(§ 11-605(4), Administrative Code.)
(a) A corporation not subject to tax will not be required to be included in a combined report unless the requirements described in 19 RCNY § 11-91(e) have been met and the Commissioner of Finance determines that inclusion is necessary to properly reflect the tax liability of one or more taxpayers included in the group because of:
(1) substantial intercorporate transactions (see: 19 RCNY § 11-91(f)(3)); or
(2) an agreement, understanding, arrangement or transaction whereby the activity, business, income or capital of any taxpayer is improperly or inaccurately reflected.
Example 1: A parent corporation, which is a taxpayer, is the sole owner of a finance subsidiary which is a corporation not subject to tax. The parent manufactures furniture which it sells to independent retail dealers. The parent has an agreement with its finance subsidiary that the subsidiary will directly finance the purchase of the parent's furniture when it is purchased by customers of the independent retail dealers. The subsidiary's income is predominantly derived from financing retail sales of its parent's products. The independent retail dealer arranges the financing for the customer with the subsidiary. The parent and finance subsidiary will be required to file a combined report because of this agreement.
(b) An alien corporation (a corporation organized under the laws of a country other than the United States) may not be included in a combined report.
Example 2: A taxpayer has several 80 percent or more owned alien subsidiaries. It organizes an 80 percent or more owned domestic subsidiary to provide financing for the alien subsidiaries. Assume the parent, the domestic subsidiary and the alien subsidiaries are conducting a unitary business. The parent and the domestic subsidiary will be permitted or required to file a combined report if they meet the requirement set forth in 19 RCNY § 11-91(f). However, in no event will the alien subsidiaries be allowed in a combined report.
(c) A corporation which is taxable under Subchapter 3 or Subchapter 4 of Chapter 6 of Title 11 or under Chapter 11 of Title 11 (except a vendor of utility services which is taxable under both Chapter 11 of Title 11 and Subchapter 2 of Chapter 6 of Title 11) may not be included in a combined report. Insurance corporations formerly taxable under former Part IV, Title R, Chapter 46 may not be included in combined reports.