(a) Use of investment allocation percentage.
(1) A taxpayer, irrespective of whether it has a regular place of business outside New York City, may allocate its investment income and capital within and without New York City by the investment allocation percentage.
(2) There are taxpayers which need to determine only an investment allocation percentage, and need not be concerned with a business allocation percentage. Thus, a taxpayer which has only investment income and investment capital allocates its entire net income and capital by the investment allocation percentage.
(3) (i) For tax years beginning before January 1, 1989, if the investment income (before allowance of any net operating loss deduction) of a taxpayer not reporting on a combined basis is more than 85 percent of its entire net income (before allowance of any net operating loss deduction) and its investment capital is more than 85 percent of its total business and investment capital, it may elect to allocate its entire net income and total business and investment capital by the investment allocation percentage.
(ii) Except as provided in subparagraph (i) of this subdivision, if a taxpayer has both business and investment capital, but has only investment income or has investment income and a business loss, the taxpayer must allocate its entire net income and its investment capital by the investment allocation percentage. Its business capital is allocated by the business allocation percentage.
(b) Computation of investment allocation percentage. (§ 11-604(3)(b), Administrative Code.)
(1) The investment allocation percentage is computed as follows:
(i) Ascertain the average net value of each stock, bond or other security, other than governmental securities, included in the taxpayer's investment capital, pursuant to subdivision (b) of 19 RCNY § 11-38. The phrase "stock, bond or other security" as used in this paragraph does not include cash, even if treated as investment capital pursuant to 19 RCNY § 11-37(a)(2) of these regulations.
(ii) Multiply the net value of each such stock, bond or other security by its issuer's allocation percentage.
(iii) Add all the products determined in paragraph (ii) of this subdivision.
(iv) Divide the sum obtained in paragraph (iii) of this subdivision by the net value of the taxpayer's total investment capital, exclusive of cash even if such cash is treated as investment capital pursuant to 19 RCNY § 11-37(a)(2).
(2) (i) The issuer's allocation percentage of an issuer of or obligor (other than an issuer or obligor subject to tax under Title 11, Chapter 6, Subchapter 3, Part 4 of the Administrative Code and other than in the case of an option on a stock or bond index or an option on a futures contract on such an index) on a stock, bond or other security constituting investment capital is computed as follows:
Tax Applicable to Issuer or Obligor: | Issuer's Allocation Percentage: |
Administrative Code Title 11, Chapter 6, Subchapter 4 (Transportation Corporation Tax) | percentage of issued capital stock required to be allocated within New York City on its report for the preceding year |
Administrative Code Title 11, Chapter 11 (Utility Tax) | percentage equal to a fraction, the numerator of which is the gross income of a utility corporation included on its New York City Utility Tax reports for periods during the preceding year, and the denominator of which is the gross income of the corporation as defined in Title 11, Chapter 11 of the Code for such periods, except that it shall include income from sources within and without the City. |
Administrative Code Title 11, Chapter 6, Subchapter 2 (General Corporation Tax) | percentage of entire capital required to be allocated within New York City on its report for the preceding year (equal to the sum of allocated business capital, allocated investment capital and allocated subsidiary capital divided by the sum of business capital, investment capital and subsidiary capital). |
(ii) In the case of an issuer or obligor subject to tax under Title 11, Chapter 6, Subchapter 3, Part 4 of the Administrative Code, the issuer's allocation percentage shall be determined as follows:
(A) In the case of a banking corporation described in § 11-640(a)(1) - (8) of the Administrative Code that is organized under the laws of the United States, this state or any other state of the United States, the issuer's allocation percentage shall be its alternative entire net income allocation percentage, as defined in § 11-642(c) of the Administrative Code, for the preceding year. In the case of such a banking corporation whose alternative entire net income for the preceding year is derived exclusively from business carried on within the city, its issuer's allocation percentage shall be 100 percent.
(B) In the case of a banking corporation described in § 11-640(a)(2) of the Administrative Code that is organized under the laws of a country other than the United States, the issuer's allocation percentage shall be determined by dividing (i) the amount described in § 11-642(a)(2)(A)(i) of the Administrative Code with respect to such issuer or obligor for the preceding year, by (ii) the gross income of such issuer or obligor from all sources within and without the United States, for such preceding year whether or not included in alternative entire net income for such year.
(C) In the case of an issuer or obligor described in § 11-640(a)(9) or 11-640(d)(2) of the Administrative Code, the issuer's allocation percentage shall be determined by dividing the portion of the entire capital of the issuer or obligor allocable to the city for the preceding year by the entire capital, wherever located, of the issuer or obligor for the preceding year.
(iii) For purposes of paragraphs (i) and (ii) of this subdivision, in determining an issuer's allocation percentage, the term "preceding year" means the taxable year of the issuer or obligor ending during the taxpayer's immediately prior taxable year. In general, if no taxable year of the issuer or obligor ends within the taxpayer's immediately prior taxable year, then the term "preceding year" means the latest taxable year of the issuer or obligor ending before the taxpayer's immediately prior taxable year. If an issuer or obligor was not required to file a report or return for the preceding year, as defined above, the issuer's allocation percentage is zero. The taxable year of an issuer or obligor that is a utility corporation subject to tax under Title 11, Chapter 11 of the Administrative Code is the utility's federal taxable year.
(iv) If a report or reports for the preceding year are required but not filed, or if filed do not contain information that would permit the determination of such issuer's allocation percentage, then, at the discretion of the Department of Finance, the issuer's allocation percentage to be used shall be either (A) the issuer's allocation percentage derived from the most recently filed report or return of the issuer or obligor, or (B) a percentage calculated by the Department of Finance to reasonably indicate the degree of economic presence in the City of the issuer or obligor during the preceding year.
(v) The issuer's allocation percentage of an option on a stock or bond index, or an option on a futures contract on such an index, will be calculated by the Department of Finance in such a manner as to reasonably indicate the economic presence in the City of the issuers of and obligors on the stocks, bonds or other securities included in the computation of the indexes.
(vi) Issuers or obligors.
(A) The issuer of stock is the corporation a portion of the equity of which is represented by such stock. Thus, the issuer of X Corporation stock is X Corporation; the issuer of Federal National Mortgage Association stock is the Federal National Mortgage Association.
(B) The issuer of, or obligor on, a bond or note is the maker of the instrument. A guarantor of a bond or note is not the issuer or obligor.
(C) The issuer of, or obligor on, a banker's acceptance is the accepting bank, irrespective of endorsements by other banks. Where banker's acceptances have been acquired in aggregate form, as in round lot trading, each banker's acceptance shall be treated separately for purposes of this paragraph.
(D) The issuer of, or obligor on, a trade acceptance is the party that has accepted the draft.
(E) The issuer of, or obligor on, an option is the entity which is the issuer of, or obligor on, the item that is the subject of the option unless the subject of the option is a stock or bond index or a futures contract on such an index. For the computation of the issuer's allocation percentage of an option on a stock or bond index or of an option on a stock or bond index or of an option on a futures contract on such an index, see § 11-68(2)(v) of these regulations.
(F) The issuer of, or obligor on, a stock which may be acquired when such right or warrant is exercised.
(G) The issuer of assets reflected in the taxpayer's books and records in connection with futures or forward contracts that constitute investment capital is the issuer of the asset, the taxpayer's position in which is hedged by the contract.
(3) The issuer's allocation percentage with respect to any stock, bond or other security may be obtained from the Department of Finance upon the written request of any corporation subject to tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code. The request must be in duplicate and specify the correct name of each entity for which an issuer's allocation percentage is needed.
(c) Discretionary adjustment of investment allocation percentage. (§ 11-604(8), Administrative Code.)
(1) Where it appears to the Commissioner of Finance that the investment allocation percentage, computed in the manner prescribed by paragraph (b) of subdivision 3 of § 11-604 of the Administrative Code does not properly reflect the investment activity, business, income or capital of the taxpayer within New York City, the Commissioner of Finance, in his discretion, may adjust such investment allocation percentage by excluding any asset therefrom, provided the income from such asset is also excluded in determining entire net income.
(2) Rulings of general public interest will be published by the Commissioner of Finance from time to time, indicating the circumstances under which, and the manner in which, such adjustments will be made.