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(§ 11-641(f)(5), Administrative Code)
(a) The ineligible funding amount of the IBF is determined by multiplying eligible net income (See: 19 RCNY § 15-03(a), supra) by the following fraction:
(1) The numerator of the fraction is the average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year which were not owed to or received from foreign persons (the term "foreign person" is defined in 19 RCNY § 15-01, supra).
(2) The denominator of the fraction is the average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year.
(b) "All liabilities and other sources of funds of the IBF" includes deposits, advances from the head office or other places of business of the taxpayer, accounts payable, notes and bonds payable, accrued expenses, deferred income, contingent liabilities, taxes payable, appropriated retained earnings (such as reserve for deferred taxes, dividends payable, etc.), unappropriated retained earnings, etc. Certain liabilities that are determined not to be sources of funds may be excluded with the permission of the Commissioner of Finance. The average aggregate amount of all liabilities and other sources of funds of the IBF for the taxable year must be computed on a quarterly basis or, at the option of the taxpayer, on a more frequent basis such as monthly, weekly, or daily. When the taxpayer's usual accounting practice does not permit a quarterly or more frequent computation of the average aggregate amount of all liabilities and other sources of funds, a semi-annual or annual computation may be allowed when it appears that no distortion of the average aggregate amount of all liabilities and other sources of funds will result. Different periods of averaging may be used for different classes of liabilities. If, because of variations in the amount or value of any class of liabilities or other sources of funds, it appears to the Commissioner of Finance that averaging on an annual, semi-annual, or quarterly basis does not properly reflect the average aggregate amount of all liabilities and other sources of funds, the Commissioner of Finance may require averaging on a more frequent basis. The method of determining the average aggregate amount of all liabilities and other sources of funds must be consistent and may not be changed on any subsequent return without the written consent of the Commissioner of Finance.
(c) The principles of separate accounting must be applied in determining the amount of liabilities and other sources of funds, including retained earnings, which were not owed to or received from foreign persons. Unless the taxpayer can substantiate that liabilities and other sources of funds, including retained earnings, were owed to or received from foreign persons, they are deemed to be owed to or received from other than foreign persons and included in the numerator described in 19 RCNY § 15-10(a)(1).
(§ 11-641(f)(6), Administrative Code)
(1) The numerator is the amount determined in subparagraph (i) of this paragraph multiplied by the applicable percentage stated in subparagraph (ii) of this paragraph minus the amount determined in subparagraph (iii) of this paragraph.
(i) Determine the average aggregate amount of loans and deposits as described in 19 RCNY § 15-11(b) which were properly recorded in the financial accounts of the taxpayer's branches, agencies, and offices within New York State for taxable years beginning in 1975, 1976, and 1977. Loans and deposits related to net income reassigned to New York State by the New York State Tax Commission are not includible for purposes of this subparagraph. The average aggregate amount of such loans and deposits may be determined by reference to the monthly or quarterly reports of the taxpayer to the Federal Reserve Bank of New York, as appropriately modified.
(ii) The average aggregate amount determined in subparagraph (i) of this paragraph is multiplied by the following percentages:
(A) 100 percent for the first taxable year the taxpayer established the IBF and for the next succeeding four taxable years,
(B) 80 percent for the sixth taxable year,
(C) 60 percent for the seventh taxable year,
(D) 40 percent for the eighth taxable year,
(E) 20 percent for the ninth taxable year, and
(F) zero percent for the tenth taxable year and thereafter.
(iii) The product obtained in subparagraph (ii) of this paragraph is reduced by the average aggregate amount of loans and deposits as described in 19 RCNY § 15-11(b) which were properly recorded in the financial accounts of the taxpayer's branches, agencies, and offices within New York State (other than the IBF) for the current taxable year. If the amount determined in this subparagraph is greater than the amount determined in subparagraph (ii) of this paragraph, the numerator is zero.
(2) The denominator is the average aggregate amount of loans and deposits as described in 19 RCNY § 15-11(b) which were properly recorded in the financial accounts of the IBF for the taxable year.
(b) For purposes of this section, the average aggregate amount of the loans described in paragraph (1) of this subdivision and the average aggregate amount of deposits described in paragraph (2) of this subdivision must be computed on a quarterly basis, or at the option of the taxpayer, on a more frequent basis such as monthly, weekly, or daily. When the taxpayer's usual accounting practice does not permit a quarterly or more frequent computation of the average aggregate of such loans and such deposits, a semi-annual or annual computation may be allowed when it appears that no distortion of the average aggregate of such loans and such deposits will result. If, because of variations in the amount or value of such loans and such deposits, it appears to the Commissioner of Finance that averaging on an annual, semi-annual, or quarterly basis does not properly reflect the average aggregate of such loans and such deposits, the Commissioner of Finance may require averaging on a more frequent basis. Any method of determining the average aggregate of such loans and such deposits may not be changed on any subsequent return without the written consent of the Commissioner of Finance.
(1) Loans means loans to foreign persons. The term "foreign person" is defined in 19 RCNY § 15-01, supra.
(2) Deposits mean deposits with foreign persons which are:
(i) banks;
(ii) foreign branches of a bank, including foreign branches of the taxpayer; or
(iii) foreign banks which are subsidiaries of a bank, including foreign banks which are subsidiaries of the taxpayer.
(c) For purposes of this section, loans and deposits that were recorded in the financial accounts for a taxable year includes those loans which were issued during such taxable year and those deposits which were made or placed during such taxable year and any other loan or deposit in the financial accounts for such taxable year. If the IBF purchases or acquires loans or deposits that were recorded in the financial accounts within New York State of a related corporation for taxable years 1975, 1976, and 1977, such loans and deposits are deemed to be recorded in the financial accounts of the taxpayer's branches, agencies, and offices within New York State for taxable years beginning in 1975, 1976, and 1977 and must be included in the numerator when computing the floor amount. A corporation is related to another corporation when such corporation owns or controls, either directly or indirectly, more than 50 percent of the capital stock of the other corporation, or more than 50 percent of the capital stock of such corporation is owned or controlled, either directly or indirectly, by the other corporation, or more than 50 percent of the capital stock of both corporations is owned or controlled, either directly or indirectly, by the same interests. A taxpayer, which, pursuant to § 11-646 of the Administrative Code, made a consolidated return with corporations affiliated with it for any of the taxable years 1975, 1976 and 1977, or makes a consolidated return for the taxable year, shall compute the floor amount as if it had filed separate returns for the taxable years 1975, 1976 and 1977 and as if it were filing a separate return for the taxable year.
This regulation shall take effect immediately, and shall apply to all taxable years which end on or after March 25, 1982; provided, however, that where a taxable year begins prior to March 25, 1982 and ends on or after that date, this regulation shall only apply to the portion of the taxable year beginning on March 25, 1982.