility vehicle subject to the provisions of subdivision twenty-four of this section, the limitation under clause (i) of subparagraph (A) of paragraph one of subdivision (a) of section two hundred eighty F of the internal revenue code applicable to the amount allowed as a deduction under this paragraph shall be determined as of the date such vehicle was placed in service and not as of September tenth, two thousand one.

   (22)   For purposes of subdivisions twenty and twenty-one of this section, qualified resurgence zone property shall mean qualified property described in paragraph two of subsection k of section one hundred sixty-eight of the internal revenue code substantially all of the use of which is in the resurgence zone, as defined below, and is in the active conduct of a trade or business by the taxpayer in such zone, and the original use of which in the resurgence zone commences with the taxpayer after September tenth, two thousand one. The resurgence zone shall mean the area of New York county bounded on the south by a line running from the intersection of the Hudson River with the Holland Tunnel, and running thence east to Canal Street, then running along the centerline of Canal Street to the intersection of the Bowery and Canal Street, running thence in a southeasterly direction diagonally across Manhattan Bridge Plaza, to the Manhattan Bridge, and thence along the centerline of the Manhattan Bridge to the point where the centerline of the Manhattan Bridge would intersect with the easterly bank of the East River, and bounded on the north by a line running from the intersection of the Hudson River with the Holland Tunnel and running thence north along West Avenue to the intersection of Clarkson Street then running east along the centerline of Clarkson Street to the intersection of Washington Avenue, then running south along the centerline of Washington Avenue to the intersection of West Houston Street, then east along the centerline of West Houston Street, then at the intersection of the Avenue of the Americas continuing east along the centerline of East Houston Street to the easterly bank of the East River.

   (23)   For taxable years beginning on or after January first, two thousand four, in the case of a taxpayer that is not an eligible farmer as defined in subsection (n) of section six hundred six of the tax law, no deduction shall be allowed for the amounts allowable as a deduction under sections one hundred seventy-nine, one hundred sixty-seven and one hundred sixty-eight of the internal revenue code with respect to a sport utility vehicle that is not a passenger automobile as defined in paragraph five of subsection (d) of section two hundred eighty F of the internal revenue code.

   (24)   For taxable years beginning on or after January first, two thousand four, in the case of a taxpayer that is not an eligible farmer as defined in subsection (n) of section six hundred six of the tax law, a deduction shall be allowed with respect to a sport utility vehicle that is not a passenger automobile as defined in paragraph five of subsection (d) of section two hundred eighty F of the internal revenue code equal to the amounts allowable as a deduction under sections one hundred seventy-nine, one hundred sixty-seven and one hundred sixty-eight of the internal revenue code, determined as if such sport utility vehicle were a passenger automobile as defined in such paragraph five.

(Am. 2020 N.Y. Laws Ch. 121, 6/17/2020, eff. 6/17/2020)

Editor's note: For related unconsolidated provisions, see Appendix A at L.L. 2002/017.

§ 11-508 Allocation to the city.

   (a)   General; allocation of business income. If an unincorporated business is carried on both within and without the city, as determined under regulations of the commissioner of finance, there shall be allocated to the city, in the manner provided in subdivision (b), (c) or (d) of this section, a fair and equitable portion of its business income. For taxable years beginning before July first, nineteen hundred ninety-six, if the unincorporated business has no regular place of business outside the city, all of such business income shall be allocated to the city.

   (b)   (1)   Allocation by taxpayer's books. For taxable years beginning before January first, two thousand five, the portion allocable to the city may be determined from the books of the business if the methods used in keeping such books are approved by the commissioner of finance as fairly and equitably reflecting the income from the city.

      (2)   (i)   If a taxpayer determines the portion of business income to be allocated to the city using the method prescribed in paragraph one of this subdivision on a timely filed original return with respect to each of the two taxable years, each of which must consist of twelve months, immediately preceding the taxpayer's first taxable year beginning on or after January first, two thousand five, the taxpayer may make a one-time election to continue to use that method for taxable years beginning on or after January first, two thousand five and before January first, two thousand twelve. Such election shall be made by using the method prescribed in paragraph one of this subdivision on an original timely filed return with respect to the first taxable year beginning on or after January first, two thousand five and before January first, two thousand six. Such election may not be made, or if made, shall be deemed revoked as of the beginning of the taxable year if, for either of the two taxable years immediately preceding the year in which the election is made, the commissioner of finance has determined the methods used in keeping such books do not fairly and equitably reflect the income from the city.

         (ii)   (A)   A taxpayer that has made the election provided for in subparagraph (i) of this paragraph may revoke it by filing an original or amended return using an allocation method permitted by this section other than the method prescribed in paragraph one of this subdivision unless the commissioner of finance has determined that such method does not fairly and equitably reflect the income from the city.

            (B)   The election provided for in subparagraph (i) of this paragraph shall be deemed to have been revoked as of the beginning of the taxable year if, for any taxable year during which the election is intended to be in effect, the commissioner of finance has determined that the methods used in keeping the taxpayer's books do not fairly and equitably reflect the income from the city.

            (C)   In the case of a taxpayer that is a partnership or other unincorporated entity, the election provided for in subparagraph (i) of this paragraph shall be deemed to have been revoked as of the beginning of the taxable year unless one or more of the persons having a proportionate interest or interests, amounting to more than fifty percent of all such interests, in the taxpayer's unincorporated business gross income and unincorporated business deductions for such taxable year were persons having a proportionate interest or interests, amounting to more than fifty percent of all such interests, in the taxpayer's unincorporated business gross income and unincorporated business deductions at the end of the taxpayer's last taxable year beginning before January first, two thousand five. For purposes of this clause, a transfer of an ownership interest in unincorporated business gross income or unincorporated business deductions upon the death of a partner or owner to such deceased partner's or owner's estate shall be disregarded but transfers by such decedent's estate shall not be disregarded.

            (D)   Once the election provided for in subparagraph (i) of this paragraph has been revoked by the taxpayer pursuant to clause (A) or deemed revoked pursuant to clauses (B) or (C) of this subparagraph, the taxpayer shall be barred from using the method prescribed in paragraph one of this subdivision for the taxable year in which the election has been revoked or deemed revoked and any subsequent taxable year.

   (c)   Allocation by formula. If subdivision (b) does not apply to the taxpayer, the portion allocable to the city shall be determined by multiplying (A) the business income by (B) a business allocation percentage to be determined by adding together the percentages computed under paragraphs one, two and three of this subdivision, and dividing the result by the number of percentages; provided, however, that for taxable years beginning on or after July first, nineteen hundred ninety-six, a taxpayer that is a "manufacturing business," as defined in subdivision (g) of this section, may determine its business allocation percentage as provided in such subdivision (g):

      (1)   Property percentage. The percentage computed by dividing (A) the average of the value, at the beginning and end of the taxable year, of real and tangible personal property connected with the unincorporated business and located within the city, by (B) the average of the value, at the beginning and end of the taxable year, of all real and tangible personal property connected with the unincorporated business and located both within and without the city. For this purpose, for taxable years beginning before January first, two thousand five, real property shall include real property rented to the unincorporated business and, for this purpose, for taxable years beginning on and after January first, two thousand five, real and tangible personal property shall include real and tangible personal property rented to the unincorporated business and the value of such real and tangible personal property rented to the unincorporated business shall mean the product of (i) eight and (ii) the gross rents payable for the rental of such property during the taxable year.

      (2)   Payroll percentage. The percentage computed by dividing (A) the total wages, salaries and other personal service compensation paid or incurred during the taxable year to employees in connection with the unincorporated business carried on within the city, by (B) the total of all wages, salaries and other personal service compensation paid or incurred during the taxable year to employees in connection with the unincorporated business carried on both within and without the city.

      (3)   Gross income percentage. The percentage computed by dividing (A) the gross sales or charges for services performed by or through an agency located within the city, by (B) the total of all gross sales or charges for services performed within and without the city. The sales or charges to be allocated to the city shall include all sales negotiated or consummated, and charges for services performed, by an employee, agent, agency or independent contractor chiefly situated at, connected by contract or otherwise with, or sent out from, offices of the unincorporated business, or other agencies, situated within the city; provided, however, that for taxable years beginning on or after July first, nineteen hundred ninety-six, sales of tangible personal property shall not be allocated to the city as hereinabove in this paragraph provided, but shall be allocated to the city only where shipments are made to points within the city, and provided, further, that:

         (A)   for taxable years beginning on or after July first, two thousand five, for taxpayers having gross receipts for the taxable year (determined without regard to any deductions) of less than one hundred thousand dollars, charges for services performed shall be allocated to the city to the extent that the services are performed within the city;

         (B)   for taxable years beginning on or after July first, two thousand six, for taxpayers having gross receipts for the taxable year (determined without regard to any deductions) of less than three hundred thousand dollars, charges for services performed shall be allocated to the city to the extent that the services are performed within the city; and

         (C)   for taxable years beginning on or after July first, two thousand seven, for all other taxpayers, charges for services performed shall be allocated to the city to the extent that the services are performed within the city.

   (d)   Other allocation methods. The portion allocable to the city shall be determined in accordance with rules and regulations of the commissioner of finance if it shall appear to the commissioner of finance that the income from the city is not fairly and equitably reflected under the provisions of either subdivision (b) or subdivision (c) of this section.

   (e)   Special rules for real estate. Income and deductions from the rental of real property, and gain and loss from the sale, exchange or other disposition of real property, shall not be subject to allocation under subdivision (b), (c), or (d) of this section, but shall be considered as entirely derived from or connected with the state, other than this state, in which such property is located or, if such property is located in this state, the political subdivision thereof. To the extent that anything in the preceding sentence is inconsistent with any provision of subdivision (d) of section 11-502, subdivision (c) of section 11-506 or subdivision sixteen of section 11-507 of this chapter, the provisions of such subdivisions shall take precedence over the provisions of the preceding sentence.

   (e-1)   Special rules for publishers and broadcasters.

      (1)   Notwithstanding anything in paragraph three of subdivision (c) of this section to the contrary and except as provided in paragraph four of this subdivision, in the case of a taxpayer engaged in the business of publishing newspapers or periodicals, there shall be allocated to the city, for purposes of such paragraph three, the gross sales or charges for services arising from sales of subscriptions to, and advertising contained in, such newspapers or periodicals, to the extent that such newspapers or periodicals are delivered to points within the city.

      (2)   Notwithstanding anything in paragraph three of subdivision (c) of this section to the contrary and except as provided in paragraph four of this subdivision, in the case of a taxpayer engaged in the business of broadcasting radio or television programs, whether through the public airwaves or by cable, direct or indirect satellite transmission, or any other means of transmission, there shall be allocated to the city, for purposes of such paragraph three, a portion of the gross sales or charges for services arising from the sale of subscriptions to such programs or from the broadcasting of such programs and of commercial messages in connection therewith, such portion to be determined according to the number of listeners or viewers within and without the city.

      (3)   Notwithstanding anything in this section (other than subdivision (e) of this section) to the contrary, in the case of a taxpayer that is substantially engaged, in the aggregate, in any combination of the businesses referred to in paragraphs one, two and four of this subdivision, the portion of business income allocable to the city shall be determined in accordance with the provisions of subdivision (c) of this section (as modified by paragraphs one, two and four of this subdivision), unless the commissioner of finance determines that the business income from the city is not fairly and equitably reflected under the provisions of such subdivision (c), in which event the provisions of subdivision (d) of this section shall apply in determining the portion of business income allocable to the city and the provisions of subdivision (b) of this section shall not apply. For purposes of this subdivision, a taxpayer shall be deemed to be substantially engaged in a business or businesses referred to in such paragraphs one and two if more than ten percent of the taxpayer's gross receipts for the taxable year are attributable to such business or businesses.

      (4)   Notwithstanding anything in paragraph one or two of this subdivision to the contrary, for taxable years beginning on or after January first, two thousand two, in the case of a taxpayer engaged in the business of publishing newspapers or periodicals, or broadcasting radio or television programs, whether through the public airwaves or by cable, direct or indirect satellite transmission, or any other means of transmission, there shall be allocated to the city, for purposes of paragraph three of subdivision (c) of this section, the gross sales or charges to subscribers located in the city for subscriptions to such newspapers, periodicals, or program services. For purposes of this paragraph, a subscriber shall be deemed located in the city if, in the case of newspapers and periodicals, the mailing address for the subscription is within the city and, in the case of program services, the billing address for the subscription is within the city. For purposes of this clause, "subscriber" shall mean a member of the general public who receives such newspapers, periodicals or program services and does not further distribute them.

   (e-2)   Rules for receipts from certain services to investment companies.

      (1)   For taxable years beginning on or after January first, two thousand one, for purposes of paragraph three of subdivision (c) of this section, the portion of receipts received from an investment company arising from the sale of management, administration or distribution services to such investment company determined in accordance with paragraph two of this subdivision shall be deemed to arise from services performed within the city (such portion referred to herein as the New York city portion).

      (2)   The New York city portion shall be the product of the total of such receipts from the sale of such services and a fraction. The numerator of that fraction is the sum of the monthly percentages (as defined hereinafter) determined for each month of the investment company's taxable year for federal income tax purposes which taxable year ends within the taxable year of the taxpayer (but excluding any month during which the investment company had no outstanding shares). The monthly percentage for each such month is determined by dividing the number of shares in the investment company which are owned on the last day of the month by shareholders that are domiciled in the city by the total number of shares in the investment company outstanding on that date. The denominator of the fraction is the number of such monthly percentages.

      (3)   (A)   For purposes of this subdivision the term "domicile", in the case of an individual shall have the meaning ascribed to it under chapter seventeen of this title; an estate or trust is domiciled in the city if it is a city resident estate or trust as defined in paragraph three of subdivision (b) of section 11-1705 of this code; a business entity is domiciled in the city if the location of the actual seat of management or control is in the city. It shall be presumed that the domicile of a shareholder, with respect to any month, is his, her or its mailing address on the records of the investment company as of the last day of such month.

         (B)   For purposes of this subdivision, the term "investment company" means a regulated investment company, as defined in section 851 of the internal revenue code, and a partnership to which section 7704(a) of the internal revenue code applies (by virtue of section 7704(c)(3) of such code) and that meets the requirements of section 851(b) of such code. The preceding sentence shall be applied to the taxable year for federal income tax purposes of the business entity that is asserted to constitute an investment company that ends within the taxable year of the taxpayer.

         (C)   For purposes of this subdivision, the term "receipts from an investment company" includes amounts received directly from an investment company as well as amounts received from the shareholders in such investment company in their capacity as such.

         (D)   For purposes of this subdivision, the term "management services" means the rendering of investment advice to an investment company, making determinations as to when sales and purchases of securities are to be made on behalf of an investment company, or the selling or purchasing of securities constituting assets of an investment company, and related activities, but only where such activity or activities are performed pursuant to a contract with the investment company entered into pursuant to section 15(a) of the federal investment company act of nineteen hundred forty, as amended.

         (E)   For purposes of this subdivision, the term "distribution services" means the services of advertising, servicing investor accounts (including redemptions), marketing shares or selling shares of an investment company, but, in the case of advertising, servicing investor accounts (including redemptions) or marketing shares, only where such service is performed by a person who is (or was, in the case of a closed end company) also engaged in the service of selling such shares. In the case of an open end company, such service of selling shares must be performed pursuant to a contract entered into pursuant to section 15(b) of the federal investment company act of nineteen hundred forty, as amended.

         (F)   For purposes of this subdivision, the term "administration services" includes clerical, accounting, bookkeeping, data processing, internal auditing, legal and tax services performed for an investment company but only if the provider of such service or services during the taxable year in which such service or services are sold also sells management or distribution services, as defined hereinabove, to such investment company.

   (e-3)   Rules for receipts for services performed by registered securities or commodities brokers or dealers. 

      (1)   For taxable years beginning after two thousand eight, in the case of a taxpayer which is a registered securities or commodities broker or dealer, for purposes of paragraph three of subdivision (c) of this section, the receipts specified in subparagraphs (A) through (G) of this paragraph shall be deemed to arise from services performed within the city to the extent set forth in such subparagraphs.

         (A)   Receipts constituting brokerage commissions derived from the execution of securities or commodities purchase or sales orders for the accounts of customers shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of the customer who is responsible for paying such commissions.

         (B)   Receipts constituting margin interest earned on behalf of brokerage accounts shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of the customer who is responsible for paying such margin interest.

         (C)   Gross income, including any accrued interest or dividends, from principal transactions for the purchase or sale of stocks, bonds, foreign exchange and other securities or commodities (including futures and forward contracts, options and other types of securities or commodities derivatives contracts) shall be deemed to arise from services performed within the city either (i) to the extent that production credits are awarded to branches, offices or employees of the taxpayer within the city as a result of such principal transactions or (ii) if the taxpayer so elects, to the extent that the gross proceeds from such principal transactions (determined without deduction for any cost incurred by the taxpayer to acquire the securities or commodities) are generated from sales of securities or commodities to customers within the city based upon the mailing addresses of such customers in the records of the taxpayer. For purposes of clause (ii) of this subparagraph, the taxpayer shall separately calculate such gross income from principal transactions by type of security or commodity. For purposes of this subparagraph, gross income from principal transactions shall be determined after the deduction of any cost incurred by the taxpayer to acquire the securities or commodities. For purposes of this subdivision, the term "production credits" means credits granted pursuant to the internal accounting system used by the taxpayer to measure the amount of revenue that should be awarded to a particular branch or office or employee of the taxpayer which is based, at least in part, on the branch's, the office's or the employee's particular activities. Upon request, the taxpayer shall be required to furnish a detailed explanation of such internal accounting system to the department.

         (D)   (i)   Receipts constituting fees earned by the taxpayer for advisory services to a customer in connection with the underwriting of securities for such customer (such customer being the entity which is contemplating issuing or is issuing securities) or fees earned by the taxpayer for managing an underwriting shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of such customer who is responsible for paying such fees.

            (ii)   Receipts constituting the primary spread or selling concession from underwritten securities shall be deemed to arise from services performed within the city to the extent that production credits are awarded to branches, offices or employees of the taxpayer within the city as a result of the sale of the underwritten securities.

            (iii)   The term "primary spread" means the difference between the price paid by the taxpayer to the issuer of the securities being marketed and the price received from the subsequent sale of the underwritten securities at the initial public offering price, less any selling concession and any fees paid to the taxpayer for advisory services or any manager's fees, if such fees are not paid by the customer to the taxpayer separately. The term "public offering price" means the price agreed upon by the taxpayer and the issuer at which the securities are to be offered to the public. The term "selling concession" means the amount paid to the taxpayer for participating in the underwriting of a security where the taxpayer is not the lead underwriter.

         (E)   Receipts constituting interest earned by the taxpayer on loans and advances made by the taxpayer to an entity affiliated with the taxpayer shall be deemed to arise from services performed at the principal place of business of such affiliated entity. For purposes of this subparagraph, an entity shall be considered affiliated with the taxpayer if such entity and the taxpayer have eighty percent or more common direct or indirect, actual or beneficial ownership.

         (F)   Receipts constituting account maintenance fees shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of the customer who is responsible for paying such account maintenance fees.

         (G)   Receipts constituting fees for management or advisory services, including fees for advisory services in relation to merger or acquisition activities, but excluding fees paid for services described in paragraph one of subdivision (e-2) of this section, shall be deemed to arise from services performed at the mailing address in the records of the taxpayer of the customer who is responsible for paying such fees.

      (2)   For purposes of this subdivision, the term "securities" shall have the same meaning as in section 475(c)(2) of the internal revenue code and the term "commodities" shall have the same meaning as in section 475(e)(2) of such code. The term "registered securities or commodities broker or dealer" means a broker or dealer registered as such by the securities and exchange commission or the commodities futures trading commission, and shall include an OTC derivatives dealer as defined under regulations of the securities and exchange commission at 17 CFR 240.3b-12.

      (3)   If the taxpayer receives any of the receipts enumerated in paragraph (1) of this subdivision as a result of a securities correspondent relationship such taxpayer has with another registered securities or commodities broker or dealer with the taxpayer acting in this relationship as the clearing firm, such receipts shall be deemed to arise from services performed within the city to the extent set forth in each of the subparagraphs in paragraph (1) of this subdivision. The amount of such receipts shall exclude the amount the taxpayer is required to pay to the correspondent firm for such correspondent relationship. If the taxpayer receives any of the receipts enumerated in paragraph (1) of this subdivision as a result of a securities correspondent relationship such taxpayer has with another registered securities or commodities broker or dealer with the taxpayer acting in this relationship as the introducing firm, such receipts shall be deemed to arise from services performed within the city to the extent set forth in each of the subparagraphs in paragraph (1) of this subdivision.

      (4)   If, for purposes of subparagraph (A), (B), (F), or (G) of paragraph (1) of this subdivision, and clause (i) of subparagraph (C) of paragraph (1) of this subdivision, the taxpayer is unable from its records to determine the mailing address of the customer, the receipts described in any of such subparagraphs and such clause shall be deemed to arise from services performed at the branch or office of the taxpayer that generates the transaction for the customer that generated such receipts.

   (f)   Allocation of investment income.

      (1)   The investment income of an unincorporated business shall be allocated to the city by multiplying such investment income by an investment allocation percentage to be determined as follows:

         (A)   multiply the amount of its investment capital invested in each stock, bond or other security (other than governmental securities) during the period covered by its return by the issuer's allocation percentage (determined as provided in paragraph two of this subdivision) of the issuer or obligor thereof:

         (B)   add together the products so obtained; and

         (C)   divide the sum so obtained by the total of its investment capital invested during such period in stocks, bonds and other securities; provided, however, that in case any investment capital is invested in any stock, bond or other security during only a portion of the period covered by the return, only such portion of such capital shall be taken into account; and provided, further, that if a taxpayer's investment allocation percentage is zero, interest received on bank accounts shall be allocated in the manner provided in subdivision (b), (c) or (d) of this section.

      (2)   (A)   In the case of an issuer or obligor subject to tax under subchapter two or three-A of chapter six of this title, or subject to tax as a utility corporation under chapter eleven of this title, the issuer's allocation percentage shall be the percentage of the appropriate measure (as defined hereinafter) which is required to be allocated within the city on the report or reports, if any, required of the issuer or obligor under chapter six or eleven of this title for the preceding year. The appropriate measure referred to in the preceding sentence shall be: in the case of an issuer or obligor subject to subchapter two or three-A of chapter six of this title, entire capital; and in the case of an issuer or obligor subject to chapter eleven of this title as a utility corporation, gross income.

         (B)   In the case of an issuer or obligor subject to tax under part four of subchapter three of chapter six of this title, the issuer's allocation percentage shall be determined as follows:

            (i)   In the case of a banking corporation described in paragraphs one through eight of subdivision (a) of section 11-640 of this title which is organized under the laws of the United States, this state or any other state of the United States, the issuer's allocation percentage shall be its alternative entire net income allocation percentage, as defined in subdivision (c) of section 11-642 of this title, for the preceding year. In the case of such a banking corporation whose alternative entire net income for the preceding year is derived exclusively from business carried on within the city, its issuer's allocation percentage shall be one hundred percent.

            (ii)   In the case of a banking corporation described in paragraph two of subdivision (a) of section 11-640 of this title which is organized under the laws of a country other than the United States, the issuer's allocation percentage shall be determined by dividing (I) the amount described in clause (i) of subparagraph (A) of paragraph two of subdivision (a) of section 11-642 of this title with respect to such issuer or obligor for the preceding year, by (II) the gross income of such issuer or obligor from all sources within and without the United States, for such preceding year, whether or not included in alternative entire net income for such year.

            (iii)   In the case of an issuer or obligor described in paragraph nine of subdivision (a) or in paragraph two of subdivision (d) of section 11-640 of this title, the issuer's allocation percentage shall be determined by dividing the portion of the entire capital of the issuer or obligor allocable to the city for the preceding year by the entire capital, wherever located, of the issuer or obligor for the preceding year.

         (C)   Provided, however, that if a report or reports for the preceding year are not filed, or if filed do not contain information which would permit the determination of such issuer's allocation percentage, then the issuer's allocation percentage to be used shall, at the discretion of the commissioner of finance, be either (i) the issuer's allocation percentage derived from the most recently filed report or reports of the issuer or obligor or (ii) a percentage calculated, by the commissioner of finance, reasonably to indicate the degree of economic presence in the city of the issuer or obligor during the preceding year.

      (3)   For purposes of this subdivision, investment capital shall be determined by taking the average value of the gross assets included therein (less liabilities deductible therefrom pursuant to the provisions of subdivision (h) of section 11-501 of this chapter). The value of investment capital which consists of marketable securities shall be the fair market value thereof and the value of investment capital other than marketable securities shall be the value thereof shown on the books and records of the unincorporated business in accordance with generally accepted accounting principles.

      (4)   [Repealed.]

   (g)   Special rules for manufacturing businesses.

      (1)   For taxable years beginning on or after July first, nineteen hundred ninety-six and before January first, two thousand eleven, a manufacturing business may elect to determine its business allocation percentage by adding together the percentages determined under paragraphs one, two and three of subdivision (c) of this section and an additional percentage equal to the percentage determined under paragraph three of subdivision (c) of this section, and dividing the result by the number of percentages so added together.

      (2)   An election under this subdivision must be made on a timely filed (determined with regard to extensions granted) original return for the taxable year. Once made for a taxable year, such election shall be irrevocable for that taxable year. A separate election must be made for each taxable year. A manufacturing business that has failed to make an election as provided in this paragraph shall be required to determine its business allocation percentage without regard to the provisions of this subdivision. Notwithstanding anything in this paragraph to the contrary, the commissioner of finance may permit a manufacturing business to make or revoke an election under this subdivision, upon such terms and conditions as the commissioner may prescribe, where the commissioner determines that such permission should be granted in the interests of fairness and equity due to a change in circumstances resulting from an audit adjustment.

      (3)   As used in this subdivision, the term "manufacturing business" means an unincorporated business primarily engaged in the manufacturing and sale thereof of tangible personal property; and the term "manufacturing" includes the process (including the assembly process) (i) of working raw materials into wares suitable for use or (ii) which gives new shapes, new qualities or new combinations to matter which already has gone through some artificial process, by the use of machinery, tools, appliances and other similar equipment. An unincorporated business shall be deemed to be primarily engaged in the activities described in the preceding sentence if more than fifty percent of its gross receipts for the taxable year are attributable to such activities.

   (h)   Notwithstanding subdivision (d) of this section, if it shall appear to the commissioner of finance that any business or investment allocation percentage determined as hereinabove provided does not properly reflect the activity, business, or income of a taxpayer within the city, the commissioner of finance shall be authorized in his or her discretion, in the case of a business allocation percentage, to adjust it by (1) excluding one or more of the factors therein; (2) including one or more factors, such as expenses, purchases, contract values (minus subcontract values); (3) excluding one or more assets in computing such allocation percentage, provided the income therefrom is also excluded in determining unincorporated business entire net income, or (4) any other similar or different method calculated to effect a fair and proper allocation of the income reasonably attributable to the city, and in the case of an investment allocation percentage, to adjust it by excluding one or more assets in computing such percentage; provided the income therefrom is also excluded in determining unincorporated business entire net income. The commissioner of finance from time to time shall publish all rulings of general public interest with respect to any application of the provisions of this subdivision.

   (i)   Notwithstanding subdivision (c) of this section, but subject to subdivision (g) of this section, the business allocation percentage shall be computed in the manner set forth in this subdivision.

      (1)   For taxable years beginning in two thousand nine, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of thirty percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of thirty percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of forty percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (2)   For taxable years beginning in two thousand ten, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of twenty-seven percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of twenty-seven percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of forty-six percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (3)   For taxable years beginning in two thousand eleven, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of twenty-three and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of twenty-three and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of fifty-three percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (4)   For taxable years beginning in two thousand twelve, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of twenty percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of twenty percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of sixty percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (5)   For taxable years beginning in two thousand thirteen, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of sixteen and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of sixteen and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of sixty-seven percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (6)   For taxable years beginning in two thousand fourteen, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of thirteen and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of thirteen and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of seventy-three percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (7)   For taxable years beginning in two thousand fifteen, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of ten percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of ten percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of eighty percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (8)   For taxable years beginning in two thousand sixteen, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of six and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of six and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of eighty-seven percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (9)   For taxable years beginning in two thousand seventeen, the business allocation percentage shall be determined by adding together the following percentages:

         (A)   the product of three and one-half percent and the percentage determined under paragraph one of subdivision (c) of this section,

         (B)   the product of three and one-half percent and the percentage determined under paragraph two of subdivision (c) of this section, and

         (C)   the product of ninety-three percent and the percentage determined under paragraph three of subdivision (c) of this section.

      (10)   For taxable years beginning after two thousand seventeen, the business allocation percentage shall be the percentage determined under paragraph three of subdivision (c) of this section.

      (11)   The commissioner shall promulgate rules necessary to implement the provisions of this subdivision under such circumstances where any of the percentages to be determined under paragraph one, two or three of subdivision (c) of this section cannot be determined because the taxpayer has no property, payroll or gross receipts from sales or services within or without the city.

§ 11-509 Deductions not subject to allocation.

   (a)   In computing unincorporated business taxable income, there shall be allowed (without allocation under section 11-508 of this chapter) deductions for reasonable compensation for taxable years beginning before January first, two thousand seven, not in excess of five thousand dollars, and for taxable years beginning on or after January first, two thousand seven, not in excess of ten thousand dollars, for personal services of the proprietor and each partner actively engaged in the unincorporated business, but the aggregate of such deductions shall not exceed twenty per centum of the unincorporated business taxable income computed without the benefit of any deductions under this subdivision or the unincorporated business exemptions under section 11-510 of this chapter.

   (b)   Subject to the conditions provided in paragraphs three and four of this subdivision at the election of the taxpayer there shall also be allowed (without allocation under section 11-508 of this chapter) either or both of the items set forth in paragraphs one and two of this subdivision, except that only one of the items shall be allowed with respect to any one item of property.

      (1)   Depreciation with respect to any property such as described in paragraphs three or four of this subdivision, and subject to the conditions provided therein, not exceeding twice the depreciation allowed with respect to the same property for federal income tax purposes. Such deduction shall be allowed only upon condition that no deduction shall be allowed pursuant to section 11-507 of this chapter for depreciation of the same property, and the total of all deductions allowed pursuant to this paragraph in any taxable year or years with respect to any property shall not exceed its cost or other basis and, in the case of an unincorporated business carried on both within and without this city, with respect to property described in paragraph four of this subdivision, such total shall not exceed its cost or other basis multiplied by (A) the percentage of the excess of the taxpayer's unincorporated business gross income over its unincorporated business deductions allocated to this city, or (B) the percentage of the taxpayer's business income allocated to this city, whichever is applicable, which percentage shall be determined under section 11-508 of this chapter for the first year such depreciation is deducted.

      (2)   Expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or acquisition of any property such as described in paragraph three or four of this subdivision, and subject to the conditions provided therein, which is used or to be used for purposes of research or development in the experimental or laboratory sense. Such purposes shall not be deemed to 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. Such deduction shall be allowed only on condition that, in the case of an unincorporated business carried on both within and without this city, with respect to property described in paragraph four of this subdivision, such deduction does not exceed the expenditures multiplied by (A) the percentage of the excess of the taxpayer's unincorporated business gross income over its unincorporated business deductions allocated to this city, or (B) the percentage of the taxpayer's business income allocated to this city, whichever is applicable, which percentage shall be determined under section 11-508 of this chapter for the first year such depreciation is deducted, and that, for the taxable year and all succeeding taxable years, no deduction shall be allowed pursuant to section 11-507 of this chapter 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 section 11-507 of this chapter for the taxable year and all succeeding taxable years. With respect to property which is used or to be used for research and development only in part, or during only part of its useful life, the deduction allowable pursuant to this paragraph shall be limited to a proportionate part of the expenditures relating thereto. If a deduction shall have been allowed pursuant to this paragraph for all or part of such expenditures with respect to any property, and such property is used for purposes other than research and development to a greater extent than originally reported, the taxpayer shall report such use in the taxpayer's return for the first taxable year during which it occurs, and the commissioner of finance may recompute the tax for the year or years for which such deduction was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by subdivision (c) of section 11-523 of this chapter.

      (3)   For purposes of this paragraph, such deduction shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in the city and used in the taxpayer's trade or business, (A) constructed, reconstructed or erected after December thirty-first, nineteen hundred sixty-five, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer or, property, the physical construction, reconstruction or erection of which began on or before December thirty-first, nineteen hundred sixty-seven or which began after such date pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-seven, and then only with respect to that portion of the basis thereof or the expenditure relating thereto which is properly attributable to such construction, reconstruction or erection after December thirty-first, nineteen hundred sixty-five, or (B) acquired after December thirty-first, nineteen hundred sixty-five, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer or pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-seven, by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in the city and commenced after December thirty-first, nineteen hundred sixty-five or (C) acquired, constructed, reconstructed, or erected subsequent to December thirty-first, nineteen hundred sixty-seven, if such acquisition, construction, reconstruction or erection is pursuant to a plan of the taxpayer which was in existence December thirty-first, nineteen hundred sixty-seven and not thereafter substantially modified, and such acquisition, construction, reconstruction or erection would qualify under the rules in paragraph four, five or six of subsection (h) of section forty-eight of the internal revenue code provided all references in such paragraphs four, five and six to the dates October nine, nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six, shall be read as December thirty-first, nineteen hundred sixty-seven. A taxpayer shall be allowed a deduction under subparagraph (A), (B) or (C) of this paragraph only if the tangible property shall be delivered or the construction, reconstruction or erection shall be completed on or before December thirty-first, nineteen hundred sixty-nine, except in the case of tangible property which is acquired, constructed, reconstructed or erected pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer. However, for any taxable year beginning on or after January first, nineteen hundred sixty-eight, a taxpayer shall not be allowed a deduction under paragraph one of this subdivision with respect to tangible personal property leased 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 shall be considered a lease. With respect to property which a taxpayer uses for purposes other than leasing for part of a taxable year and leases for a part of a taxable year, a deduction under paragraph one may be taken in proportion to the part of the year such property is used by the taxpayer.

      (4)   For purposes of this paragraph, such deductions shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in this city and used in the taxpayer's trade or business, (A) the construction, reconstruction, or erection of which is completed after December thirty-first, nineteen hundred sixty-seven, 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 thirty-first, nineteen hundred sixty-three, or (B) acquired after December thirty-first, nineteen hundred sixty-seven, by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in this city and commenced after December thirty-first, nineteen hundred sixty-five. Provided, however, a deduction under paragraph one of this subdivision shall be allowed with respect to property described in this paragraph 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 manufacturing and of the products that are manufactured. At the option of the taxpayer, air and water pollution control facilities which qualify for elective deductions under subdivision nine of section 11-507 of this chapter may be treated, for purposes of this paragraph, 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 subdivision nine of section 11-507 of this chapter. However, for any taxable year beginning on or after January first, nineteen hundred sixty-eight, a taxpayer shall not be allowed a deduction under paragraph one of this subdivision with respect to tangible personal property leased 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 shall be considered a lease. With respect to property which a taxpayer uses for purposes other than leasing for part of a taxable year and leases for a part of a taxable year, a deduction under paragraph one shall be allowed in proportion to the part of the year such property is used by the taxpayer.

      (5)   If the deductions allowable for any taxable year pursuant to this subdivision 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 and may be deducted (without allocation under section 11-508 of this chapter) in computing unincorporated business taxable income for such year or years.

      (6)   In any taxable year when property is sold or otherwise disposed of, with respect to which a deduction has been allowed pursuant to paragraph one or two of this subdivision, the basis of such property shall be adjusted to reflect the deductions so allowed, and if the basis as so adjusted is lower than the adjusted basis of the same property for federal income tax purposes, there shall be added to federal gross income the amount of the difference between such adjusted bases.

§ 11-510 Unincorporated business exemptions.

In computing unincorporated business taxable income, there shall be allowed (without allocation under section 11-508 of this chapter):

   (1)   an unincorporated business exemption of five thousand dollars, prorated for taxable years of less than twelve months under regulations of the commissioner of finance;

   (2)   if a partner in an unincorporated business is taxable under this chapter or under any local law imposed pursuant to section one of chapter seven hundred seventy-two of the laws of nineteen hundred sixty-six, an exemption for the amount of the partner's proportionate interest in the excess of the unincorporated business gross income over the deductions allowed under sections 11-507 and 11-509 of this chapter, but this exemption shall be limited to the amount which is included in the partner's unincorporated business taxable income allocable to the city, or included in a corporate partner's net income allocable to the city, provided, however, no such exemption shall be allowed to an unincorporated business for any taxable year of the unincorporated business beginning after June thirtieth, nineteen hundred ninety-four.

§ 11-511 Declaration of estimated tax.

   (a)   Requirement of declaration. Except as provided in subdivision (j) of this section, every unincorporated business shall make a declaration of its estimated tax for the taxable year, containing such information as the commissioner of finance may prescribe by regulations or instruction, if:

      (1)   for taxable years beginning after nineteen hundred eighty-six but before nineteen hundred ninety-six, its unincorporated business taxable income can reasonably be expected to exceed fifteen thousand dollars;

      (2)   for taxable years beginning in nineteen hundred ninety-six, its unincorporated business taxable income can reasonably be expected to exceed twenty thousand dollars;

      (3)   for taxable years beginning after nineteen hundred ninety-six but before two thousand nine, its estimated tax can reasonably be expected to exceed one thousand eight hundred dollars; and

      (4)   for taxable years beginning after two thousand eight, its estimated tax can reasonably be expected to exceed three thousand four hundred dollars.

   (b)   Definition of estimated tax. The term "estimated tax" means the amount which an unincorporated business estimates to be its tax under this chapter for the taxable year, less the amount which it estimates to be the sum of any credits allowable against the tax other than the credit allowable under subdivision (c) of section 11-503 of this chapter.

   (c)   Time for filing declaration. Except as hereinafter provided, a declaration of estimated tax required under this section shall be filed on or before April fifteenth of the taxable year provided, however, that if the requirements of subdivision (a) of this section are first met:

      (1)   after April first and before June second of the taxable year, the declaration shall be filed on or before June fifteenth, or

      (2)   after June first and before September second of the taxable year, the declaration shall be filed on or before September fifteenth, or

      (3)   after September first of the taxable year, the declaration shall be filed on or before January fifteenth of the succeeding year.

   (d)   Filing of declarations on or before January fifteenth.

      (1)   A declaration of estimated tax by an unincorporated business having an estimated unincorporated business taxable income from farming (including oyster farming) for the taxable year which is at least two-thirds of its total estimated unincorporated business taxable income for the taxable year may be filed at any time on or before January fifteenth of the succeeding year.

      (2)   For taxable years beginning before nineteen hundred ninety-seven, a declaration of estimated tax under this section of forty dollars or less for the taxable year may be filed at any time on or before January fifteenth of the succeeding year under regulations of the commissioner of finance.

   (e)   Amendments of declaration. An unincorporated business may amend a declaration under regulations of the commissioner of finance.

   (f)   Return as declaration or amendment. If on or before February fifteenth of the succeeding taxable year an unincorporated business subject to the estimated tax requirements of this section files its return for the taxable year for which the declaration is required, and pays on or before such date the full amount of the tax shown to be due on the return:

      (1)   such return shall be considered as its declaration if no declaration was required to be filed during the taxable year, but is otherwise required to be filed on or before January fifteenth of the succeeding year, and

      (2)   such return shall be considered as the amendment permitted by subdivision (e) to be filed on or before January fifteenth if the tax shown on the return is greater than the estimated tax shown in a declaration previously made.

   (g)   Fiscal year. This section shall apply to a taxable year other than a calendar year by the substitution of the months of such fiscal year for the corresponding months specified in this section.

   (h)   Short taxable year. An unincorporated business subject to the estimated tax requirements of this section and having a taxable year of less than twelve months shall make a declaration in accordance with regulations of the commissioner of finance.

   (i)   Declaration of unincorporated business under a disability. The declaration of estimated tax for an unincorporated business which is unable to make a declaration for any reason shall be made and filed by the committee, fiduciary or other person charged with the care of the property of such unincorporated business (other than a receiver in possession of only a part of such property), or by his or her duly authorized agent.

   (j)   Declaration of estimated tax for taxable years beginning prior to July thirteenth, nineteen hundred sixty-six. Notwithstanding subdivision (c) of this section, no declaration of estimated tax required by subdivision (a) of this section need be filed until September twelfth, nineteen hundred sixty-six.

Editor's note: For related unconsolidated provisions, see Appendix A at L.L. 1987/051.

§ 11-512 Payments of estimated tax.

   (a)   General. The estimated tax with respect to which a declaration is required shall be paid as follows:

      (1)   If the declaration is filed on or before April fifteenth of the taxable year, the estimated tax shall be paid in four equal installments. The first installment shall be paid at the time of the filing of the declaration, and the second, third and fourth installments shall be paid on the following June fifteenth, September fifteenth, and January fifteenth, respectively.

      (2)   If the declaration is filed after April fifteenth and not after June fifteenth of the taxable year, and is not required to be filed on or before April fifteenth of the taxable year, the estimated tax shall be paid in three equal installments. The first installment shall be paid at the time of the filing of the declaration, and the second and third installments shall be paid on the following September fifteenth and January fifteenth, respectively.

      (3)   If the declaration is filed after June fifteenth and not after September fifteenth of the taxable year, and is not required to be filed on or before June fifteenth of the taxable year, the estimated tax shall be paid in two equal installments. The first installment shall be paid at the time of the filing of the declaration, and the second shall be paid on the following January fifteenth.

      (4)   If the declaration is filed after September fifteenth of the taxable year, and is not required to be filed on or before September fifteenth of the taxable year, the estimated tax shall be paid in full at the time of the filing of the declaration.

      (5)   If the declaration is filed after the time prescribed therefor, or after the expiration of any extension of time therefor, paragraphs two, three and four of this subdivision shall not apply, and there shall be paid at the time of such filing all installments of estimated tax payable at or before such time, and the remaining installments shall be paid at the times at which, and in the amounts in which, they would have been payable if the declaration had been filed when due.

   (b)   Amendments of declaration. If any amendment of a declaration is filed, the remaining installments, if any, shall be ratably increased or decreased (as the case may be) to reflect any increase or decrease in the estimated tax by reason of such amendment, and if any amendment is made after September fifteenth of the taxable year, any increase in the estimated tax by reason thereof shall be paid at the time of making such amendment.

   (c)   Application to short taxable year. This section shall apply to a taxable year of less than twelve months in accordance with regulations of the commissioner of finance.

   (d)   Fiscal year. This section shall apply to a taxable year other than a calendar year by the substitution of the months of such fiscal year for the corresponding months specified in this section.

   (e)   Installments paid in advance. An unincorporated business may elect to pay any installment of its estimated tax prior to the date prescribed for the payment thereof.

   (f)   Cross-reference. For unincorporated businesses with taxable years beginning prior to July thirteenth, nineteen hundred sixty-six, see subdivision (j) of section 11-511 of this chapter.

   (g)   Taxpayers with credit relating to stock transfer tax. The portion of an overpayment attributable to a credit allowable pursuant to subdivision (c) of section 11-503 of this chapter may not be credited against any payment due under this section.

§ 11-513 Accounting periods and methods.

   (a)   Accounting periods. A taxpayer's taxable year under this chapter shall be the same as the taxpayer's taxable year for federal income tax purposes.

   (b)   Accounting methods. A taxpayer's method of accounting under this chapter shall be the same as the taxpayer's method of accounting for federal income tax purposes. In the absence of any method of accounting for federal income tax purposes, unincorporated business taxable income shall be computed under such method as in the opinion of the commissioner of finance clearly reflects income.

   (c)   Change of accounting period or method.

      (1)   If a taxpayer's taxable year or method of accounting is changed for federal income tax purposes, the taxable year or method of accounting for purposes of this chapter shall be similarly changed.

      (2)   If a taxpayer's method of accounting is changed, other than from an accrual to an installment method, any additional tax which results from adjustments determined to be necessary solely by reason of the change 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, beginning after January first, nineteen hundred sixty-six, during which the taxpayer used the method of accounting from which the change is made.

      (3)   If a taxpayer's method of accounting is changed from an accrual to an installment method, any additional tax for the year of such change of method and for any subsequent year, which is attributable to the receipt of installment payments properly accrued in a prior year, shall be reduced by the portion of tax for any prior taxable year attributable to the accrual of such installment payments, in accordance with regulations of the commissioner of finance.

§ 11-514 Returns, payment of tax.

   (a)   General. An unincorporated business income tax return shall be made and filed, and the balance of any tax shown on the face of such return, not previously paid as installments of estimated tax, shall be paid, on or before the fifteenth day of the fourth month following the close of a taxable year for taxable years beginning before January first, two thousand sixteen, and on or before the fifteenth day of the third month following the close of a taxable year for taxable years beginning on or after January first, two thousand sixteen:

      (1)   by or for every unincorporated business, for taxable years beginning after nineteen hundred eighty-six but before nineteen hundred ninety-seven, having unincorporated business gross income, determined for purposes of this subdivision without any deduction for the cost of goods sold or services performed, of more than ten thousand dollars, or having any amount of unincorporated business taxable income;

      (2)   by or for every partnership, for taxable years beginning after nineteen hundred ninety-six but before two thousand nine, having unincorporated business gross income, determined for purposes of this subdivision without any deduction for the cost of goods sold or services performed, of more than twenty-five thousand dollars, or having unincorporated business taxable income of more than fifteen thousand dollars;

      (3)   by or for every unincorporated business other than a partnership, for taxable years beginning after nineteen hundred ninety-six but before two thousand nine, having unincorporated business gross income, determined for purposes of this subdivision without any deduction for the cost of goods sold or services performed, of more than seventy-five thousand dollars, or having unincorporated business taxable income of more than thirty-five thousand dollars; and

      (4)   by or for every unincorporated business, for taxable years beginning after two thousand eight, having unincorporated business gross income, determined for purposes of this subdivision without any deduction for the cost of goods sold or services performed, of more than ninety-five thousand dollars.

   (b)   Decedents. The return for any deceased individual shall be made and filed by his or her executor, administrator, or other person charged with his or her property. If a final return of a decedent is for a fractional part of a year, the due date of such return shall be, for taxable years beginning before January first, two thousand sixteen, the fifteenth day of the fourth month following the close of the twelve-month period that began with the first day of such fractional part of the year, and, for taxable years beginning on or after January first, two thousand sixteen, the fifteenth day of the third month following the close of the twelve-month period that began with the first day of such fractional part of the year.

   (c)   Individuals under a disability. The return for an individual who is unable to make a return by reason of minority or other disability shall be made and filed by such individual's guardian, committee, fiduciary or other person charged with the care of his or her person or property (other than a receiver in possession of only a part of his or her property), or by such individual's duly authorized agent.

   (d)   Estates and trusts. The return for an estate or trust shall be made and filed by the fiduciary.

   (e)   Joint fiduciaries. If two or more fiduciaries are acting jointly, the return may be made by any one of them.

   (f)   Returns for taxable years ending prior to December thirty-first nineteen hundred sixty-six. With respect to taxable years ending prior to December thirty-first, nineteen hundred sixty-six, the returns required to be made and filed pursuant to this section shall be made and filed on or before the fifteenth day of the fourth month following the close of such taxable year or September twelfth, nineteen hundred sixty-six, whichever is later.

   (g)   Taxpayers with credit relating to stock transfer tax. Subdivisions one and two of this section shall apply to a taxpayer which has a right to a credit pursuant to subdivision (c) of section 11-503 of this chapter, except that the tax, or balance thereof, payable to the commissioner of finance in full pursuant to subdivision (a) of this section, at the time the report is required to be filed, shall be calculated and paid at such time as if the credit provided for in subdivision (c) of section 11-503 of this chapter were not allowed.

(Am. 2016 N.Y. Laws Ch. 60, 4/13/2016, eff. 4/13/2016)

Editor's note: For related unconsolidated provisions, see Appendix A at L.L. 1987/051.