§ 3-04 — Allocation

§ 3-04 Allocation.

(a) General. (1) General rules for allocation. (Administrative Code, § 11-642) (i) (A) The banking corporation tax law provides for distinct allocations of entire net income, alternative entire net income and taxable assets. Entire net income is defined in 19 RCNY § 3-03(b)(2). Alternative entire net income is defined in 19 RCNY § 3-03(d)(1)(ii). Taxable assets are defined in 19 RCNY § 3-03(e)(2). A corporation subject to the banking corporation tax which has entire net income derived from business carried on both within and without New York City shall determine the portion of its entire net income which is derived from business carried on within New York City pursuant to 19 RCNY § 3-04(b). A corporation subject to the banking corporation tax which has alternative entire net income derived from business carried on both within and without New York City shall determine the portion of its alternative entire net income which is derived from business carried on within New York City pursuant to 19 RCNY § 3-04(c). A corporation subject to the banking corporation tax which has taxable assets derived from business carried on both within and without New York City shall determine the portion of its taxable assets derived from business carried on within New York City pursuant to 19 RCNY § 3-04(d). Except as provided in subparagraph (B) of this paragraph, a corporation subject to the banking corporation tax which does not have entire net income, alternative entire net income or taxable assets derived from business carried on without New York City must allocate such entire net income, alternative entire net income or taxable assets 100 percent to New York City. (B) A taxpayer which has established an IBF as defined in 19 RCNY § 3-01(b)(16) may, in lieu of modifying its entire net income by deducting therefrom the adjusted eligible net income of the IBF (in the case of a loss, such loss must be added to entire net income) elect on an annual basis, pursuant to 19 RCNY § 3-04(b)(3)(iii), to reflect the results of its IBF operations in its entire net income allocation percentage and its alternative entire net income allocation percentage. When the taxpayer makes such election, such taxpayer is entitled to allocate its entire net income and alternative entire net income within and without New York City pursuant to 19 RCNY § 3-04(b) and (c), respectively. (ii) When a corporation subject to the banking corporation tax carries on business within and without New York City for only part of the taxable year, it allocates entire net income, alternative entire net income or taxable assets within and without New York City for only that part of the taxable year during which it carries on such business within and without New York City. For allocation of entire net income for a short period, see 19 RCNY § 3-04(h)(1). For allocation of alternative entire net income for a short period, see 19 RCNY § 3-04(h)(2). For allocation of taxable assets for a short period, see 19 RCNY § 3-04(h)(3). (iii) For purposes of this Part, the phrase "business carried on" means "doing business" as defined in 19 RCNY § 3-01(b)(7), provided the income or expenses from such business are required to be included in the computation of the taxpayer's alternative entire net income. (2) Allocation on combined returns. (Administrative Code, § 11-646(f)) In the case of combined returns, allocation of entire net income, alternative entire net income and taxable assets is made on the basis of combined accounts from which all intercorporate transactions between corporations included in the combined return are eliminated. All corporations included in a combined return must make the same IBF election pursuant to 19 RCNY § 3-04(b)(3). (b) Allocation of entire net income. (1) General rules for allocation of entire net income. (Administrative Code, § 11-642) (i) When a taxpayer's entire net income, as defined in 19 RCNY § 3-03(b)(2), is derived from business carried on both within and without New York City, the portion thereof which is derived from business carried on within New York City is determined by multiplying entire net income by the entire net income allocation percentage. When a taxpayer is entitled to allocate entire net income pursuant to 19 RCNY § 3-04(a)(1)(i)(B), the portion of its entire net income which is attributable to New York City is determined by multiplying entire net income by the entire net income allocation percentage. The entire net income allocation percentage is determined by a formula consisting of a payroll factor, a receipts factor, a deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor. (ii) If allocation by the entire net income allocation percentage does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may permit or require the allocation of entire net income by a different method. A taxpayer may not use a method other than the entire net income allocation percentage for allocating its entire net income within and without New York City without the written consent of the Commissioner of Finance. (See: 19 RCNY § 3-04(h)(4) – Power of the Commissioner of Finance to adjust or change the method of allocation.) (2) Computation of entire net income allocation percentage. (Administrative Code, § 11-642) (i) The taxpayer's entire net income allocation percentage is computed by (A) adding the taxpayer's payroll factor, receipts factor, deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor, and (B) dividing the total by five. If the payroll factor is missing, the receipts factor, deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor are added together and the sum is divided by four. If the receipts factor is missing, the remaining three factors are added together and the sum is divided by three. If the deposits factor is missing, the remaining three factors are added together and the sum is divided by three. If all but one factor are missing, that factor is the entire net income allocation percentage. A factor is missing if both its numerator and denominator are zero but it is not missing merely because its numerator is zero. (ii) The taxpayer's payroll factor, receipts factor and deposits factor are expressed as percentages and are determined as follows. (A) The payroll factor is computed by dividing 80 percent of the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within New York City by the total wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within and without New York City. (See: 19 RCNY § 3-04(e).) (B) The receipts factor is computed by dividing the amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within New York City by the total amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within and without New York City. (See: 19 RCNY § 3-04(f).) (C) The deposits factor is computed by dividing the average value of deposits maintained at branches of the taxpayer within New York City by the average value of deposits maintained at branches of the taxpayer within and without New York City. (See: 19 RCNY § 3-04(g).) (iii) The receipts factor includes only receipts which are included in the computation of alternative entire net income (as defined in 19 RCNY § 3-03(d)(1)(ii)) for the taxable year. The payroll factor includes only the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, the expenses of which are included in the computation of alternative entire net income for the taxable year. The deposits factor includes only deposits the expenses of which are included in the computation of alternative entire net income for the taxable year. Where the taxpayer includes in its Federal income tax return interbranch transactions between the taxpayer's places of business, such interbranch receipts, payroll and deposits are not included in either the numerators or denominators of the factors in computing the entire net income allocation percentage. For taxpayers that have an IBF, see 19 RCNY § 3-04(b)(3) for special allocation rules. (iv) If it appears that the entire net income allocation percentage computed on the basis of all or any of the payroll, receipts or deposits factors does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance may adjust the entire net income allocation percentage as set forth in 19 RCNY § 3-04(h)(4). (v) For computation of the entire net income allocation percentage when a taxpayer is subject to tax for a period less than its taxable period for Federal income tax purposes, see 19 RCNY § 3-04(h)(1) – Allocation of entire net income for a short period. (2-a) Income allocation percentage where an allocation factor is missing for taxable years beginning in 2009 and thereafter but before 2018. (i) In the event that any of the percentages to be determined under paragraphs (1), (2) or (3) of subdivision (a) of § 11-642 of the Administrative Code cannot be determined because the taxpayer has either no payroll, or no receipts, or no deposits within or without the City, then the computation to be made under paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code (applicable to taxable years beginning in 2009 and thereafter but before 2018) shall be made by taking the sum of the products that are determined under such paragraph (1-a) for the factors that are present, and dividing that sum by the sum of the weight factors that apply to each of the present factors in the calculation made under such paragraph (1-a). This amount is then rounded to four decimal places. (An allocation factor is not missing merely because its numerator is zero, but it is missing if both its numerator and its denominator are zero.) (ii) Weight factor defined. For purposes of this paragraph, "weight factor" is the percentage used in the allocation computation in paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code, by which the percentage derived from subdivision (a) of § 11-642 of the Administrative Code is multiplied in such allocation computation. For example, in clause (i) of subparagraph (A) of paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code, the weight factor is 18%; in clause (i) of subparagraph (I) of paragraph (1-a) of subdivision (b) of § 11-642 of the Administrative Code, the weight factor is 2%. (iii) Example: For the tax year 2009, a taxpayer has no employees either within or without the City. The receipts factor percentage determined under paragraph (2) of subdivision (a) of § 11-642 of the Administrative Code is 10%, and the deposit factor percentage determined under paragraph (3) of subdivision (a) of § 11-642 of the Administrative Code is 25%. As the payroll factor is missing, the allocation percentage may be computed by taking the sum of (A) the product of 46% and 10%, and (B) the product of 36% and 25%, which is .046 + .09 = .136, then dividing that sum by the sum of the weight factors for receipts and deposits, which are .46 and .36, respectively: .136 .46 +.36 = .136 .82 = .16585, rounded to four decimal places = .1659 (3) IBF entire net income allocation rules. (Administrative Code, § 11-642) (i) A taxpayer which has established an IBF, as defined in 19 RCNY § 3-01(b)(16), is entitled, pursuant to 19 RCNY § 3-03(c), to modify its entire net income by deducting therefrom the adjusted eligible net income of the IBF. (In the case of a loss, such loss must be added to entire net income.) Where the taxpayer makes that modification and the taxpayer is entitled to allocate its entire net income by the entire net income allocation percentage pursuant to 19 RCNY § 3-04(a)(1)(i)(A), such taxpayer must (A) exclude from both the numerator and denominator of the payroll and deposits factors the wages, salaries and other personal service compensation and deposits the expenses of which are attributable as provided in 19 RCNY § 3-03(c) to the production of eligible gross income and (B) exclude from both the numerator and denominator of the receipts factor those receipts which are attributable as provided in 19 RCNY § 3-03(c) to the production of eligible gross income. Such method of treating the results of the IBF operations is referred to in this paragraph as the "IBF modification." (ii) When the taxpayer elects, pursuant to subparagraph (iii) of this paragraph, to reflect the results of its IBF operations in its entire net income allocation percentage in lieu of the IBF modification, such allocation percentage is adjusted by (A) including in the denominator of the payroll factor, wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, but excluding from the numerator of the payroll factor, wages, salaries and other personal service compensation of the taxpayer's employees, the expenses of which are attributable, as provided in 19 RCNY § 3-03(c), to the production of eligible gross income, (B) including in the denominator but excluding from the numerator of the receipts factors those receipts which are attributable, as provided in 19 RCNY § 3-03(c), to the production of eligible gross income and (C) including in the denominator but excluding from the numerator of the deposits factor, deposits the expenses of which are attributable, as provided in 19 RCNY § 3-03(c), to the production of eligible gross income. Such election is referred to in this section as the "IBF formula allocation method." (iii) The election to use the IBF formula allocation method for a taxable year is made with the filing of the return for such taxable year. Such election may be made or changed with the filing of an amended return for such taxable year. When a combined return is filed, the IBF election is made by the parent corporation included in such combined return and is binding on all corporations included in such combined return. Where the parent corporation is not included in the combined return, the IBF election shall be made for the corporations included in the combined return by their common parent and such election is binding on all corporations included in such return. (iv) As used in this paragraph, the term "eligible gross income" has the same meaning as is given to that term in 19 RCNY § 3-03(c)(4), except that for purposes of subparagraph (ii) of this paragraph, the term "foreign person," as defined in 19 RCNY § 3-03(c)(2)(vii), shall not include a foreign branch of the taxpayer, and no consideration shall be given to any transaction between the taxpayer's foreign branches and its IBF. (4) Allocation of entire net income on combined returns. (Administrative Code, § 11-646(f)) In the case of combined returns, the factors comprising the entire net income allocation percentage are computed as though the corporations included in the return were one corporation. Intercorporate dividends and all other intercorporate transactions, including intercorporate receipts between the corporations included in the combined return, are eliminated. If one corporation included in the combined return makes the IBF election pursuant to 19 RCNY § 3-04(b)(3), all corporations included in the combined return must make the same election. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b). (c) Allocation of alternative entire net income. (1) General rules for allocation of alternative entire net income. (Administrative Code, § 11-642) (i) When a taxpayer's alternative entire net income, as defined in 19 RCNY § 3-03(d)(1)(ii), is derived from business carried on both within and without New York City, the portion thereof which is derived from business carried on within New York City is determined by multiplying alternative entire net income by the alternative entire net income allocation percentage. When a taxpayer is entitled to allocate alternative entire net income pursuant to 19 RCNY § 3-04(a)(1)(i)(B), the portion of its alternative entire net income which is attributable to New York City is determined by multiplying alternative entire net income by the alternative entire net income allocation percentage. The alternative entire net income allocation percentage is determined by a formula consisting of a payroll factor, a receipts factor and a deposits factor. (ii) If allocation by the alternative entire net income allocation percentage does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may permit or require the allocation of alternative entire net income by a different method. A taxpayer may not use a method other than the alternative entire net income allocation percentage for allocating its alternative entire net income within and without New York City without the written consent of the Commissioner of Finance. (See: 19 RCNY § 3-04(h)(4) – Power of the Commissioner of Finance to adjust or change the method of allocation.) (2) Computation of alternative entire net income allocation percentage. (Administrative Code, § 11-642) (i) The alternative entire net income allocation percentage is computed by (A) adding the taxpayer's payroll factor, receipts factor and deposits factor, and (B) dividing the total by three. If one of the factors is missing, the two remaining factors are added together and the sum is divided by two. If two of the factors are missing, the remaining factor is the alternative entire net income allocation percentage. A factor is missing if both its numerator and denominator are zero, but is not missing merely because its numerator is zero. (ii) The taxpayer's payroll factor, receipts factor and deposits factor are expressed as percentages and are determined as follows. (A) The payroll factor is computed by dividing 100 percent of the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within New York City by the total wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within and without New York City. (See: 19 RCNY § 3-04(e).) (B) The receipts factor is computed by dividing the amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within New York City by the total amount of receipts of the taxpayers from loans, financing leases and all other business receipts earned within and without New York City. (See: 19 RCNY § 3-04(f).) (C) The deposits factor is computed by dividing the average value of deposits maintained at branches of the taxpayer within New York City by the average value of deposits maintained at branches of the taxpayer within and without New York City. (See: 19 RCNY § 3-04(g).) (iii) The receipts factor includes only receipts which are included in the computation of alternative entire net income for the taxable year. The payroll factor includes only the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, the expenses of which are included in the computation of alternative entire net income for the taxable year. The deposits factor includes only deposits the expenses of which are included in the computation of alternative entire net income for the taxable year. Where the taxpayer includes in its Federal income tax return interbranch transactions between the taxpayer's places of business, such interbranch receipts, payroll and deposits are not included in either the numerators or denominators of the factors in computing the alternative entire net income allocation percentage. For taxpayers that have an IBF, see 19 RCNY § 3-04(c)(3) for special allocation rules. (iv) If it appears that the alternative entire net income allocation percentage computed on the basis of all or any of the payroll, receipts or deposits factor does not properly reflect the activity, business or income of the taxpayer in New York City, the Commissioner of Finance may adjust the alternative entire net income allocation percentage as set forth in 19 RCNY § 3-04(h)(4). (v) For computation of the alternative entire net income allocation percentage when a taxpayer is subject to tax for a period less than its taxable period for Federal income tax purposes, see 19 RCNY § 3-04(h)(2) – Allocation of alternative entire net income for a short period. (3) IBF alternative entire net income allocation rules. (Administrative Code, § 11-642) A taxpayer which has established an IBF, as described in 19 RCNY § 3-03(c), and which has elected to use the IBF formula allocation method pursuant to 19 RCNY § 3-04(b)(3) must make the same election for purposes of allocating alternative entire net income by the alternative entire net income allocation percentage. If, pursuant to 19 RCNY § 3-04(b)(3), a taxpayer utilizes the IBF modification, the taxpayer must utilize the IBF modification for purposes of computing alternative entire net income and the alternative entire net income allocation percentage. (4) Allocation of Alternative Entire Net Income on Combined Returns. (Administrative Code, § 11-646(f)) In the case of combined returns, the factors comprising the alternative entire net income allocation percentage are computed as though the corporations included in the return were one corporation. Intercorporate dividends and all other intercorporate transactions including intercorporate receipts between the corporations included in the combined return are eliminated. If one corporation included in the combined return makes the IBF election pursuant to 19 RCNY § 3-04(b)(3), all corporations included in the combined return must make the same election. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b). (d) Allocation of taxable assets. (1) General rules for allocation of taxable assets. (Administrative Code, § 11-642) (i) When a taxpayer's taxable assets, as defined in 19 RCNY § 3-03(e)(2), are derived from business carried on both within and without New York City, the portion thereof which is derived from business carried on within New York City is determined by multiplying taxable assets by the asset allocation percentage. The asset allocation percentage is determined by a formula consisting of a payroll factor, a receipts factor, a deposits factor, an additional factor equal to the receipts factor, and an additional factor equal to the deposits factor. (ii) If allocation by the asset allocation percentage does not properly reflect the activity, business or assets of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may permit or require the allocation of taxable assets within and without New York City by a different method. A taxpayer may not use a method other than the asset allocation percentage for allocating its taxable assets within and without New York City without the written consent of the Commissioner of Finance. (See: 19 RCNY § 3-04(h)(4) – Power of the Commissioner of Finance to Adjust or Change the Method of Allocation.) (2) Computation of asset allocation percentage. (Administrative Code, § 11-642) (i) The taxpayer's asset allocation percentage is computed by (A) adding the taxpayer's payroll factor, receipts factor, deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor, and (B) dividing the total by five. If the payroll factor is missing, the receipts factor and deposits factor, an additional factor equal to the receipts factor and an additional factor equal to the deposits factor are added together and the sum is divided by four. If the receipts factor is missing, the remaining three factors are added together and the sum is divided by three. If the deposits factor is missing, the remaining three factors are added together and the sum is divided by three. If all but one factor are missing, the remaining factor is the asset allocation percentage. A percentage is missing if both its numerator and denominator are zero but it is not missing merely because its numerator is zero. (ii) The taxpayer's payroll factor, receipts factor and deposits factor are expressed as percentages and are determined as follows. (A) The payroll factor is computed by dividing 80 percent of the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within New York City by the total wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within and without New York City. (See: 19 RCNY § 3-04(e).) (B) The receipts factor is computed by dividing the amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within New York City by the total amount of receipts of the taxpayer from loans, financing leases and all other business receipts earned within and without New York City. (See: 19 RCNY § 3-04(f).) (C) The deposits factor is computed by dividing the average value of deposits maintained at branches of the taxpayer within New York City by the average value of deposits maintained at branches of the taxpayer within and without New York City. (See: 19 RCNY § 3-04(g).) (iii) (A) Both the numerator and denominator of the receipts factor consist of (a) receipts that are included in the computation of alternative entire net income (as defined in 19 RCNY § 3-03(d)(1)(ii)) for the taxable year and (b) receipts that are attributable to the production of eligible gross income of the IBF for the taxable year, regardless of whether the IBF election is made pursuant to 19 RCNY § 3-04(b)(3). (B) Both the numerator and denominator of the payroll factor consist of (a) wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, the expenses of which are included in the computation of alternative entire net income for the taxable year, and (b) wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, the expenses of which are attributable to the production of eligible gross income of the IBF for the taxable year, regardless of whether the IBF election is made pursuant to 19 RCNY § 3-04(b)(3). (C) Both the numerator and the denominator of the deposits factor consist of (a) deposits the expenses of which are included in the computation of alternative entire net income for the taxable year, and (b) deposits the expenses of which are attributable to the production of eligible gross income of the IBF for the taxable year, regardless of whether the IBF election is made pursuant to 19 RCNY § 3-04(b)(3). (D) As used in this subdivision, the term "eligible gross income" has the same meaning as is given to that term in 19 RCNY § 3-03(c)(4), except that for the purposes of this subdivision, the term "foreign person," as defined in 19 RCNY § 3-03(c)(2)(vii), shall not include a foreign branch of the taxpayer, and no consideration shall be given to any transactions between the taxpayer's foreign branches and its IBF. (E) Where the taxpayer includes in its Federal income tax return interbranch transactions between the taxpayer's places of business, such interbranch receipts, payroll and deposits are not included in either the numerators or denominators of the factors in computing the asset allocation percentage. (iv) If it appears that the asset allocation percentage computed on the basis of all or any of the payroll, receipts or deposits factors does not properly reflect the activity, business or assets of the taxpayer in New York City, the Commissioner of Finance may adjust the asset allocation percentage as set forth in 19 RCNY § 3-04(h)(4). (v) For computation of the asset allocation percentage when a taxpayer is subject to tax for a period less than its taxable period for Federal income tax purposes, see 19 RCNY § 3-04(h)(3) – Allocation of taxable assets for a short period. (3) Allocation of taxable assets on combined returns. (Administrative Code, § 11-646(f)) In the case of combined returns, the factors of the asset allocation percentage are computed as though the corporations included in the return were one corporation. Intercorporate dividends and all other intercorporate transactions including intercorporate receipts between the corporations included in the combined return are eliminated. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b). (e) Payroll factor. (1) General. (Administrative Code, § 11-642) (i) The percentage of the taxpayer's payroll allocated to New York City is determined by dividing 80 percent (100 percent when computing the alternative entire net income allocation percentage) of the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within New York City during the period the taxpayer is entitled to allocate by the total amount of wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, both within and without New York City during the period the taxpayer is entitled to allocate. (ii) The term "employees within New York City" includes all employees regularly connected with or working out of an office of the taxpayer within New York City, irrespective of where the services of such employees were performed. However, if the taxpayer establishes to the satisfaction of the Commissioner of Finance or the Commissioner of Finance establishes on his own motion that (A) a substantial part of the taxpayer's payroll was paid to employees attached to an office in New York City who performed a substantial part of their services outside New York City or a substantial part of the taxpayer's payroll was paid to employees attached to an office outside New York City who performed a substantial part of their services within New York City, and (B) establishes that the computation of the payroll factor according to the general rule stated in this subparagraph would not properly reflect the amount of the taxpayer's business carried on within New York City by its employees, then the Commissioner of Finance may permit or require the payroll factor to be computed on the basis of the amount of compensation paid for services performed within New York City. The compensation paid for services performed within New York City will be deemed to be: (a) in the case of an employee whose compensation depended directly on the volume of business secured by him, the amount received by him for the business attributable to his efforts within New York City; (b) in the case of an employee whose compensation depended on other results achieved, the proportion of the total compensation which the value of his services within New York City bears to the value of all his services; and (c) in the case of an employee compensated on a time basis, the proportion of the total amount received by him which the working time within New York City bears to the total working time. (iii) Wages, salaries and other personal service compensation include all amounts paid for services to the taxpayer and deducted by the taxpayer in computing its alternative entire net income, but do not include amounts paid by the taxpayer which do not have the element of compensation for personal services actually rendered or to be rendered. (iv) Wages, salaries and other personal service compensation are computed on a cash or accrual basis, in accordance with the method of accounting used by the taxpayer for the taxable year in computing alternative entire net income. (2) Definition of employee. (i) Employees whose wages, salaries and other personal service compensation are included in the computation of the payroll factor include every individual, except general executive officers, where the relationship existing between the taxpayer and the individual is that of employer and employee. (ii) Generally, the relationship of employer and employee exists when the taxpayer has the right to control and direct the individual not only as to the result to be accomplished by him but also as to the means by which such result is to be accomplished. If the relationship of employer and employee exists, the designation or description of the relationship, and the measure, method or designation of the compensation is immaterial. (iii) Compensation paid to directors for acting as such is not included in computing the payroll factor. (3) General executive officers. (i) A general executive officer must be an officer of the corporation charged with and performing general executive duties of the corporation and elected by the shareholders, elected or appointed by the board of directors, or if initially appointed by another officer such appointment must be ratified by the board of directors. If the place of incorporation is other than New York State, the officer of the corporation must be elected or appointed in accordance with the laws of the place of incorporation. (ii) A general executive officer is an appointed or elected officer of the corporation having company-wide authority with respect to his assigned functions or duties or is responsible for an entire division of the company. Any person who has merely been designated as an officer but who is not an appointed or elected officer, as described in subparagraph (i) of this paragraph, is not a general executive officer. (iii) Personal service compensation paid to a general executive officer of the taxpayer for acting as such is not included in the computation of the payroll factor. (f) Receipts factor. (1) General. (Administrative Code, § 11-642) (i) The percentage of the taxpayer's receipts allocated to New York City is determined by dividing 100 percent of the taxpayer's receipts from loans (including the taxpayer's portion of a participation in a loan) and financing leases and all other business receipts earned within New York City during the period the taxpayer is entitled to allocate by the total amount of the taxpayer's receipts from loans (including the taxpayer's portion of a participation in a loan) and financing leases and all other business receipts within and without New York City during the period the taxpayer is entitled to allocate. (ii) Receipts are computed on a cash or accrual basis in accordance with the method of accounting used by the taxpayer for the taxable year in computing its alternative entire net income. (2) Income from loans and financing leases. (Administrative Code, § 11-642) (i) Gross income from a loan or financing lease is allocated to New York City if such income is attributable to a loan or financing lease which is located in New York City. A loan or financing lease is located where the greater portion of income producing activity relating to the loan or financing lease occurred, provided however: (A) In the case of a taxpayer described in subparagraphs (i), (ii), (iii), (iv), (v), (vi), or (ix) of 19 RCNY § 3-01(b)(5), a loan or financing lease that is attributed by such taxpayer to a branch without New York City is presumed to be properly attributed provided that such presumption may be rebutted if the Commissioner of Finance demonstrates that the greater portion of income producing activity relating to the loan or financing lease did not occur at such branch. Where such presumption has been rebutted by the Commissioner of Finance, the loan or financing lease shall be presumed to be within New York City if the taxpayer had a branch within New York City at the time the loan or financing lease was made. However, the taxpayer may rebut such presumption by demonstrating that the greater portion of income producing activity relating to the loan or financing lease did not occur within New York City. For purposes of this section, a loan or financing lease is made when such loan or financing lease is approved. (B) In the case of a taxpayer described in subparagraphs (i), (ii), (iii), (iv), (v), (vi), or (ix) of 19 RCNY § 3-01(b)(5) which records a loan or financing lease on the books of a place without New York City 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 New York City if the taxpayer had a branch within New York City 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 New York City. A loan or financing lease is made when such loan or financing lease is approved. (C) In the case of a taxpayer which is a bank holding company or a taxpayer described in subparagraphs (vii) or (x) of 19 RCNY § 3-01(b)(5), a loan or financing lease attributed by such taxpayer to a bona fide office without New York City is presumed to be properly attributed provided that such presumption may be rebutted if the Commissioner of Finance demonstrates that the greater portion of income producing activity relating to the loan or financing lease did not occur without New York City. (ii) A) The term "loan" means any loan, whether the transaction is represented by a promissory note, security, acknowledgement of advance, due bill or any other form of credit transaction, if the related asset is properly recorded in the financial accounts of the taxpayer. Loans include the taxpayer's portion of a participation in a loan. (B) The term "financing lease" means a lease where the taxpayer is not treated as the owner of the property for purposes of computing alternative entire net income. (C) The phrase "gross income from a loan or financing lease" includes interest and fees, such as arrangement, commitment and management fees but does not include the repayments of principal. (iii) To determine where the greater portion of income producing activity relating to a loan or financing lease occurred, consideration is given to such activities as the solicitation, investigation, negotiation, final approval and administration of the loan or financing lease. Each loan or financing lease has its own characteristics. In some cases, one or more of the activities to be considered may not be present. The significance to be accorded to each activity depends upon the facts in each case. (iv) The terms "solicitation,""investigation," "negotiation,""final approval" and "administration" are defined as follows: Administration. Administration is the process of managing the account. This process includes bookkeeping, collecting the payments, corresponding with the customer, reporting to management regarding the status of the agreement and proceeding against the borrower if the borrower is in default. Such activity is located at the office which oversees this activity. Final approval. Final approval is the act of employees or the board of directors of the taxpayer which legally binds the taxpayer to perform under an agreement. Such activity is located at the office which the taxpayer's employees are regularly connected with, regardless of where the services of such employees were actually performed. If the board of directors makes such final approval, such activity occurred where the actual seat of management and control of the taxpayer is located. Investigation. Investigation is the procedure whereby employees of the taxpayer determine the credit-worthiness of the customer as well as the degree of risk involved in making a particular agreement. Such activity is located at the office which the taxpayer's employees are regularly connected with, regardless of where the services of such employees were actually performed. Negotiation. Negotiation is the procedure whereby employees of the taxpayer and its customer determine the terms of the agreement (e.g., the amount, duration, interest rate, frequency of repayment, currency denomination and security required). Such activity is located at the office which the taxpayer's employees are regularly connected with, regardless of where the services of such employees were actually performed. Solicitation. Solicitation is either active or passive. (a) Active solicitation occurs when an employee of the taxpayer initiates the contact with the customer. Such activity is located at the office which the taxpayer's employee is regularly connected with, regardless of where the services of such employee were actually performed. (b) Passive solicitation occurs when the customer initiates the contact with the taxpayer. If the customer's initial contact was not at an office of the taxpayer, the office, if any, where the passive solicitation occurred is determined by the facts in each case. (3) Receipts from leases and rents. (Administrative Code, § 11-642) (i) Receipts from real property and tangible personal property leased or rented from the taxpayer are allocated to New York City if such property is located in New York City. Receipts from rentals include all amounts received by the taxpayer for the use of or occupation of property, whether or not such property is owned by the taxpayer. Gross receipts received from real property and tangible personal property which is subleased must be included in the receipts factor. (ii) For the treatment of income from financing lease, see 19 RCNY § 3-04(f)(2). (4) Income from bank, credit, travel, entertainment and other card operations. (Administrative Code, § 11-642) (i) Interest, fees in the nature of interest and penalties in the nature of interest from a bank, credit, travel, entertainment and other card receivables are allocated to New York City if the card holder's domicile is in New York City. In the case of an individual, domicile, in general, is the place where such individual intends his permanent home to be. Such permanent home is the place to which a person intends to return whenever he may be absent. In all other cases, domicile is the place where the actual seat of management or control is located. It shall be presumed that the domicile of the cardholder is its billing address. (ii) Service charges and fees from bank, credit, travel, entertainment and other cards are allocated to New York City if the card is serviced within New York City. A card is serviced at the place where the records pertaining to such account are kept and managed. (iii) Receipts from merchant discounts are allocated to New York City if the merchant is located within New York City. In the case of a merchant with locations both within and without New York City, only receipts from merchant discounts attributable to sales made from locations within New York City are allocated to New York City. It shall be presumed that the location of the merchant is the address of the merchant shown on the invoice submitted by the merchant to the taxpayer. (5) Income from trading activities and investment activities. (Administrative Code, § 11-642) (i) Income from trading activities and investment activities shall be allocated to New York City, if the greater portion of income producing activity relating to such trading and investment activities occurred within New York City. When determining the income from trading and investment activities, the taxpayer must net the gains with the losses from such activities that are included in the computation of Federal taxable income. A net loss is deemed to be zero. (ii) Trading activities include, but are not limited to, foreign exchange transactions, the purchase and sale of options and financial futures, and in appropriate cases, interbank fund transfers. (iii) Except as provided in subparagraph (iv) of this paragraph, to determine where the greater portion of income producing activity relating to trading activities or investment activities occurred, consideration is given to such factors as: (A) where the particular policies of the taxpayer regarding the trading or investment activities are established and guidelines set up; (B) where the day to day decisions regarding each transaction relating to the trading or investment activities are made; and (C) where the equipment and other support activities relating to such trading or investment activities are located. The significance to be accorded to each factor depends upon the facts in each case. Consideration shall also be given to where the general policies of the taxpayer regarding the trading or investment activities are established and the guidelines set up. However, this shall not be accorded as much significance as any of the factors enumerated in subparagraphs (iii)(A), (iii)(B), or (iii)(C) of this paragraph. (iv) Securities owned by a bank but held by a public official or pledged to secure public funds or trust funds deposited in such bank shall be allocated to New York City if such secured deposit is maintained in New York City. (See: 19 RCNY § 3-04(g)(3) for definition of maintained.) (6) Fees or charges from letters of credit, traveler's checks and money orders. (Administrative Code, § 11-642) Fees or charges from the issuance of letters of credit, traveler's checks and money orders are allocated to New York City if such letters of credit, traveler's checks or money orders are issued within New York City. (7) Receipts for services performed. (Administrative Code, § 11-642) (i) Receipts for services performed by the taxpayer's employees regularly connected with or working out of a New York City office of the taxpayer are allocated to New York City if such services are performed within New York City. (ii) When allocating receipts for services performed, it is immaterial where such receipts are payable or where they are actually received. (iii) Where services are performed both within and without New York City, the portion of the receipt attributable to services performed within New York City is determined on the basis of the relative value of, or amount of time spent in performance of, such services within New York City, or by some other reasonable method. Full details must be submitted with the taxpayer's return. (8) Receipts of royalties. (Administrative Code, § 11-642) Receipts of royalties from the use of patents, copyrights and trademarks are allocated to New York City if the taxpayer's actual seat of management or control is located in New York City. Royalties include all amounts received by the taxpayer for the use of patents, copyrights or trademarks, whether or not such patents, copyrights or trademarks were issued to the tax- payer. (9) Other business receipts. (Administrative Code, § 11-642) (i) Income from securities used to maintain reserves against deposits to meet Federal and state reserve requirements shall be allocated to New York City based upon the ratio that total deposits in New York City bears to total deposits everywhere. (See: 19 RCNY § 3-04(g)(2) for definition of deposit.) (ii) All other business receipts earned by the taxpayer in New York City are allocated to New York City. (iii) A receipt from the sale of a capital asset is not a business receipt and is not included in the receipts factor. For example, the receipt from the sale of a capital asset as scrap or at a gain is not included in the receipts factor. (10) Receipts factor on combined returns. The receipts factor on a combined return is computed as though the corporations included in the return were one corporation. All intercorporate receipts between the corporations included in the combined return are eliminated in computing the combined receipts factor. As to when combined returns will be required or permitted, see 19 RCNY § 3-05(b). (g) Deposits factor. (1) General. (Administrative Code, § 11-642) The percentage of the taxpayer's deposits allocated to New York City is determined by dividing the average value of deposits maintained at branches of the taxpayer within New York City during the period the taxpayer is entitled to allocate by the average value of all deposits maintained at branches of the taxpayer both within and without New York City during the period the taxpayer is entitled to allocate. (2) Definition of deposit. (Administrative Code, § 11-642) For purposes of this subdivision the term "deposit" means: (i) the unpaid balance of money or its equivalent received or held by a bank in the usual course of business and for which it has given or is obligated to give credit, either conditionally or unconditionally, to a commercial, checking, savings, time, or thrift account, or which is evidenced by its certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar name, or a check or draft drawn against a deposit account and certified by the bank, or a letter of credit or a traveler's check on which the bank is primarily liable; provided, that, without limiting the generality of the term "money or its equivalent," any such account or instrument must be regarded as evidencing the receipt of the equivalent of money when credited or issued in exchange for checks or drafts or for a promissory note upon which the person obtaining any such credit or instrument is primarily or secondarily liable, or for a charge against a deposit account, or in settlement of checks, drafts, or other instruments forwarded to such bank for collection; (ii) trust funds received or held by such bank, whether held in the trust department or held or deposited in any other department of such bank; (iii) money received or held by a bank, or the credit given for money or its equivalent received or held by a bank, in the usual course of business for a special or specific purpose, regardless of the legal relationship thereby established, including without being limited to, escrow funds, funds held as security for an obligation due to the bank or others (including funds held as dealers' reserves) or for securities loaned by the bank, funds deposited by a debtor to meet maturing obligations, funds deposited as advance payment on subscriptions to United States Government securities, funds held for distribution or purchase of securities, funds held to meet its acceptances or letters of credit, and withheld taxes; provided, that there shall not be included funds which are received by the bank for immediate application to the reduction of an indebtedness to the receiving bank, or under condition that the receipt thereof immediately reduces or extinguishes such an indebtedness; (iv) outstanding drafts (including advice or authorization to charge bank's balance in another bank), cashier's checks, money orders, or other officer's checks issued in the usual course of business for any purpose, but not including those issued in payment for services, dividends, or purchase or other costs or expenses of the bank itself. (3) Definition of maintained. (Administrative Code, § 11-642) (i) For purposes of this subdivision, a deposit is "maintained" at the branch of the taxpayer at which the deposit is properly booked. (A) A deposit, the value of which at all times during the taxable year was less than $100,000, that is booked by a taxpayer at a branch without New York City is presumed to be properly booked, provided that such presumption may be rebutted if the Commissioner of Finance demonstrates that the greater portion of contact relating to the deposit did not occur at such branch. Where such presumption has been rebutted by the Commissioner of Finance, the deposit shall be presumed to be maintained within New York City if the taxpayer had a branch within New York City at the time the deposit was booked. However, the taxpayer may rebut such presumption by demonstrating that the greater portion of contact relating to the deposit did occur at a branch outside New York City. (B) A deposit, the value of which at any time during the taxable year was $100,000 or more, is considered to be properly booked at the branch with which it has a greater portion of contact. (ii) In determining whether a deposit has a greater portion of contact with a particular branch, consideration is given to such activities as: (A) Whether the deposit account was opened at or transferred to that branch by or at the direction of the depositor or by a broker of deposits, regardless of where subsequent deposits or withdrawals may be made; (B) whether employees regularly connected with that branch are primarily responsible for servicing the depositor's general banking and other financial needs; (C) whether the deposit was solicited by an employee regularly connected with that branch, regardless of where such deposit was actually solicited; (D) whether the terms governing the deposit were negotiated by employees regularly connected with that branch regardless of where the negotiations were actually conducted; and (E) whether essential records relating to the deposit are kept at that branch and whether the deposit is serviced at that branch. (iii) In some cases, one or more of the activities considered in subparagraph (ii) of this paragraph may not be present. The significance to be accorded to each activity depends upon the facts in each case. (iv) A deposit that is maintained at a bona fide office of the taxpayer which is not a branch is excluded from both the numerator and denominator of the deposits factor. (4) Average value of deposits. (Administrative Code, § 11-642) The value of deposits maintained at branches of the taxpayer is the total of the amounts credited to depositors, including the amount of any interest so credited. The average value of deposits is to be computed on a daily basis. However, if the taxpayer's usual accounting practices do not permit the computation of average value on a daily basis, a computation on a weekly basis will be permitted. The Commissioner of Finance will not permit the computation of average value of deposits on a basis less frequent than weekly, unless the taxpayer demonstrates that requiring it to use a weekly computation would produce an undue hardship. Any method of determining average value of deposits which is adopted by the taxpayer on any return may not be changed on any subsequent return without the prior written consent of the Commissioner of Finance. (h) Other rules. (1) Allocation of entire net income for a short period. (Administrative Code, §§ 11-641(k) and 11-642) (i) A taxpayer which is entitled to allocate entire net income within and without New York City for only part of a taxable year allocates its entire net income for only that part of the taxable year during which it is entitled to allocate. (See: 19 RCNY § 3-04(b)(1) – General Rules for Allocation of Entire Net Income.) A taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes computes its prorated entire net income pursuant to 19 RCNY § 3-03(b)(8) and computes its entire net income allocation percentage only for that part of the taxable year during which it is entitled to allocate. (ii) (A) The entire net income allocation percentage is applied to entire net income which has been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes, the entire net income allocation percentage is applied to entire net income which (a) has been prorated pursuant to 19 RCNY § 3-03(b)(8), for the period during which the taxpayer is subject to tax; and (b) has been prorated for the period during which the taxpayer is entitled to allocate. (B) Entire net income (or prorated entire net income) is prorated for the period the taxpayer is entitled to allocate and is computed as follows: (a) divide entire net income (or prorated entire net income) by the number of calendar months or major parts thereof covered by the taxpayer's New York City return; and (b) multiply the amount determined in subparagraph (ii)(A) of this paragraph by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate. (C) After entire net income (or prorated entire net income) has been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of entire net income (or prorated entire net income) will be allocated at either 100 percent or zero percent depending on whether the taxpayer's business was conducted solely within or solely without New York City. (iii) If, in the opinion of the Commissioner of Finance, the method described in this section for prorating entire net income (or prorated entire net income) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxpayer's entire net income (or prorated entire net income) for the period during which it is entitled to allocate and for the remaining period, the Commissioner of Finance may determine entire net income solely on the basis of the entire net income properly recorded on the taxpayer's books and records during such periods. (iv) The short period entire net income allocation percentage is determined in the same manner as the entire net income allocation percentage described in 19 RCNY § 3-04(b)(2), except that (A) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate; (B) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and (C) the deposits factor is computed only for the period for which the taxpayer is entitled to allocate. A taxpayer must submit complete details with its return showing how it computed each factor of the short period entire net income allocation percentage. (v) The following are examples illustrating the computation of the entire net income allocation percentage for a short period and the application of this percentage to entire net income: Example 1: A taxpayer which was subject to tax for all of 1985 reports on a calendar year basis and had entire net income of $72,000 for such taxable year 1985. On June 13, 1985 the taxpayer began doing business both within and without New York City which entitled it to allocate for the period June 13, 1985 through December 31, 1985. For the short period June 13, 1985 through December 31, 1985 (7 months), the taxpayer had the following: New York City Total Payroll $60,800* $80,000 Receipts $777,600* $960,000 Deposits $1,080,000* $1,350,000 * 80% of the New York City amount The taxpayer's short period entire net income allocation percentage is computed as follows: Payroll factor [($60,800/$80,000) × 100] 76% Receipts factor [($777,600/$960,000) × 100] 81% Deposits factor [($1,080,000/$1,350,000) × 100] 80% Receipts factor [($777,600/$960,000) × 100] 81% Deposits factor [($1,080,000/$1,350,000) × 100] 80% Total 398% The short period entire net income allocation percentage is 79.6% (398%/5). The taxpayers entire net income allocated to New York City is $63,432 computed as follows: $72,000/12 (months) = $6,000 $6,000 × 7 (months) = $42,000 $42,000 × 79.6% = $33,432 $72,000 - $42,000 = $30,000 Entire net income allocated at 100% $30,000 Entire net income allocated at 79.6% $33,432 Total allocated entire net income $63,432 Example 2: A banking corporation incorporated outside the United States has been doing business in the State of California since 1979. It began doing business and became subject to tax in New York State on April 2, 1985. The taxpayer reports on a calendar year basis and had entire net income of $60,000 for the 12 month calendar year 1985.For the short taxable period April 2, 1985 through December 31, 1985 (9 months), the taxpayer had the following: New York City Total Payroll $70,000* $100,000 Receipts $560,000* $800,000 Deposits $672,000* $1,120,000 * 80% of the New York City amount The taxpayer's short period entire net income allocation percentage is computed as follows: Payroll factor [($70,000/$100,000) x 100] 70% Receipts factor [($560,000/$800,000) x 100] 70% Deposits factor [($672,000/$1,120,00) x 100] 60% Receipts factor [($560,000/$800,000) x 100] 70% Deposits factor [($672,000/$1,120,000) x 100] 60% Total 330% The short period entire net income allocation percentage 66% (330%/5) The taxpayer's prorated entire net income computed pursuant to 19 RCNY § 3-03(b)(7) is $45,000 computed as follows: $60,000/12 (months) = $5,000 $5,000 × 9 (months) = $45,000 Such prorated entire net income allocated to New York City is $29,700 ($45,000 × 66%). (2) Allocation of alternative entire net income for a short period. (Administrative Code, §§ 11-641(k) and 11-642) (i) A taxpayer which is entitled to allocate alternative entire net income within and without New York City for only part of a taxable year allocates its alternative entire net income for only that part of the taxable year during which it is entitled to allocate. (See: 19 RCNY § 3-04(c)(1) – General rules for allocation of alternative entire net income.) A taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes computes its prorated alternative entire net income pursuant to 19 RCNY § 3-03(d)(4) and computes its alternative entire net income allocation percentage only for that part of the taxable year during which it is entitled to allocate. (ii) The alternative entire net income allocation percentage is applied to alternative entire net income which has been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes, the alternative entire net income allocation percentage is applied to alternative entire net income which (A) has been prorated pursuant to 19 RCNY § 3-03(d)(4), for the period during which the taxpayer is subject to tax; and (B) has been prorated for the period during which the taxpayer is entitled to allocate. Alternative entire net income (or prorated alternative entire net income) is prorated for the period the taxpayer is entitled to allocate and is computed as follows: (C) divide alternative entire net income (or prorated alternative entire net income) by the number of calendar months or major parts thereof covered by the taxpayer's New York City return; and (D) multiply the amount determined in subparagraph (ii)(c) of this paragraph by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate. After alternative entire net income (or prorated alternative entire net income) has been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of alternative entire net income (or prorated alternative entire net income) will be allocated at either 100 percent or zero percent depending on whether the taxpayer's business was conducted solely within or solely without New York City. (iii) If, in the opinion of the Commissioner of Finance, the method described in this paragraph for prorating alternative entire net income (or prorated alternative entire net income) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxpayer's alternative entire net income (or prorated alternative entire net income) for the period during which it is entitled to allocate and the remaining period, the Commissioner of Finance may determine alternative entire net income solely on the basis of the alternative entire net income properly recorded on the taxpayer's books and records during such periods. (iv) The short period alternative entire net income allocation percentage is determined in the same manner as the alternative entire net income allocation percentage described in 19 RCNY § 3-04(c)(2) except that: (A) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate; (B) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and (C) the deposits factors is computed only for the period for which the taxpayer is entitled to allocate. A taxpayer must submit complete details with its return showing how it computed each factor of the short period alternative entire net income allocation percentage. (v) The following is an example illustrating the computation of the alternative entire net income allocation percentage for a short period and the application of this percentage to alternative entire net income: Example: A banking corporation incorporated outside the United States had been doing business in the State of Florida since 1978. It began doing business and became subject to tax in New York City on May 3, 1985. On November 30, 1985 the taxpayer ceased doing business in Florida but continued its operations in New York City. For Federal income tax purposes, the taxpayer reports on a calendar year basis and had alternative entire net income of $120,000 for the 12 month calendar year 1985. For the period the taxpayer is entitled to allocate, that is, May 3, 1985 through November 30, 1985 (7 months), the taxpayer had the following: New York City Total Payroll $80,000* $100,000 Receipts $875,000* $1,250,000 Deposits $990,000* $1,650,000 * 100% of the New York City amount The taxpayer's short period alternative entire net income allocation percentage is computed as follows: Payroll factor [($80,000/$100,000) × 100] 80% Receipts factor [($875,000/$1,250,000) × 100] 70% Deposits factor [($990,000/$1,650,000) × 100] 60% Total 210% The short period alternative entire net income allocation percentage is 70% (210%/3). The taxpayers alternative entire net income allocated to New York City is $59,000 computed as follows: $120,000/12 (months) = $10,000 $10,000 × 7 (months) = $70,000 $70,000 × 70% = $49,000 $10,000 × 1 (month) = $10,000 $120,000 - $70,000 - $10,000 = $40,000 Alternative entire net income for period 1/1/85 - 4/30/85 is $40,000 allocated at 0% 0 Alternative entire net income for period 5/1/85 - 11/30/85 is $70,000 allocated at 70% $49,000 Alternative entire net income for period 12/1/85 - 12/31/85 is $10,000 allocated at 100% $10,000 Total allocated alternative entire net income $59,000 (3) Allocation of taxable assets for a short period. (Administrative Code, § 11-642) (i) A taxpayer which is entitled to allocate taxable assets within and without New York City for only part of a taxable year allocates its taxable assets for only that part of the taxable year during which it is entitled to allocate. (See: 19 RCNY § 3-04(d)(1) – General rules for allocation of taxable assets.) A taxpayer subject to tax for a period other than 12 calendar months computes its prorated taxable assets pursuant to 19 RCNY § 3-03(e)(7) and computes its asset allocation percentage only for that part of the taxable year during which it is entitled to allocate. (ii) The asset allocation percentage is applied to taxable assets which have been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period other than 12 calendar months, the asset allocation percentage is applied to taxable assets which: (A) have been prorated, pursuant to 19 RCNY § 3-03(e)(7), for the period during which the taxpayer is subject to tax; and (B) have been prorated for the period during which the taxpayer is entitled to allocate. Taxable assets (or prorated taxable assets) are prorated for the period the taxpayer is entitled to allocate and are computed as follows: (C) divide taxable assets (or prorated taxable assets) by the number of calendar months or major parts thereof covered by the taxpayer's New York City return; and (D) multiply the amount determined in subparagraph (ii)(c) of this paragraph by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate. After taxable assets (or prorated taxable assets) have been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of taxable assets (or prorated taxable assets) will be allocated at either 100 percent or zero percent depending on whether the taxpayer's business was conducted solely within or solely without New York City. (iii) If, in the opinion of the Commissioner of Finance, the method described in this paragraph for prorating taxable assets (or prorated taxable assets) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxable assets (or prorated taxable assets) for the period during which it is entitled to allocate and for the remaining period, the Commissioner of Finance may determine taxable assets solely on the basis of the taxable assets properly recorded on the taxpayer's books and records during such periods. (iv) The short period assets allocation percentage is determined in the same manner as the asset allocation percentage described in 19 RCNY § 3-04(d)(2), except that: (A) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate; (B) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and (C) the deposits factor is computed only for the period for which the taxpayer is entitled to allocate. A taxpayer must submit complete details with its return showing how it computed each factor of the short period asset allocation percentage. (v) The following is an example illustrating the computation of the asset allocation percentage for a short period and the application of this percentage to taxable assets: Example: A taxpayer, which was subject to tax for all of 1985, reports on a calendar year basis and had taxable assets of $1,800,000 for such taxable year 1985. On February 11, 1985 the taxpayer began doing business both within and without New York City which entitled it to allocate for the period February 11, 1985 through December 31, 1985. For the short period February 11, 1985 through December 31, 1985 (11 months), the taxpayer had the following: New York City Total Payroll $73,000* $100,000 Receipts $720,000* $900,000 Deposits $855,000* $1,125,000 * 80% of the New York City amount The taxpayer's short period asset allocation percentage is computed as follows: Payroll factor [($73,000/$100,000) × 100] 73% Receipts factor [($720,000/$900,000) × 100] 80% Deposits factor [($855,000/$1,125,000) × 100] 76% Receipts factor [($720,000/$900,000) × 100] 80% Deposits factor [$855,000/$1,125,000) × 100] 76% Total 385% The short period asset allocation percentage is 77% (385%/5). The amount of the taxpayer's taxable assets allocated to New York City is $1,420,500 computed as follows: $1,800,000/12 (months) = $150,000 $150,000 × 11 (months) = $1,650,000 $1,650,000 × 77% = $1,270,500 $1,800,000 - $1,650,000 = $150,000 Taxable assets allocated at 100% $150,000 Taxable assets allocated at 77% $1,270,500 Total allocated taxable assets $1,420,500 (4) Power of the Commissioner of Finance to adjust or change the method of allocation. (Administrative Code, § 11-642) (i) When it appears that the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage described in this section does not properly reflect the activity, business, income or assets of the taxpayer in New York City, the Commissioner of Finance, in his discretion, may adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage by: (A) excluding one or more factors; or (B) including one or more factors. (ii) The Commissioner of Finance is authorized, in his discretion, to permit or require the allocation of entire net income, alternative entire net income or taxable assets by a different method of allocation when it appears to the Commissioner of Finance that such method of allocation will effect a fair and proper allocation of the taxpayer's income or assets reasonably attributable to New York City. (iii) A taxpayer may not adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage described in this section or use a different method of allocating its entire net income, alternative entire net income or taxable assets within and without New York City without the written consent of the Commissioner of Finance. A request to adjust the entire net income allocation percentage, the alternative entire net income allocation percentage or the asset allocation percentage or to use a different method of allocation must be made through the Department of Finance, Audit Division, Banking Corporation Tax Unit. The request must set forth complete information on which the request is made, together with a computation of the amount of tax which would be due under the proposed method. A taxpayer making a request for an adjustment of any of its allocation percentages, or to use a different method of allocation must compute and pay its tax in accordance with the entire net income allocation percentage, the alternative entire net income allocation percentage and the asset allocation percentage described in this section and it must file its return in accordance with the instructions shown on the return. (iv) If a taxpayer has been permitted or required to adjust the entire net income allocation percentage, alternative entire net income allocation percentage or asset allocation percentage described in this section or to use a different method of allocating its entire net income, alternative entire net income or taxable assets within and without New York City, the taxpayer must continue to use such permitted or required method in subsequent taxable years. If the facts materially change, the taxpayer must notify the Commissioner of Finance of such change. If such permitted or required method no longer properly reflects the activity, business, income or assets of the taxpayer, the taxpayer must request permission or the Commissioner of Finance may require the taxpayer to change such permitted or required method. (v) See 19 RCNY § 3-03(a)(3) concerning other powers of the Commissioner of Finance to adjust entire net income, alternative entire net income and taxable assets. (5) Optional depreciation. (Administrative Code, §§ 11-641(j) and 11-641.1) (i) For taxable years beginning on or after January 1, 1966, a taxpayer is provided an option to elect to deduct from allocated entire net income an amount not to exceed twice the amount of Federal depreciation on certain newly acquired depreciable property. Such deduction is allowed only upon the condition that entire net income be computed without any deduction for depreciation or amortization of qualified property. The total depreciation deduction allowed under Parts 1, 2 and 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code in any taxable year or years on each item of qualified property may not exceed the cost or other basis of the property described in subparagraph (ii)(E) of this paragraph. (ii) For purposes of this paragraph the term, "qualified property" means tangible property which: (A) is depreciable pursuant to § 167 of the Internal Revenue Code; (B) has a situs in New York City; (C) is used in the taxpayer's trade or business; (D) the original use of which commenced with the taxpayer, commenced in New York City and commenced after December 31, 1965; and (E) is acquired by purchase as defined in § 179(d) of the Internal Revenue Code, or constructed, reconstructed or erected after December 31, 1965, pursuant to a contract which was, on or before December 31, 1967, and at all times thereafter, binding on the taxpayer, or property, the physical construction, reconstruction or erection of which began on or before December 31, 1967, which was completed on or before December 31, 1969. For any taxable year beginning on or after January 1, 1968, a taxpayer is not allowed a deduction under subparagraph (i) of this paragraph with respect to tangible personal property leased by it to any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property is considered a lease. (iii) If the deduction allowable for any taxable year exceeds the taxpayer's entire net income allocated to New York City, the excess may be carried over to the following taxable year or years. The taxpayer's entire net income allocated to New York City must be reduced to zero before any allowance of a carry-over of any unused deduction under this section. If a carry-over under this provision is claimed, complete details of the computation must be submitted with the return. (iv) In any taxable year when property on which depreciation under this paragraph has been allowed, is sold or otherwise disposed of, entire net income before allocation must be adjusted by adding the Federal loss or subtracting the Federal gain resulting from such sale or disposition. The New York City gain resulting from such sale or disposition must be added to entire net income allocated to New York City. If a New York City loss results from such sale or disposition, it is subtracted from entire net income allocated to New York City. To determine the basis of the property, in computing the gain or loss for purposes of the banking corporation tax, the sum of the amounts allowed as depreciation under this paragraph for all taxable years from the year of acquisition to and including the year of the sale or other disposition is subtracted from the original Federal cost or other basis. No loss shall be recognized with respect to a sale or other disposition to a person whose acquisition thereof is not a purchase as defined in § 179(d) of the Internal Revenue Code. A sale or other disposition of qualified property includes any transfer or exchange without regard to whether a gain or loss from the transaction is recognized for Federal income tax purposes. A disposition of qualified property includes: (A) a sale of the property; (B) a liquidation other than as part of a statutory merger or consolidation; (C) a legal dissolution of the taxpayer; (D) a trade-in of the property; (E) a gift of the property; (F) transfer upon foreclosure of a security interest in the property; (G) retirement of the property before expiration of its useful life; (H) condemnation of the property; (I) loss of the property due to fire, theft, storm or other casualty; and (J) transfer of the property to a corporation not taxable under the banking corporation tax law. (v) If the election provided in subparagraph (i) of this paragraph is made when computing entire net income, alternative entire net income must also be computed without any deduction for depreciation or amortization of qualified property. The deduction from allocated alternative entire net income for the taxable year is the same as the deduction from allocated entire net income for the taxable year. (Amended City Record 1/16/2020, eff. 2/15/2020)