Loading...
(§ 11-605(3), Administrative Code.)
(a) If the amount of the taxable income of any taxpayer or of any shareholder of any taxpayer which has elected to be taxed under subchapter S of chapter 1 of the Internal Revenue Code, as returned for Federal or New York State income or franchise tax purposes, is changed or corrected by a final determination of the Commissioner of Internal Revenue or other officer of the United States or New York Tax Commission, or other competent authority, or if a renegotiation of a contract or subcontract with the United States or the State of New York results in a change in taxable income, the taxpayer is required to report such changed or corrected taxable income or the results of such renegotiation and to concede the accuracy thereof or state wherein it is erroneous.
(b) Any deficiency notice (including a notice issued pursuant to a waiver filed by a taxpayer) pursuant to the provisions of the Internal Revenue Code or the New York Tax Law is a final determination, unless a timely petition to redetermine the deficiency is filed in the Tax Court of the United States or with the State Tax Commission, in which event the judgment of the court of last resort affirming the deficiency, or the redetermination of the deficiency pursuant to the judgment of the court of last resort, is the final determination. The allowance by the Commissioner of Internal Revenue or the State Tax Commission of a refund of any part of the tax shown on the taxpayer's return or of any deficiency thereafter assessed, whether such refund is made on his or its own motion or pursuant to judgment of a court, is also a final determination.
(c) Any taxpayer filing an amended return with the United States Treasury Department or the New York State Department of Taxation and Finance shall also file an amended report with the Commissioner of Finance.
(§ 11-605(3), Administrative Code.)
(a) If a taxpayer realizes a recovery of war loss it should indicate on its next annual tax report:
(1) The amount of any such recovery, the year in which recovered and the years in which the taxpayer deducted such recovered loss.
(2) Whether any such recovery has been included in taxable income for tax purposes and the year so included.
(3) Whether any such recovery was the basis for any adjustment by the United States Treasury Department or the State Tax Commission of the income of any year prior to the year of recovery.
(b) If a taxpayer has elected to exclude such recovery from Federal taxable income in the year of recovery resulting in a computation or recomputation of any tax imposed by the United States or New York State, the taxpayer is required to report the results of such computation or recomputation of tax to the Commissioner of Finance and to concede the accuracy thereof or state wherein it is erroneous.
(§ 11-605(1), Administrative Code.)
(a) Reports are required to be made on forms prescribed by the Commissioner of Finance. In the case of all taxpayers, annual reports are required to be filed on form NYC-3L or NYC-4S. As to the form of combined reports, see 19 RCNY § 11-86 below. In the case of a corporation which is not a taxpayer, but which has an officer, agent or representative within New York City, an annual information report is required to be filed on form NYC-245 (see: 19 RCNY § 11-82, supra). Form NYC-3360 is to be used for reporting changes in Federal taxable income (see: 19 RCNY § 11-83, supra).
(b) The Commissioner of Finance may require any taxpayer to file such other reports and submit such further information as he may require in the course of the administration of the provisions of Subchapter 2 of Chapter 6 of Title 11.
(c) Every report must have annexed thereto a certification of the president, vice-president, treasurer, assistant treasurer or chief accounting officer or any other officer of the taxpayer duly authorized so to act to the effect that the statements contained in the report are true. The fact that an individual's name is signed on a certification of the report shall be prima facie evidence that such individual is authorized to sign and certify the report on behalf of the corporation.
(d) Annual report forms are supplied by the Commissioner of Finance, but failure to secure a form does not release any corporation from the obligation of making any report required by Subchapter 2 of Chapter 6 of Title 11.
In all cases where a combined report is required or permitted to be filed (see: 19 RCNY § 11-91, infra), such report must be filed on form NYC-3A, setting forth the information requested. In addition, a separate report on form NYC-3L is required to be filed for each corporation included in the combined report.
(§ 11-605(1), Administrative Code.)
(a) Subject to the provisions of subdivision (c) of this section, the appropriate annual tax or information report must be filed on or before March 15 next succeeding the close of each calendar year of the corporation, or if the report is made on the basis of a fiscal year on or before the 15th day of the third month following the close of each fiscal year.
(b) The report of a change in Federal or New York State taxable income or the results of renegotiation of a contract or subcontract with the United States or New York State resulting in a change in taxable income, or a computation or recomputation of Federal or New York State tax as a result of a recovery of war loss, must be made within 90 days after the final determination of such change or renegotiation or recomputation of tax (see: 19 RCNY § 11-83, supra), or as otherwise required by the Commissioner of Finance. An amended report must be filed within 90 days after any taxpayer files an amended return with the United States Treasury Department or the New York State Department of Taxation and Finance.
(c) Short period reports.
(1) Taxpayers joining a Federal consolidated group.
(i) Short period precedes joining the group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, where a taxpayer, not previously part of a Federal consolidated group (i.e., an affiliated group filing a Federal consolidated return), becomes part of a Federal consolidated group on a day other than the first day of its Federal taxable year, determined without reference to its membership in the group, and the taxpayer is required to file a Federal short period return for the period from the first day of its taxable year through the end of the day on which it becomes such a member pursuant to Treas. Reg. § 1.1502-76(b), the taxpayer must file a report under this section covering the same period. The short period report required by this paragraph shall be due on the due date for the Federal short period return as provided by paragraphs (1) or (2) of subdivision (c) of Treas. Reg. § 1.1502-76(c), whichever is applicable. This provision does not apply in the case of an amended Federal short period return required under Treas. Reg. § 1.1502-76(c)(2). An amended return for any such short period must be filed within 90 days after the taxpayer files an amended return with the United States Treasury Department. See subdivision (b) of this section.
(ii) Short period follows joining group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, where a taxpayer joins a Federal consolidated group, including a situation where a taxpayer leaves one group to join another, the taxpayer must file a short period report under this section covering the period from the day it becomes a member of the group through the end of its new taxable year for purposes of Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code of the City of New York, which shall be the same as the end of the taxable year of the new consolidated group. Such report shall be filed on or before the 15th day of the third month following the end of its new taxable year.
(2) Taxpayers leaving a Federal consolidated group.
(i) Short period precedes leaving group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, where a taxpayer ceases to be part of a Federal consolidated group, including a situation where a taxpayer leaves one Federal consolidated group to join another, the taxpayer must file a report under this section covering the period from the beginning of its taxable year up to the date it leaves the group. Such report shall be filed on or before the 15th day of the third month following the close of its taxable year determined as if it had not ceased to be a member.
(ii) Short period follows leaving group. Except as otherwise provided in paragraph 3 or 4 of this subdivision, where a taxpayer ceases to be part of a Federal consolidated group, other than a situation where a taxpayer leaves one Federal consolidated group to join another, the taxpayer must file a short period report under this section covering the period from the day it ceases to be a member of the group through the end of its taxable year determined as if it had not left the group. Such report shall be filed on or before the 15th day of the third month following the close of its taxable year determined as if it had not ceased to be a member.
(3) Short period returns relating to IRC § 338 elections.
(i) Subject to the provisions of subparagraph (ii), if a taxpayer is an old target (within the meaning of Treas. Reg. § 1.338-2(c)(17)) any short period report required by 19 RCNY § 11-81(b)(7) shall cover the same period as is covered by the Federal report and shall be due on the due date for the Federal short period return set forth in Treas. Reg. § 1.338-10(a)(6), including any deemed extensions granted pursuant to Treas. Reg. § 1.338-10(a)(6)(ii)(B).
(ii) This paragraph shall not apply to an amended return described in Treas. Reg. § 1.338-10(a)(6)(ii)(D). An amended return for any such short period must be filed within 90 days after the taxpayer files an amended return with the United States Treasury Department. See subdivision (b) of this section.
(iii) 19 RCNY § 11-88(a) shall not apply to a taxpayer for which an election is made pursuant to section 338 of the Internal Revenue Code, regardless of whether such election is deemed invalid pursuant to 19 RCNY § 11-27(j), notwithstanding any deemed cessation of existence of such taxpayer pursuant to Treas. Reg. § 1.338(h)(10)-1(d)(4).
(4) If a corporation required to file a short period report as provided in this subdivision becomes subject to tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code on a date other than the first day of such short period, the short period report shall begin on the date the corporation becomes subject to tax under such Subchapter. Except as provided in paragraph (3) of this subdivision, if a corporation required to file a short period report as provided in this subdivision ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code on the last day of such short period, the provisions of 19 RCNY § 11-88 shall apply in determining the due date for such short period report.
(§ 11-605(1), Administrative Code.)
(a) If a corporation ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11 (see: 19 RCNY § 11-03, supra), the corporation shall file a report on or before the 15th day following the date of such cessation, covering the period from the close of its last calendar or fiscal year up to and including the date of such cessation. This subdivision shall not apply to a taxpayer for which an election is made pursuant to section 338 of the Internal Revenue Code, regardless of whether such election is deemed invalid pursuant to 19 RCNY § 11-27(j) of these rules, notwithstanding any deemed cessation of existence of such taxpayer pursuant to Treas. Reg. § 1.338(h)(10)-1(d)(4).
(b) If a corporation ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11, because of a change of classification (see: 19 RCNY § 11-05, supra), the corporation shall file a report on or before the 15th day following the date of such change of classification, covering the period from the close of its last calendar or fiscal year up to and including the date of such cessation.
(c) Notwithstanding subdivisions (a) and (b) of this section, a corporation need not file a separate report within 15 days of the date it ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11 if:
(1) it is a member of a group taxed on the basis of a combined report for the period including the date of such cessation; and
(2) it is properly included in such combined report (see: 19 RCNY § 11-14(c), supra.)
(§ 11-605(1), Administrative Code.)
(a) General. The Commissioner of Finance may grant a reasonable extension of time for filing reports whenever good cause exists. An application for an extension of time shall be made prior to the due date of the report.
(b) Automatic extensions.
(1) An automatic six-month extension of time for filing the annual tax report (form NYC-3L or NYC-4S) will be granted only on the condition that form NYC-6 (Application for Automatic Extension) is filed and a properly estimated tax is paid on or before the due date of the report for the taxable period for which the extension is requested. Such application must set forth the amount of tax that the taxpayer estimates it will be required to pay.
(2) Notwithstanding paragraph (1) of this subdivision, a corporation that ceases to be subject to tax under Subchapter 2 of Chapter 6 of Title 11 shall receive an automatic six-month extension of time for filing an annual tax report (form NYC-3L or NYC-4S) only on the condition that form NYC-6F (Application for Automatic Extension to File Final Return) is filed and a properly estimated tax is paid on or before the due date of the return for the taxable period for which the extension is requested.
(3) Notwithstanding paragraphs (1) and (2) of this subdivision, an automatic six-month extension of time for filing a combined report (form NYC-3A) will be granted only on the condition that form NYC-6 (Application for Automatic Extension) is filed and a properly estimated combined tax is paid on or before the due date of the return for the taxable period for which the extension is requested. Such application must be filed by the corporation paying the tax for the combined group. The applicant must submit the following information:
(i) its complete corporate name;
(ii) its employer identification number;
(iii) a list showing the corporate name and employer identification number of each of the other corporations properly included as part of the combined group; and
(iv) a list showing the estimated tax for each taxpayer included as part of the combined group. A properly estimated tax includes a tax measure by the fixed dollar minimum for each of the other taxpayers included in the combined group.
(c) Additional extensions. On or before the expiration of the automatic extension of time for filing a report, the Commissioner of Finance may grant up to two additional three-month extensions of time for filing reports when good cause exists. An application for each additional three-month extension shall be made on form NYC-6.1 before the expiration of the previous extension. Additional extensions of time for filing by a combined group must be requested in one application by the corporation paying the tax for the combined group. The application for an additional extension must contain the following information of the applicant:
(1) its complete corporate name;
(2) its employer identification number;
(3) the reason for requesting the additional extension; and
(4) in an application made by a combined group, a list showing the corporate name and employer identification number of each of the other corporations properly included as part of the combined group.
(d) Properly estimated taxes. The amount of tax is deemed to be properly estimated if the amount paid is either:
(1) not less than 90 percent of the tax as finally determined, or
(2) not less than the tax shown on the taxpayer's report for the preceding taxable year, if such preceding year was a taxable year of 12 months.
(e) Effect of extension.
(1) If a corporation has timely applied for an automatic extension of time to file a general corporation tax report and paid a properly estimated tax on or before the date such application is filed, the only amount payable in addition to any balance of general corporation tax due is interest at the underpayment rate prescribed by the Commissioner of Finance pursuant to the authority of § 11-687 of the Administrative Code on the balance due from the original due date of the report (determined without regard to any extensions of time) to the date of payment.
(2) The failure to meet any of the requirements of subdivisions (b) and (d) of this section will make the application for extension of time to file invalid and any report filed after the due date will be treated as a late filed report.
(§ 11-605(6), Administrative Code.)
An action may be brought at any time by the Corporation Counsel, at the instance of the Commissioner of Finance, to compel the filing of reports due under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code.
(§ 11-605(4), Administrative Code.)
(a) Every corporation is a separate taxable entity and shall file its own report. However, the Commissioner of Finance, in his discretion, may require a group of corporations to file a combined report or may grant permission to a group of corporations to file a combined report where:
(1) the requirement of stock ownership or control (as described in 19 RCNY § 11-91(e)(1) is met,
(2) the group of corporations is engaged in a unitary business (as described in subdivision (b) of 19 RCNY § 11-91(e)(2)), and
(b) Each corporation in the combined report must compute and show the tax which would have been required to be shown if it had filed on a separate basis.
(c) The decision to permit or require a combined report will be based on the facts in each case using the requirements set forth in this Section.
(d) Domestic International Sales Corporations (DISC). (§ 11-605(4), Administrative Code.)
(1) A taxpayer which owns or controls either directly or indirectly substantially all the capital stock of a domestic international sales corporation (DISC) which is a tax-exempt DISC for purposes of Article 9-A of the New York State Tax Law must file a combined report with DISC whether or not the latter is doing business in New York City.
(2) In the case of a DISC which is a taxable DISC for purposes of Article 9-A of the State Tax Law, the Commissioner may permit or require a combined report where the requirements described in 19 RCNY § 11-91(e) and (f) are met. The provisions of 19 RCNY §§ 11-91(g) and 11-92 apply to the taxable DISC and its corporate shareholder.
(3) The combined report permitted or required under this subdivision is to be filed for the taxable year of the corporate shareholder. If any DISC included in a combined report has a taxable year which differs from that of its corporate shareholder, the combined report should include the results of the DISC's operations for its taxable year which ends within the taxable year of its corporate shareholder. For example, if the shareholder reports on a calendar-year basis and the DISC has a taxable year ending on January 31 the combined report for the calendar year 1983 will include the DISC's activities for its taxable year ended January 31, 1983.
(4) If any corporation required to file a combined report under this subdivision believes that such filing should not be required, it must nevertheless file on a combined basis and attach to the report a statement setting forth the reasons for its belief that a combined report should not be required. After considering such statement, the Commissioner of Finance, in his sole discretion, may waive the requirement that a combined report be filed.
(5) In addition to the circumstances described above in which a combined report is required, the Commissioner of Finance may require a combined report in other situations if he determines that such a report is necessary in order to properly reflect the tax due from a corporate shareholder and one or more DISC's. Similarly, a corporation not required or permitted under this subdivision to file a combined report, which believes that it should be permitted to file such a report, may apply to the Commissioner of Finance for permission to file a combined report.
(e) Capital Stock and Unitary Business Requirements. (§ 11-605(4), Administrative Code.)
(1) Capital stock requirement. (i) In deciding whether to permit or require a group of corporations to file a combined report, the Commissioner of Finance will first determine whether
(A) the taxpayer owns or controls, either directly or indirectly, substantially all of the capital stock of all the other corporations which are to be included in the combined report; or
(B) substantially all the capital stock of the taxpayer is owned or controlled, either directly or indirectly, by other corporations which are to be included in the combined report; or
(C) substantially all of the capital stock of the taxpayer and substantially all of the capital stock of the other corporations which are to be included in the combined report are owned or controlled, either directly or indirectly, by the same interests.
(ii) The term "substantially all" means ownership or control of 80 percent or more of the voting stock. Ownership includes actual or beneficial ownership. To be considered the owner, the stockholder must have the right to vote and the right to receive dividends. The term "control" refers to all cases where the taxpayer controls the stock of all the other corporations or the stock of the taxpayer is controlled by other corporations or the taxpayer and the other corporations are controlled by the same interests. The decision as to whether or not a corporation is controlled by the same interests will be determined by the facts in each case.
Example 1: The taxpayer, X Corporation, owns 70 percent of the voting stock of Y Corporation. The remaining voting stock is owned by three employees of X Corporation. These employees have agreed in writing to sell their stock to X Corporation when they leave the corporation. As part of the agreement, the employees have given X Corporation their voting proxy. Thus, X Corporation owns or controls 80 percent or more of the voting stock of Y Corporation.
(2) Unitary business requirement.
(i) In deciding whether a corporation is part of a unitary business, the Commissioner of Finance will consider whether the activities in which the corporation engages are related to the activities of the other corporations in the group, such as:
(A) manufacturing or acquiring goods or property or performing services for other corporations in the group, or
(B) selling goods acquired from other corporations in the group, or
(C) financing sales of other corporations in the group.
(ii) The Commissioner of Finance, in deciding whether a corporation is part of a unitary business, will also consider whether the corporation is engaged in the same or related lines of business as the other corporations in the group, such as:
(A) manufacturing or selling similar products; or
(B) performing similar services, or
(C) performing services for the same customers.
(iii) Examples:
Example 2: A manufacturing corporation organizes an 80 percent or more owned subsidiary and transfers all of its selling activities to the subsidiary. The subsidiary sells only the parent's products for which it receives a commission. The subsidiary has a place of business of its own and its own employees. The corporations are conducting a unitary business.
Example 3: The taxpayer, a manufacturing corporation, forms a holding company which is also subject to tax. The holding company owns all of the manufacturing company's stock. The only activity of the parent-holding company is to receive dividends from the manufacturing corporation. The corporations are not conducting a unitary business.
(f) Other requirements. (§ 11-605(4), Administrative Code.)
(1) If the capital stock and unitary business requirements described in 19 RCNY § 11-91(e) have been met, the Commissioner of Finance may permit or require a group of taxpayers to file a combined report if reporting on a separate basis distorts the activities, business, income or capital in New York City of the taxpayers. The activities, business, income or capital of a taxpayer will be presumed to be distorted when the taxpayer reports on a separate basis if there are substantial intercorporate transactions among the corporations.
(2) If the requirements described in 19 RCNY § 11-91(e) have been met, the Commissioner of Finance may permit a corporation which is not a taxpayer to be included in a combined report if reporting on a separate basis distorts the activities, business, income or capital of one or more taxpayers. (For rules for requiring a corporation which is not a taxpayer to be included in a combined report, see 19 RCNY § 11-92(a).) The activities, business, income or capital of a taxpayer will be presumed to be distorted when the taxpayer reports on a separate basis if there are substantial intercorporate transactions among the corporations.
(3) In determining whether there are substantial intercorporate transactions, the Commissioner of Finance will consider transactions directly connected with the business conducted by the taxpayer, such as:
(i) manufacturing or acquiring goods or property or performing services for other corporations in the group; or
(ii) selling goods acquired from other corporations in the group; or
(iii) financing sales of other corporations in the group; or
(iv) performing related customer services using common facilities and employees. Service functions will not be considered when they are incidental to the business of the corporation providing such services. Service functions include, but are not limited to, accounting, legal and personnel services. The substantial intercorporate transaction requirement may be met where as little as 50 percent of a corporation's receipts or expenses are from one or more qualified activities described in this subdivision. It is not necessary that there be substantial intercorporate transactions between any one member with every other member of the group. It is, however, essential that each corporation have substantial intercorporate transactions with one other corporation or with a combined or combinable group of corporations.
Example: Corporation Z sells 30 percent of its product to Corporation X and 40 percent of its product to Corporation Y. If Corporations X and Y constitute a combined or combinable group, there are substantial intercorporate transactions between Corporation Z and such a combined group because 70 percent of Corporation Z's sales are to such combined group. If Corporations X and Y do not constitute a combined or combinable group, there are not substantial intercorporate transactions between Corporation Z and Corporations X and Y.
(4) If a taxpayer fails to meet the presumption of distortion because it does not have substantial intercorporate transactions with any corporation described in 19 RCNY § 11-91(e) or with a combined or combinable group of such corporations and if the filing of a report on a separate basis nevertheless results in a distortion of such taxpayer's activities, business, income or capital in New York City then the Commissioner of Finance will permit or require the filing of a combined report. If a taxpayer meets the presumption of distortion because it has substantial intercorporate transactions with any corporation described in 19 RCNY § 11-91(e) or with a combined or combinable group of such corporations and if the filing of a report on a separate basis does not result in a distortion of such taxpayer's activities, business, income or capital in New York City then the Commissioner of Finance will not permit or require the filing of a combined report.
(5) Notwithstanding the fact that the members of one or more existing or proposed combined group or groups of corporations within an entire group meet, in addition to the requirements of 19 RCNY § 11-91(e), the requirement of the Commissioner of Finance may permit or require a different combination of such corporations within such entire group with respect to a combined report if any such different combination or combinations, in addition to meeting the requirements of such 19 RCNY § 11-91(e) would result in less distortion of the activities, business, income or capital in New York City of such corporations within. the entire group.
(6) Examples:
Example 1: Corporation A manufactures goods, of which 40 percent are distributed through five 80 percent or more owned subsidiaries. Corporation A and its subsidiaries are taxpayers. The only function of the subsidiaries is to act as distributor for Corporation A. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation A and its subsidiaries. However, if the subsidiaries were engaged in other activities from which they received significant income the result could be changed.
Example 2: Corporation B manufactures goods which it sells through unrelated retailers. Corporation B will accept notes of the retailers' customers as part payment for its goods. These notes are sold to an 80 percent or more owned finance subsidiary of Corporation B. The subsidiary obtains funds by borrowing from a bank. The subsidiary's income is the difference between the interest charged to the retail customers and the interest paid to the bank. All of the subsidiary's business is obtained from Corporation B. Corporation B and the finance subsidiary are taxpayers. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation B and its finance subsidiary.
Example 3: A taxpayer's sole activity is to provide a management service for four 80 percent or more owned subsidiaries which are also taxpayers. The four subsidiaries manufacture the same type of product. Each of the four subsidiaries pays 25 percent of the parent's income for management services. There are no intercorporate transactions among the subsidiaries. Because there are insufficient intercorporate transactions among the corporations, it is presumed that reporting on a separate basis will not result in a distortion of the activities, business, income or capital of any of the corporations.
Example 4: Corporation C is a manufacturer. At the bank's insistence, its new factory building in New York City is owned by an 80 percent or more owned subsidiary. This is the only activity of the subsidiary. The manufacturer pays a rent to the subsidiary equal to principal, interest and taxes on the factory building. Corporation C and its subsidiary are taxpayers. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation C and its subsidiary.
Example 5: Assume the same facts as in Example 4 except that the factory building is located outside New York City and the subsidiary is not a taxpayer. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporation C and a combined report may be permitted. (For rules for requiring a corporation which is not a taxpayer to be included in a combined report, see 19 RCNY § 11-92(a).)
Example 6: A corporation is in the plumbing contracting business. In order to assure itself of a sufficient supply of a certain material, it acquires 80 percent or more of the voting stock of a corporation which produces that material. However, this subsidiary sells only 35 percent of its output to the parent which is 25 percent of the parent's total purchases. The parent and the subsidiary are taxpayers. Because there are insufficient intercorporate transactions between the corporations, it is presumed that reporting on a separate basis will not result in a distortion of the activities, business, income or capital of either taxpayer.
Example 7: Corporation H owns 80 percent or more of the stock of Corporations D, E and F. All four corporations are taxpayers. Corporation H's only activities are to receive the dividends of Corporations D, E and F and to pay dividends to its shareholders. Corporation D sells stocks, Corporation E sells municipal bonds and Corporation F sells corporate bonds. Corporations D, E and F each have their own employees. However, the employees of one corporation are authorized to and do sell extensively the securities sold by the other corporations. Eighty percent of the receipts of Corporation D, seventy percent of the receipts of Corporation E and sixty percent of the receipts of Corporation F are generated by sales made by the common pool of employees of Corporations D, E and F. All three corporations carry on their activities at or using common facilities. Because there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will result in a distortion of the activities, business, income or capital of Corporations D, E and F. Corporation H will not be permitted or required to be included in a combined report since it is not conducting a unitary business with Corporations D, E and F.
Example 8: The taxpayer, an advertising corporation, owns 80 percent or more of the voting stock of a publishing corporation which is also a taxpayer. The parent has total receipts of $900,000. $100,000 of the parent's receipts are from services performed for the subsidiary and $300,000 are from services performed for unrelated corporations. The parent also receives $500,000 in dividends from its subsidiary. Since dividends are not considered in determining whether there are substantial intercorporate transactions, it is presumed that reporting on a separate basis will not result in a distortion of the activities, business, income or capital of either taxpayer.
Example 9: Corporation T and three 80 percent or more owned subsidiaries, Corporations X, Y and Z, manufacture the same type product. All of the corporations are taxpayers. Corporation T conducts all research and development activities for the group without any direct charges to the subsidiaries. The parent owns all patents relating to the manufacture and marketing of each company's product and charges the subsidiaries fees or royalties for the use of the patents. The parent receives this type of income only from its subsidiaries. Corporation T's operations are located entirely in New York City. Each subsidiary has facilities in and out of the City. The following tabulation shows the business activities of each corporation for a particular taxable year.
T | X | Y | Z | |
Receipts from Products | 30,000 | 30,000 | 30,000 | 30,000 |
Royalty Income (expense) | 10,000 | (3,000) | (3,000) | (4,000) |
Dividends from Subsidiaries | 50,000 | |||
Research & Development Expenditures | (25,000) | |||
Other Deductions | (3,000) | (7,000) | (7,000) | (6,000) |
Entire Net Income | 12,000 | 20,000 | 20,000 | 20,000 |
Portion to New York City | 100% | 30% | 40% | 20% |
Allocated Income | 12,000 | 6,000 | 8,000 | 4,000 |
The only intercompany transactions within the group are the royalty payments which represent 25 percent of Corporation T's business income and are 40 percent or less of any subsidiary's total expenses. The royalties are based on a percentage of sales and do not represent adequate compensation to Corporation T for the value of the patents or the research and development expenditures.
Since the research and development expenditures are incurred only by Corporation T on behalf of the group, the entire net income of Corporation T is understated and that of the subsidiaries is overstated. The research and development expenditures represent a major portion of the group's overall expenses. Individually, these expenditures are allocated 100 percent to New York City whereas the income derived as a result of these expenditures is allocated to New York City at percentages ranging from 20 percent to 100 percent. The result is a distortion of the activities and income within New York City when the corporations report on a separate basis. A combined report will be permitted or required.
(g) Permission for filing combined reports. (§ 11-605(4), Administrative Code.)
(1) A group of corporations meeting the requirements set forth in 19 RCNY § 11-91(e) and (f) does not need to request prior permission to file on a combined basis. To file on a combined basis, the group must file a completed combined report. The first year the group files on a combined basis, and each year thereafter in which the composition of the group changes, the group must include the following information, either on the report or attached thereto:
(i) the exact name, address, employer identification number and the state of incorporation of each corporation included in the combined report,
(ii) information showing that each of the corporations meets the requirements of 19 RCNY § 11-91(e) and (f) for the taxable year,
(iii) the exact name, address, employer identification number and the state of incorporation of all corporations (except alien corporations) which meet the capital stock requirement of 19 RCNY § 11-91(e)(1) for the taxable year, which are not included in the combined report,
(iv) for the taxable year:
(A) the nature of the business conducted by each corporation included in subparagraphs (i) and (iii) of this paragraph,
(B) the source and amount of gross receipts of each corporation and the portion derived from transactions with each of the other corporations for the taxable year,
(C) the source and amount of total purchases, services and other transactions of each corporation and the portion related to transactions with each of the other corporations for the taxable year, and
(D) any other data that shows the degree of involvement of the corporations with each other,
(v) a statement providing details as to why a combined report including only the corporations listed in subparagraph (i) of this paragraph equitably reflects the New York City activities of the corporations which meet the capital stock requirement of 19 RCNY § 11-91(e)(1) and why the corporations listed in subparagraph (iii) of this paragraph should be excluded, and
(vi) a statement indicating whether each corporation listed in subparagraphs (i) or (iii) of this paragraph files on a combined basis for purposes of Article 9-A of the New York State Tax Law for the same taxable year and indicating the first taxable year each such corporation filed on a combined basis for State purposes. A copy of the State letter authorizing that corporation to file on a combined basis, if one was received, and any subsequent document authorizing the continued filing on a combined basis, must be submitted with this statement. In addition, if any corporation was required to file on a combined basis for purposes of Article 9-A of the State Tax Law, documentation evidencing that such combined filing has been required must also be submitted.
(2) The filing of a combined report or the inclusion of a corporation in, or the exclusion of a corporation from, a combined report is subject to revision or disallowance on audit in which event the Commissioner of Finance may compute and assess the tax of each taxpayer not permitted to be included in a combined report on a separate basis.
(3) If a corporation properly reports on a combined basis, it must continue to file its reports on a combined basis until the facts relevant to the requirements of 19 RCNY § 11-91(e) and (f) materially change.
(4) If the New York State Department of Taxation and Finance disallows the filing of a combined report or the inclusion of a corporation in, or the exclusion of a corporation from, a combined report, for purposes of Article 9-A of the New York State Tax Law, the taxpayer must report such fact to the Commissioner of Finance within 30 days following such disallowance.
Loading...