1454 - Allocation.
§ 1454. Allocation. (a) In general. If a taxpayer's entire net income, alternative entire net income, or taxable assets are derived from business carried on within and without the state, the taxpayer shall, for purposes of computing allocation percentages, compute payroll, receipts, and deposits percentages in accordance with the following rules: (1) The taxpayer shall ascertain the percentage which eighty percent of the total wages, salaries and other personal service compensation during the taxable year of employees within the state, except wages, salaries and other personal service compensation of general executive officers, bears to the total wages, salaries and other personal service compensation during the taxable year of all the taxpayer's employees within and without the state, except wages, salaries and other personal service compensation of general executive officers. (2) (A) The taxpayer shall ascertain the percentage which the receipts of the taxpayer arising during the taxable year from: (i) loans (including a taxpayer's portion of a participation in a loan) and financing leases within the state, and all other business receipts earned within the state, bear to (ii) the total amount of the taxpayer's receipts from loans (including a taxpayer's portion of a participation in a loan) and financing leases and all other business receipts within and without the state. (B) All interest from loans and financing leases is located where the greater portion of income producing activity related to the loan or financing lease occurred; provided, however: (i) In the case of a taxpayer described in paragraph one, two, three, four, five or seven of subsection (a) of section fourteen hundred fifty-two of this article, a loan or financing lease attributed by such taxpayer to a branch without the state shall be presumed to be properly so attributed provided that such presumption may be rebutted if the tax commission demonstrates that the greater portion of income producing activity related to the loan or financing lease did not occur at such branch. Where such presumption has been rebutted, the loan or financing lease shall be presumed to be within this state if the taxpayer had a branch within this state at the time the loan or financing lease was made. The taxpayer may rebut such presumption by demonstrating that the greater portion of income producing activity related to the loan or financing lease did not occur within the state. In the case of a loan or financing lease which is recorded on the books of a place without the state which is not a branch, it shall be presumed that the greater portion of income producing activity related to such loan or financing lease occurred within this state if the taxpayer had a branch within this state at the time the loan or financing lease was made. The taxpayer may rebut such presumption by demonstrating that the greater portion of income producing activity related to the loan or financing lease did not occur within this state. (ii) In the case of a taxpayer described in paragraph six or nine of subsection (a) of section fourteen hundred fifty-two of this article, a loan or financing lease attributed by such taxpayer to a bona fide office without the state shall be presumed to be properly so attributed provided that such presumption may be rebutted if the tax commission demonstrates that the greater portion of income producing activity related to the loan or financing lease did not occur without this state. (C) Receipts from lease transactions other than financing leases referred to in subparagraph (B) are located where the property subject to the lease is located. (D) (i) Interest, and fees and penalties in the nature of interest, from bank, credit, travel and entertainment card receivables are earnedwithin the state if the mailing address of the card holder in the records of the taxpayer is in the state; (ii) Service charges and fees from such cards are earned within the state if the mailing address of the card holder in the records of the taxpayer is in the state; and (iii) Receipts from merchant discounts are earned within the state if the merchant is located within the state. (E) The portion of total net gains and other income from trading activities (including but not limited to foreign exchange, options and financial futures), and from investment activities which is attributed within the state shall be ascertained by multiplying such total net gains and other income by a fraction the numerator of which is the average value of trading assets and investment assets attributable to this state and the denominator of which is the average value of all trading and investment assets. A trading asset or investment asset is attributable to this state if the greater portion of income producing activity related to the trading asset or investment asset occurred within the state. (F) Fees or charges from the issuance of letters of credit, travelers checks and money orders are earned within the state if such letters of credit, travelers checks or money orders are issued within the state. (G) Rules for receipts from certain services to investment companies. (1) For taxable years beginning on or after January first, two thousand one, 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 clause two of this subparagraph shall be deemed to arise from services performed within the state (such portion referred to herein as the New York portion). (2) The New York portion shall be the product of (i) the total of such receipts from the sale of such services and (ii) 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 (i) the number of shares in the investment company which are owned on the last day of the month by shareholders which are domiciled in the state by (ii) 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)(i) For purposes of this subparagraph the term "domicile", in the case of an individual shall have the meaning ascribed to it under article twenty-two of this chapter; an estate or trust is domiciled in the state if it is a resident estate or trust as defined in paragraph three of subsection (b) of section six hundred five of this chapter; a business entity is domiciled in the state if the location of the actual seat of management or control is in the state. 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. (ii) For purposes of this subparagraph, the term "investment company" shall mean 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 which 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 which is asserted toconstitute an investment company which ends within the taxable year of the taxpayer. (iii) For purposes of this subparagraph, 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. (iv) For purposes of this subparagraph, 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. (v) For purposes of this subparagraph, 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. (vi) For purposes of this subparagraph, 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. (H) All receipts from the performance of services not described above are earned within the state if the services are performed in the state. When a service is performed both within and without the state, the receipts shall be allocated within and without the state in accordance with rules and regulations of the tax commission. (I) All other receipts not described in subparagraphs (B) through (H) of this paragraph shall be attributable within and without the state in accordance with rules and regulations issued by the commissioner of taxation and finance. (3) The taxpayer shall ascertain the percentage which the average value of deposits maintained at branches within the state during the taxable year, bears to the average value of all the taxpayer's deposits maintained at branches within and without the state during the taxable year. (4) Each percentage computed pursuant to this subsection shall be computed on a cash or accrual basis according to the method of accounting used for the taxable year. The receipts percentage shall include only receipts which are included in alternative entire net income for the taxable year. The deposits and payroll percentages shall include only deposits and payroll the expenses of which are included in the computation of alternative entire net income for the taxable year. (5) For purposes of this section: (A) The term "bona fide office" means an office at which the taxpayer carries on its business in a regular and systematic manner and which is continuously maintained, occupied and used by employees of the taxpayer.(B) The term "branch" means a bona fide office which is used by the taxpayer on a regular and systematic basis to (i) approve loans (regardless of whether the approval of certain classes of loans requires review or final approval by another office of the taxpayer), (ii) accept loan repayments, (iii) disburse funds, and (iv) conduct one or more other functions of a banking business. (6) If it shall appear to the tax commission that the allocation percentage determined in subsection (b), (c), or (d) of this section does not properly reflect the activity, business, income or assets of a taxpayer within the state, the tax commission shall be authorized in its discretion to adjust it by (1) excluding one or more of the factors therein, (2) including one or more other factors, or (3) any other similar or different method calculated to effect a fair and proper allocation of the income or assets reasonably attributable to the state. (7) The tax commission from time to time shall publish all rulings of general public interest with respect to any application of the provisions of paragraph six of this subsection. (b) Allocation of entire net income. (1) If a taxpayer's entire net income is derived from business carried on both within and without the state, the portion thereof which is derived from business carried on within the state shall be determined by multiplying its entire net income by the income allocation percentage determined as follows: add the percentages ascertained under paragraphs one, two and three of subsection (a) of this section, plus, in the case of a taxpayer other than a New York S corporation, an additional percentage equal to the receipts percentage ascertained under paragraph two of such subsection and an additional percentage equal to the deposits percentage ascertained under paragraph three of such subsection, and divide the result by the number of percentages so added together. 1-a. Notwithstanding the provisions of paragraph one of this subsection, each banking corporation described in paragraph nine of subsection (a) of section fourteen hundred fifty-two of this article subject to the tax imposed by this article that substantially provides management, administrative or distribution services to an investment company, as such terms are defined in subparagraph (G) of paragraph two of subsection (a) of this section, shall determine the portion of its entire net income derived from business carried on within the state by multiplying such income by an income allocation percentage obtained as follows: (A) For taxable years beginning on or after January first, two thousand six and before the first day of January, two thousand seven, by adding the following percentages: (i) the product of seventeen percent and the percentage determined under paragraph one of subsection (a) of this section, (ii) the product of fifty percent and the percentage determined under paragraph two of subsection (a) of this section, and (iii) the product of thirty-three percent and the percentage determined under paragraph three of subsection (a) of this section. (B) For taxable years beginning on or after January first, two thousand seven and before the first day of January, two thousand eight, by adding the following percentages: (i) the product of ten percent and the percentage determined under paragraph one of subsection (a) of this section, (ii) the product of seventy percent and the percentage determined under paragraph two of subsection (a) of this section, and (iii) the product of twenty percent and the percentage determined under paragraph three of subsection (a) of this section.(C) For taxable years beginning on or after January first, two thousand eight, by the percentage ascertained under paragraph two of subsection (a) of this section. (2) (A) In lieu of the modification provided for in subsection (f) of section fourteen hundred fifty-three of this article, (relating to a modification for the adjusted eligible net income of an international banking facility), a taxpayer may, in the manner prescribed by the tax commission, elect to modify on an annual basis its income allocation percentage in the manner described in clauses (i), (ii) and (iii) below: (i) wages, salaries and other personal service compensation properly attributable to the production of eligible gross income of the tax- payer's international banking facility shall not be included in the computation of wages, salaries and other personal service compensation of employees within the state, (ii) receipts properly attributable to the production of eligible gross income of the taxpayer's international banking facility shall not be included in the computation of receipts within the state, and (iii) deposits from foreign persons which are properly attributable to the production of eligible gross income of the taxpayer's international banking facility shall not be included in the computation of deposits maintained at branches within the state. (B) For purposes of this paragraph, the term "eligible gross income" refers to such term as set out in subsection (f) of section fourteen hundred fifty-three of this article except that the term "foreign person" as defined in paragraph eight of such subsection (f) shall not include a foreign branch of the taxpayer and in no event shall transactions between the taxpayer's international banking facility and its foreign branches be considered. (c) Allocation of alternative entire net income. If a taxpayer's alternative entire net income is derived from business carried on both within and without the state, the portion thereof which is derived from business carried on within the state shall be determined by multiplying its alternative entire net income by the alternative entire net income allocation percentage determined as follows: (1) Recompute the payroll percentage under paragraph one of subsection (a) of this section without giving consideration to the phrase "eighty percent of," add to the resulting percentage the percentages ascertained under paragraphs two and three of such subsection, and divide the result by the number of percentages so added together. (2) When an election has been made pursuant to paragraph two of subsection (b) of this section (relating to international banking facilities) the taxpayer shall make the modifications described in such paragraph for purposes of its alternative entire net income allocation percentage. (3) For taxable years beginning on or after January first, two thousand six, each banking corporation described in paragraph nine of subsection (a) of section fourteen hundred fifty-two of this article subject to the tax imposed by this article that substantially provides management, administrative or distribution services to an investment company, as such terms are defined in subparagraph (G) of paragraph two of subsection (a) of this section, shall determine the portion of its alternative entire net income derived from business carried on within the state by multiplying such income by the percentage ascertained for the taxable year under paragraph one-a of subsection (b) of this section, except that in computing such percentage (A) for taxable years beginning before January first, two thousand eight, no consideration shall be given to the phrase "eighty percent of" in paragraph one of subsection (a) of this section, (B) for taxable years beginning beforeJanuary first, two thousand eight, when an election has been made pursuant to paragraph two of subsection (b) of this section (relating to an international banking facility) the taxpayer shall make the modifications described in such paragraph, and (C) for taxable years beginning on or after January first, two thousand eight, when an election has been made pursuant to paragraph two of subsection (b) of this section (relating to an international banking facility) the taxpayer shall make the modifications described in clause (ii) of subparagraph (A) of such paragraph. (d) Allocation of taxable assets. If the taxpayer's taxable assets are derived from business carried on both within and without the state, the portion thereof which is derived from business carried on within the state shall be determined by multiplying its taxable assets by an asset allocation percentage determined in the same manner as the income allocation percentage under subsection (b) of this section, determined as if the election provided for in paragraph two of such subsection has been made, except that the modifications described in clauses (i), (ii) and (iii) of subparagraph (A) of such paragraph shall not be made.